<PAGE> 1
As filed with the Securities and Exchange Commission on August 2, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
FRONTIERVISION OPERATING PARTNERS, L.P.
FRONTIERVISION CAPITAL CORPORATION
(Exact name of Registrants as specified in their charters)
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<S> <C> <C>
Delaware 4841 84-1316775
Delaware 4841 Applied for
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Numbers)
</TABLE>
1777 SOUTH HARRISON STREET, SUITE P-200, DENVER, COLORADO 80210 (303) 757-1588
(Address, including Zip Code, and telephone number, including area code, of
Registrants' principal executive offices)
--------------------
JAMES C. VAUGHN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FrontierVision Inc.
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
(303) 757-1588
(Name, address, including Zip Code, and telephone number, including
area code, of Registrants' agent for service)
--------------------
Please address a copy of all communications to:
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<S> <C>
LEONARD J. BAXT, ESQ. GERALD S. TANENBAUM, ESQ.
Dow, Lohnes & Albertson Cahill Gordon & Reindel
1200 New Hampshire Avenue, N.W. 80 Pine Street
Washington, D.C. 20036 New York, New York 10005
(202) 776-2000 (212) 701-3000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. / /
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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===================================================================================================================================
Title of Each Class of Amount to Be Proposed Maximum Proposed Maximum Amount of
Securities to Be Registered Registered Offering Price Per Unit(1) Aggregate Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
% Senior Subordinated Notes due 2006 $200,000,000 100% $200,000,000 $68,966
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(1) Estimated solely for purposes of calculating the registration fee
in accordance with Rule 457 of the Securities Act of 1933, as
amended.
--------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement covers the registration of $200,000,000 aggregate
principal amount of % Senior Subordinated Notes due 2006 (the "Notes") which
are being issued by FrontierVision Operating Partners, L.P. and FrontierVision
Capital Corporation (collectively, the "Issuers"). The complete Prospectus
contained herein relates to the primary offering of the Notes by the Issuers.
Immediately following the complete Prospectus are certain alternate pages of
the Prospectus relating to the sale of the Notes by J.P. Morgan Securities Inc.
and First Union Capital Markets Corp. in market making transactions, including
an alternate front cover page and a section entitled "Plan of Distribution."
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION
[LOGO] DATED AUGUST 2, 1996
FRONTIERVISION OPERATING PARTNERS, L.P.
FRONTIERVISION CAPITAL CORPORATION
$200,000,000
% Senior Subordinated Notes due 2006
Interest payable and
ISSUE PRICE: %
The % Senior Subordinated Notes due 2006 (the "Notes") are being offered
(the "Offering") by FrontierVision Operating Partners, L.P., a Delaware limited
partnership ("FVOP" or the "Company"), and FrontierVision Capital Corporation,
a Delaware corporation ("Capital") which is a wholly owned subsidiary of FVOP.
The Notes are the joint and several obligations of FVOP and Capital
(collectively, the "Issuers"). The Company will receive all of the net
proceeds of the Offering. Capital has nominal assets and does not conduct any
operations.
The Notes mature on , 2006, unless previously redeemed. Interest on
the Notes is payable semiannually on each and , commencing
, 1997. The Notes are not redeemable prior to , 2001, except as set
forth below. The Notes will be redeemable at the option of the Issuers, in
whole or in part, at any time on or after , 2001, at the redemption
prices set forth herein, together with accrued and unpaid interest to the
redemption date. In addition, prior to , 1999, the Issuers may redeem up to
35% of the principal amount of the Notes with the net cash proceeds received
from one or more Public Equity Offerings or Strategic Equity Investments (as
such terms are defined) at a redemption price of % of the principal amount
thereof, together with accrued and unpaid interest to the redemption date;
provided, however, that at least 65% in aggregate principal amount of the Notes
originally issued remains outstanding immediately after any such redemption.
Upon a Change of Control (as defined), the Issuers will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Issuers and will rank
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined) of the Issuers. The Notes will rank pari passu in right of
payment with any other senior subordinated indebtedness of the Issuers. At
March 31, 1996, as adjusted to give effect to the transactions described herein
under "Use of Proceeds," the Company would have had approximately $199.7
million of Senior Indebtedness outstanding.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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=================================================================================================================================
Price to Underwriting Proceeds to
Public (1) Discount (2) Company (1)(3)
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<S> <C> <C> <C>
Per Note % % %
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Total $ $ $
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(1) Plus accrued interest, if any, from the date of issuance.
(2) The Issuers have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $1,000,000.
The Notes are being offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by Cahill Gordon & Reindel, counsel for the
Underwriters, and certain other conditions. The Underwriters withhold the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the Notes will be made against
payment therefor, in immediately available funds, on or about
, 1996 at the offices of J.P. Morgan Securities Inc., 60 Wall Street,
New York, New York.
J.P. MORGAN & CO.
CHASE SECURITIES INC.
CIBC WOOD GUNDY SECURITIES CORP.
, 1996
FIRST UNION CAPITAL MARKETS CORP.
<PAGE> 4
[INSIDE FRONT COVER PAGE]
[MAP OF FRONTIERVISION SYSTEMS, INCLUDING EXISTING SYSTEMS, ACQUISITION SYSTEMS
(ACE, TRIAX, GRASSROOTS AND PENN/OHIO), AND DISPOSITION SYSTEMS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
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No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Issuers or any Underwriter. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, the Notes in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any date subsequent to the date hereof or that there has been no
change in the affairs of the Issuers since the date hereof.
TABLE OF CONTENTS
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Page Page
<S> <C> <C> <C>
Available Information . . . . . . . . . . . . . . . 4 Management . . . . . . . . . . . . . . . . . . . 69
Prospectus Summary . . . . . . . . . . . . . . . . 5 Certain Relationships and Related Transactions . 73
Risk Factors . . . . . . . . . . . . . . . . . . 17 Principal Security Holders . . . . . . . . . . . 74
Use of Proceeds . . . . . . . . . . . . . . . . . 22 The Partnership Agreements . . . . . . . . . . . 77
Capitalization . . . . . . . . . . . . . . . . . 24 Credit Arrangements of the Company . . . . . . . 86
Selected Financial Data . . . . . . . . . . . . . 25 Description of the Notes . . . . . . . . . . . . 87
Pro Forma Financial Data . . . . . . . . . . . . 30 Underwriting . . . . . . . . . . . . . . . . . . 117
Management's Discussion and Analysis of Financial Legal Matters . . . . . . . . . . . . . . . . . . 119
Condition and Results of Operations . . . . . . 41 Experts . . . . . . . . . . . . . . . . . . . . . 119
Business . . . . . . . . . . . . . . . . . . . . 45 Glossary . . . . . . . . . . . . . . . . . . . . 120
Legislation and Regulation . . . . . . . . . . . 60 Index to Financial Statements . . . . . . . . . . F-1
</TABLE>
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UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3
<PAGE> 6
AVAILABLE INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part and
which term shall encompass any amendments thereto) on Form S-1, pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Notes offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information about the Issuers and the Notes, reference is hereby made
to the Registration Statement and to such exhibits and schedules. Statements
contained herein concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of
such document so filed. Each such statement is qualified in its entirety by
such reference.
In addition, as a result of the Offering, the Issuers will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will file reports and other
information with the Commission. In addition, under the Indenture governing
the Notes, the Issuers will be required to furnish to the Trustee and to
registered holders of the Notes audited annual consolidated financial
statements, unaudited quarterly consolidated financial reports and certain
other reports. The Registration Statement, the exhibits and schedules forming
a part thereof and the reports and other information filed by the Issuers with
the Commission pursuant to the informational requirements of the Exchange Act
may be inspected without charge and copied upon payment of certain fees at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional
Office, Northwestern Atrium, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission also maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports and other information
regarding registrants that file electronically with the Commission.
----------------
FVOP was organized as a Delaware limited partnership in 1995. Capital is a
newly created Delaware corporation formed solely for the purpose of serving as
an Issuer of the Notes and is wholly owned by FVOP. The principal office of
each of the Issuers is located at 1777 South Harrison Street, Suite P-200,
Denver, Colorado 80210, and their telephone number is (303) 757-1588.
4
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. The information set forth in this Prospectus gives effect to
the organization of Capital, a newly created corporation, as a wholly owned
subsidiary of FVOP. The financial and operating data set forth in this
Prospectus give effect (unless otherwise noted) to the April 9, 1996
acquisition by the Company of certain cable television systems from affiliates
of Cox Communications, Inc. as if such transaction had occurred as of March 31,
1996. See "Risk Factors" for a discussion of certain risks associated with an
investment in the Notes. See "Glossary" for the definitions of certain terms
used herein.
THE COMPANY
The Company owns, operates and develops cable television systems in small and
medium-sized suburban and exurban communities, primarily concentrated in two
operating regions--New England and Ohio/Kentucky --with a third, smaller group
of cable television systems in the Southeast. To date, the Company has
acquired strategically located cable television systems at historically
attractive values, thus establishing its core geographic base and building
subscriber mass. Since closing its initial acquisition in November 1995, the
Company has become one of the 35 largest multiple system cable operators
("MSOs") in the U.S. The Company's currently owned cable television systems
(the "Existing Systems") passed approximately 304,700 homes in six states and
served approximately 215,100 basic subscribers as of March 31, 1996.
The Company has entered into agreements to acquire, for an aggregate purchase
price of approximately $244.4 million, additional systems (the "Acquisition
Systems") which passed approximately 202,400 homes and served approximately
147,500 basic subscribers as of March 31, 1996. The Acquisition Systems
primarily consist of certain significant cable television systems to be
acquired from American Cable Entertainment of Kentucky-Indiana, Inc. ("ACE")
and from an affiliate of Triax Communications Corp. ("Triax"). The ACE
systems, serving approximately 83,300 subscribers in Kentucky and Indiana, and
the Triax systems, serving approximately 53,800 subscribers in Ohio/Kentucky
and the Southeast, are contiguous or in close proximity to the Existing
Systems, consistent with the Company's strategy of clustering its cable
television systems to achieve economies of scale and operating efficiencies.
The Company intends to continue to pursue, on an opportunistic basis,
additional strategic acquisitions and smaller "fill-in" acquisitions within its
existing operating regions to further enhance their operational and financial
performance. In addition, the Company has sold or entered into agreements to
sell three systems in the Southeast (the "Disposition Systems") for an
aggregate sales price of approximately $17.1 million, representing a per
subscriber sales price that is over 30% more than the average per subscriber
acquisition cost of the Existing Systems in the Southeast.
As of March 31, 1996, after giving pro forma effect to the purchase of the
Existing Systems and the Acquisition Systems and the sale of the Disposition
Systems, the Company's cable television systems passed approximately 493,900
homes and served approximately 351,900 basic subscribers, representing a basic
penetration level of 71.2%. On such a pro forma basis, as of March 31, 1996,
the Company would be one of the 25 largest MSOs in the U.S. and a dominant
cable operator in its two primary operating regions. On the same pro forma
basis, for the three months ended March 31, 1996 annualized and for the year
ended December 31, 1995, the Company had revenues of approximately $120.6
million and $117.0 million, respectively, and EBITDA (as defined) of
approximately $58.9 million and $54.6 million, respectively.
In order to execute the Company's business strategy, James C. Vaughn and John
S. Koo, the Company's co-founders, have assembled a senior management group of
seven individuals with over 100 years of collective experience in the cable
industry. The equity investors in the Company include affiliates of J.P.
Morgan & Co. Incorporated, Brown Brothers Harriman & Co., Olympus Partners and
First Union Capital Partners, Inc. After giving pro forma effect to a $70.0
million rights offering (the "Rights Offering"), which is expected to be
consummated concurrently with or prior to the Offering, the Company will have
obtained aggregate equity capital commitments of approximately $193.5 million,
of which approximately $190.0 million is available for investment in the
Company.
5
<PAGE> 8
The Existing Systems and the Acquisition Systems represent the substantial
completion of the first phase of the Company's business plan. Through its core
acquisitions in New England and Ohio/Kentucky, the Company has established
significant subscriber mass and positioned itself as a dominant cable operator
in each of its primary operating regions. The Company is currently the second
largest MSO in Maine, and, after giving pro forma effect to the purchase of the
Existing Systems and the Acquisition Systems, as of March 31, 1996, the Company
would be the second largest MSO in Kentucky and one of the largest operators of
small and medium-sized cable systems in southern Ohio. In the Southeast, the
Company has accumulated attractive systems which it expects either to
consolidate with subsequent system acquisitions, trade for systems within the
Company's primary operating regions or divest at favorable prices. The next
phase of the Company's business plan will focus on increasing subscriber
density within its primary operating regions through selective acquisitions,
integrating and streamlining business operations, making significant investment
and improvements in technical plant and developing existing and new cable and
broadband telecommunications services.
BUSINESS STRATEGY
The Company's objective is to increase its operating cash flow and the value of
its systems by utilizing its expertise in acquiring and managing cable systems.
Through strategic acquisitions and internal growth, the Company seeks to own
and operate cable television systems serving at least 500,000 subscribers in
geographically concentrated clusters serving 100,000 or more subscribers. To
achieve its objective, the Company pursues the following business strategies:
TARGET CLUSTERS IN SMALL AND MEDIUM-SIZED MARKETS. The Company has acquired
clusters of cable television systems serving small and medium-sized suburban
and exurban markets which are generally within 50 to 100 miles of larger urban
and suburban communities. The Company believes that such markets have many of
the beneficial attributes of larger urban and suburban markets--moderate to
high household growth, economic stability, attractive subscriber demographics
and favorable potential for additional clustering. Moreover, in such markets,
the Company believes that (i) it will face less direct competition given the
lower population densities and higher costs per subscriber of installing cable
plant, (ii) it will maintain higher subscriber penetration levels and lower
customer turnover based on fewer competing entertainment alternatives, and
(iii) its overhead and certain operating costs will generally be lower than
those in larger markets.
GROW THROUGH STRATEGIC AND OPPORTUNISTIC ACQUISITIONS. Beginning with its
initial acquisition in November 1995 of systems in Maine and Ohio, the Company
has systematically implemented a focused acquisition and consolidation strategy
within its two primary operating regions of New England and Ohio/Kentucky and
its systems group in the Southeast. Going forward, the Company will seek to
acquire systems that can be readily integrated into its primary operating
regions in order to maximize operating efficiencies. As a consolidator of
systems within its primary operating regions, the Company will pursue both
"fill-in" acquisitions of smaller systems as well as strategic acquisitions.
The Company believes that such acquisition targets will have diminished
strategic value to other prospective buyers given its geographic prominence in
these regions. Consequently, the Company believes these systems can be
purchased at favorable prices. The Company also opportunistically pursues
acquisitions outside of its primary operating regions that can either be resold
at higher prices or exchanged for systems that are contiguous to its primary
operating regions. The Company has begun to execute this strategy with its
Southeast systems.
IMPLEMENT OPERATING EFFICIENCIES. Upon acquiring a system, the Company
implements extensive management, operational and technical changes designed to
improve operating efficiencies, enhance operating cash flow and operating
margins and reduce overhead through economies of scale. Within each of its
operating regions, the Company has begun to streamline field operations by
establishing centralized customer service facilities, installing
state-of-the-art telephone systems, management information systems ("MIS") and
billing systems and eliminating duplicative functions. These changes have
resulted in lower administrative costs, better trained employees and a higher
level of customer service. Lastly, the Company seeks to reduce technical
operating costs and capital expenditures associated with the implementation of
new channels and services by consolidating headends. By serving more
subscribers from a single distribution point, the
6
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Company has begun to decrease ongoing technical maintenance expenses, improve
system reliability and enhance cost efficiencies in adding new channels and
services.
PROMOTE AND EXPAND SERVICE OFFERINGS. The Company aggressively promotes and
expands services to add and retain customers and increase revenue per customer.
The Company employs a coordinated array of marketing techniques, including
door-to-door sales, telemarketing, direct mail, print and broadcast
advertising, flyers and billing inserts and cross-channel promotion. Many of
the Company's customers received limited service offerings prior to acquisition
and, accordingly, the Company has begun to expand and repackage the basic and
premium services it offers. The Company believes that significant opportunity
exists to increase service revenue by expanding the programming and pricing
options available to its customers. Towards this end, the Company has created
new basic and premium packages and launched several lower priced premium
channels such as The Disney Channel, Starz! and Encore. As systems are
consolidated and technically enhanced, the Company will also expand
addressability, currently accessed by only 27.6% of the subscribers in the
Existing Systems and the Acquisition Systems. Addressability will enable the
Company to increase revenues derived from pay-per-view movies and events and
new pay services such as interactive video games, including The Sega Channel.
In addition, with the expanded advertising market delivery afforded by larger,
contiguous system clusters, the Company plans to intensify local spot
advertising sales efforts.
STRATEGICALLY UPGRADE SYSTEMS. The Company will selectively upgrade its cable
systems to increase channel capacity, enhance signal quality and improve
technical reliability. The Company believes such technical upgrades will not
only enhance the potential for increasing revenues, but also will improve
customer and community relations and further solidify the Company's position as
the preeminent local provider of video services in its operating regions. In
addition, by implementing a hybrid fiber optic-backbone/coaxial cable design
across the portions of its cable plant that serve its highest subscriber
densities, the Company will effectively position itself for the introduction of
new broadband and interactive services. In its primary operating regions of
New England and Ohio/Kentucky, the Company intends to invest up to $50.0
million over the next five years to establish a technical platform of at least
400 MHz to 450 MHz (54 to 62 channels) in a majority of its systems and 550 MHz
to 750 MHz (78 to 100 channels) in certain of its larger markets. Over the
same period, the Company plans to invest up to an additional $10.6 million for
addressable converters in its two primary operating regions.
FOCUS ON THE CUSTOMER. The Company continually seeks to provide superior
customer service and improve programming and service choices for its
subscribers. By centralizing customer service at the regional level, all
functions that directly impact subscribers--sales and marketing, customer
service and administration and technical support--are implemented more quickly
and effectively. In addition, as a result of its consolidation efforts, the
Company has been able to enhance its customer service by increasing hours of
operations for its customer service functions, better coordinating service
calls, increasing responsiveness to customer inquiries and standardizing
maintenance procedures. While centralizing and improving customer service, the
Company has retained local payment and technical offices to maintain its
presence and visibility within its communities.
7
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THE EXISTING SYSTEMS AND THE ACQUISITION SYSTEMS
The following table illustrates certain subscriber and operating statistics for
the Company as of March 31, 1996 on a pro forma basis giving effect to the
purchase of the Acquisition Systems and the sale of the Disposition Systems
(see "--Summary Financial and Operating Data of the Company" for a description
of certain terms used in the following table):
<TABLE>
<CAPTION>
AVG. MONTHLY
REVENUE PER
HOMES BASIC BASIC PREMIUM BASIC
CABLE SYSTEMS PASSED SUBSCRIBERS PENETRATION PENETRATION SUBSCRIBER EBITDA (1)
-------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Existing Systems(2):
New England 82,985 58,930 71.0% 35.6% $ 27.83 $ 8,878
Ohio/Kentucky 159,662 115,787 72.5% 37.7% 28.43 20,417
Southeast 62,082 40,413 65.1% 44.6% 23.98 4,997
-------- ------------ ------------- ------------ ------------ ----------
Total Existing Systems 304,729 215,130 70.6% 38.4% 27.43 34,292
Acquisition Systems:
ACE 106,617 83,347 78.2% 35.8% 30.42 13,864
Triax 79,237 53,825 67.9% 56.2% 29.06 10,152
Other 16,512 10,292 62.3% 47.8% 30.15 2,012
-------- ------------ ------------- ------------ ------------ ----------
Total Acquisition Systems 202,366 147,464 72.9% 44.1% 29.91 26,028
Disposition Systems: (13,233) (10,742) 81.2% 41.8% 25.20 (1,432)
-------- ------------ ------------- ------------ ------------ ----------
Total Systems 493,862 351,852 71.2% 40.7% $ 28.52 $ 58,888
======== ============ ============= ============ ============ ==========
</TABLE>
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(1) Annualized for the most recent quarter ended March 31, 1996 (in thousands)
on a pro forma basis after giving effect to the adjustments described
under "--Summary Financial and Operating Data of the Company."
(2) The Existing Systems include cable television systems acquired from (i)
United Video Cablevision, Inc. ("UVC"), (ii) Longfellow Cable Company,
Inc. ("Longfellow"), (iii) C4 Media Cable Southeast, Limited Partnership
and County Cable Company, L.P. ("C4"), (iv) Americable International
Maine, Inc. ("Americable") and (v) affiliates of Cox Communications, Inc.
("Cox").
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<PAGE> 11
THE ACQUISITION SYSTEMS
ACE Systems. The Company has entered into an agreement with ACE to acquire
systems (the "ACE Systems") serving approximately 83,300 subscribers as of
March 31, 1996 in Kentucky and Indiana for $146.0 million. The Company intends
to operate all of the ACE Systems as part of its Ohio/Kentucky cluster. It is
anticipated that this acquisition will be completed in the third quarter of
1996. The Company's agreement for the acquisition of the ACE Systems is
subject to the approval of ACE's existing creditors and a bankruptcy court.
Although there can be no assurances that this transaction will be consummated,
the Company has no reason to believe that ACE's existing creditors or the
bankruptcy court will not approve the transaction or that the bankruptcy
proceedings will have any material adverse effect on the operations of the ACE
Systems.
Triax Systems. The Company has also entered into an agreement with Triax to
acquire systems (the "Triax Systems") serving approximately 53,800 subscribers
as of March 31, 1996 in Ohio, Kentucky, Virginia, West Virginia, Pennsylvania,
Maryland and North Carolina for $85.0 million. The Company intends to operate
the systems in Kentucky, Ohio and West Virginia, serving approximately 28,900
basic subscribers, as part of its Ohio/Kentucky cluster. The Company intends
to operate the systems in North Carolina, Virginia, Pennsylvania and Maryland,
serving approximately 24,900 basic subscribers, as part of its Southeast
region. It is anticipated that this acquisition will be completed in the third
quarter of 1996, although there can be no assurances that this transaction will
be consummated.
Upon acquisition and the subsequent integration of the ACE Systems and the
Triax Systems with the Existing Systems, the Company will serve over 200,000
subscribers in communities south of Columbus, Ohio to the southern perimeter of
Lexington, Kentucky. Within this region are ten county service areas along the
Interstate 75 "growth corridor," which is among the fastest growing areas in
the region. By 1997, it is anticipated that 30% of the Company's subscribers
within this region will be served by fiber-to-the-feeder 550 MHz or 750 MHz
technical plant.
Other Acquisitions. In addition to the acquisition of the ACE Systems and the
Triax Systems, the Company has entered into agreements to acquire systems
serving an aggregate of approximately 10,300 basic subscribers as of March 31,
1996 for approximately $13.4 million. In July 1996, the Company entered into
an agreement with Phoenix Grassroots Cable Systems, L.L.C. ("Grassroots") to
acquire systems serving approximately 7,000 basic subscribers as of March 31,
1996 in Maine and New Hampshire for $9.6 million. The Company expects to enter
into an agreement in August 1996 with SRW, Inc.'s Penn/Ohio Cablevision, L.P.
("Penn/Ohio") to acquire systems serving approximately 3,300 subscribers as of
March 31, 1996 in Ohio and Pennsylvania for $3.8 million. It is anticipated
that both acquisitions will be completed in the third quarter of 1996, although
there can be no assurances that either of these transactions will be
consummated.
The Company believes that other acquisition opportunities exist, and the
Company is continuously engaged in discussions with other cable television
system owners and operators to explore such potential opportunities. Some of
these potential opportunities may involve systems serving substantial numbers
of subscribers. Although the Company does not currently have definitive
agreements to acquire systems other than those described herein, the Company
intends to continue to pursue, on an opportunistic basis, additional strategic
acquisitions and smaller "fill-in" acquisitions within its existing operating
regions to enhance further their operational and financial performance.
THE DISPOSITION SYSTEMS
On July 24, 1996, the Company sold its Chatsworth, Georgia system, representing
approximately 5,700 basic subscribers as of March 31, 1996, to an affiliate of
Helicon Partners for approximately $8.6 million. The Company also has entered
into an agreement to sell its Woodstock and New Market, Virginia systems,
representing approximately 5,000 subscribers, to Shenandoah Cable Television
Company, an affiliate of Shenandoah Telephone Company, for approximately $8.5
million. It is anticipated that this sale will be completed in the fourth
quarter of 1996, although there can be no assurances that this transaction will
be
9
<PAGE> 12
consummated. The aggregate sales price of approximately $17.1 million for the
Disposition Systems represents a per subscriber sales price that is over 30%
more than the average per subscriber acquisition cost of the Existing Systems
in the Southeast.
THE TRANSACTIONS
Concurrently with or prior to the completion of the Offering, it is anticipated
that FrontierVision Partners, L.P. ("FVP"), the sole general partner and the
owner, directly and indirectly, of substantially all of the partnership
interests of the Company, will consummate a $70.0 million Rights Offering, the
net proceeds of which will be contributed as equity to the Company over time to
fund future acquisitions. The Company will use (i) $32.0 million of the
proceeds from the Rights Offering, (ii) $193.0 million of net proceeds from the
Offering, (iii) $16.9 million of proceeds (net of transaction costs) from the
sale of the Disposition Systems, (iv) $5.7 million of net working capital
adjustment related to the Acquisition Systems and (v) $0.3 million of available
cash on hand to (i) pay the purchase prices for the Acquisition Systems and (ii)
pay estimated transaction costs associated with the purchase of the Acquisition
Systems. The Rights Offering, the Offering, the sale of the Disposition Systems
and the purchase of the Acquisition Systems are collectively referred to as the
"Acquisition Transactions." To the extent that there is any delay in
consummating the purchase of any of the Acquisition Systems, a portion of the
net proceeds of the Offering corresponding to the purchase price of such system
may be applied to reduce temporarily revolving indebtedness for borrowings under
the Senior Credit Facility. See "Use of Proceeds," "The Partnership Agreements"
and "Credit Arrangements of the Company."
The following table sets forth the sources and uses of the proceeds to be
received by the Company in connection with the Acquisition Transactions
(determined as of March 31, 1996):
<TABLE>
<CAPTION>
======
In thousands Amount
SOURCES OF FUNDS: ------
<S> <C>
Rights Offering (1) $ 32,000
% Senior Subordinated Notes due 2006 (2) 193,000
Sale of Disposition Systems (3) 16,860
Net working capital adjustment 5,732
Available cash on hand 278
---------
Total sources of funds $247,870
========
USES OF FUNDS:
Purchase Acquisition Systems:
ACE 146,000
Triax 85,000
Grassroots and Penn/Ohio 13,400
Estimated transaction costs for Acquisition Systems 3,470
--------
Total uses of funds $247,870
========
</TABLE>
Effective as of April 9, 1996, and in conjunction with the acquisition of
systems from affiliates of Cox Communications, Inc., the Company amended and
restated its credit facility to effect an increase in the amount available to
be borrowed thereunder from $130.0 million to $265.0 million (the "Credit
Agreement Restatement"). In July 1996, the Company called an additional $10.6
million (the "Equity Call") from equity commitments in place prior to the
Rights Offering, which additional $10.6 million is expected to be received by
August 1996. Concurrently with or prior to the consummation of the Offering, it
is anticipated that a subordinated note (the "UVC Note") in the aggregate
principal amount of $7.2 million issued by the Company in connection with the
acquisition of the systems from UVC, which UVC Note has accreted to $7.5
million as of March 31, 1996, will be converted into $5.0 million of Class A
limited partnership interests in the Company (the "Class A Partnership
Interests"), with the balance of the aggregate accreted principal amount of the
UVC Note to be repaid in cash (the "UVC Note Conversion"). See "Business --
Development of the Systems -- The Existing Systems -- UVC Systems" and "The
Partnership Agreements -- The Company Partnership Agreement -- Class A
Partnership Interests." It is also anticipated that the outstanding
indebtedness under the Senior Credit Facility will be reduced by $10.3 million
from the aggregate of approximately $210.0 million outstanding immediately
after giving effect to the acquisition of the systems from Cox, with such
application to reduce revolving indebtedness thereunder (the "Credit Agreement
Repayment"). The Credit Agreement Restatement, the Equity Call, the UVC Note
Conversion and the Credit Agreement Repayment are collectively referred to
herein as the "Other Transactions", and the Acquisition Transactions and the
Other Transactions are collectively referred to herein as the "Transactions."
10
<PAGE> 13
- -----------------------
(1) The approximately $37.8 million of net proceeds remaining from the Rights
Offering will be used to fund additional strategic acquisitions to be
identified and approved by the Advisory Committee of FVP. See
"Management" and "The Partnership Agreements." The size of the equity
commitments to be made available to FVOP through the Rights Offering may
be reduced if no such additional strategic acquisition is so identified or
approved on or before June 30, 1997.
(2) Aggregate proceeds of $200.0 million reduced by underwriting discounts of
$6.0 million and estimated Offering expenses of $1.0 million.
(3) Aggregate proceeds of $17.1 million reduced by approximately $0.2 million
of transaction costs.
11
<PAGE> 14
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED . . . . . . . . . . . $200.0 million aggregate principal amount of % Senior Subordinated Notes
due 2006.
MATURITY DATE . . . . . . . . . . . . . . , 2006.
INTEREST PAYMENT DATES . . . . . . . . . and , commencing
, 1997.
ISSUERS . . . . . . . . . . . . . . . . . The Notes are the joint and several obligations of FVOP and Capital.
OPTIONAL REDEMPTION BY THE ISSUERS . . . The Notes are not redeemable prior to , 2001, except as set forth
below. The Notes will be redeemable at the option of the Issuers, in whole
or in part, at any time on or after , 2001, at the redemption prices
set forth herein, together with accrued and unpaid interest to the redemption
date. In addition, prior to , 1999, the Issuers may redeem up to
35% of the principal amount of the Notes with the net cash proceeds from one
or more Public Equity Offerings or Strategic Equity Investments (as defined
in the Indenture for the Notes) at a redemption price of % of the
principal amount thereof, together with accrued and unpaid interest to the
redemption date; provided, however, that at least 65% in aggregate principal
amount of the Notes originally issued remains outstanding immediately after
any such redemption.
MANDATORY REDEMPTION BY THE ISSUERS . . . None.
CHANGE OF CONTROL OFFER . . . . . . . . . Upon a Change of Control, the Issuers will be required to make an offer to
purchase all outstanding Notes at 101% of the principal amount thereof,
together with accrued and unpaid interest to the purchase date.
RANKING . . . . . . . . . . . . . . . . . The Notes are general unsecured obligations of the Issuers and will
rank subordinate in right of payment to all existing and future Senior
Indebtedness (as defined in the Indenture governing the Notes (the
"Indenture")) of the Issuers, including indebtedness under the Senior Credit
Facility. The Notes will rank pari passu in right of payment with any other
senior subordinated indebtedness of the Issuers.
CERTAIN COVENANTS . . . . . . . . . . . . The Indenture will contain certain covenants that, among other things, limit
the ability of each Issuer and certain of its Subsidiaries to incur
additional Indebtedness, create certain Liens, make certain Restricted
Payments, enter into certain transactions with Affiliates, permit dividend or
other payment
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C>
restrictions to apply to certain Subsidiaries or consummate certain merger,
consolidation or similar transactions. In addition, in certain
circumstances, the Issuers will be required to offer to purchase Notes at
100% of the principal amount thereof with the net proceeds of certain asset
sales. These covenants are subject to a number of significant exceptions and
qualifications. See "Description of the Notes."
</TABLE>
RISK FACTORS
Prior to purchasing any of the Notes offered hereby, prospective investors
should consider carefully the risks set forth under "Risk Factors," in addition
to the other information contained in this Prospectus.
13
<PAGE> 16
SUMMARY FINANCIAL AND OPERATING DATA OF THE COMPANY
The following tables present summary financial and operating data derived from
the Company's financial statements as of and for the period from inception
(April 17, 1995) through December 31, 1995 which have been audited by Arthur
Andersen LLP, independent public accountants. The following tables also
present unaudited summary financial and operating data as of and for the three
months ended March 31, 1996 derived from the unaudited financial statements of
the Company. In the opinion of management, the unaudited interim financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, which consist only of normal recurring
adjustments, necessary to present fairly the financial position and the results
of operations for the interim period. Operating results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the full year.
In addition, the following tables present unaudited pro forma summary financial
and operating data for the Company as of and for the three months ended March
31, 1996 and the year ended December 31, 1995, as adjusted to give pro forma
effect to the acquisition of the Existing Systems as if such transactions had
been consummated on January 1, 1995 and as adjusted to give pro forma effect to
the acquisition of the Existing Systems and the Transactions as if such
transactions had been consummated on January 1, 1995. See "Pro Forma Financial
Data." The unaudited pro forma balance sheet data as of March 31, 1996 give
effect to the purchase of the systems from Cox and the Transactions as if they
occurred on March 31, 1996. The unaudited pro forma financial and operating
data presented below are based upon the historical financial statements of the
Company and certain of the Existing Systems and the Acquisition Systems. The
unaudited pro forma data give effect to the acquisition under the purchase
method of accounting and certain other operating assumptions. See "Pro Forma
Financial Data."
The unaudited summary pro forma financial and operating data do not purport to
represent what the Company's results of operations or financial condition would
have actually been if the transactions that give rise to the pro forma
adjustments had occurred on the dates assumed or operations of the Company in
any future period. The following information is qualified by reference to and
should be read in conjunction with "Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and related notes thereto included elsewhere
in this Prospectus.
14
<PAGE> 17
<TABLE>
<CAPTION>
Annualized
Three Months April 17 to
Three Months Ended March 31 Ended March 31 Year Ended December 31 December 31
--------------------------- -------------- ---------------------- -----------
Pro Forma for
Transactions Pro Forma Pro Forma for Pro Forma for Pro Forma
and Existing for Existing Transactions Transactions for Existing
Systems Systems Actual and Existing and Existing Systems Actual
1996 1996 1996 (1) Systems 1996 Systems 1995 1995 1995 (1)
-------------- ----------- --------- --------------- ---------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands, except
ratios and operating
statistical data
STATEMENT OF OPERATIONS
DATA:
Revenues $ 30,148 $ 17,704 $ 9,780 $120,592 $116,962 $70,827 $ 4,369
Operating expenses 14,367 8,362 4,688 57,468 58,441 34,748 2,311
Corporate administrative
expenses 1,059 769 570 4,236 3,029 1,788 127
Depreciation and
amortization 14,409 7,990 3,476 57,636 59,794 35,041 2,308
Pre-acquisition expenses - - - - 940 940 940
-------- ------- ------- -------- --------- --------- -------
Operating income (loss) 313 583 1,046 1,252 (5,242) (1,690) (1,317)
Interest expense, net (2) 10,362 6,046 2,473 41,448 41,397 24,736 1,386
-------- -------- ------- -------- --------- -------- --------
Net income (loss) $(10,049) $ (5,463) $ (1,427) $(40,196) $(46,639) $(26,426) $ (2,703)
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET DATA (END OF
PERIOD):
Total assets $562,414 $325,005 $188,258 $143,512
Total debt 399,735 217,272 124,072 93,579
Partners' capital 148,309 100,509 60,009 46,407
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA (3) $ 14,722 $ 8,573 $ 4,522 $ 58,888 $ 54,552 $ 33,351 $ 991
EBITDA margin 48.8% 48.4% 46.2% 48.8% 46.6% 47.1% 22.7%
Total debt to EBITDA (4) 6.79 6.34 6.86 6.79
EBITDA to interest expense 1.41 1.40 1.77 1.41 1.32 1.35 0.69
Earnings to fixed charges - - - - - - -
(5)
OPERATING STATISTICAL DATA
(END OF PERIOD EXCEPT
AVERAGE):
Homes passed 493,862 291,496 180,626 490,610 288,428 177,553
Basic subscribers 351,983 204,519 126,264 350,936 203,525 125,498
Basic penetration 71.3% 70.2% 69.9% 71.5% 70.6% 70.7%
Premium units 143,218 78,219 49,759 146,216 77,557 50,305
Premium penetration 40.7% 38.2% 39.4% 41.7% 38.1% 40.1%
Average monthly revenue
per basic subscriber $ 28.55 $ 28.85 $ 27.15 $ 27.77 $ 29.00 $ 27.70
</TABLE>
15
<PAGE> 18
(1) All financial data exclude the systems acquired from Cox.
(2) Pro forma interest expense is calculated assuming that borrowings under the
Senior Credit Facility were at a weighted average rate of 8.38% and the
interest rate on the Notes was 11.5%. If the actual interest rate were to
increase or decrease by 25 basis points, pro forma interest expense on the
Notes would increase or decrease by $500,000 per annum. Interest expense of
$10,362, $6,046, $2,473, $41,448, $41,397, $24,736 and $1,386 was net of
interest income of $84, $84, $84, $334, $60, $60 and $60, respectively
(dollars in thousands). Assuming the purchase of the Acquisition Systems
does not occur, pro forma interest expense would have been approximately
$24.6 million and $6.2 million for the year ended December 31, 1995 and the
three months ended March 31, 1996, respectively.
(3) EBITDA is defined as net income before interest, taxes, depreciation and
amortization. The Company believes that EBITDA is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. In addition, the Indenture for the
Notes and the Senior Credit Facility contain certain covenants measured by
computations substantially similar to those used in determining EBITDA.
See "Credit Arrangements of the Company" and "Description of the Notes."
However, EBITDA is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to cash flows as a measure of
liquidity, as determined in accordance with generally accepted accounting
principles.
(4) Based on annualized EBITDA for the quarter ended March 31, 1996.
(5) Earnings before fixed charges were inadequate to cover fixed charges by
$1,427 and $2,703 for the three months ended March 31, 1996 and for the
period from inception (April 17, 1995) to December 31, 1995, respectively
(dollars in thousands). Pro forma for the Transactions and the
acquisitions of the Existing Systems, as if each occurred on January 1,
1995, earnings before fixed charges were inadequate to cover fixed charges
for the three months ended March 31, 1996 by $10,049 and inadequate to
cover fixed charges for the year ended December 31, 1995 by $46,639
(dollars in thousands). Pro forma for the acquisitions of the Existing
Systems as if each occurred on January 1, 1995, earnings before fixed
charges were inadequate to cover fixed charges for the three months ended
March 31, 1996 and for the year ended December 31, 1995 by $5,463 and
$26,426, respectively (dollars in thousands). For purposes of this
computation, earnings are defined as income (loss) before fixed charges.
Fixed charges are defined as the sum of (i) interest costs and (ii)
amortization of deferred financing costs.
16
<PAGE> 19
RISK FACTORS
Prior to purchasing any of the Notes offered hereby, prospective investors
should consider carefully the following factors in addition to the other
information contained in this Prospectus. This Prospectus contains
forward-looking statements, within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which are inherently uncertain.
Actual results and events may differ significantly from those discussed in such
forward-looking statements. In addition to the other information set forth in
this Prospectus, factors that might cause or contribute to such differences
include, but are not limited to, the following risk factors.
SUBSTANTIAL LEVERAGE; INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
The Company is, and will continue to be, highly leveraged as a result of the
substantial indebtedness it has incurred, and intends to incur, to finance
acquisitions and expand its operations. As of March 31, 1996, the Company's
total indebtedness outstanding was approximately $217.3 million. As of March
31, 1996, after giving pro forma effect to the Transactions, the Company would
have had approximately $399.7 million of total indebtedness outstanding. In
addition, subject to the restrictions in the Senior Credit Facility and the
Indenture, the Company may incur additional indebtedness, including
indebtedness constituting Senior Indebtedness, from time to time, to finance
acquisitions in the future, for capital expenditures or for general business
purposes. The Company anticipates that, in light of the amount of its existing
indebtedness, it will continue to have substantial leverage for the foreseeable
future. The degree to which the Company is leveraged could adversely affect
the Company's ability to (i) service the Notes, (ii) finance its operations and
fund its capital expenditure requirements, (iii) compete effectively, (iv)
expand its business, (v) comply with its obligations under its franchise
agreements or (vi) operate under adverse economic conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
After giving pro forma effect to the Transactions and the acquisition of the
Existing Systems as if such transactions had occurred at January 1, 1995, the
Company's earnings before fixed charges would have been insufficient to cover
its fixed charges by $46.6 million for the year ended December 31, 1995 and
$10.0 million for the three months ended March 31, 1996. Pro forma for the
acquisitions of the Existing Systems as if each occurred on January 1, 1995,
earnings before fixed charges were inadequate to cover fixed charges for the
three months ended March 31, 1996 and for the year ended December 31, 1995 by
$5.5 million and $26.4 million, respectively. However, for both periods,
earnings are reduced by substantial non-cash charges, principally consisting of
depreciation and amortization.
Since its founding in 1995, the Company has received from FVP aggregate capital
commitments of approximately $123.5 million and, as of March 31, 1996, the
Company had an aggregate of $210.0 million in bank indebtedness outstanding.
The Company's cash from these sources has been sufficient to finance its
acquisitions and, together with cash generated from operating activities, also
has been sufficient to meet the Company's debt service, working capital and
capital expenditure requirements. The ability of the Company to meet its debt
service and other obligations will depend upon the future performance of the
Company which, in turn, is subject to general economic conditions and to
financial, political, competitive, regulatory and other factors, many of which
are beyond the Company's control. The Company's ability to meet its debt
service and other obligations also may be affected by changes in prevailing
interest rates, as borrowings under the Senior Credit Facility will bear
interest at floating rates, subject to certain interest rate protection
agreements. The Company believes that it will continue to generate cash and
obtain financing sufficient to meet such requirements in the future; however,
there can be no assurances that the Company will be able to meet its debt
service and other obligations. If the Company were unable to do so, it would
have to refinance its indebtedness or obtain new financing. Although in the
past the Company has been able to obtain financing through equity investments
and bank borrowings, there can be no assurances that the Company will be able
to do so in the future or that, if the Company were able to do so, the terms
available will be favorable to the Company. See "Selected Financial Data,"
"Management's Discussion and Analysis of Financial
17
<PAGE> 20
Condition and Results of Operations," "Credit Arrangements of the Company" and
"Description of the Notes."
SUBORDINATION OF THE NOTES
The Notes will be general unsecured obligations of the Issuers and will rank
subordinate in right of payment to all existing and future Senior Indebtedness
of the Issuers, including the Company's obligations under the Senior Credit
Facility. The Notes will rank pari passu in right of payment with any other
senior subordinated indebtedness of the Issuers, other than indebtedness, if
any, that by its terms is expressly subordinated in right and priority of
payment to the Notes. At March 31, 1996, on a pro forma basis after giving
effect to the Transactions, the Company would have had approximately $199.7
million of Senior Indebtedness (excluding unused commitments of approximately
$65.3 million under the Senior Credit Facility) and Capital would have had no
Senior Indebtedness. Additional Senior Indebtedness may be incurred by the
Issuers from time to time subject to restrictions in the Senior Credit Facility
and the Indenture. The lenders under the Senior Credit Facility have a
security interest in substantially all the assets of, and partnership interests
in, the Company and thereby have available to them all of the remedies
available to a secured creditor under applicable law. See "--Substantial
Leverage; Insufficiency of Earnings to Cover Fixed Charges" and "Credit
Arrangements of the Company." In the event of a bankruptcy, insolvency or
liquidation of the Company, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. See "Description of
the Notes--Subordination."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture and the Senior Credit Facility impose restrictions that, among
other things, limit the amount of additional indebtedness that may be incurred
by the Company and impose limitations on, among other things, investments,
loans and other payments, certain transactions with affiliates and certain
mergers and acquisitions. The Senior Credit Facility also requires the Company
to maintain specified financial ratios and meet certain financial tests. The
ability of the Company to comply with such covenants and restrictions can be
affected by events beyond its control, and there can be no assurances that the
Company will achieve operating results that would permit compliance with such
provisions. The breach of any of the provisions of the Senior Credit Facility
would, under certain circumstances, result in defaults thereunder, permitting
the lenders under the Senior Credit Facility to accelerate the indebtedness
under the Senior Credit Facility. If the Company were unable to pay the
amounts due in respect of the Senior Credit Facility, the lenders thereunder
could foreclose upon the assets pledged to secure such payment. In such event,
the holders of the Notes might not be able to receive any payments, if ever,
until the payment default was cured or waived, any such acceleration was
rescinded or the indebtedness under the Senior Credit Facility was discharged
or paid in full. Any of such events would adversely affect the Issuers'
ability to service the Notes.
KEY PERSONNEL
The Company's business is substantially dependent upon the performance of
certain key individuals, including Mr. Vaughn and Mr. Koo. Although the
Company maintains a strong management team, the loss of the services of Mr.
Vaughn or Mr. Koo could have a material adverse effect on the Company.
LIMITED OPERATING HISTORY
The Company was formed in July 1995 and has grown principally through
acquisitions. Prospective investors, therefore, have limited historical
financial information about the Company, and about the results that can be
achieved by the Company in managing the cable systems not previously managed by
the Company, upon which to base an evaluation of its performance and an
investment in the Notes. In addition, as a result of the Company's rapid
growth through acquisitions, past operating history is not necessarily
indicative of future results.
18
<PAGE> 21
SIGNIFICANT CAPITAL EXPENDITURES
Consistent with its business strategy, the Company expects to upgrade a
significant portion of its cable television distribution systems over the next
several years to, among other things, increase bandwidth and channel capacity.
The Company's inability to upgrade its cable television systems could have a
material adverse effect on its operations and competitive position. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business."
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY
Cable television systems face competition from alternative methods of receiving
and distributing television signals and from other sources of news, information
and entertainment, such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, online computer services and
home video products, including video tape cassette recorders. Because the
Company's franchises are generally non-exclusive, there is the potential for
competition with the Company's systems from other operators of cable television
systems, including systems operated by local governmental authorities, and from
other distribution systems capable of delivering programming to homes or
businesses, including direct broadcast satellite ("DBS") systems and
multichannel, multipoint distribution service ("MMDS") systems. In recent
years, there has been significant national growth in the number of subscribers
to DBS services. Subscribership to MMDS also is increasing and can be expected
to grow as a result of recent significant investments in and acquisitions of
MMDS companies by local telephone companies. Additionally, recent changes in
federal law and recent administrative and judicial decisions have removed
certain of the restrictions that have limited entry into the cable television
business by potential competitors such as telephone companies, registered
utility holding companies and their subsidiaries. Such developments will
enable local telephone companies to provide a wide variety of video services in
the telephone company's own service area which will be directly competitive
with services provided by cable television systems.
Many of the Company's potential competitors have substantially greater
resources than the Company, and the Company cannot predict the extent to which
competition will materialize in its franchise areas from other cable television
operators, other distribution systems for delivering video programming and
other broadband telecommunications services to the home, or from other
potential competitors, or, if such competition materializes, the extent of its
effect on the Company. See "Business--Competition" and "Legislation and
Regulation."
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under franchises granted by local
authorities which are subject to renewal and renegotiation from time to time.
The Company's business is dependent upon the retention and renewal of its local
franchises. A franchise is generally granted for a fixed term ranging from
five to 15 years but in many cases is terminable if the franchisee fails to
comply with the material provisions thereof. The Company's franchises
typically impose conditions relating to the use and operation of the cable
television system, including requirements relating to the payment of fees,
system bandwidth capacity, customer service requirements, franchise renewal and
termination. See "--Significant Capital Expenditures." The Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act")
prohibits franchising authorities from granting exclusive cable television
franchises and from unreasonably refusing to award additional competitive
franchises; it also permits municipal authorities to operate cable television
systems in their communities without franchises. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act" and collectively with the 1992 Cable
Act, the "Cable Acts") provides, among other things, for an orderly franchise
renewal process in which franchise renewal will not be unreasonably withheld
or, if renewal is
19
<PAGE> 22
withheld, the franchising authority must pay the operator the "fair market
value" for the system covered by such franchise. Although the Company believes
that it generally has good relationships with its franchise authorities, no
assurances can be given that the Company will be able to retain or renew such
franchises or that the terms of any such renewals will be on terms as favorable
to the Company as the Company's existing franchises. The non-renewal or
termination of franchises relating to a significant portion of the Company's
subscribers could have a material adverse effect on the Company's results of
operations. See "Business--Franchises."
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state governmental agencies. The Cable Acts,
both of which amended the Communications Act of 1934 (as amended, the
"Communications Act"), established a national policy to guide the development
and regulation of cable television systems. The Communications Act was
recently substantially amended by the Telecommunications Act of 1996 (the "1996
Telecom Act"). Principal responsibility for implementing the policies of the
Cable Acts has been allocated between the Federal Communications Commission
(the "FCC") and state or local franchising authorities.
Federal Law and Regulation. The 1992 Cable Act and the FCC's rules
implementing that Act generally have increased the administrative and
operational expenses of cable television systems and have resulted in
additional regulatory oversight by the FCC and local or state franchise
authorities. The Cable Acts and the corresponding FCC regulations have
established, among other things, (i) rate regulations, (ii) mandatory carriage
and retransmission consent requirements that require a cable system under
certain circumstances to carry a local broadcast station or to obtain consent
to carry a local or distant broadcast station, (iii) rules for franchise
renewals and transfers, and (iv) other requirements covering a variety of
operational areas such as equal employment opportunity and technical standards
and customer service requirements.
The 1996 Telecom Act deregulates rates for certain cable programming services
tiers ("CPSTs") in 1999 for most MSOs (including the Company) and, for certain
small cable operators, immediately eliminates rate regulation of CPSTs, and, in
certain circumstances, basic services and equipment. The FCC is currently
developing permanent regulations to implement the rate deregulation provisions
of the 1996 Telecom Act. The Company is currently unable to predict the
ultimate effect of the 1992 Cable Act or the 1996 Telecom Act, the ultimate
outcome of the various FCC rulemaking proceedings, or the litigation
challenging various aspects of this federal legislation and the FCC's
regulations implementing the legislation.
State and Local Regulation. Cable television systems generally operate
pursuant to non-exclusive franchises, permits or licenses granted by a
municipality or other state or local governmental entity. The terms and
conditions of franchises vary materially from jurisdiction to jurisdiction. A
number of states subject cable systems to the jurisdiction of centralized state
governmental agencies. To date, no state in which the Company operates has
enacted state level regulation. The Company cannot predict whether any of the
states in which it currently operates will engage in such regulation in the
future. See "Legislation and Regulation."
RISKS RELATING TO ACQUISITION STRATEGY
A significant element of the Company's acquisition strategy is to expand in
certain regions of the United States by acquiring cable television systems
located in reasonable proximity to existing systems or of a sufficient size to
enable the acquired system to serve as the basis for a new local cluster.
Furthermore, any acquisition may have an adverse effect upon the Company's
operating results or cash flow, particularly for acquisitions of new systems
which must be integrated with the Company's existing operations. There can be
no assurances that the Company will be able to integrate successfully any
acquired business with its existing operations or realize any efficiencies
therefrom. There can also be no assurances that any such acquisition, if
consummated, will be profitable or that the Company will be able to obtain any
required financing to acquire additional systems in the future. In addition,
the Company's purchase of the Acquisition Systems is subject to, among other
things, the satisfaction of customary closing conditions and the receipt of
certain third-party or governmental approvals, including the consent of
franchising authorities and, in the case of the Acquisition
20
<PAGE> 23
Systems to be purchased from ACE, the satisfactory conclusion of certain
voluntary bankruptcy proceedings involving ACE. There can be no assurance that
such closing conditions will be satisfied or that the consummation of the
purchase of any of the Acquisition Systems will not otherwise be unduly
delayed. See "Business--Business Strategy."
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
In order to purchase the Notes upon the occurrence of a Change of Control (as
defined in the Indenture governing the Notes), the Issuers may be required to
seek additional financings or engage in asset sales or similar transactions.
There can be no assurance that the Issuers will have sufficient funds to
purchase the Notes upon a Change of Control. In addition, the Senior Credit
Facility includes "change of control" provisions that permit the bank lenders
thereunder to accelerate the repayment of indebtedness under the Senior Credit
Facility (which is senior in right of payment to the Notes), as well as other
provisions that restrict the ability of the Issuers to consummate an offer to
purchase outstanding Notes in connection with a Change of Control. See "Credit
Arrangements of the Company" and "Description of the Notes."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
established market. If the Notes are traded after their initial issuance, they
may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other factors.
The Underwriters have informed the Issuers that, subject to applicable laws and
regulations, they currently intend to make a market in the Notes. However, the
Underwriters are not obligated to do so, and any such market making may be
discontinued at any time without notice. Therefore, no assurances can be given
as to whether an active trading market will develop for the Notes. The Issuers
do not intend to apply for listing of the Notes on any securities exchange.
See "Underwriting."
21
<PAGE> 24
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are estimated
to be approximately $193.0 million. The Company will use such net proceeds,
together with (i) $32.0 million of the proceeds from the Rights Offering, (ii)
$16.9 million of proceeds (net of transaction costs) from the sale of the
Disposition Systems, (iii) $5.7 million of net working capital adjustment
related to the Acquisition Systems and (iv) $0.3 million of available cash on
hand to (i) pay the purchase prices for the Acquisition Systems and (ii) pay
estimated transaction costs associated with the purchase of the Acquisition
Systems. To the extent that there is any delay in consummating the purchase of
any of the Acquisition Systems, a portion of the net proceeds of the Offering
corresponding to the purchase price of such system may be applied to reduce
temporarily revolving indebtedness for borrowings under the Senior Credit
Facility. See "Prospectus Summary -- The Transactions," "The Partnership
Agreements" and "Credit Arrangements of the Company."
The following table sets forth the sources and uses of the proceeds to be
received by the Company in connection with the Acquisition Transactions
(determined as of March 31, 1996):
<TABLE>
<CAPTION> ======
In thousands Amount
------
SOURCES OF FUNDS:
<S> <C>
Rights Offering (1) $ 32,000
% Senior Subordinated Notes due 2006 (2) 193,000
Sale of Disposition Systems (3) 16,860
Net working capital adjustment 5,732
Available cash on hand 278
---
Total sources of funds $247,870
========
USES OF FUNDS:
Purchase Acquisition Systems:
ACE $146,000
Triax 85,000
Grassroots and Penn/Ohio 13,400
Estimated transaction costs for Acquisition Systems 3,470
--------
Total uses of funds $247,870
========
</TABLE>
- -------------------
(1) The approximately $37.8 million of net proceeds remaining from the Rights
Offering will be used to fund additional strategic acquisitions to be
identified and approved by the Advisory Committee of FVP. See
"Management" and "The Partnership Agreements." The size of the equity
commitments to be made available to FVOP through the Rights Offering may
be reduced if no such additional strategic acquisition is so identified or
approved on or before June 30, 1997.
(2) Aggregate proceeds of $200.0 million reduced by underwriting discounts of
$6.0 million and estimated Offering expenses of $1.0 million.
22
<PAGE> 25
(3) Aggregate proceeds of $17.1 million reduced by approximately $0.2 million
of transaction costs associated with the sale of the Disposition Systems.
23
<PAGE> 26
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company at
March 31, 1996, (ii) the Company's capitalization at March 31, 1996 as
adjusted to give effect to the acquisition of certain systems from Cox as if
such transaction had been consummated as of March 31, 1996, and (iii) the
Company's capitalization on a pro forma basis to give effect to the acquisition
of certain systems from Cox, the Offering and the other Transactions as if such
transactions had been consummated as of March 31, 1996. See "Use of Proceeds."
<TABLE>
<CAPTION>
===============================================
As of March 31, 1996
Actual
Actual as Adjusted Pro Forma
-----------------------------------------------
<S> <C> <C> <C>
In thousands
LONG-TERM INDEBTEDNESS:
Senior Credit Facility (1) $116,800 $210,000 $199,663
___% Senior Subordinated Notes due 2006 - - 200,000
Capital leases 72 72 72
UVC Note (2) 7,200 7,200 -
------- ------- -------
Total long-term indebtedness 124,072 217,272 399,735
PARTNERS' EQUITY:
Class A Partnership Interests (2) - - 5,000
Other partnership interests 60,009 100,509 143,309
------- ------- -------
Total partners' equity 60,009 100,509 148,309
------- ------- -------
Total capitalization $184,081 $317,781 $548,044
======== ========= =========
</TABLE>
(1) On a pro forma basis, after giving effect to the Transactions, $65.3
million aggregate principal amount will be unused and available for
borrowing.
(2) Concurrently with or prior to the consummation of the Offering, it is
anticipated that UVC will convert $5.0 million aggregate principal amount
of the UVC Note into Class A Partnership Interests and the balance of
accrued interest and principal under the UVC Note will be repaid. See "The
Partnership Agreements--The Company Partnership Agreement--Class A
Partnership Interests."
24
<PAGE> 27
SELECTED FINANCIAL DATA
The following tables present selected financial and operating data derived from
the Company's financial statements as of and for the period from inception
(April 17, 1995) through December 31, 1995 which have been audited by Arthur
Andersen LLP, independent public accountants. The following tables also
present selected financial and operating data as of and for the three months
ended March 31, 1996 derived from the unaudited financial statements of the
Company. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, which consist only of normal recurring adjustments, necessary
to present fairly the financial position and the results of operations for the
interim period. Operating results for the three months ended March 31, 1996
are not necessarily indicative of the results that may be expected for the full
year.
In addition, the following tables present unaudited pro forma selected
financial and operating data for the Company as of and for the three months
ended March 31, 1996 and the year ended December 31, 1995, as adjusted to give
pro forma effect to the acquisition of the Existing Systems as if such
transactions had been consummated on January 1, 1995 and as adjusted to
give pro forma effect to the acquisition of the Existing Systems and the
Transactions as if such transactions had been consummated on January 1, 1995.
See "Pro Forma Financial Data." The unaudited pro forma balance sheet data as
of March 31, 1996 give effect to the purchase of the systems from Cox and the
Transactions as if they occurred on March 31, 1996. The unaudited pro forma
financial and operating data presented below are based upon the historical
financial statements of the Company and certain of the Existing Systems and the
Acquisition Systems. The unaudited pro forma data give effect to the
acquisitions under the purchase method of accounting and certain other
operating assumptions. See "Pro Forma Financial Data."
The unaudited pro forma financial and operating data do not purport to
represent what the Company's results of operations or financial condition would
have actually been if the transactions that give rise to the pro forma
adjustments had occurred on the dates assumed or operations of the Company in
any future period. The following information is qualified by reference to and
should be read in conjunction with "Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and related notes thereto of the Company and
certain of the Existing Systems and Acquisition Systems included elsewhere in
this Prospectus.
25
<PAGE> 28
<TABLE>
<CAPTION>
Annualized
Three Months April 17 to
Three Months Ended March 31 Ended March 31 Year Ended December 31 December 31
--------------------------- -------------- ---------------------- -----------
Pro Forma for
Transactions Pro Forma Pro Forma for Pro Forma for Pro Forma
and Existing for Existing Transactions Transactions for Existing
Systems Systems Actual and Existing and Existing Systems Actual
1996 1996 1996 (1) Systems 1996 Systems 1995 1995 1995 (1)
------------ ----------- --------- ------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands, except
ratios and operating
statistical data
STATEMENT OF OPERATIONS
DATA:
Revenues $ 30,148 $ 17,704 $ 9,780 $120,592 $116,962 $70,827 $ 4,369
Operating expenses 14,367 8,362 4,688 57,468 58,441 34,748 2,311
Corporate administrative
expenses 1,059 769 570 4,236 3,029 1,788 127
Depreciation and
amortization 14,409 7,990 3,476 57,636 59,794 35,041 2,308
Pre-acquisition expenses - - - - 940 940 940
-------- -------- ------- -------- --------- -------- --------
Operating income (loss) 313 583 1,046 1,252 (5,242) (1,690) (1,317)
Interest expense, net (2) 10,362 6,046 2,473 41,448 41,397 24,736 1,386
-------- -------- ------- -------- --------- -------- --------
Net income (loss) $(10,049) $ (5,463) $ (1,427) $(40,196) $(46,639) $(26,426) $ (2,703)
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET DATA (END OF
PERIOD):
Total assets $562,414 $325,005 $188,258 $143,512
Total debt 399,735 217,272 124,072 93,579
Partners' capital 148,309 100,509 60,009 46,407
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA (3) $ 14,722 $ 8,573 $ 4,522 $ 58,888 $ 54,552 $ 33,351 $ 991
EBITDA margin 48.8% 48.4% 46.2% 48.8% 46.6% 47.1% 22.7%
Total debt to EBITDA (4) 6.79 6.34s 6.86 6.79
EBITDA to interest expense 1.41 1.40 1.77 1.41 1.32 1.35 0.69
Earnings to fixed charges - - - - - - -
(5)
OPERATING STATISTICAL DATA
(END OF PERIOD EXCEPT
AVERAGE):
Homes passed 493,862 291,496 180,626 490,610 288,428 177,553
Basic subscribers 351,983 204,519 126,264 350,936 203,525 125,498
Basic penetration 71.3% 70.2% 69.9% 71.5% 70.6% 70.7%
Premium units 143,218 78,219 49,759 146,216 77,557 50,305
Premium penetration 40.7% 38.2% 39.4% 41.7% 38.1% 40.1%
Average monthly revenue
per basic subscriber $ 28.55 $ 28.85 $ 27.15 $ 27.77 $ 29.00 $ 27.70
</TABLE>
26
<PAGE> 29
(1) All financial data exclude the systems acquired from Cox.
(2) Pro forma interest expense is calculated assuming that borrowings under the
Senior Credit Facility were at a weighted average rate of 8.38% and the
interest rate on the Notes was 11.5%. If the actual interest rate were to
increase or decrease by 25 basis points, pro forma interest expense on the
Notes would increase or decrease by $500,000 per annum. Interest expense of
$10,362, $6,046, $2,473, $41,448, $41,397, $24,736 and $1,386 was net of
interest income of $84, $84, $84, $334, $60, $60 and $60, respectively
(dollars in thousands). Assuming the purchase of the Acquisition Systems
does not occur, pro forma interest expense would have been approximately
$24.6 million and $6.2 million for the year ended December 31, 1995 and the
three months ended March 31, 1996, respectively.
(3) EBITDA is defined as net income before interest, taxes, depreciation and
amortization. The Company believes that EBITDA is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. In addition, the Indenture for the
Notes and the Senior Credit Facility contain certain covenants measured by
computations substantially similar to those used in determining EBITDA.
See "Credit Arrangements of the Company" and "Description of the Notes."
However, EBITDA is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to cash flows as a measure of
liquidity, as determined in accordance with generally accepted accounting
principles.
(4) Based on annualized EBITDA for the quarter ended March 31, 1996.
(5) Earnings before fixed charges were inadequate to cover fixed charges by
$1,427 and $2,703 for the three months ended March 31, 1996 and for the
period from inception (April 17, 1995) to December 31, 1995, respectively
(dollars in thousands). Pro forma for the Transactions and the
acquisitions of the Existing Systems, as if each occurred on January 1,
1995, earnings before fixed charges were inadequate to cover fixed charges
by $10,049 for the three months ended March 31, 1996 and inadequate to
cover charges for the year ended December 31, 1995 by $46,639 (dollars
in thousands). Pro forma for the acquisitions of the Existing Systems
as if each occurred on January 1, 1995, earnings before fixed charges
were inadequate to cover fixed charges for the three months ended
March 31, 1996 and for the year ended December 31, 1995 by $5,463 and
$26,426, respectively (dollars in thousands). For purposes of this
computation, earnings are defined as income (loss) before fixed charges.
Fixed charges are defined as the sum of (i) interest costs and (ii)
amortization of deferred financing costs.
27
<PAGE> 30
SUMMARY COMBINED SELECTED HISTORICAL FINANCIAL DATA OF
CERTAIN EXISTING SYSTEMS AND ACQUISITION SYSTEMS
The summary combined selected historical financial data presented below
represent the combined historical financial data of certain of the Existing
Systems and the Acquisition Systems. Combined financial data do not include
results of operations of the systems acquired from UVC and Longfellow during
the period in 1995 when such systems were owned by the Company. The
presentation is made on two bases for both the Existing Systems and the
Acquisition Systems. First, information for the Existing Systems is provided
on a combined basis as of and for the year ended December 31, 1995. Second,
combined historical financial data is presented as of and for the years ended
December 31, 1995, 1994 and 1993 for certain of the Existing Systems, which
represented approximately 96% of the Existing Systems in terms of number of
basic subscribers, on a pro forma basis as of March 31, 1996 and include only
the systems acquired from UVC, C4 and Cox (collectively the "Acquired
Predecessor Systems"). Similarly, information for the Acquisition Systems is
provided on a combined basis as of and for the year ended December 31, 1995.
In addition, combined historical financial data is presented as of and for the
years ended December 31, 1995, 1994 and 1993 for the ACE and Triax systems
(collectively the "Probable Predecessor Acquisition Systems"), which
represented approximately 93% of the Acquisition Systems in terms of the number
of basic subscribers, on a pro forma basis as of March 31, 1996.
The summary unaudited combined selected historical financial data presented
below are derived from the audited and unaudited historical financial
statements of the Existing Systems and the Acquisition Systems and should be
read in conjunction with the audited financial statements and related notes
thereto of the Acquired Predecessor Systems and the Probable Predecessor
Acquisition Systems and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
The combined selected financial data set forth below represent the combined
results of operations for the systems for periods during which the systems were
not owned by the Company and, accordingly, do not reflect any purchase
accounting adjustments or any changes in the operation or management of the
systems that the Company has made since the date of acquisition or that it
intends to make in the future. Accordingly, the Company does not believe that
such operating results are indicative of future operating results of the
Company.
<TABLE>
<CAPTION>
EXISTING SYSTEMS
=========================================================================
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------------
EXISTING SYSTEMS ACQUIRED PREDECESSOR SYSTEMS
----------------- -----------------------------------------------------
1995 (1)(2) 1995 (3)(4) 1994 (5)(6) 1993 (5)(6)
---------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
In thousands
STATEMENT OF OPERATIONS DATA:
Revenues $ 66,370 $ 63,897 $ 64,431 $ 63,383
Operating expenses 37,747 35,819 35,443 34,647
Depreciation and amortization 24,080 23,726 22,038 20,324
--------- --------- --------- --------
Operating income 4,543 4,352 6,950 8,412
Interest expense (12,254) (12,216) (11,905) (11,763)
Other expenses (3,899) (3,899) ( 3,836) (3,450)
---------- ---------- ---------- --------
Net loss $ (11,610) $ (11,763) $ ( 8,791) $(6,801)
========== ========== ========== ========
BALANCE SHEET DATA (END OF
PERIOD):
Total assets $ 204,657 $ 195,341 $ 132,016 $ 70,399
Total debt 68,545 60,166 60,166 60,166
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
Acquisition Systems
======================================================================
Year Ended December 31
----------------------
Acquisition Systems Probable Predecessor Acquisition Systems
------------------- ------------------------------------------------
1995 (7)(8) 1995 (9)(10) 1994 (9)(10) 1993 (9)(10)
------------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
In thousands
STATEMENT OF OPERATIONS DATA:
Revenues $ 49,698 $ 45,868 $ 40,937 $ 32,788
Operating expenses 29,452 26,836 23,200 18,055
Depreciation and amortization 19,939 18,628 24,307 21,539
------- -------- -------- --------
Operating income 307 404 (6,570) (6,806)
Interest expense (26,397) (25,682) (22,601) (19,467)
Other expense - 48 1,266 -
-------- --------- --------- --------
Net loss $(26,090) $(25,230) $(27,905) $(26,273)
========= ========= ========= =========
BALANCE SHEET DATA (END OF PERIOD):
Total assets $ 97,121 $ 92,912 $ 96,804 $111,500
Total debt 220,296 210,252 206,131 195,153
</TABLE>
- ------------------
(1) Includes the combined results of operations of systems acquired from UVC,
Longfellow, C4, Americable and Cox for the period ended December 31, 1995
(except for UVC and Longfellow, which is for the period ended November 8,
1995 and November 20, 1995, respectively). As the results of operations of
systems acquired from UVC and Longfellow are included in the Company's
historical results of operations subsequent to the date of the Company's
acquisition (November 9, 1995 and November 21, 1995, respectively), the
amounts do not include $4.4 million in revenues, $2.4 million in operating
expenses and $2.3 million in depreciation and amortization (computed after
the application of purchase accounting adjustments attributable to such
systems).
(2) Includes combined balance sheet data for systems acquired from UVC and
Longfellow as of November 9, 1995 and November 21, 1995, the dates of the
Company's acquisition thereof, and combined balance sheet data for systems
acquired from C4, Americable and Cox as of December 31, 1995, because such
acquisitions occurred after December 31, 1995.
(3) Includes the combined results of operations of systems acquired from UVC,
C4 and Cox for the year ended December 31, 1995 (except for UVC, which is
for the period ended November 8, 1995). As the results of operations of
systems acquired from UVC are included in the Company's historical results
of operations subsequent to the date of the Company's acquisition thereof
(November 9, 1995), the amounts do not include $4.2 million in revenues,
$2.4 million in operating expenses and $2.2 million in depreciation and
amortization (computed after the application of purchase accounting
adjustments attributable to such systems).
(4) Includes combined balance sheet data for systems acquired from UVC as of
November 9, 1995, the date of the Company's acquisition thereof, and
combined balance sheet data for systems acquired from C4 and Cox as of
December 31, 1995, because such acquisitions occurred after that date.
(5) Includes the combined results of operations of systems acquired from
UVC, C4 and Cox for the year ended December 31, 1994 and 1993.
(6) Includes combined balance sheet data for systems acquired from UVC, C4 and
Cox as of December 31, 1994 and 1993.
(7) Includes the combined results of operations of systems expected to be
acquired from ACE, Triax, Grassroots and Penn/Ohio for the year ended
December 31, 1995.
(8) Includes combined balance sheet data for systems expected to be acquired
from ACE, Triax, Grassroots and Penn/Ohio.
(9) Includes the combined results of operations of systems expected to be
acquired from ACE and Triax for the years ended December 31, 1995, 1994 and
1993.
(10) Includes combined balance sheet data for systems acquired from ACE
and Triax as of December 31, 1995, 1994 and 1993.
29
<PAGE> 32
PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data presented below are based upon the
historical financial statements of the Company and certain of the Existing
Systems and the Acquisition Systems. The unaudited pro forma condensed
consolidated statement of operations data for the three months ended March 31,
1996 and for the period from inception (April 17, 1995) to December 31, 1995
give effect to the purchase of the Existing Systems and the Transactions as if
each such transaction had occurred on January 1, 1995. The unaudited pro forma
balance sheet data as of March 31, 1996 give effect to the the Transactions and
the acquisition of the Cox systems as if each such transaction had occurred on
March 31, 1996. The Transactions consist of the Rights Offering, the Offering,
the Credit Agreement Restatement, the Credit Agreement Repayment, the sale of
the Disposition Systems, the purchase of the Acquisition Systems and the
of the UVC Note. The Rights Offering and the UVC Note Conversion are expected
to be consummated concurrently with or prior to the closing of the Offering.
The unaudited pro forma financial data give effect to the acquisitions
described above under the purchase method of accounting and are based
upon the assumptions and adjustments described in the accompanying notes
to the unaudited pro forma financial statements presented on the following
pages. The allocations of the total purchase price for certain of the Existing
Systems as well as each of the Acquisition Systems are based on preliminary
estimates and are subject to final allocation adjustments.
The unaudited pro forma financial statements may not be indicative of the
results that actually would have occurred if the acquisitions and other
transactions described above had been completed and in effect for the periods
indicated or the results that may be obtained in the future. The unaudited pro
forma financial data presented below should be read in conjunction with the
audited and unaudited historical financial statements and related notes
thereto of the Company and various Existing Systems and the Acquisition
Systems and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
30
<PAGE> 33
FRONTIERVISION OPERATING PARTNERS, L.P.
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
===============================================================================
As of March 31, 1996
Cox Systems Existing Systems ACE Systems Triax Systems
Actual Acquisition (1) Subtotal Acquisition (2) Acquisition (3)
---------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
In thousands
Cash and cash equivalents $ 407 $2,263 $ 2,670 $ $
Accounts receivable, net 471 1,784 2,255 305 769
Prepaid expenses 599 - 599 198 -
Property and equipment 64,169 47,600 111,769 58,400 38,761
Franchise costs 80,612 40,800 121,412 51,100 31,414
Covenant not to compete - 13,600 13,600 7,300 100
Subscriber lists 27,939 27,200 55,139 21,900 14,725
Goodwill 4,125 6,800 10,925 7,300 -
Deferred financing costs and other 2,936 3,700 6,636 6,207 3,710
Earnest money deposits 7,000 (7,000) - - -
-------- --------- -------- --------- ------
Total assets $188,258 $136,747 $325,005 $ 152,710 $89,479
======== ======== ======== ========= =======
Accounts payable 340 580 920 4,244 1,711
Accrued liabilities 2,572 1,112 3,684 - 310
Subscriber prepayments and
deposits 424 1,355 1,779 259 -
Accrued interest payable 841 - 841 - -
Debt 124,072 93,200 217,272 123,981 73,329
Partners' capital - Existing 60,009 40,500 100,509 5,110 3,000
Partners' capital - Rights Offering - - - 19,116 11,129
-------- -------- -------- -------- --------
Total liabilities and partners' capital $188,258 $136,747 $325,005 $152,710 $89,479
======== ======== ======== ======== =======
<CAPTION>
======================================================================
As of March 31, 1996
Other Pending The UVC
Acquisitions (4) Dispositions (5) Note (6) Pro Forma
---------------- --------------- --------- -----------
<S> <C> <C> <C> <C>
In thousands
Cash and cash equivalents $266 $ - $(2,529)(7) $ 407
Accounts receivable, net 147 - - 3,476
Prepaid expenses 42 - - 839
Property and equipment 4,643 (5,264) - 208,309
Franchise costs 4,990 (9,711) - 199,205
Covenant not to compete 867 (1,108) - 20,759
Subscriber lists 2,223 - - 93,987
Goodwill 677 (577) - 18,325
Deferred financing costs and other 554 - - 17,107
Earnest money deposits - - - -
------- -------- ------- --------
Total assets $14,409 $(16,660) $(2,529) $562,414
======= ========= ======== ========
Accounts payable 295 - - 7,170
Accrued liabilities 640 - - 4,634
Subscriber prepayments and - - - 2,038
deposits
Accrued interest payable 16 - (329) 528
Debt 9,213 (16,860) (7,200) 399,735
Partners' capital - Existing 2,490 200 - 111,309 (8)
Partners' capital - Rights Offering 1,755 5,000 37,000
------- -------- ------- --------
Total liabilities and partners' capital $14,409 $(16,660) $(2,529) $562,414
======= ========= ======= ========
</TABLE>
31
<PAGE> 34
FOOTNOTES FOR THE PRO FORMA BALANCE SHEET AS OF MARCH 31, 1996
(1) The Company purchased the Cox Systems on April 9, 1996 for approximately
$136.5 million. See "Business--Development of the Systems--The Existing
Systems--Cox Systems." The purchase price was allocated to the tangible
and intangible assets comprising the Cox Systems as follows:
<TABLE>
<CAPTION>
=========================================================================
Annualized
Purchase Price Preliminary Depreciation and
Historical Adjustments Allocation Asset Life Amortization
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
In thousands
Property and equipment $ 25,621 $ 21,979 $47,600 8 $5,950
Franchise costs - 40,800 40,800 15 2,720
Covenant not to compete - 13,600 13,600 5 2,720
Subscriber lists - 27,200 27,200 7 3,885
Goodwill 110,796 (103,496) 7,300 15 453
--------
Total $136,500
</TABLE>
(2) In July 1996, the Company entered into an agreement with ACE to acquire the
ACE Systems for approximately $146.0 million. See "Business--Development
of the Systems--The Acquisition Systems--ACE Systems." The total pro forma
balance sheet effect of the purchase of the ACE Systems include the
anticipated balance sheet effect of $146.0 million allocated according to
the following table, approximately $6.2 million of anticipated transaction
and allocated financing costs and the accounting for working capital of
approximately $0.5 million. Liabilities assumed directly reduce the cash
needed to finance the acquisition. Although the final allocation of the
purchase price has not yet been determined, the Company estimates that the
purchase price will be allocated to the tangible and intangible assets
comprising the ACE Systems as follows:
<TABLE>
<CAPTION>
========================================================================
Annualized
Purchase Depreciation
Price Preliminary and
Historical Adjustments Allocation Asset Life Amortization
---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
In thousands
Property and equipment $25,864 $32,536 $ 58,400 8 $7,300
Franchise costs 2,089 49,011 51,100 15 3,407
Covenant not to compete 61 7,239 7,300 5 1,460
Subscriber lists 1,317 20,583 21,900 7 3,129
Goodwill 3,553 3,580 7,300 15 487
-------
Total $146,000
</TABLE>
(3) In May 1996, the Company entered into an agreement with Triax to acquire
the Triax Systems for approximately $85.0 million. See
"Business--Development of the Systems--The Acquisition Systems--Triax
Systems." The total pro forma balance sheet effect of the purchase of the
Triax Systems include the anticipated balance sheet effect of $85.0 million
allocated according to the following table, approximately $3.7 million
of anticipated transaction and allocated financing costs and the accounting
for working capital of approximately $0.8 million. Liabilities assumed
directly reduce the cash needed to finance the acquisition. Although the
final allocation of the purchase price has not yet been determined, the
Company estimates that the purchase price will be allocated to the tangible
and intangible assets comprising the Triax Systems as follows:
<TABLE>
<CAPTION>
==========================================================================
Annualized
Purchase Price Preliminary Depreciation and
Historical Adjustments Allocation Asset Life Amortization
---------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
In thousands
Property and equipment $37,837 $ 924 $38,761 8 $4,845
Franchise costs 9,123 22,291 31,414 15 2,094
Covenant not to compete - 100 100 5 20
Subscriber lists - 14,725 14,725 7 2,104
Goodwill - - -
---------
Total $85,000
</TABLE>
32
<PAGE> 35
(4) The Company has entered into an agreement to acquire the Grassroots Systems
for approximately $9.6 million and expects to enter into an agreement in
August 1996 to acquire the Penn/Ohio Systems for approximately $3.8 million.
See "Business--Development of the Systems--The Acquisition
Systems--Grassroots Systems" and "--Penn/Ohio Systems." The total pro forma
balance sheet effect at the purchase of the Grassroots and Penn/Ohio Systems
include the anticipated balance sheet effect of $13.4 million allocated
according to the following table, approximately $0.5 million of anticipated
transaction and allocated deferred financing costs and the accounting for
working capital of approximately $0.5 million. Liabilities assumed directly
reduce the cash needed to finance the acquisition. Although the final
allocation of the purchase price has not yet been determined, the Company
estimates that the purchase price will be allocated to the tangible and
intangible assets as follows:
<TABLE>
<CAPTION>
================================================================================
Annualized
Purchase Price Preliminary Depreciation and
Historical Adjustments Allocation Asset Life Amortization
---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
In thousands
Property and equipment $3,158 $1,485 $4,643 8 $593
Franchise costs 312 4,678 4,990 15 336
Covenant not to compete 11 856 867 5 174
Subscriber lists - 2,222 2,222 7 317
Goodwill - 678 678 15 45
------
Total $13,400
</TABLE>
(5) On July 24, 1996, the Company sold its Chatsworth, Georgia System for
approximately $8.6 million. The Company has also entered into an agreement
to sell its Woodstock and New Market, Virginia systems for approximately
$8.5 million. See "Business--Development of the Systems--Disposition
Systems." The Company anticipates using the net proceeds from such sales
to reduce revolving indebtedness under the Senior Credit Facility.
(6) Includes the conversion of $5.0 million of the $7.2 million aggregate
principal amount outstanding under the UVC Note into Class A Partnership
Interests of FVOP and the repayment of the balance of the outstanding
principal and accrued interest of approximately $2.2 million and $329,000,
respectively.
(7) Represents the use of certain of the available cash on hand resulting from
prior equity contributions in excess of immediately needed funds.
(8) Total pro forma equity includes capital commitments previously received by
the Company to fund prior acquisitions, earnest money deposits and
accumulated operating losses, but does not include capital committed to the
Company which has not yet been contributed by the general partner.
33
<PAGE> 36
<TABLE>
<CAPTION>
FRONTIERVISION OPERATING PARTNERS, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
===================================================================================================================================
Existing Systems
================================================================================================
Pro Forma
Americable Cox for the
C4 Systems Systems Systems Pro Forma Existing
Actual Acquisition (1) Acquisitions (2) Acquisition (3) Adjustments Systems
------ --------------- ---------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
In thousands
Revenues $9,780 $ 945 $ 284 $ 6,695 - $ 17,704
Expenses
Operating expenses 4,688 579 181 3,250 (336)(5) 8,362
Corporate 570 67 41 321 (230)(7) 769
administrative
expense
Depreciation and
amortization 3,476 463 148 1,044 2,859 (9) 7,990
Total expenses 8,734 1,109 370 4,615 2,293 17,121
Operating income 1,046 (164) (86) 2,080 (2,293) 583
(loss)
Interest expense, net (2,473) (682) (12) (5) (2,874) (11) (6,046)
Minority interest in
loss of subsidiary 0 10 0 0 (10) (13) 0
--------- --------- ---------- ---------- ----------- --------
Net income (loss) (1,427) (836) (98) 2,075 (5,177) (5,463)
========== ========== =========== ========== =========== ===========
<CAPTION>
FRONTIERVISION OPERATING PARTNERS, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
===================================================================================================================================
Acquisition Systems
=====================================================================
Grassroots Pro Forma
ACE Triax and for the Pro Forma
Systems Systems Penn/Ohio Pro Forma Acquisition Disposition for all
Acquisition Acquisition Acquisitions Adjustments Systems Systems (4) Systems
----------- ----------- ------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
Revenues $ 7,607 $ 4,722 $ 927 $ 0 $ 13,256 $ (812) $ 30,148
Expenses
Operating expenses 4,046 2,202 468 (298) (6) 6,418 (413) 14,367
Corporate 228 349 16 (262) (8) 331 (41) 1,059
administrative
expense
Depreciation and
amortization 2,358 1,803 328 2,090 (10) 6,579 (160) 14,409
Total expenses 6,632 4,354 812 1,530 13,328 (614) 29,835
Operating income 975 368 115 (1,530) (72) (198) 313
(loss)
Interest expense, net (6,698) (796) (295) 3,473 (12) (4,316) - (10,362)
Minority interest in
loss of subsidiary 0 0 - - 0 - 0
-------- -------- --------- --------- --------- ---------- ---------
Net income (loss) (5,723) (428) (180) 1,943 (4,388) (198) (10,049)
========= ========= ========== ========== ========== ========== ==========
</TABLE>
34
<PAGE> 37
(1) The C4 acquisition was completed on February 1, 1996. Accordingly, results
of operations subsequent to February 1, 1996 are included in the Company's
historical results. Amounts listed in this column represent the
pre-acquisition results of operations of the systems acquired from C4
during the period from January 1, 1996 through January 31, 1996.
(2) The Americable acquisition was completed on March 29, 1996. Accordingly,
the Company will reflect the results of operations of the systems acquired
from Americable beginning April 1, 1996. The amounts reflected in this
column represent the pre-acquisition results of operations of the systems
acquired from Americable during the three months ended March 31, 1996.
(3) The Cox acquisition was completed on April 9, 1996. Accordingly, the
Company will reflect the results of operations of the systems acquired from
Cox beginning April 10, 1996. The amounts reflected in this column
represent the pre-acquisition results of operations of the systems acquired
from Cox during the three months ended March 31, 1996.
(4) Represents the operations of Chatsworth, Georgia and Woodstock and New
Market, Virginia.
(5) Represents the estimated cost savings of the Company's master programming
contracts and the elimination of duplicative functions and personnel
attributable to the C4, Americable and Coxacquisitions:
<TABLE>
<CAPTION>
==================================================
Programming Duplicative Pro Forma
In thousands Costs Functions Savings
------------- -------------- --------------
<S> <C> <C> <C>
$272 $64 $336
</TABLE>
(6) Represents the estimated cost savings of the Company's master programming
contracts and the elimination of duplicative functions and personnel
attributable to the acquisition of the Acquisition Systems.
<TABLE>
<CAPTION>
==================================================
Programming Duplicative Pro Forma
In thousands Costs Functions Savings
------------- -------------- --------------
<S> <C> <C> <C>
$67 $231 $298
</TABLE>
(7) Represents the elimination of management fees and allocated overhead costs,
and the inclusion of estimated incremental overhead costs of the Company
attributable to the C4, Americable and Cox acquisitions:
<TABLE>
<CAPTION>
==================================================
Reversal of
Management Company Pro Forma
In thousands Fees Overhead Savings
------------- -------------- --------------
<S> <C> <C> <C>
$429 $(199) $230
</TABLE>
35
<PAGE> 38
(8) Represents the elimination of management fees and allocated overhead costs,
and the inclusion of estimated incremental overhead costs of the Company
attributable to the acquisition of the Acquisition Systems:
<TABLE>
<CAPTION>
======================================================
Reversal of
Management Company Pro Forma
In Fees Overhead Savings
thousands
----------------- ------------ ---------------
<S> <C> <C> <C>
$593 $(331) $262
</TABLE>
(9) Represents additional depreciation and amortization of $2,859 (in
thousands) resulting from the application of purchase accounting
to the C4, Americable and Cox acquisitions.
(10) Represents additional depreciation and amortization of $2,090 (in
thousands) resulting from the application of purchase accounting to
the acquisition of the Acquisition Systems.
(11)(12) Adjusted to account for the Transactions:
<TABLE>
<CAPTION>
====================================================
The Company Existing Acquisition
Systems Systems
In thousands ------------ ------------- --------------
<S> <C> <C> <C>
Note number (11) (12)
Interest expense on the Notes $ 5,750 $3,351 $ 2,399
Net incremental amortization of issuance costs 328 80 248
Commitment fee on unused amount 82 48 34
Interest on Senior Credit Facility 4,205 2,653 1,635
Less: Interest on former credit facility (2,557) (2,557) (0)
Less: Interest recorded by prior asset owners (8,490) (701) (7,789)
------------ ------------- ----------------
Pro forma interest adjustment $ (682) $2,874 $(3,473)
============ ============= ================
</TABLE>
Interest expense is calculated based on total outstanding debt of approximately
$399.7 million of which $200.0 million represents proceeds of the Offering and
$199.7 million represents borrowings under the Company's Senior Credit
Facility. Pro forma interest expense is calculated on the applicable
outstanding principal amounts at rates of 11.5% on the Notes and rates at 275
to 325 basis points above LIBOR for the borrowings under the Senior Credit
Facility. Interest expense for the 12 months also includes the amortization of
deferred financing fees of approximately $1.3 million and commitment fees of
$326,000 on the unfunded amount under the Senior Credit Facility of
approximately $65.3 million. Pro forma interest expense is generally allocated
to the Existing Systems and the Acquisition Systems based upon the relative
approximate purchase price of each system. The net amount of the pro forma
interest expense adjustment includes the effect of approximately $83,400 of
interest income for the three months ended March 31, 1996.
(13) Represents the elimination of the minority interest in earnings
of C4 prior to acquisition.
36
<PAGE> 39
FRONTIERVISION OPERATING PARTNERS, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
=======================================================================================================
Existing Systems
-------------------------------------------------------------------------------------------------------
Actual for the Longfellow
Period from Systems and Pro Forma
Inception UVC C4 Americable Cox for the
(July 14, 1995) to Systems Systems Systems Systems Pro Forma Existing
December 31, 1995(1) Acquisition(2) Acquisition Acquisitions(3) Acquisition Adjustments Systems
----------------- ------------ ----------- ------------ ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
Revenues $ 4,369 $ 25,417 $ 11,756 $ 2,561 $ 26,724 $ - $ 70,827
Expenses
Operating expenses 2,311 13,098 6,735 1,662 12,662 (1,720)(5) 34,748
Corporate administrative 127 1,270 546 347 1,513 (2,015)(7) 1,788
expense
Depreciation and 2,308 9,625 5,552 354 8,549 8,653 (9) 35,041
amortization
Pre-acquisition expenses 940 0 0 0 0 0 940
--------- ----------- --------- --------- ---------- ---------- ----------
Total expenses 5,686 23,993 12,833 2,363 22,724 4,918 72,517
Operating income (loss) (1,317) 1,424 (1,077) 198 4,000 (4,918) (1,690)
Interest expense net (1,386) (4,087) (8,208) (35) 79 (11,099)(11) (24,736)
Other income (expense) -
Minority interest in loss 0 0 103 0 0 (103)(14) 0
of subsidiary
Net income (loss),
before income taxes (2,703) (2,663) (9,182) 163 4,079 (16,120) (26,426)
Provision for income taxes 0 0 0 0 (3,997) 3,997 (16) 0
---------- ----------- --------- --------- --------- ---------- ---------
Net income (loss) $ (2,703) $ (2,663) $ (9,182) $ 163 $ 82 $ (12,123) $ (26,426)
========= ========== ========== ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
Acquisition Systems
----------------------------------------------------------------------------------------------------
Grassroots Pro Forma
ACE Triax and for the ProForma
Systems Systems Penn/Ohio Pro Forma Acquisition Disposition for all
Acquisition Acquisition Acquisitions Adjustments Systems Systems(4) Systems
----------- ----------- ------------ ----------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
Revenues $28,088 $17,780 $ 3,828 $0 $49,696 $(3,561)(15) $116,962
Expenses
Operating expenses 15,829 8,438 2,415 (1,166)(6) 25,516 (1,823)(14) 58,441
Corporate administrative 843 1,168 247 (1,017)(8) 1,241 0 3,029
expense
Depreciation and 11,284 7,344 1,311 6,369(10) 26,308 (1,555) 59,794
amortization
Pre-acquisition expenses 0 0 0 0 0 - 940
-------- -------- -------- -------- ------- -------- --------
Total expenses 27,956 16,950 3,973 4,186 53,065 (3,378) 122,204
Operating income (loss) 132 830 (145) (4,186) (3,369) (183) (5,242)
Interest expense net (22,366) (3,316) (715) 9,736 (12) (16,661) 0 (41,397)
Other income (expense) (558) 0 0 558(13) 0 0 0
Minority interest in loss 48 0 0 (48)(15) 0 0 0
of subsidiary
Net income (loss),
before income taxes (22,744) (2,486) (860) 6,060 (20,030) (183) (46,639)
Provision for income taxes - 0 - - 0 - 0
-------- -------- -------- -------- ------- -------- --------
Net income (loss) $(22,744) $(2,486) $(860) $6,060 $(20,030) $ (183) $(46,639)
======== ======== ======== ======== ======= ======== ========
</TABLE>
37
<PAGE> 40
(1) Includes the results of operations of the systems acquired from UVC
subsequent to November 9, 1995 and the results of operations of the systems
acquired from Longfellow subsequent to November 21, 1995.
(2) Historical results for the period prior to acquisition (January 1, 1995
through November 8, 1995).
(3) Historical results of the systems acquired from Longfellow for the period
from January 1, 1995 through November 20, 1995 and of the systems acquired
from Americable for the year ended December 31, 1995.
(4) Represents the operations of Chatsworth, Georgia and Woodstock and New
Market, Virginia.
(5) Represents the estimated cost savings of the Company's master programming
contracts and the elimination of duplicative functions and personnel
attributable to the acquisition of the Existing Systems:
<TABLE>
<CAPTION>
==================================================
Programming Duplicative Pro Forma
In thousands Costs Functions Savings
------------- -------------- -------------
<S> <C> <C> <C>
$762 $958 $1,720
</TABLE>
(6) Represents the estimated cost savings of the Company's master programming
contracts and the elimination of duplicative functions and personnel
attributable to the acquisition of the Acquisition Systems:
<TABLE>
<CAPTION>
==================================================
Programming Duplicative Pro Forma
In thousands Costs Functions Savings
------------- -------------- -------------
<S> <C> <C> <C>
$(1) $1,167 $1,166
</TABLE>
(7) Represents the elimination of management fees and allocated overhead costs,
and the inclusion of estimated incremental overhead costs of the Company
attributable to the acquisition of the Existing Systems:
<TABLE>
<CAPTION>
==================================================
Reversal of
In thousands Management Company Pro Forma
Fees Overhead Savings
------------- -------------- -------------
<S> <C> <C> <C>
$3,676 $(1,661) $2,015
</TABLE>
38
<PAGE> 41
(8) Represents the elimination of management fees and allocated overhead costs,
and the inclusion of estimated incremental overhead costs of the Company
attributable to the acquisition of the Acquisition Systems:
<TABLE>
<CAPTION>
===================================================
Reversal of
Management Company Pro Forma
Fees Overhead Savings
------------- ------------ -------------
In thousands
<S> <C> <C> <C>
$2,258 $(1,241) $1,017
</TABLE>
(9) Represents additional depreciation and amortization of $8,653 (in
thousands) resulting from the application of purchase accounting
from the acquisition of the Existing Systems:
(10) Represents additional depreciation and amortization of $6,369 (in
thousands) resulting from the application of purchase accounting
from the acquisition of the Acquisition Systems:
(11)(12) Adjusted to account for the Transactions:
<TABLE>
<CAPTION>
============= ============== ==============
The Company Existing Acquisition
Systems Systems
In thousands ============= ============== ==============
<S> <C> <C> <C>
Note number (11) (12)
Interest expense on the Notes $23,000 $13,405 $ 9,595
Net incremental amortization of issuance 1,311 320 991
costs
Commitment fee on unused amount 326 190 136
Interest on Senior Credit Facility 16,820 10,881 5,939
Less: Interest on former credit (1,446) (1,446) -
facility
Less: Interest recorded by prior asset (38,648) (12,251) (26,397)
owners
------------- ------------ ---------------
Pro forma interest adjustment $ (1,363) $11,099 $(9,736)
============= ============ ===============
</TABLE>
Interest expense is calculated based on total outstanding debt of approximately
$399.7 million of which $200.0 million represents proceeds of the Offering and
$199.7 million represents borrowings under the Company's Senior Credit
Facility. Pro forma interest expense is calculated on the applicable
outstanding principal amounts at rates of 11.5% on the Notes and rates at 275
to 325 basis points above LIBOR for the borrowings under the Senior Credit
Facility. Interest expense for the 12 months also includes the amortization of
deferred financing fees of approximately $1.3 million and commitment fees of
$326,000 on the unfunded amount under the Senior Credit Facility of
approximately $65.3 million. Pro forma interest expense is generally allocated
to the Existing Systems and the Acquisition Systems based upon the
39
<PAGE> 42
relative approximate purchase price of each system The net amount of the
pro forma interest expense adjustment includes the effect of approximately
$59,000 of interest income for the year ended December 31, 1995.
(13) Represents the elimination of forbearance costs of ACE prior to
acquisition.
(14) Represents elimination of the minority interest in earnings of C4
prior to acquisition.
(15) Represents elimination of the minority interest in earnings of ACE
prior to acquisition.
(16) Represents elimination of the provision for income taxes of Cox
prior to acquisition.
40
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company commenced operations in November 1995. The Company acquired certain
cable television systems from UVC on November 9, 1995 (the "UVC Systems") and
certain other cable systems from Longfellow on November 21, 1995 (the
"Longfellow Systems"), from C4 on February 1, 1996 (the "C4 Systems"), from
Americable on March 29, 1996 and from Cox on April 9, 1996 (the "Americable
Systems"), for aggregate consideration of $315.7 million. See
"Business--Development of the Systems--The Existing Systems" for a description
of the Existing Systems. The Company has operated the Existing Systems for a
limited period of time and had no operations prior to November 9, 1995. All
acquisitions have been accounted for under the purchase method of accounting
and, therefore, the Company's historical results of operations include the
results of operations for each acquired system subsequent to its respective
acquisition date.
The Company has entered into definitive agreements to acquire cable system
assets of ACE, Triax, Grassroots, and expects to enter into a definitive
agreement to acquire cable system assets of Penn/Ohio, for aggregate
consideration of approximately $244.4 million. See "Business--Development of
the Systems--The Acquisition Systems" for a description of the Acquisition
Systems. If consummated, the purchase of the Acquisition Systems will result in
a substantial increase in the number of subscribers and the revenues and
expenses of the Company. As a result of the Company's limited operating history
and the expected effect of the purchase of the Acquisition Systems, the Company
believes that its results of operations for the period ended December 31, 1995
and for the three months ended March 31, 1996 are not indicative of the
Company's results of operations in the future.
RESULTS OF OPERATIONS
ACTUAL
The following table sets forth, for the periods indicated, certain statements of
operations and other data of the Company expressed in dollar amounts (in
thousands) and as a percentage of revenue.
<TABLE>
<CAPTION>
===================================================
Three Months Ended April 17 to
March 31, 1996 December 31, 1995 (1)
---------------------- -----------------------
% of % of
In thousands Amount Revenue Amount Revenue
------ ------- ------ -------
<S> <C> <C> <C> <C>
Revenues $ 9,780 100.0% $ 4,369 100.0%
Expenses
Operating expenses 4,688 47.9 2,311 52.9
Corporate expenses 570 5.8 127 2.9
Depreciation and amortization 3,476 35.5 2,308 52.8
Pre-acquisition expenses - - 940 21.5
------ ----- ------ -----
Total expenses 8,734 89.3 5,686 130.1%
------ ----- ------ -----
Operating income (loss) 1,046 10.7 (1,317) (30.1)
Interest expense, net 2,473 25.3 1,386 31.7
------ ----- ------- -----
Net loss $(1,427) (14.6) $(2,703) (61.9)
======= ====== ======= ======
Other Data:
EBITDA (2) $ 4,522 46.2% $ 991 22.7%
</TABLE>
(1) Reflects the historical financial statements for the period from inception
(April 17, 1995) through December 31, 1995.
41
<PAGE> 44
(2) EBITDA represents operating income (loss) before depreciation and
amortization.
Actual
First quarter of 1996 compared with the year ended December 31, 1995
Revenues increased 123.8% to $9.8 million in the first quarter of 1996 from
$4.4 million in 1995. These increases were attributable to the commencement of
operations in November 1995 with the acquisition of the UVC Systems on November
9, 1995 and of the Longfellow Systems on November 21, 1995. Revenues for the
first quarter of 1996 reflect full period operations of the UVC and Longfellow
systems, as well as the acquisition of the C4 Systems on February 1, 1996 and
of the Americable Systems on March 29, 1996.
Operating expenses were reduced to 53.7% of sales in the first quarter of 1996
from 55.8% of sales in 1995 due to initial cost-cutting measures implemented by
the Company. These efforts included the establishment of centralized regional
service centers in Rockland, Maine and Greeneville, Tennessee and the
elimination of ten customer service offices. Employee staffing was reduced by
9.0% from pre-acquisition levels. Other cost reductions have been realized
through the elimination of duplicative expenses, such as customer billing,
accounting, accounts payable and payroll administration.
As a result of such cost efficiencies and accounting for pre-acquisition
expenses, EBITDA increased to 46.2% of sales in the first quarter of 1996 from
22.7% of sales in 1995.
Combined Historical Existing Systems
The discussion of the results of operations for the years ended December 31,
1993, 1994 and 1995 is based on the combined historical results of the Acquired
Predecessor Systems (UVC, Cox and C4), which do not reflect changes in the
operation or management of the Existing Systems that the Company has made or
intends to make and are not necessarily indicative of the results that would
have been achieved had such systems been owned and operated by the Company
during the periods presented.
Year ended December 31, 1995 compared to the year ended December 31, 1994
Revenues increased to $68.1 million in the year ended December 31, 1995 from
$64.4 million in the year ended December 31, 1994 due to increases in service
rates and internal subscriber growth. During this period, basic subscribers
increased by approximately 2.9%, primarily in the Cox Systems and the C4
Systems, which grew by 1,800 and 1,200 subscribers respectively. Basic
penetration improved to 71.1% at year-end 1995 from 69.7% at year-end 1994.
Premium penetration over the period declined to 42.1% at year-end 1995
from 45.9% at year-end 1994. Operating expenses grew at rates generally
approximating revenue growth, increasing to $38.3 million in the year ended
December 31, 1995 from $35.4 million in the year ended December 31, 1994.
EBITDA increased to $29.8 million in 1995 from $29.0 million in 1994.
Year ended December 31, 1994 compared to the year ended December 31, 1993
Revenues increased to $64.4 million in the year ended December 31, 1994 from
$63.4 million in the year ended December 31, 1993, primarily due to growth in
the number of basic subscribers and premium units, which increased over the
period by approximately 2.9% and 20.9% respectively. Basic service penetration
improved to 70.1% at year end 1994 from 69.0% at year end 1993, while premium
penetration increased to 45.9% from 42.1% over the same period. In spite of
these increases, revenue growth was inhibited by regulations of basic service
rates which were instituted by the 1992 Cable Act. See "Legislation and
Regulation" for a further discussion of recent cable television regulation.
Operating expenses increased to $35.4 million in the year ended December 31,
1994 from $34.6 million in the year ended December 31, 1993. Increases in
expenses were partially attributable to higher administrative costs of complying
with regulatory reporting requirements under the 1992 Cable Act, as well as the
addition of new services and shifting of service tiers in response to
regulation. As a result, EBITDA increased modestly to $29.0 million in 1994
from $28.7 million in 1993.
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Combined Historical Acquisition Systems
The discussion of the results of operations for the years ended December 31,
1993, 1994 and 1995 is based on the combined historical results of
the Probable Predecessor Acquisition Systems (ACE and Triax), which do not
reflect changes in the operation or management of the Acquisition Systems that
the Company has made or intends to make and are not necessarily indicative of
the results that would have been achieved had such systems been owned and
operated by the Company during the periods presented.
Year ended December 31, 1995 compared to the year ended December 31, 1994
Revenues increased to $45.9 million in the year ended December 31, 1995 from
$40.9 million in the year ended December 31, 1994, primarily due to increases in
service rates, internal subscriber growth and the acquisition of approximately
9,000 subscribers in the Triax Systems during the first quarter of 1995. Over
this period, the number of basic subscribers and premium units increased by
approximately 7.1% and 13.1%, respectively. Basic penetration improved to
approximately 73.2% at year end 1995 from approximately 71.9% at year end 1994.
Premium penetration increased to 44.9% at year end 1995 from 42.5% at year end
1994. Operating expenses increased 15.7% to $26.8 million in 1995 from $23.2
million in 1994. EBITDA increased to $19.0 million in 1995 from $17.7 million
in 1994.
Year ended December 31, 1994 compared to the year ended December 31, 1993
Revenues increased to $40.9 million in the year ended December 31, 1994 from
$32.8 million in the year ended December 31, 1993, primarily due to internal
subscriber growth and the integration of system acquisitions. In 1993, the
Triax Systems completed three acquisitions, totaling over 23,000 subscribers,
90% of which were acquired in December of 1993. The increase in revenues from
1993 to 1994 was largely attributable to the full period of operations of the
acquired properties and a 5.0% increase in subscribers at ACE. Basic
subscribers and premium units in the Acquisition Systems increased over the
period by approximately 4.1% and 17.2%, respectively. Basic penetration
improved to 71.9% at year end 1994 from 69.3% at year end 1993, while premium
penetration increased to 42.5% from 36.4% over the same period. Operating
expenses grew 28.5% to $23.2 million in 1994, an increase of 28.5% from $18.1
million in 1993, due in part to regulatory related expenses. EBITDA increased
to $17.7 million in 1994 from $14.7 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business generally requires substantial capital for the
construction, expansion and maintenance of the delivery system. In addition,
the Company has pursued, and intends to pursue in the future, a business
strategy which includes selective acquisitions. The Company has financed these
expenditures through a combination of cash from operations, indebtedness from
outside sources and equity capital from its partners. On a pro forma basis for
the Existing Systems, for the three months ended March 31, 1996, the Company's
cash from operations totaled $8.6 million and was sufficient to meet the
Company's debt service obligations, working capital and capital expenditure
requirements with the exception of the acquisition of the C4 Systems, which was
funded by borrowings under the Senior Credit Facility. As of March 31, 1996,
and giving effect to the acquisition of all of the Existing Systems, the
Company had outstanding indebtedness of $210.0 million. This debt was used
principally for the acquisition of the Existing Systems. In addition to this
debt, the Company had additional availability of $55.0 million under the Senior
Credit Facility. Pro forma for the Transactions, the Company would have had
$199.7 million outstanding and availability of $65.3 million under the Senior
Credit Facility. See "Credit Arrangements of the Company" for a further
discussion of the Company's credit facilities. From November 1995 to March 31,
1996, in connection with the acquisitions of the Existing Systems, the Company
received aggregate equity contributions of approximately $112.5 million of the
initial 123.4 million commitments for equity contributions from existing
partners of Concurrently with or prior to the closing of the Offering, the
Company will complete the Rights Offering pursuant to which $69.8 million in
further equity will be available. It is anticipated that following
consummation of the Transactions, approximately $37.8 million of proceeds from
the Rights Offering will be available to fund additional acquisitions. On an
actual basis, representing solely the Company's results for the three months
ended March 31, 1996, annualized cash flow was $18.1 million with outstanding
indebtedness of $124.1 million.
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Historically, the combined cash flow of substantially all of the Existing
Systems totaled approximately $28.7 million, $29.0 million and $29.9 million
for the years ended December 31, 1993, 1994 and 1995, respectively. For the
same periods, the combined cash flow of substantially all of the Acquisition
Systems was $14.7 million, $17.7 million and $19.0 million, respectively.
CAPITAL EXPENDITURES
From November 9, 1995 to March 31, 1996, the Company had capital expenditures
(exclusive of system acquisitions) of approximately $1.7 million which were
financed through a variety of sources which included (i) cash flows from
operations, (ii) credit facilities from institutional lenders and affiliates and
(iii) equity infusions. Capital expenditures included expansion and
improvements of existing cable properties, plant and equipment, maintenance of
existing equipment and the addition of new subscribers necessitating cable line
drops and extension of cable plant facilities and installations.
During the first three months of 1996, the Company's capital expenditures were
approximately $1.1 million. These expenditures were primarily to establish and
equip regional service centers, to upgrade existing plant and facilities and to
build out facilities to previously unserved areas. On a pro forma basis for
that period, the Existing Systems and the Acquisition Systems expended
approximately $2.3 in capital expenditures, primarily for extensions of cable
plant facilities and for system rebuilds. Pro forma for the purchase of the
Acquisition Systems, the Company expects capital expenditures to total
approximately $116.8 million over the period ending December 31, 2001. Of that
amount, approximately $59.1 million will be used to upgrade the technical
platform of substantially all of the Company's systems to at least 400 MHz to
450 MHz, approximately $12.8 million will be invested in addressable
converters, primarily for its two primary operating regions, approximately
$18.7 million will be used to build out the system to new homes and the
balance of approximately $26.2 million will be used for repair and
maintenance. In general, the Company expects to expend approximately $120 per
subscriber over the two years ending December 31, 1998. The Company intends to
finance such capital expenditures through operating cash flow. See
"Business--Business Strategy" for a discussion of the Company's capital
improvement strategy.
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BUSINESS
GENERAL
The Company owns, operates and develops cable television systems in small and
medium-sized suburban and exurban communities, primarily concentrated in two
operating regions--New England and Ohio/Kentucky--with a third, smaller group
of cable television systems in the Southeast. To date, the Company has
acquired strategically located cable television systems at historically
attractive values, thus establishing its core geographic base and building
subscriber mass. Since closing its initial acquisition in November 1995, the
Company has become one of the 35 largest MSOs in the U.S. The Existing Systems
passed approximately 304,700 homes in six states and served approximately
215,100 basic subscribers as of March 31, 1996.
The Company has entered into agreements to acquire, for an aggregate purchase
price of approximately $244.4 million, the Acquisition Systems which passed
approximately 202,400 homes and served approximately 147,500 basic subscribers
as of March 31, 1996. The Acquisition Systems primarily consist of certain
significant cable television systems to be acquired from ACE and from Triax.
The ACE systems, serving approximately 83,300 subscribers in Kentucky and
Indiana, and the Triax systems, serving approximately 53,800 subscribers in
Ohio/Kentucky and the Southeast, are contiguous or in close proximity to the
Existing Systems, consistent with the Company's strategy of clustering its
cable television systems to achieve economies of scale and operating
efficiencies. In addition, the Company has sold or entered into agreements to
sell the Disposition Systems in the Southeast for an aggregate sales price of
approximately $17.1 million, representing a per subscriber sales price that is
over 30% more than the average per subscriber acquisition cost of the Existing
Systems in the Southeast.
As of March 31, 1996, after giving pro forma effect to the purchase of the
Existing Systems and the Acquisition Systems and the sale of the Disposition
Systems, the Company's cable television systems passed approximately 493,900
homes and served approximately 351,900 basic subscribers, representing basic
penetration of 71.2%. On such a pro forma basis, as of March 31, 1996,
the Company would be one of the 25 largest MSOs in the U.S. and a dominant
cable operator in its two primary operating regions. On the same pro forma
basis, for the three months ended March 31, 1996 annualized and for the year
ended December 31, 1995, the Company had revenues of approximately $120.6
million and $117.0 million, respectively, and EBITDA of approximately $58.9
million and $54.6 million, respectively.
The Company focuses on cable television systems in small and medium-sized
suburban and exurban markets in order to exploit unique acquisition
opportunities in the cable television marketplace created by the confluence of
several economic, regulatory, competitive and technical forces. The cable
television industry has experienced rapid and continuing consolidation over the
last several years. Operators also have been faced with the need for increased
levels of capital expenditures to expand channel capacity and to provide new
broadband services. In addition, in recent years cable operators have begun to
face the threat of competition from new market entrants, including telephone
company video programming services and DBS services. Many smaller MSOs,
particularly those that were acquisitive during the late 1980's and purchased
systems at significantly higher prices, are either seeking liquidity for their
investors or are constrained from accessing additional capital to upgrade or
rebuild aging plant to remain competitive with other video programming
providers. At the same time that "financial players" and smaller operators are
seeking to exit the cable television business, larger MSOs are directing their
finite human and financial resources to the major urban and suburban markets,
which industry analysts expect to be the first battlefield between cable
television and telephone companies for "information superhighway" related
services. Large MSOs are divesting less strategic systems or are trading for
other assets in an effort to conserve capital, to rationalize their own
geographic clusters and to increase subscriber density in their larger urban
and suburban systems.
The convergence of these market forces has resulted in a large inventory of
cable systems for sale in small to medium-sized markets, combined with a
relatively small pool of capable buyers. As a result of this supply and demand
anomaly, the Company has been able to acquire selectively cable properties at
historically
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attractive prices. The aggregate purchase price paid by the Company for the
Existing Systems was approximately $315.7 million, representing an average of
8.7 times the pro forma acquisition cash flow (as defined) of the Existing
Systems. The aggregate purchase price to be paid by the Company for the
Acquisition Systems is approximately $244.4 million.
The Company believes that other acquisition opportunities exist, and the
Company is continuously engaged in discussions with other cable television
system owners and operators to explore such potential opportunities. Some of
these potential opportunities may involve systems serving substantial numbers
of subscribers. Although the Company does not currently have definitive
agreements to acquire systems other than those described herein, the Company
intends to continue to pursue, on an opportunistic basis, additional strategic
acquisitions and smaller "fill-in" acquisitions within its existing operating
regions to further enhance their operational and financial performance.
The Existing Systems and the Acquisition Systems represent the substantial
completion of the first phase of the Company's business plan. Through its core
acquisitions in New England and Ohio/Kentucky, the Company has established
significant subscriber mass and positioned itself as a dominant cable operator
in each of its primary operating regions. The Company is currently the second
largest MSO in Maine, and, after giving pro forma effect to the purchase of the
Existing Systems and the Acquisition Systems, as of March 31, 1996, the Company
would be the second largest MSO in Kentucky and one of the largest operators of
small and medium-sized cable systems in southern Ohio. In the Southeast, the
Company has accumulated attractive systems, which it expects either to
consolidate with subsequent system acquisitions, trade for systems within the
Company's primary operating regions or divest at favorable prices. The next
phase of the Company's business plan will focus on increasing subscriber
density within its primary operating regions through selective acquisitions,
integrating and streamlining business operations, making significant investment
and improvements in technical plant and developing existing and new cable and
broadband telecommunications services.
BUSINESS STRATEGY
The Company's objective is to increase its operating cash flow and the value of
its systems by utilizing its expertise in acquiring and managing cable systems.
Through strategic acquisitions and internal growth, the Company seeks to own
and operate cable television systems serving at least 500,000 subscribers in
geographically concentrated clusters serving 100,000 or more subscribers. To
achieve its objective, the Company pursues the following business strategies:
TARGET CLUSTERS IN SMALL AND MEDIUM-SIZED MARKETS. The Company has acquired
clusters of cable television systems serving small and medium-sized suburban
and exurban markets which are generally within 50 to 100 miles of larger urban
and suburban communities. The Company believes that such markets have many of
the beneficial attributes of larger urban and suburban markets--moderate to
high household growth, economic stability, attractive subscriber demographics
and favorable potential for additional clustering. Moreover, in such markets,
the Company believes that (i) it will face less direct competition given the
lower population densities and higher costs per subscriber of installing cable
plant, (ii) it will maintain higher subscriber penetration levels and lower
customer turnover based on fewer competing entertainment alternatives, and
(iii) its overhead and certain operating costs will generally be lower than
those in larger markets.
GROW THROUGH STRATEGIC AND OPPORTUNISTIC ACQUISITIONS. Beginning with its
initial acquisition in November 1995 of systems in Maine and Ohio, the Company
has systematically implemented a focused acquisition and consolidation strategy
within its two primary operating regions of New England and Ohio/Kentucky and
its systems group in the Southeast. Going forward, the Company will seek to
acquire systems that can be readily integrated into its primary operating
regions, in order to maximize operating efficiencies. As a consolidator of
systems within its operating regions, the Company will pursue both "fill-in"
acquisitions of smaller systems as well as strategic acquisitions. The Company
believes that such acquisition
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targets will have diminished strategic value to other prospective buyers given
its geographic prominence in these regions. Consequently, the Company believes
these systems can be purchased at favorable prices. The Company also
opportunistically pursues acquisitions outside of its primary operating regions
that can either be resold at higher prices or exchanged for systems that are
contiguous to its primary operating regions. The Company has begun to execute
this strategy with its Southeast systems.
IMPLEMENT OPERATING EFFICIENCIES. Upon acquiring a system, the Company
implements extensive management, operational and technical changes designed to
improve operating efficiencies, enhance operating cash flow and operating
margins and reduce overhead through economies of scale. Within each of its
operating regions, the Company has begun to streamline field operations by
establishing centralized customer service facilities, installing
state-of-the-art telephone systems, MIS and billing systems and eliminating
duplicative functions. These changes have resulted in lower administrative
costs, better trained employees and a higher level of customer service. Within
the Existing Systems and Acquisition Systems, the Company plans to consolidate
up to 31 customer service and sales offices into four regional service centers
and seven local payment offices. Lastly, the Company seeks to reduce technical
operating costs and capital expenditures by consolidating headend facilities.
In the Existing Systems and the Acquisition Systems, the Company plans to
eliminate up to 59 of 202 headends. By serving more subscribers from a single
distribution point, the Company has begun to decrease ongoing technical
maintenance expenses, improve system reliability and enhance cost efficiencies
in adding new channels and services.
PROMOTE AND EXPAND SERVICE OFFERINGS. The Company aggressively promotes and
expands services to add and retain customers and increase revenue per customer.
The Company employs a coordinated array of marketing techniques, including
door-to-door sales, telemarketing, direct mail, print and broadcast
advertising, flyers and billing inserts and cross-channel promotion. Many of
the Company's customers received limited service offerings prior to acquisition
and, accordingly, the Company has begun to expand and repackage the basic and
premium services it offers. The Company believes that significant opportunity
exists to increase service revenue by expanding the programming and pricing
options available to its customers. Towards this end, the Company has created
new basic and premium packages and launched several lower priced premium
channels such as The Disney Channel, Starz! and Encore. As systems are
consolidated and technically enhanced, the Company will also seek to expand
addressable penetration. Only approximately 27.6% of the subscribers in the
Existing Systems and the Acquisition Systems access addressable technology.
Addressability will enable the Company to increase revenues derived from
pay-per-view movies and events and new pay services such as interactive video
games, including The Sega Channel. In addition, with the expanded advertising
market delivery afforded by larger, contiguous system clusters, the Company
plans to intensify local spot advertising sales efforts.
STRATEGICALLY UPGRADE SYSTEMS. The Company will selectively upgrade its cable
systems to increase channel capacity, enhance signal quality and improve
technical reliability. The Company believes such technical upgrades will not
only enhance the potential for increasing revenues, but also will improve
customer and community relations and further solidify the Company's position as
the preeminent local provider of video services in its operating regions. In
addition, by implementing a hybrid fiber optic-backbone/coaxial cable design
across the portions of its cable plant that serve its highest subscriber
densities, the Company will effectively position itself for the introduction of
new broadband and interactive services. In its primary operating regions in
New England and Ohio/Kentucky, the Company intends to invest up to $49.0
million over the next five years to establish a technical platform of at least
400 MHz to 450 MHz (54 to 62 channels) in a majority of its systems and 550 MHz
to 750 MHz (78 to 100 channels) in certain of its larger markets. Over the
same period, the Company plans to invest up to an additional $10.6 million for
addressable converters in its two primary operating regions.
Additional potential for increased revenues will result as the Company develops
broadband service capability for the transmission of video, voice and data
services. Creating full service broadband terrestrial and satellite networks
interconnecting contiguous cable systems will enable the Company's regional
systems to offer a wide range of new services. These service offerings will
include multi-channel pay-per-view, interactive video
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games, advertising insertion and the delivery of videotext or other information
services. The Company's regional systems could then be interconnected,
creating potential opportunities to utilize the network for services such as
Internet access, regional advertising, distance learning and telemedicine.
Over the longer term, potential applications for fiber interconnected networks
include competitive telephone access, long distance telephone backhaul, PCS and
ESMR interconnection and energy management and monitoring.
FOCUS ON THE CUSTOMER. The Company continually seeks to provide superior
customer service and improve programming and service choices for its
subscribers. By centralizing customer service at the regional level, all
functions that directly impact subscribers--sales and marketing, customer
service and administration and technical support--are implemented more quickly
and effectively. In addition, as a result of its consolidation efforts, the
Company has been able to enhance its customer service by increasing hours of
operations for its customer service functions, better coordinating service
calls, increasing responsiveness to customer inquiries and standardizing
maintenance procedures. While centralizing and improving customer service, the
Company has retained local payment and technical offices to maintain its
presence and visibility within its communities.
THE CABLE TELEVISION INDUSTRY
A cable television system receives television, radio and data signals that are
transmitted to the system's headend site by means of off-air antennas,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial, and in some
instances, fiber optic cable, to customers who pay a fee for this service.
Cable television systems may also originate their own television programming
and other information services for distribution through the system. Cable
television systems generally are constructed and operated pursuant to
non-exclusive franchises or similar licenses granted by local governmental
authorities for a specified term of years, generally for extended periods of up
to 15 years.
The cable television industry developed in the United States in the late 1940's
and early 1950's in response to the needs of residents in predominantly rural
and mountainous areas of the country where the quality of off-air television
reception was inadequate due to factors such as topography and remoteness from
television broadcast towers. In the 1960's, cable television systems also
developed in small and medium-sized cities and suburban areas that had a
limited availability of clear off-air television station signals. All of these
markets are regarded within the cable industry as "classic" cable television
system markets. In more recent years, cable television systems have been
constructed in large urban cities and nearby suburban areas, where good off-air
reception from multiple television stations usually is already available, in
order to receive the numerous, satellite-delivered channels carried by cable
television systems which are not otherwise available via broadcast television
reception.
Cable television systems offer customers various levels (or "tiers") of basic
cable services consisting of (i) off-air television signals of local network,
independent and educational stations, (ii) a limited number of television
signals from so-called super stations originating from distant cities (such as
WTBS, WGN and WWOR), (iii) various satellite-delivered, non-broadcast channels
(such as Cable News Network ("CNN"), MTV: Music Television, the USA Network
("USA"), Entertainment and Sports Programming Network ("ESPN") and Turner
Network Television ("TNT")), (iv) certain programming originated locally by the
cable television system (such as public, governmental and educational access
programs) and (v) informational displays featuring news, weather, stock market
and financial reports and public service announcements. For an extra monthly
charge, cable television systems also offer premium television services to
their customers. These services (such as Home Box Office ("HBO"), Showtime and
regional sports networks) are satellite-delivered channels consisting
principally of feature films, live sports events, concerts and other special
entertainment features, usually presented without commercial interruption.
A customer generally pays an initial installation charge and fixed monthly fees
for basic and premium television services and for other services (such as the
rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenues for cable television systems. In
addition to
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customer revenues from these services, cable television systems generate
revenues from additional fees paid by customers for pay-per-view programming of
movies and special events and from the sale of available advertising spots on
advertiser-supported programming. Cable television systems frequently also
offer to their customers home shopping services, which pay the systems a share
of revenues from sales of products in the systems' service areas. See
"--Programming, Services and Rates."
DEVELOPMENT OF THE SYSTEMS
THE EXISTING SYSTEMS. The Company's Existing Systems include cable television
systems acquired in five separate asset purchase transactions since the
Company's inception. The aggregate purchase price paid by the Company for the
Existing Systems was approximately $315.7 million, representing an average of
8.7 times the pro forma acquisition cash flow of such systems. As of March 31,
1996, the Company's Existing Systems passed approximately 304,700 homes and
served approximately 215,100 basic subscribers and 82,700 premium units,
representing basic penetration of 70.6% and premium penetration of 38.4%. The
information set forth below briefly describes the five acquisitions that
comprise the Existing Systems, which are organized into two primary operating
regions--New England and Ohio/Kentucky--and a third, smaller group of systems in
the Southeast.
UVC Systems. On November 9, 1995, the Company completed its first acquisition
by acquiring certain cable systems in Maine and Ohio owned by United Video
Cablevision, Inc. (the "UVC Systems") for an aggregate purchase price of $120.7
million, an 8.3 times multiple of pro forma acquisition cash flow. At the date
of acquisition, the UVC Systems passed approximately 116,600 homes and served
approximately 87,700 basic subscribers. Approximately 50,600 subscribers in
Maine formed the initial systems in the Company's New England cluster and
approximately 37,100 subscribers in Ohio formed the initial systems in the
Company's Ohio/Kentucky cluster.
Longfellow Systems. On November 21, 1995, the Company completed a "fill-in"
acquisition by purchasing all of the cable systems in central Maine owned by
Longfellow Cable Company, Inc. and two of its affiliates (the "Longfellow
Systems") for an aggregate purchase price of $6.1 million, a 7.4 times multiple
of pro forma acquisition cash flow. At the date of acquisition, the Longfellow
Systems passed approximately 8,700 homes and served approximately 5,100 basic
subscribers, all of which were integrated into the Company's New England
cluster.
C4 Systems. On February 1, 1996, the Company completed the acquisition of all
of the cable systems owned by C4 Media Cable Southeast, Limited Partnership and
County Cable Company, L.P. (the "C4 Systems") for an aggregate purchase price
of $47.6 million, an 8.2 times multiple of pro forma acquisition cash flow. At
the date of acquisition, the C4 Systems passed approximately 60,300 homes and
served approximately 40,700 basic subscribers. The C4 Systems, which are
located in Virginia, Tennessee and Georgia, formed the initial systems in the
Company's Southeast region.
Americable Systems. On March 29, 1996, the Company completed a second
"fill-in" acquisition by purchasing additional cable systems located in Maine
from Americable International Maine, Inc. (the "Americable Systems") for $4.7
million, a 6.5 times multiple of pro forma acquisition cash flow. At the date
of acquisition, the Americable Systems passed approximately 5,200 homes and
served approximately 3,400 basic subscribers. The Americable Systems have also
been integrated into the Company's New England cluster.
Cox Systems. On April 9, 1996, the Company completed the acquisition of
certain cable systems in Ohio and Kentucky owned by affiliates of Cox
Communications, Inc. (the "Cox Systems") for an aggregate purchase price of
$136.5 million, a 9.5 times multiple of pro forma acquisition cash flow. At
the date of acquisition, the Cox Systems passed approximately 110,900 homes and
served approximately 78,300 basic subscribers. The Cox Systems have been
integrated into the Ohio/Kentucky cluster.
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THE ACQUISITION SYSTEMS. The Company has entered into four agreements to
purchase the Acquisition Systems for an aggregate purchase price of
approximately $244.4 million. As of March 31, 1996, the Acquisition Systems
passed approximately 202,400 homes and served approximately 147,500 basic
subscribers and 65,000 premium units, representing basic penetration of 72.9%
and premium penetration of 44.1%. As described below, many of the Acquisitions
Systems are in close proximity to the Existing Systems, consistent with the
Company's strategy of clustering its cable television systems to achieve
operating efficiencies. It is anticipated that these acquisitions will be
completed in the third quarter of 1996, but there can be no assurance that any
of these transactions will be consummated.
ACE Systems. On July 15, 1996, the Company entered into an agreement with ACE
to purchase substantially all of the assets comprising the 19 ACE Systems
located in the central and northern Bluegrass region of Kentucky and adjacent
southern Indiana for a purchase price of $146.0 million. The purchase price is
subject to reduction in the event the number of basic subscribers or operating
revenues do not meet a specified target at closing. As of March 31, 1996, the
ACE Systems passed approximately 106,600 homes and served approximately 83,300
basic subscribers (76,400 in Kentucky and 6,900 in Indiana) who purchased
approximately 29,800 premium service units, representing basic penetration of
78.2% and premium penetration of 35.8%. At March 31, 1996, the average monthly
revenue per subscriber was $30.42. The Company intends to operate all of the
ACE Systems as part of its Ohio/Kentucky cluster. The Company's agreement for
the acquisition of the ACE Systems will be subject to approval of ACE's
existing creditors and a bankruptcy court. Although there can be no
assurances, the Company has no reason to believe that such creditors or the
bankruptcy court will not approve the transaction or that the bankruptcy
proceedings will have any material adverse effect on the operations of the ACE
Systems.
Triax Systems. On May 16, 1996, the Company entered into an agreement with
Triax to purchase substantially all of the assets comprising the 59 Triax
Systems serving approximately 53,800 basic subscribers in Ohio, Kentucky,
Virginia, West Virginia, Pennsylvania, Maryland and North Carolina for a
purchase price of $85.0 million. The purchase price is subject to reduction in
the event the operating revenues of the Triax Systems do not meet a specified
target for the two calendar month period prior to closing. As of March 31,
1996, the Triax Systems operated at a 67.9% basic penetration and 56.2% premium
penetration and generated average monthly revenue per basic subscriber of
$29.06. The Company intends to operate the Kentucky, Ohio and West Virginia
systems, serving approximately 28,900 basic subscribers, as part of its
Ohio/Kentucky cluster. The Company intends to operate the North Carolina,
Virginia, Pennsylvania and Maryland systems, serving approximately 24,900 basic
subscribers, as part of its Southeast region.
Upon acquisition and the subsequent integration of the ACE Systems and the
Triax Systems with the Existing Systems, the Company will serve over 200,000
subscribers in communities south of Columbus, Ohio to the southern perimeter of
Lexington, Kentucky. Within this region are ten county service areas along the
Interstate 75 "growth corridor," which runs from Cincinnati through Lexington
to Atlanta, Georgia and is among the fastest growing areas in the region.
After completion of several capital projects by 1997, 30% of the Company's
subscribers within this region will be served by fiber-to-the-feeder 500 MHz or
750 MHz technical plant.
Grassroots Systems. On July 19, 1996, the Company entered into an agreement
with Grassroots to purchase substantially all of the assets comprising 21 cable
television systems in New Hampshire and Maine (the "Grassroots Systems") for a
purchase price of $9.6 million. The purchase price is subject to reduction in
the event that minimum revenue thresholds are not met at closing. As of March
31, 1996, the Grassroots Systems passed approximately 12,400 homes and served
approximately 7,000 basic subscribers (4,800 in New Hampshire and 2,200 in
Maine), representing basic penetration of 56.4%. The Company intends to
operate the Grassroots Systems as part of its New England cluster. The
acquisition is expected to close in August 1996.
Penn/Ohio Systems. The Company expects to enter into an agreement in August
1996 with SRW Penn/Ohio to purchase substantially all the assets comprising two
cable television systems in Ohio and Pennsylvania (the
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"Penn/Ohio Systems") for a purchase price of $3.8 million. The purchase price
is subject to reduction in the event that minimum subscriber thresholds are not
met at closing. As of March 31, 1996, the Penn/Ohio Systems passed
approximately 4,100 homes and served approximately 3,300 basic subscribers
(1,700 in Ohio and 1,600 in Pennsylvania), representing basic penetration of
80.4%. The Company intends to operate the Ohio system as part of its
Ohio/Kentucky cluster. The Pennsylvania system will be interconnected with the
Triax Systems' Rockwood, Pennsylvania system and operated as part of the
Southeast region.
THE DISPOSITION SYSTEMS. On July 24, 1996, the Company sold its Chatsworth,
Georgia system, representing approximately 5,700 basic subscribers, to an
affiliate of Helicon Partners for $8.6 million. The Company also has entered
into an agreement to sell its Woodstock and New Market, Virginia systems,
representing approximately 5,000 subscribers, to Shenandoah Cable Television
Company, an affiliate of Shenandoah Telephone Company, for $8.5 million. It is
anticipated that this sale will be completed in the fourth quarter of 1996.
The aggregate $17.1 million sales price for the Disposition Systems represents
a per subscriber sales price that is over 30% more than the average per
subscriber acquisition cost of the Existing Systems in the Southeast.
SYSTEM DESCRIPTIONS
After giving effect to the purchase of the Acquisition Systems and the sale of
the Disposition Systems, the Company's cable television systems will consist of
two primary operating regions--New England and Ohio/Kentucky--with a third,
smaller group of systems in the Southeast. The following chart provides
certain pro forma operating statistics as of and for the three-month period
ended March 31, 1996:
COMBINED EXISTING SYSTEMS AND ACQUISITION SYSTEMS
<TABLE>
<CAPTION>
==================================================================
New England Ohio/Kentucky Southeast Combined
Cluster Cluster Region Systems
--------------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
Homes passed 95,414 306,193 92,255 493,862
Basic subscribers 65,940 229,819 56,093 351,852
Basic penetration 69.1% 75.1% 60.8% 71.2%
Premium units 24,608 88,316 30,294 143,218
Premium penetration 37.3% 38.4% 54.0% 40.7%
Avg. monthly revenue per basic subscriber $27.83 $28.43 $23.98 $27.43
--------------- ----------------- --------- -----------
</TABLE>
New England Cluster. As of March 31, 1996, after giving pro forma effect to
the purchase of the Acquisition Systems, the Company passed approximately
95,400 homes and served approximately 65,900 basic subscribers and 24,600
premium units in the New England cluster, which is comprised of communities
primarily in southern and coastal Maine and central New Hampshire. The
majority of the Maine systems are located within a 30-60 minute driving radius
of the cities of Portland and Bangor in predominantly blue-collar, middle
income bedroom communities. In addition, the Company serves resort communities
in Maine's Carrabassett Valley that include Sugarloaf/USA and Sunday River.
Most of the approximately 4,800 subscribers in New Hampshire are within
commuting distance of Laconia, Plymouth and Littleton. The 1996 median
household income and projected household growth rates (from 1996 to 2001) in
the New England cluster meet or exceed U.S. averages for counties with less
than 100,000 households ("Comparable Counties"), according to Equifax National
Decision Systems, 1996. After giving pro forma effect to the purchase of the
Acquisition Systems, eighty-seven percent of the counties in which the
Company has systems have fewer than 100,000 households.
The New England systems are currently served by 70 headends, of which up to 19
are scheduled to be eliminated over the next three years by the Company as part
of its consolidation efforts. Prior to acquisition, the New England cluster
was served by seven customer service locations, which the Company will
consolidate over the next six months into a single regional service center in
Rockland, Maine and a local payment office in Madawaska, Maine. More than
66.0% of the current plant design for the New England
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<PAGE> 54
Systems is at 54 channels (400 MHz) or higher. Upon completion of the plant
rebuild projects to fiber-to-the-feeder design by year-end 1996 in Rockland and
Thomaston, Maine, 10.0% of the plant in the New England cluster will have
channel capacities of 78 channels (550 MHz) or higher. Over the next five
years, the Company expects to invest up to $11.1 million to selectively rebuild
or upgrade the majority of the New England systems to at least a 54 channel
technical platform to position the systems for business opportunities in
advertising insertion, impulse pay-per-view, high speed data networking and
Internet access. In addition, the Company plans to complete several line
extension projects, which is expected to add approximately 1,000 homes passed
to the New England systems by year-end 1996.
To date, the Company has added between three and seven tiered programming or
premium channels to over 70.0% of its systems. In conjunction with the channel
line-up improvements, direct mail promotions and follow-up telemarketing
campaigns have enabled the Company to raise its average combined basic and tier
service rates in those systems from $23.21 per month to $25.44 per month in May
1996. The Company believes that basic and premium penetration can be increased
through such programming additions, repackaging and aggressive marketing.
Moreover, the Company has begun to introduce addressability in the New England
systems to improve revenues derived from pay-per-view and other interactive
services such as video games, including The Sega Channel. As of March 31,
1996, none of the New England systems were addressable. As systems are
interconnected and consolidated, the Company will more aggressively pursue spot
advertising revenues, which accounted for only $0.20 per subscriber per month
in March 1996.
Ohio/Kentucky Cluster. As of March 31, 1996, after giving effect to the
purchase of the Acquisition Systems, the Company passed approximately 306,200
homes and served approximately 229,800 subscribers and 88,300 premium units in
the Ohio/Kentucky cluster in communities primarily in southern Ohio and
northern and central Kentucky. The majority of the Ohio systems are located
within a 60 minute driving distance of Cincinnati, Columbus or Toledo. The
majority of the Company's Kentucky subscribers reside in the outlying
communities surrounding Lexington and Ashland, Kentucky. The Company's
Madison, Indiana system, which served approximately 6,900 subscribers as of
March 31, 1996, is near Cincinnati. The Company's approximately 240 West
Virginia subscribers reside along the Ohio River and are served from the
Ohio/Kentucky systems. The 1996 median household income in the Ohio/Kentucky
cluster exceeds U.S. averages for Comparable Counties, according to Equifax
National Decision Systems, 1996. However, growth in the number of households
in the Ohio/Kentucky cluster is projected to lag that of Comparable Counties
over the next five years.
Over the next three years, the Company plans to eliminate up to 32 of the 90
headends that currently serve the Ohio/Kentucky systems, which will increase
the cluster's average system size to over 4,000 subscribers per headend. The
Ohio/Kentucky cluster's fifteen customer service offices will be consolidated
by the Company by early 1997 into two regional service centers, in Chillicothe,
Ohio and Richmond, Kentucky, and five local payment offices. Over 40.0% of the
current plant design for the Ohio/Kentucky systems is at 54 channels or higher,
including fiber-to-the-feeder 550 MHz and 750 MHz systems in Delhi and Ironton,
Ohio, Nicholasville and Cynthiana, Kentucky and Madison, Indiana. Upon
completion of its current rebuild of the Chillicothe and Jackson, Ohio and
Winchester, Kentucky systems by 1997, the Company will serve 26.0% of
its subscribers with at least 78 channel plant. Similar to the New England
cluster, the Company plans to invest significant capital to selectively rebuild
or upgrade the majority of the Ohio/Kentucky systems to at least a 54 channel
technical platform to position the systems for additional cable and broadband
telecommunications service revenues. Over the next five years, the Company
expects to invest $37.9 million in connection with its plant improvement
program for these systems.
To date, the Company has added between three and six tiered programming or
premium channels to 34.0% of its systems. Average combined basic and tier
service rates in those systems were also increased from $22.80 to $24.43 at May
31, 1996, in conjunction with direct mail and telemarketing campaigns, as in
the New England cluster. Similar new channel launches, rate increases and
marketing programs are planned to be instituted by the Company in the majority
of the remaining Ohio systems in the fourth quarter of 1996. As part of its
technical improvement program, the Company plans to increase the deployment of
addressable
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<PAGE> 55
converters, which served only 42.0% of the Ohio/Kentucky subscribers as of
March 31, 1996, and more aggressively market pay-per-view and other interactive
services such as video games. In addition, the systems acquired from Cox and
those to be acquired from ACE generated significant spot advertising revenues,
averaging $0.76 and $1.32 per subscriber per month, respectively, in 1995.
The Company plans to leverage these advertising sales efforts in the remaining
Ohio/Kentucky systems, which averaged only $0.07 per month per subscriber in
March 1996.
Southeast Region. As of March 31, 1996, after giving effect to the purchase of
the Acquisition Systems and the sale of the Disposition Systems, the Company
passed approximately 92,300 homes and served approximately 56,100 subscribers
and 30,300 premium units in the Southeast region. The Southeast region is
comprised of four groups of systems located in the following states: (i)
Tennessee, which served approximately 16,500 basic subscribers as of March 31,
1996; (ii) North Carolina, which served approximately 14,500 basic subscribers;
(iii) Virginia/West Virginia, which served approximately 20,300 basic
subscribers; and (iv) Maryland/Pennsylvania, which served approximately 4,800
basic subscribers. The Tennessee systems are located primarily in Greeneville,
Tennessee and surrounding communities in Eastern Tennessee. The North Carolina
systems are located between Raleigh and Rocky Mount, North Carolina. The
majority of the Virginia systems are located in north central Virginia between
Charlottesville and Winchester and in Eastern Virginia near Richmond and the
Chesapeake Bay. The Maryland/Pennsylvania systems are located at the Maryland
and Pennsylvania border. The 1996 median household income and actual and
projected growth rate in the number of households (from 1990 to 2001) in the
Southeast region exceed U.S. averages for Comparable Counties, according to
Equifax National Decision Systems, 1996.
As noted above, the Company plans either to consolidate further the Southeast
region systems through acquisitions, trade the systems for properties within
its primary operating regions in New England and Ohio/Kentucky, or sell the
systems outright. To date, the Company has received expressions of interest to
trade or sell all four system groups in this region. As such, the Company's
operating and capital expenditure plans for the Southeast region will be
limited to maintenance and discretionary projects that will increase the value
of the systems to a potential buyer or trading partner. The Southeast systems
are currently served by 41 headends. The Company has identified at least seven
headends that could be eliminated by interconnected plant. Prior to the
acquisitions, the Southeast region consisted of nine customer service
locations. The Company has consolidated five offices from the Existing Systems
into a regional service center in Greeneville, Tennessee and a local payment
office in Matthews, Virginia. The Company believes that the remaining four
offices of the Acquisition Systems can also be integrated into the Greeneville
facility. Approximately 24% of the current plant design for the Southeast
systems is at 54 channels (400 MHz) or higher. The Company will continue to
evaluate capital expenditures to rebuild and upgrade plant based on the sales
or trading status of the Southeast systems.
PROGRAMMING, SERVICES AND RATES
The Company has various contracts to obtain basic and premium programming for
its systems from program suppliers whose compensation is typically based on a
fixed fee per customer. The Company's programming contracts are generally for
a fixed period of time and are subject to negotiated renewal. Some program
suppliers provide volume discount pricing structures or offer marketing support
to the Company. In particular, the Company has negotiated programming
agreements with premium service suppliers that offer cost incentives to the
Company under which premium service unit prices decline as certain premium
service growth thresholds are met. The Company's successful marketing of
multiple premium service packages emphasizing customer value has enabled the
Company to take advantage of such cost incentives. In addition, the Company is
a member of a programming consortium consisting of small to medium-sized MSOs
serving, in the aggregate, over three million cable subscribers. The
consortium was formed to help create efficiencies in the areas of securing and
administering programming contracts, as well as to establish more favorable
programming rates and contract terms for small to medium-sized operators.
Going forward, the Company intends to negotiate programming contract renewals
both directly and through the consortium to obtain the
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<PAGE> 56
best possible contract terms. The Company also has various retransmission
consent arrangements with commercial broadcast stations. Some of these
consents require direct payment of nominal fees for carriage. In some other
instances no payment is required; however, the Company has entered into
agreements with certain stations to carry satellite-delivered cable programming
which is affiliated with the network carried by such stations. A substantial
portion of these retransmission consent agreements are required to be renewed
before October 1996. There can be no assurance that such agreements can or
will be renewed under similar terms. See "Legislation and Regulation."
Although services vary from system to system due to differences in channel
capacity, viewer interests and community demographics, the majority of the
Company's systems offer a "basic service tier," consisting of local television
channels (network and independent stations) available over-the-air and local
public, governmental, home-shopping and leased access channels. The majority
of the Company's systems offers, for a monthly fee, an expanded basic tier of
"superstations" originating from distant cities (such as WTBS, WGN and WWOR),
various satellite-delivered, non-broadcast channels (such as CNN, MTV, USA,
ESPN and TNT) and certain programming originated locally by the cable system
(such as public, governmental and educational access programs) providing
information with respect to news, time, weather and the stock market. In
addition to these services, the Company's systems typically provide one or more
premium services purchased from independent suppliers and combined in different
formats to appeal to the various segments of the viewing audience, such as HBO,
Cinemax, Showtime, The Movie Channel, Starz! and The Disney Channel. These
services are satellite-delivered channels consisting principally of feature
films, original programming, live sports events, concerts and other special
entertainment features, usually presented without commercial interruption.
Such premium programming services are offered by the Company's systems both on
an a la carte basis and as part of premium service packages designed to enhance
customer value and to enable the Company's systems to take advantage of
programming agreements offering cost incentives based on premium unit growth.
Subscribers may subscribe for one or more premium units. Additionally, the
Company plans to upgrade certain of its systems with fiber optic cable, which
will allow the Company to expand its ability to use "tiered" packaging
strategies for marketing premium services and promoting niche programming
services. The Company believes that this ability will increase basic and
premium penetration as well as revenue per subscriber.
Rates to subscribers vary from market to market and in accordance with the type
of service selected. As of March 31, 1996, the average monthly basic fees for
the Existing Systems was $9.09 for the basic service tier and $22.52 for the
expanded basic service tier. These rates reflect reductions effected in
response to the 1992 Cable Act's re-regulation of cable television industry
rates, and in particular, the FCC's rate regulations implementing the 1992
Cable Act, which became effective in 1993. A one-time installation fee, which
may be waived in part during certain promotional periods, is charged to new
subscribers. Management believes that the Company's rate practices are
generally consistent with the current practices in the industry. See
"Legislation and Regulation."
MARKETING, CUSTOMER SERVICE AND COMMUNITY RELATIONS
The Company aggressively markets and promotes its cable television services
with the objective of adding and retaining customers and increasing revenue per
customer. The Company actively markets its basic and premium program packages
through a number of coordinated marketing techniques, which include (i) direct
door-to-door sales in targeted areas where subscriber concentration and
efficiencies provide a reasonable cost of sale, (ii) telemarketing primarily
for pay unit acquisition and customer satisfaction, quality control and
retention, (iii) direct mail for promotional and target service offers, (iv)
monthly billing statement inserts and flyers for major basic subscriber
campaigns, (v) local newspaper and broadcast television and radio advertising
where population densities are sufficient to provide a reasonable cost of sale,
and (vi) cross-channel promotion of new services such as pay-per-view.
The Company is dedicated to providing superior customer service. To meet this
objective, the Company provides its customers with a full line-up of
programming, a wide variety of programming options and
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packages, timely and reliable service and improved technical quality. The
Company's employees receive ongoing training in customer service, sales and
subscriber retention and technical support. In general, following a new
installation, customer service representatives will follow up by telephone
contact with the subscriber to assess the quality of installation, the service
the subscriber is receiving and to ensure overall subscriber satisfaction.
Customer service representatives and technicians are also trained to market
upgrades or cross-sell services at the point of sale or service. As part of
its consolidation efforts, the Company has established centralized customer
service facilities, increased hours of operation, and installed
state-of-the-art telephone, information and billing systems to improve
responsiveness to customer needs. In addition, the Company has retained local
payment and technical offices to maintain its local presence and visibility
within its communities.
Recognizing that strong governmental, franchise and public relations are
crucial to the overall success of the Company, an aggressive initiative has
been undertaken to maintain and improve the working relationships with all
governmental entities within the franchise areas. Regional managers are
required to meet regularly with local officials for the purposes of keeping
them advised on the Company's activities within the communities, to receive
information and feedback on the Company's standing with officials and customers
alike and to ensure that the Company can maximize its growth potential in areas
where new housing development is occurring or where significant technical plant
improvement is underway. The regional managers are also responsible for all
franchise renewal negotiations as well as the maintenance of Company visibility
through involvement in various community and civic organizations and charities.
TECHNOLOGICAL DEVELOPMENTS
As part of its commitment to customer service, the Company maintains high
technical performance standards in all of its cable systems. Acquired and
existing systems are selectively upgraded to increase channel capacity and
improve picture quality and reliability for the delivery of additional
programming and new services. Before committing the capital to upgrade a
system, Company management carefully assesses (i) subscribers' demand for more
channels, (ii) upgrade requirements in connection with franchise renewals,
(iii) which competing technologies are currently available, (iv) the likely
subscriber demand for other cable and broadband telecommunications services,
(v) the extent to which system improvements will increase the attractiveness of
the property to a future buyer and (vi) the cost effectiveness of any such
upgrades.
The following table sets forth certain information regarding the channel
capacities and miles of plant for the Existing Systems and the Acquisition
Systems as of March 31, 1996.
<TABLE>
<CAPTION>
===========================================================================================================
UP TO 36 37 TO 42 43 TO 54 55 TO 62 63 TO 78 79 TO 100
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
EXISTING SYSTEMS:
Number of systems 14.4 38.5 23.7 22.7 1.8 0.0 101.0
Miles of plant 538 3,541 1,739 1,863 880 0 8,561
% miles of plant 6.3% 41.4% 20.3% 21.8% 10.3% 0.0% 100.0%
ACQUISITION SYSTEMS:
Number of systems 10.5 59.0 0.5 26.0 2.0 2.0 100.0
Miles of plant 1,030 3,228 179 1,169 152 261 6,019
% miles of plant 17.1% 53.6% 3.0% 19.4% 2.5% 4.3% 100.0%
TOTAL:
Number of systems 24.9 97.5 24.2 48.7 3.8 2.0 201.0
Miles of plant 1,568 6,769 1,918 3,032 1,032 261 14,580
% miles of plant 10.8% 46.4% 13.2% 20.8% 7.1% 1.8% 100.0%
</TABLE>
The Company's systems have an average capacity of approximately 49 channels and
approximately 27.6% of the Company's subscribers currently access addressable
technology. Addressable technology enables the Company, from the office or
headend, to change the premium channels being delivered to each subscriber or
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<PAGE> 58
to activate pay-per-view services. These service level changes can be
effectuated without the delay or expense associated with dispatching a
technician to the subscriber's home. Addressable technology also reduces
premium service theft and allows the Company automatically to disconnect
delinquent accounts electronically from the customer service center.
The use of fiber optic technology in concert with coaxial cable has
significantly enhanced cable system performance. Fiber optics strands are
capable of carrying hundreds of video, data and voice channels over extended
distances without the extensive signal amplification typically required for
coaxial cable. To date, the Company has used fiber to interconnect headends,
to eliminate headends by installing fiber backbones and to reduce amplifier
cascades, thereby improving both picture quality and system reliability and
gaining operational efficiencies.
Digital compression and high capacity data modems may become commercially
viable within the next few years. These developments may enable an increase in
system channel capacity and may allow the introduction of alternative
communications delivery systems for data and voice. The Company does not
currently plan to deploy digital technology, as it believes such technologies
will not become cost-effective for its systems in the near term. However, the
Company will continue to monitor the development of such technology and its
utilization by other cable operators to assess the cost-effectiveness of
widespread deployment of such technology.
FRANCHISES
Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, such as time limitations on
commencement and completion of construction; conditions of service, including
number of channels, types of programming and the provision of free service to
schools and certain other public institutions; and the maintenance of insurance
and indemnity bonds. The provisions of local franchises are subject to federal
regulation under the Cable Acts. See "Legislation and Regulation."
As of March 31, 1996, the Company held 257 franchises. These franchises, the
majority of which are non-exclusive, provide for the payment of fees to the
issuing authority. In all of the Existing Systems, such franchise fees are
passed through directly to the customers. The Cable Acts prohibit franchising
authorities from imposing franchise fees in excess of 5% of gross revenues and
also permit the cable system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances. See "Legislation
and Regulation."
More than 95.0% of the Company's basic subscribers are in service areas that
require a franchise. The table below groups the franchises of the Existing
Systems by date of expiration and presents the approximate number and
percentage of basic subscribers for each group of franchises as of March 31,
1996.
<TABLE>
<CAPTION>
====================================================================================
YEAR OF FRANCHISE NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
EXPIRATION FRANCHISES TOTAL FRANCHISES SUBSCRIBERS TOTAL SUBSCRIBERS
-------------------- ----------- ---------------- ----------- -----------------
<S> <C> <C> <C> <C>
1996-2000 93 36.2% 80,394 39.3%
2001 and after 164 63.8% 123,994 60.7%
------------ ----------------- ----------- ------------------
Total 257 100.0% 204,388 100.0%
</TABLE>
The Cable Acts provide, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if
renewal is withheld, the franchising authority must pay the
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<PAGE> 59
operator the "fair market value" for the system covered by such franchise. In
addition, the 1984 Cable Acts established comprehensive renewal procedures
which require that an incumbent franchisee's renewal application be assessed on
its own merits and not as part of a comparative process with competing
applications. See "Legislation and Regulation."
The Company believes that it generally has very good relationships with its
franchising communities. The Company has never had a franchise revoked or
failed to have a franchise renewed. In addition, all of the franchises of the
Company eligible for renewal have been renewed or extended at or prior to their
stated expirations, and no franchise community has refused to consent to a
franchise transfer to the Company.
COMPETITION
Cable television systems face competition from alternative methods of receiving
and distributing television signals and from other sources of news, information
and entertainment such as off-air television broadcast programming, newspapers,
movie theaters, live sporting events, online computer services and home video
products, including videotape cassette recorders. The extent to which a cable
communications system is competitive depends, in part, upon the cable system's
ability to provide, at a reasonable price to customers, a greater variety of
programming and other communications services than those which are available
off-air or through other alternative delivery sources and upon superior
technical performance and customer service.
Cable television systems generally operate pursuant to franchises granted on a
nonexclusive basis. The 1992 Cable Act prohibits franchising authorities from
unreasonably denying requests for additional franchises and permits franchising
authorities to operate cable television systems without a franchise. It is
possible that a franchising authority might grant a second franchise to another
company containing terms and conditions more favorable than those afforded the
Company. Well-financed businesses from outside the cable industry (such as the
public utilities that own the poles to which cable is attached) may become
competitors for franchises or providers of competing services. In a limited
number of the Company's franchise areas, the Company faces direct competition
from another franchised cable television system.
Cable operators also face competition from private satellite master antenna
television ("SMATV") systems that serve condominiums, apartment and office
complexes and private residential developments. SMATV systems offer both
improved reception of local television stations and many of the same
satellite-delivered program services offered by franchised cable television
systems. SMATV operators often enter into exclusive agreements with building
owners or homeowners' associations, although some states have enacted laws that
authorize franchised cable operators access to such private complexes. These
laws have been challenged in the courts with varying results. The ability of
the Company to compete for customers in residential and commercial developments
served by SMATV operators is uncertain.
In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
television systems. These technologies include, among others, DBS service,
whereby signals are transmitted by satellite to receiving facilities located on
customer premises. Programming is currently available to the owners of DBS
dishes through conventional, medium and high-powered satellites. DBS systems
are expected to increase channel capacity and thus to provide movies, broadcast
stations, and other program services comparable to those of cable television
systems. Digital satellite service ("DSS") offered by DBS systems has certain
advantages over cable systems with respect to programming and digital quality,
as well as disadvantages that include high upfront costs and a lack of local
programming, service and equipment distribution.
While DSS presents a potential competitive threat, the Company currently has
excess channel capacity available in most of its systems, as well as strong
local customer service and technical support, which will enhance its ability to
compete. By selectively increasing channel capacities of systems to between 54
and 100 channels and introducing new premium channels, pay-per-view and other
services, the Company will seek to
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maintain programming parity with DSS and magnify competitive service price
points. Based on internal tracking of subscriber disconnects, the Company
believes it has lost less than one percent of its customers to date to DSS
providers. The Company will continue to monitor closely the activity level and
the product and service needs of its customer base to counter potential erosion
of its market position or unit growth to DSS.
Cable television systems also compete with wireless program distribution
services such as MMDS, which uses low power microwave frequencies to transmit
video programming over the air to customers. Additionally, the FCC recently
adopted new regulations allocating frequencies in the 28 GHz band for a new
multichannel wireless video service similar to MMDS. Wireless distribution
services generally provide many of the programming services provided by cable
systems, and digital compression technology is likely to increase significantly
the channel capacity of their systems. Because MMDS service requires
unobstructed "line of sight" transmission paths, the ability of MMDS systems to
compete may be hampered in some areas by physical terrain and large buildings.
In the majority of the Company's franchise service areas, prohibitive
topography and limited "line of sight" access has limited, and is likely to
continue to limit, competition from MMDS systems. The Company is not aware of
any significant MMDS operation currently within its cable franchise service
areas.
The 1996 Telecom Act eliminated the previous prohibition on the provision of
video programming by local exchange telephone companies ("LECs") in their
telephone service areas. Various LECs currently are seeking to provide video
programming services within their telephone service areas through a variety of
distribution methods, including both the deployment of broadband wire
facilities and the use of wireless (MMDS) transmission. Cable television
systems could be placed at a competitive disadvantage if the delivery of video
programming services by LECs becomes widespread, since LECs may not be
required, under certain circumstance, to obtain local franchises to deliver
such video services or to comply with the variety of obligations imposed upon
cable television systems under such franchises. Issues of cross-subsidization
by LECs of video and telephony services also pose strategic disadvantages for
cable operators seeking to compete with LECs that provide video services. The
Company believes, however, that the small to medium-sized markets in which it
provides or expects to provide cable services are unlikely to support
competition in the provision of video and telecommunications broadband services
given the lower population densities and higher costs per subscriber of
installing plant. The 1996 Telecom Act's provisions promoting facilities-based
broadband competition are primarily targeted at larger markets, and its
prohibition on buy outs and joint ventures between incumbent cable operators
and LECs exempts small operators and carriers meeting certain criteria. See
"Legislation and Regulation." The Company believes that significant growth
opportunities exist for the Company by establishing cooperative rather than
competitive relationships with LECs within its service areas, to the extent
permitted by law. The Company has initiated discussions with such carriers
regarding possible joint ventures.
Other new technologies may become competitive with non-entertainment services
that cable television systems can offer. The FCC has authorized television
broadcast stations to transmit textual and graphic information useful both to
consumers and businesses. The FCC also permits commercial and noncommercial FM
stations to use their subcarrier frequencies to provide nonbroadcast services
including data transmissions. The FCC established an over-the-air Interactive
Video and Data Service that will permit two-way interaction with commercial and
educational programming along with informational and data services. The
expansion of fiber optic systems by LECs and other common carriers is providing
facilities for the transmission and distribution to homes and businesses of
video services, including interactive computer-based services like the
Internet, data and other nonvideo services. The FCC has held spectrum auctions
for licenses to provide PCS. PCS will enable license holders, including cable
operators, to provide voice and data services.
Advances in communications technology as well as changes in the marketplace and
the regulatory and legislative environments are constantly occurring. Thus, it
is not possible to predict the effect that ongoing or future developments might
have on the cable industry or on the operations of the Company.
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PROPERTIES
The Company's principal physical assets consist of cable television operating
plant and equipment, including signal receiving, encoding and decoding devices,
headends and distribution systems and customer house drop equipment for each of
its cable television systems. The signal receiving apparatus typically
includes a tower, antenna, ancillary electronic equipment and earth stations
for reception of satellite signals. Headends, consisting of associated
electronic equipment necessary for the reception, amplification and modulation
of signals, are located near the receiving devices. The Company's distribution
system consists primarily of coaxial and fiber optic cables and related
electronic equipment. Customer devices consist of decoding converters, which
expand channel capacity to permit reception of more than twelve channels of
programming. Some of the Existing Systems utilize converters that can be
addressed by sending coded signals from the headend over the cable network.
See "--Technological Developments."
The Company owns or leases parcels of real property for signal reception sites
(antenna towers and headends), microwave facilities and business offices, and
owns most of its service vehicles. The Company believes that its properties,
both owned and leased, are in good condition and are suitable and adequate for
the Company's business operations.
The Company's cables generally are attached to utility poles under pole rental
agreements with local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. The physical components of
the Company's systems require maintenance and periodic upgrading to keep pace
with technological advances.
LITIGATION
There are no material pending legal proceedings to which the Company is a party
or to which any of its properties are subject.
EMPLOYEES
At March 31, 1996, the Company had approximately 265 equivalent full-time
employees, nine of whom belonged to a collective bargaining unit. The Company
considers its relations with its employees to be good.
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LEGISLATION AND REGULATION
The cable television industry currently is regulated by the FCC and certain
state and local governments. In addition, legislative and regulatory proposals
under consideration by the Congress and federal agencies may materially affect
the cable television industry.
The Cable Acts and the 1996 Telecom Act amend the Communications Act and
establish a national policy to guide the development and regulation of cable
television systems. Principal responsibility for implementing the policies of
the Cable Acts and the 1996 Telecom Act is allocated between the FCC and state
or local franchising authorities. The FCC and state regulatory agencies are
required to conduct numerous rulemaking and regulatory proceedings to implement
the 1996 Telecom Act and such proceedings may materially affect the cable
television industry. The following is a summary of federal laws and
regulations materially affecting the growth and operation of the cable
television industry and a description of certain state and local laws.
THE TELECOMMUNICATIONS ACT OF 1996
The 1996 Telecom Act, which became effective on February 8, 1996, is the most
comprehensive reform of the nation's telecommunications laws since the
Communications Act. The 1996 Telecom Act is expected to cause significant
changes in the marketplace for cable, telephone and other telecommunications
services. Although the long term goal of the 1996 Telecom Act is to promote
competition and decrease regulation of various communications industries, in
the short term, the law delegates to the FCC (and in some cases to the states)
broad new rulemaking authority. The new law requires many of these rulemakings
to be completed in a very limited period of time. The following is a brief
summary of the important features of the 1996 Telecom Act that will affect the
cable and telephone industries.
Cable Communications. The 1996 Telecom Act deregulates cable operators' CPST
rates after March 31, 1999, except that such rates are immediately deregulated
for certain small operators. Deregulation will occur sooner for systems in
markets where comparable video programming services, other than DBS, are
offered by local telephone companies, or their affiliates, or by third parties
using the local telephone company's facilities, or where "effective
competition" is established under the 1992 Cable Act. The 1996 Telecom Act
also modifies the uniform rate provisions of the 1992 Cable Act by prohibiting
regulation of bulk discount rates offered to multiple dwelling units (except
that a cable operator may not charge predatory prices to a multiple dwelling
unit) and permits regulated equipment rates to be computed by aggregating costs
of broad categories of equipment at the franchise, system, regional or company
level. The 1996 Telecom Act eliminates the right of individual customers to
file rate complaints with the FCC concerning certain CPSTs and requires the FCC
to issue a final order within 90 days after receipt of CPST rate complaints
filed by any franchising authority after the date of enactment of the 1996
Telecom Act. The 1996 Telecom Act also modifies the existing statutory
provisions governing cable system technical standards, equipment compatibility,
customer notice requirements and program access, permits certain operators to
include losses incurred prior to September 1992 in setting regulated rates and
repeals the three-year anti-trafficking prohibition adopted in the 1992 Cable
Act.
The 1996 Telecom Act eliminates the requirement that LECs obtain FCC approval
under Section 214 of the Communications Act before providing video services in
their telephone service areas and removes the telephone company/cable
television cross-ownership prohibition that had been codified by the 1984 Cable
Act, thereby allowing LECs to offer video services in their telephone service
areas. LECs may provide service as traditional cable operators with local
franchises or they may opt to provide their programming over unfranchised "open
video systems," subject to certain conditions, including, but not limited to,
setting aside a portion of their channel capacity for use by unaffiliated
program distributors on a nondiscriminatory basis. Under certain
circumstances, cable operators also will be able to offer services through open
video systems. The 1996 Telecom Act also prohibits a local telephone company
from acquiring a cable operator in its telephone service area except in limited
circumstances, such as where a nonurbanized franchise area has a population of
less than 35,000 or pursuant to an FCC waiver.
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Telephone. The 1996 Telecom Act removes barriers to entry in the local
telephone exchange market that is now monopolized by the seven RBOCs and other
LECs by preempting state and local laws that restrict competition and by
requiring LECs to provide nondiscriminatory access and interconnection to
potential competitors, such as cable operators and long distance companies. At
the same time, the new law eliminates the prospective effects of the AT&T, GTE
and McCaw consent decrees and permits the RBOCs to enter the market for long
distance services (through a separate subsidiary) after they satisfy certain
competitive requirements intended to open the local telephone markets to
competition. The 1996 Telecom Act also permits interstate utility companies to
enter the telecommunications market for the first time.
While the 1996 Telecom Act imposes new requirements with regard to
interconnection, it also directs the FCC to substantially relax much of its
regulation of telecommunications providers. The FCC may, for example, forbear
from applying any regulation if it finds, inter alia, that forbearance would be
consistent with the public interest and would promote competition. The new law
also eliminates or streamlines many of the requirements applicable to local
exchange carriers, such as the requirement to obtain prior approval of the
extension or construction of telephone plant. In addition, the 1996 Telecom
Act requires the FCC and states to review universal service programs and to
encourage access to advanced telecommunications services by schools, libraries
and other public institutions.
Other Communications Services. In addition to these provisions governing
regulation of specific segments of the market, the 1996 Telecom Act also
contains provisions regulating the content of video programming and computer
services. Specifically, the new law prohibits the use of computer services to
transmit "indecent" material to minors. Several special three-judge federal
district courts have issued preliminary injunctions enjoining the enforcement
of these provisions as unconstitutional to the extent they regulated the
transmission of indecent material. The 1996 Telecom Act also requires the FCC
to prescribe guidelines for a ratings system for violent and indecent video
programming (unless video programming distributors adopt voluntary guidelines)
and requires all new television sets to contain a so-called "V-chip" capable of
blocking all programs with a given rating. The new law also substantially
relaxes current broadcast ownership rules by eliminating, among other things,
the statutory broadcast/cable television cross-ownership restriction that had
been codified by the 1984 Cable Act and by directing the FCC to eliminate its
network/cable cross-ownership regulation and review the need for its rule
prohibiting broadcast/cable cross-ownership.
Rate Regulation. Prior to April 1, 1993, virtually all cable systems were free
to adjust cable service rates without obtaining local governmental approval.
The 1992 Cable Act authorized rate regulation for certain cable communications
services and equipment in communities that are not subject to "effective
competition" as defined by federal law. Under the 1992 Cable Act virtually all
cable television systems were subject to rate regulation for basic cable
service and equipment by local officials under the oversight of the FCC, which
prescribed detailed guidelines for such rate regulation. The 1992 Cable Act
also required the FCC to resolve complaints about rates for nonbasic cable
programming services (other than programming offered on a per channel or per
program basis) and to reduce any such rates found to be unreasonable. The 1992
Cable Act limited the ability of cable television systems to raise rates for
basic and certain cable programming services (collectively the "Regulated
Services") and eliminated the 5% annual basic service rate increase permitted
by the 1984 Cable Act without local approval. Cable services offered on a per
channel (a la carte) or per program (pay-per-view) basis are not subject to
rate regulation by either local franchising authorities or the FCC.
The 1996 Telecom Act deregulates rates for CPSTs after March 31, 1999 for most
MSOs (including the Company) and, for certain small cable operators,
immediately eliminates rate regulation of CPSTs and, in certain circumstances,
basic services and equipment. The deregulation of a smaller cable operator's
rates only applies in franchise areas in which the small cable operator serves
50,000 or fewer subscribers. To qualify for the "small cable operator" rate
deregulation under the 1996 Telecom Act, the operator (and its affiliates) must
serve in the aggregate less than one percent (currently estimated by the FCC to
be approximately 617,000 subscribers) of all U.S. cable television subscribers
and may not be affiliated with an entity or group of entities that in the
aggregate has annual gross revenues exceeding $250 million. The FCC has
adopted
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interim rules in which it has defined "affiliate" as any entity that has a 20%
or greater equity interest in the small cable operator (active or passive) or
that holds de jure or de facto control over the small cable operator. The FCC
is currently conducting a rulemaking to implement the 1996 Telecom Act's
"small cable operator" rate deregulation, including adoption of permanent
affiliation standards.
On April 1, 1993, the FCC adopted regulations pursuant to the 1992 Cable Act
governing the rates charged to customers for Regulated Services and ordered an
interim freeze on these rates effective April 5, 1993. The FCC's rate
regulations became effective on September 1, 1993 and the FCC's rate freeze was
extended until the earlier of May 15, 1994 or the date on which a cable
system's basic service rate was regulated by a franchising authority.
In implementing the 1992 Cable Act, the FCC adopted a benchmark method of
regulating rates for Regulated Services. Cable operators with rates above the
allowable level under the FCC's benchmark methodology may justify such rates
using a cost-of-service methodology. As of September 1, 1993, cable operators
subject to rate regulation whose then current rates were above FCC benchmark
levels were required, absent a successful cost-of-service showing, to reduce
those rates to the benchmark level or by up to 10% of the rates in effect on
September 30, 1992, whichever reduction was less, adjusted for equipment costs
and inflation and programming modifications occurring subsequent to September
30, 1992. Effective May 15, 1994, the FCC modified its benchmark methodology
to require reductions of up to 17% of the rates for Regulated Services in
effect on September 30, 1992, adjusted for inflation, channel modifications,
equipment costs and increases in certain operating costs. The FCC's modified
benchmark regulations were designed to cause an additional 7% reduction in the
rates for Regulated Services on top of any rate reductions implemented under
the FCC's initial benchmark regulations.
The FCC's initial "going-forward" regulations limited rate increases for
Regulated Services after the establishment of an initial regulated rate to an
inflation-indexed amount plus increases for channel additions and certain
external costs beyond the cable operator's control, such as franchise fees,
taxes and increased programming costs. Under these regulations, cable
operators are entitled to take a 7.5% markup on certain programming cost
increases. In November 1994, the FCC modified these regulations and instituted
an alternative three-year flat fee markup plan for charges relating to new
channels added to the CPST. As of January 1, 1995, cable operators may charge
customers for channels added to the CPST after May 14, 1994 at a monthly rate
of up to $0.20 per added channel, up to a total of $1.20 plus an additional
$0.30 for programming license fees per customer over the first two years of the
three-year period. Cable operators may charge an additional $0.20 plus the
cost of the programming in the third year (1997) for one additional channel
added in that year. Alternatively, operators may increase rates by the amount
of any programming license fees in connection with such added channels,
provided that the total monthly rate increase per customer for the added
channels, including license fees, does not exceed $1.50 over the first two
years, and $1.70, plus any increase in the license fees for the added channels,
in the third year. Operators must make a one-time election to use either the
$0.20 per channel adjustment or the 7.5% markup on programming cost increases
for all channels added after December 31, 1994. The FCC is currently
considering whether to modify or eliminate the regulation allowing operators to
receive the 7.5% markup on increases in existing programming license fees.
In November 1994, the FCC adopted regulations permitting cable operators to
create new product tiers ("NPTs") that will not be subject to rate regulation
if certain conditions are met. The FCC also revised its previously adopted
policy and concluded that packages of a la carte services are subject to rate
regulation by the FCC as CPSTs. Because of the uncertainty created by the
FCC's prior a la carte package guidelines, the FCC allows cable operators,
under certain circumstances, to treat previously offered a la carte packages as
NPTs.
In September 1995, the FCC authorized a new, alternative method of implementing
rate adjustments which allows cable operators to increase rates for Regulated
Services annually on the basis of projected increases in external costs
(inflation, costs of programming, franchise-related obligations and changes in
the number of
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regulated channels) rather than on the basis of cost increases incurred in the
preceding calendar quarter. Operators electing not to recover all of their
accrued external costs and inflation pass-throughs each year may recover them
(with interest) in subsequent years.
In addition to rate deregulation for certain small cable operators under the
1996 Telecom Act, the FCC adopted regulations in June 1995 ("Small System
Regulations") pursuant to the 1992 Cable Act that were designed to reduce the
substantive and procedural burdens of rate regulation on "small cable systems."
For purposes of these FCC regulations, a "small cable system" is a system
serving 15,000 or fewer subscribers that is owned by or affiliated with a cable
company which serves, in the aggregate, 400,000 or fewer subscribers. Under
the FCC's Small System Regulations, qualifying systems may justify their
regulated service and equipment rates using a simplified cost-of-service
formula. The regulatory benefits accruing to qualified small cable systems
under certain circumstances remain effective even if such systems are later
acquired by a larger cable operator that serves in excess of 400,000
subscribers. Various franchising authorities and municipal groups have
requested the FCC to reconsider its Small System Regulations. The FCC recently
determined that the 1996 Telecom Act does not require modification of its Small
System Regulations. The Company believes that many of the Company Systems and
the Acquisition Systems currently satisfy the eligibility criteria under the
FCC's Small System Regulations and would therefore be eligible to use the FCC's
simplified cost-of-service methodology to justify basic service, CPST and
equipment rates if regulated by a franchising authority or the FCC.
Franchising authorities are empowered to regulate the rates charged for
additional outlets and for the installation, lease and sale of equipment used
by customers to receive the basic service tier, such as converter boxes and
remote control units. The FCC's rules require franchising authorities to
regulate these rates on the basis of actual cost plus a reasonable profit as
defined by the FCC. The 1996 Telecom Act requires the FCC to revise its
regulations to permit operators to compute regulated equipment rates by
aggregating costs of broad categories of equipment at the franchise, system,
regional or company level. In November 1995, the FCC initiated a general
rulemaking proposal that permits cable operators to price services uniformly
across multiple franchise areas, as well as regional areas. If the FCC adopts
the proposals, cable operators that provide service to clusters of systems
would be permitted to charge uniform rates across large geographic areas.
Because the proposal is designed to be revenue neutral, it would not affect the
overall revenue that operators receive, but administrative and marketing costs
could be reduced.
Cable operators required to reduce rates may also be required to refund
overcharges with interest. Rate reductions will not be required where a cable
operator can demonstrate that rates for Regulated Services are justified and
reasonable using cost-of-service guidelines. In November 1993, the FCC ruled
that operators choosing to justify above-benchmark rates through a
cost-of-service submission must do so for all Regulated Services. In February
1994, the FCC adopted interim cost-of-service regulations establishing, among
other things, an industry-wide 11.25% after-tax rate of return on an operator's
allowable rate base and a rebuttable presumption that acquisition costs above
original historic book value of tangible assets should be excluded from the
allowable base. In December 1995, the FCC adopted final cost-of-service rate
regulations requiring, among other things, cable operators to exclude 34% of
system acquisition costs related to intangible and tangible assets used to
provide Regulated Services. The FCC also reaffirmed the industry-wide 11.25%
after-tax rate of return on an operator's allowable rate base, but initiated a
further rulemaking in which it proposes to use an operator's actual debt cost
and capital structure to determine an operator's cost of capital or rate of
return.
"Anti-Buy Through" Provisions. The 1992 Cable Act also requires cable systems
to permit customers to purchase video programming offered by the operator on a
per channel or a per program basis without the necessity of subscribing to any
tier of service, other than the basic service tier, unless the system's lack of
addressable converter boxes or other technological limitations does not permit
it to do so. The statutory exemption for cable systems that do not have the
technological capacity to offer programming in the manner required by the
statute is available until a system obtains such capability, but not later than
December 2002. The FCC may waive such time periods, if deemed necessary. Most
of the Company's cable systems do not
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have the technological capability to offer programming in the manner required
by the statute and currently are exempt from complying with the requirement.
The Company cannot predict the extent to which this provision of the 1992 Cable
Act and the corresponding FCC rules may cause customers to discontinue optional
nonbasic service tiers in favor of the less expensive basic cable service.
Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast
signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years to require a cable system to carry the
station, subject to certain exceptions, or to negotiate for "retransmission
consent" to carry the station. A cable system generally is required to devote
up to one-third of its activated channel capacity for the carriage of local
commercial television stations whether pursuant to the mandatory carriage or
retransmission consent requirements of the 1992 Cable Act. Local noncommercial
television stations are also given mandatory carriage rights; however, such
stations are not given the option to negotiate retransmission consent for the
carriage of their signals by cable systems. Additionally, cable systems are
required to obtain retransmission consent for all "distant" commercial
television stations (except for commercial satellite-delivered independent
"superstations" such as WTBS), commercial radio stations and certain low power
television stations carried by such systems after October 6, 1993. In April
1993, a special three-judge federal district court issued a decision upholding
the constitutional validity of the mandatory signal carriage requirements. In
June 1994, the United States Supreme Court vacated this decision and remanded
it to the district court to determine, among other matters, whether the
statutory carriage requirements are necessary to preserve the economic
viability of the broadcast industry. In December 1995, the district court
upheld the mandatory carriage requirements of the 1992 Cable Act. In February
1996, the United States Supreme Court agreed to review this decision. The
Company cannot predict the ultimate outcome of this litigation. Pending final
action by the Supreme Court, the mandatory broadcast signal carriage
requirements remain in effect.
As a result of the mandatory carriage rules, some of the Company's systems have
been required to carry television broadcast stations that otherwise would not
have been carried and have caused displacement of possibly more attractive
programming. The retransmission consent rules have resulted in the deletion of
certain local and distant televisions broadcast stations which various Company
systems were carrying. To the extent retransmission consent fees must be paid
for the continued carriage of certain television stations, the Company's cost
of doing business will increase with no assurance that such fees can be
recovered through rate increases.
Designated Channels. The 1984 Cable Act permits franchising authorities to
require cable operators to set aside certain channels for public, educational
and governmental access programming. The 1984 Cable Act also requires a cable
system with 36 or more channels to designate a portion of its channel capacity
for commercial leased access by third parties to provide programming that may
compete with services offered by the cable operator. The FCC has adopted rules
regulating: (i) the maximum reasonable rate a cable operator may charge for
commercial use of the designated channel capacity; (ii) the terms and
conditions for commercial use of such channels; and (iii) the procedures for
the expedited resolution of disputes concerning rates or commercial use of the
designated channel capacity. The FCC is currently conducting a further
rulemaking to consider adoption of a cost-based methodology to compute the
maximum reasonable rate a cable operator may charge for commercial use of the
designated channel capacity.
Franchise Procedures. The 1984 Cable Act affirms the right of franchising
authorities (state or local, depending on the practice in individual states) to
award one or more franchises within their jurisdictions and prohibits
non-grandfathered cable systems from operating without a franchise in such
jurisdictions. The 1992 Cable Act encourages competition with existing cable
systems by (i) allowing municipalities to operate their own cable systems
without franchises, (ii) preventing franchising authorities from granting
exclusive franchises or unreasonably refusing to award additional franchises
covering an existing cable system's service area, and (iii) prohibiting (with
limited exceptions) the common ownership of cable systems and co-located MMDS
or SMATV systems. In January 1995, the FCC relaxed its restrictions on
ownership of SMATV systems to permit a cable operator to acquire SMATV systems
in the operator's existing franchise area so long as the
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programming services provided through the SMATV system are offered according to
the terms and conditions of the cable operator's local franchise agreement.
The 1996 Telecom Act provides that the cable/SMATV and cable/MMDS
cross-ownership rules do not apply in any franchise area where the cable
operator faces "effective competition" as defined by federal law. The 1996
Telecom Act also permits local telephone companies to provide video programming
services as traditional cable operators with local franchises.
The 1984 Cable Act also provides that in granting or renewing franchises, local
authorities may establish requirements for cable-related facilities and
equipment, but not for video programming or information services other than in
broad categories. Among the more significant provisions, the Cable Act limits
franchise fees to 5% of cable system revenues and permits cable operators to
obtain modification of franchise requirements by the franchising authority or
judicial action if warranted by changed circumstances. The Company's
franchises typically provide for payment of fees to franchising authorities in
the range of 3% to 5% of "revenues" (as defined by each franchise agreement).
The 1984 Cable Act contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. The 1992 Cable Act makes
several changes to the renewal process which could make it easier for a
franchising authority to deny renewal. Moreover, even if the franchise is
renewed, the franchising authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a
franchising authority's consent is required for the purchase or sale of a cable
system or franchise, such authority may attempt to impose more burdensome or
onerous franchise requirements in connection with a request for such consent.
Historically, franchises have been renewed for cable operators that have
provided satisfactory services and have complied with the terms of their
franchises. The Company believes that it has generally met the terms of its
franchises and has provided quality levels of service, and it anticipates that
its future franchise renewal prospects generally will be favorable.
Various courts have considered whether franchising authorities have the legal
right to limit franchise awards to a single cable operator and to impose
certain substantive franchise requirements (i.e., access channels, universal
service and other technical requirements). These decisions have been somewhat
inconsistent and, until the United States Supreme Court rules definitively on
the scope of cable operators' First Amendment protections, the legality of the
franchising process generally and of various specific franchise requirements is
likely to be in a state of flux.
Ownership Limitations. Pursuant to the 1992 Cable Act, the FCC adopted rules
prescribing national customer limits and limits on the number of channels that
can be occupied on a cable system by a video programmer in which the cable
operator has an attributable interest. The FCC's horizontal ownership limits
have been stayed because a federal district court found the statutory
limitation to be unconstitutional. An appeal of that decision is pending. The
1996 Telecom Act eliminates the statutory prohibition on the common ownership,
operation or control of a cable system and a television broadcast station in
the same service area and directs the FCC to eliminate its regulatory
restrictions on cross-ownership of cable systems and national broadcasting
networks and to review its broadcast-cable ownership restrictions to determine
if they are necessary in the public interest.
Telephone Company Ownership of Cable Systems. The 1984 Cable Act, FCC
regulations and the 1982 federal court consent decree that settled the AT&T
antitrust suit regulated the provision of video programming and other
information services by telephone companies. The statutory provision and
corresponding FCC regulations are of particular competitive importance because
telephone companies already own much of the plant necessary for cable
communications operations, such as poles, underground conduit and associated
rights-of-way. The 1996 Telecom Act makes far-reaching changes in the
regulation of telephone companies that provide video programming services. The
new law eliminates current legal barriers to competition in the local telephone
and cable communications businesses, preempts legal barriers to competition
that previously existed in state and local laws and regulation and sets basic
standards for relationships between telecommunications providers. The 1996
Telecom Act generally limits acquisitions and prohibits certain joint
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ventures between LECs and cable operators in the same market. LECs or their
affiliates generally are prohibited from holding greater than a 10% financial
interest or any management interest in a cable operator providing cable service
within the LEC's telephone service area. Similarly, cable operators and their
affiliates generally are prohibited from holding greater than a 10% financial
interest or any management interest in an LEC which provides telephone service
in the cable operator's franchise area. An LEC and cable operator who are
operating in the same market may not enter into any joint venture or
partnership to provide video programming directly to subscribers or to provide
telecommunications services to households within that market. There are some
statutory exceptions to the buy out and joint venture prohibitions, including
exceptions for certain small cable systems (as defined by federal law) and for
cable systems or telephone facilities serving certain rural areas, and the FCC
is authorized to grant waivers of the prohibitions under certain circumstances.
The FCC and, in some cases, states are required to conduct numerous rulemaking
proceedings to implement the 1996 Telecom Act. The ultimate outcome of these
rulemakings, and the ultimate impact of the 1996 Telecom Act or any final
regulations adopted pursuant to the new law on the Company or its business,
cannot be determined at this time.
Pole Attachment. The Communications Act requires the FCC to regulate the
rates, terms and conditions imposed by public utilities for cable systems' use
of utility pole and conduit space unless state authorities can demonstrate that
they adequately regulate pole attachment rates. In the absence of state
regulation, the FCC administers pole attachment rates through the use of a
formula that it has devised. In some cases, utility companies have increased
pole attachment fees for cable systems that have installed fiber optic cables
and that are using such cables for the distribution of nonvideo services. The
FCC concluded that, in the absence of state regulation, it has jurisdiction to
determine whether utility companies have justified their demand for additional
rental fees and that the Communications Act does not permit disparate rates
based on the type of service provided over the equipment attached to the
utility's pole.
The 1996 Telecom Act modifies the current pole attachment provisions of the
Communications Act by immediately permitting certain providers of
telecommunications services to rely upon the protections of the current law and
by requiring that utilities provide cable systems and telecommunications
carriers with nondiscriminatory access to any pole, conduit or right-of-way
controlled by the utility. Additionally, within two years of enactment of the
1996 Telecom Act, the FCC is required to adopt new regulations to govern the
charges for pole attachments used by companies providing telecommunications
services, including cable operators. These new pole attachment regulations
will become effective five years after enactment of the 1996 Telecom Act, and
any increase in attachment rates resulting from the FCC's new regulations will
be phased in equal annual increments over a period of five years beginning on
the effective date of the new FCC regulations.
Other Statutory Provisions. The 1992 Cable Act and the 1996 Telecom Act
preclude video programmers affiliated with cable companies or common carriers
providing video programming directly to customers from favoring the affiliated
company over competitors and require such programmers to sell their programming
to other multichannel video distributors. These provisions limit the ability
of cable program suppliers affiliated with cable companies or common carriers
providing video programming to offer exclusive programming arrangements to
their affiliates. The Communications Act also includes provisions, among
others, concerning horizontal and vertical ownership of cable systems, customer
service, customer privacy, commercial leased access channels, marketing
practices, equal employment opportunity, franchise renewal and transfer, award
of franchises, technical standards, consumer equipment compatibility and
obscene or indecent programming. The United States Supreme Court recently held
parts of the 1992 Cable Act regulating "indecent" programming on local access
channels to be unconstitutional, but upheld the statutory right of cable
operators to prohibit or limit the provision of "indecent" programming on
commercial leased access channels.
Other FCC Regulations. The FCC has numerous rulemaking proceedings pending
that will implement various provisions of the 1996 Telecom Act; it also has
adopted regulations implementing various provisions of the 1992 Cable Act and
the 1996 Telecom Act that are the subject of petitions requesting
reconsideration of various aspects of its rulemaking proceedings. In addition
to the FCC regulations noted above, there are
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other FCC regulations covering such areas as equal employment opportunity,
syndicated program exclusivity, network program nonduplication, registration of
cable systems, maintenance of various records and public inspection files,
microwave frequency usage, lockbox availability, origination cablecasting and
sponsorship identification, antenna structure notification, marking and
lighting, carriage of local sports programming, application of the fairness
doctrine and rules governing political broadcasts, limitations on advertising
contained in nonbroadcast children's programming, consumer protection and
customer service, leased commercial access, ownership of home wiring, indecent
programming, programmer access to cable systems, programming agreements,
technical standards, consumer electronics equipment compatibility and DBS
implementation. The FCC has the authority to enforce its regulations through
the imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the revocation
of FCC licenses needed to operate certain transmission facilities often used in
connection with cable operations.
The 1992 Cable Act and the FCC's rules implementing it generally have increased
the administrative and operational expenses of cable systems and have resulted
in additional regulatory oversight by the FCC and local franchise authorities.
The Company will continue to develop strategies to minimize the adverse impact
the FCC's regulations and the other provisions of the 1992 Cable Act and the
1996 Telecom Act have on the Company's business. However, no assurances can be
given that the Company will be able to develop and successfully implement such
strategies to minimize the adverse impact of the FCC's rate regulations, or the
1992 Cable Act or the 1996 Telecom Act on the Company's business.
COPYRIGHT
Cable systems are subject to federal copyright licensing covering carriage of
television and radio broadcast signals. In exchange for filing certain reports
and contributing a percentage of their revenues to a federal copyright royalty
pool, cable operators can obtain blanket permission to retransmit copyrighted
material on broadcast signals. The nature and amount of future payments for
broadcast signal carriage cannot be predicted at this time. The possible
simplification, modification or elimination of the compulsory copyright license
is the subject of continuing legislative review. The elimination or
substantial modification of the cable compulsory license could adversely affect
the Company's ability to obtain suitable programming and could substantially
increase the cost of programming that remained available for distribution to
the Company's customers. The Company cannot predict the outcome of this
legislative activity.
Cable operators may produce programming and advertising that use music
controlled by the two major music performing rights organizations, ASCAP and
BMI. In October 1989, the special rate court of the United States District
Court for the Southern District of New York imposed interim rates on the cable
industry's use of ASCAP-controlled music. The same federal district court
recently established a special rate court for BMI. BMI and certain cable
industry representatives recently concluded negotiations for a standard
licensing agreement covering the usage of BMI music contained in advertising
and other information inserted by operators into cable programming and on
certain local access and origination channels carried on cable systems. ASCAP
and cable industry representatives have met to discuss the development of a
standard licensing agreement covering ASCAP music in local origination and an
access licensing agreement covering ASCAP music in local origination and access
channels and pay-per-view programming. Although the Company cannot predict the
ultimate outcome of these industry negotiations or the amount of any license
fees it may be required to pay for past and future use of ASCAP-controlled
music, it does not believe such license fees will be material to the Company's
operations.
STATE AND LOCAL REGULATION
Cable systems are subject to state and local regulation, typically imposed
through the franchising processing because they use local streets and
rights-of-way. Regulatory responsibility for essentially local aspects of the
cable business such as franchisee selection, billing practices, system design
and construction, and safety and consumer protection remains with either state
or local officials and, in some jurisdictions, with both.
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<PAGE> 70
Cable systems generally are operated pursuant to nonexclusive franchises,
permits or licenses granted by a municipality or other state or local
government entity. Franchises generally are granted for fixed terms and in
many cases are terminable if the franchisee fails to comply with material
provisions. The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing payment of franchise fees, franchise term, system construction and
maintenance obligations, system channel capacity, design and technical
performance, customer service standards, franchise renewal, sale or transfer of
the franchise, territory of the franchisee, indemnification of the franchising
authority, use and occupancy of public streets and types of cable services
provided. A number of states subject cable systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Attempts in other states to
regulate cable systems are continuing and can be expected to increase. To
date, no state in which the Company operates has enacted such state level
regulation. The Company cannot predict whether any of the states in which it
currently operates will engage in such regulation in the future. State and
local franchising jurisdiction is not unlimited, however, and must be exercised
consistently with federal law. The 1992 Cable Act immunizes franchising
authorities from monetary damage awards arising from regulation of cable
systems or decisions made on franchise grants, renewals, transfers and
amendments.
The foregoing does not purport to describe all present and proposed federal,
state, and local regulations and legislation affecting the cable industry.
Other existing federal regulations, copyright licensing, and, in many
jurisdictions, state and local franchise requirements, are currently the
subject of judicial proceedings, legislative hearings and administrative and
legislative proposals which could change, in varying degrees, the manner in
which cable systems operate. Neither the outcome of these proceedings nor the
impact on the cable communications industry or the Company can be predicted at
this time.
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<PAGE> 71
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF FRONTIERVISION INC.
FVOP's sole general partner is FVP, whose sole general partner is FVP GP, L.P.
("FVP GP"). FVP GP's sole general partner is FrontierVision Inc. Information
with respect to the directors and executive officers of FrontierVision Inc. is
set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James C. Vaughn 50 President, Chief Executive Officer and
Director
John S. Koo 35 Senior Vice President, Chief Financial
Officer, Secretary and Director
William Mahon 55 Vice President of Operations
Gary T. Crosby 44 Vice President of Development
James W. McHose 32 Vice President and Treasurer
Robert G. Sullivan 35 Corporate Controller
Todd E. Padgett 30 Director of Finance
</TABLE>
JAMES C. VAUGHN, President, Chief Executive Officer and a Director of
FrontierVision Inc. and a founder of the Company, is a cable television system
operator and manager with over 30 years of experience in the cable television
industry. From 1987 to 1995, he served as Senior Vice President of Operations
for Triax Communications Corp., a top 40 MSO, where he was responsible for
managing all aspects of small and medium-sized cable television systems. These
systems grew from serving 57,000 subscribers to over 376,000 subscribers during
Mr. Vaughn's tenure. Prior to joining Triax Communications, Mr. Vaughn served
as Director of Operations for Tele-Communications, Inc. from 1986 to 1987, with
responsibility for managing the development of Chicago-area cable television
systems. From 1985 to 1986, Mr. Vaughn was Division Manager for Harte-Hanks
Communications. From 1983 to 1985, Mr. Vaughn served as Vice President of
Operations for Bycom, Inc. From 1979 to 1983, Mr. Vaughn served as Director
of Engineering for the Development Division of Cox Cable Communications Corp.
From 1970 to 1979, Mr. Vaughn served as Senior Staff Engineer for Viacom,
Inc.'s cable division, and as Director of Engineering for Showtime, a division
of Viacom International, Inc.
JOHN S. KOO, Senior Vice President, Chief Financial Officer, Secretary and a
Director of FrontierVision Inc. and a founder of the Company, has over 11 years
of banking experience in the telecommunications industry. From 1990 to 1995,
Mr. Koo served as a Vice President at Canadian Imperial Bank of Commerce
("CIBC"), where he co-founded CIBC's Mezzanine Finance Group, targeted at
emerging media and telecommunications businesses. From 1986 to 1990, Mr. Koo
was a Vice President at Bank of New England specializing in media finance.
From 1984 to 1986, he was a management consultant to the financial services
industry.
WILLIAM MAHON, Vice President of Operations of FrontierVision Inc. since
December 1995, has over 15 years of cable television operations management
experience. Prior to joining FrontierVision Inc., Mr. Mahon served as Vice
President of Operations for UVC, a top 50 MSO, from 1990 to 1995, where he was
responsible for the day-to-day operations of approximately 130 cable systems
located in twelve states. From 1983 to 1989, Mr. Mahon served as President and
General Manager of Heritage Cable Vision, a 90,000 subscriber MSO.
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<PAGE> 72
Mr. Mahon is a member of the Society of Cable Engineers and serves on the Board
of Directors of the New England Cable Television Association.
GARY T. CROSBY, Vice President of Development of FrontierVision Inc. since
October 1995, has over 22 years of experience in the cable television industry.
Mr. Crosby served as Regional Manager for Triax Communications Corp., a top 40
MSO, from 1988 to 1995, where he managed 130 cable systems representing
233 franchising authorities. From 1982 to 1988, Mr. Crosby served as Regional
Manager for Dowden Communications, Inc., an Atlanta-based MSO. From 1978 to
1982, he served as Vice President for Crosby Cable Company, where he was
responsible for day-to-day operations. Mr. Crosby has been actively involved
in the Illinois Cable Television Association (ICTA), where he served as
Chairman.
JAMES W. MCHOSE, Vice President and Treasurer of FrontierVision Inc. since July
1996, has over 10 years of accounting and tax experience, including during the
past six years providing tax, accounting and consulting services to companies
engaged in the cable television industry. Prior to joining the Company, Mr.
McHose was a Senior Manager in the Information, Communications, and
Entertainment practice of KPMG Peat Marwick, LLP, where he specialized in
taxation of companies in the cable television industry. In this capacity, Mr.
McHose served MSOs with over 14 million subscribers in the aggregate. Mr.
McHose is a member of the Cable Television Tax Professional's Institute and is
a Certified Public Accountant.
ROBERT G. SULLIVAN, Corporate Controller of FrontierVision Inc. since February
1996, has over 14 years of accounting experience, including the past eight in
the cable television field. Prior to joining the Company, Mr. Sullivan served
as the Corporate Controller and Chief Financial Officer for UVC, a top 50 MSO,
from 1991 to 1995. From 1988 until 1991, Mr. Sullivan was Regional Controller
with Simmons Communications, a top 40 MSO with over 400,000 subscribers and
revenues in excess of $100 million. Prior to that, Mr. Sullivan was a Senior
Accountant with the international public accounting firm of Pannell Kerr
Forster in New York City, and an Internal Auditor for Avon Products, Inc. Mr.
Sullivan is a Certified Public Accountant.
TODD E. PADGETT, Director of Finance of FrontierVision Inc. since July 1995,
has over five years of project management and corporate finance experience in
the natural gas transmission and marketing industry, where he specialized in
developing, evaluating, negotiating and financing natural gas pipeline and
international power projects. From 1990 to 1995, Mr. Padgett served as Project
Manager for Natural Gas Pipeline Company of America, a subsidiary of MidCon
Corp., which is a division of Occidental Petroleum Corporation. Mr. Padgett is
a Certified Public Accountant and has an MBA from the University of Chicago.
ADVISORY COMMITTEE
The partnership agreement of FVP provides for the establishment of an Advisory
Committee to consult with and advise FVP GP, the general partner of FVP, with
respect to FVP's business and overall strategy. The Advisory Committee has
broad authority to review and approve or disapprove matters relating to all
material aspects of FVP's business. The approval of seventy-five
percent (75%) of the members of the Advisory Committee that are entitled to
vote on the matter is required in order for the Company to effect any cable
television system acquisition. The Advisory Committee consists of four
representatives of the Attributable Class A Limited Partners of FVP and one
representative of FVP GP. Subject to certain conditions, each of J.P. Morgan
Investment Corporation, Brown Brothers Harriman & Co., Olympus Growth Fund II,
L.P. and First Union Capital Partners, Inc., through their respective
affiliates listed in "Principal Security Holders," is entitled to designate one
member of the Advisory Committee. See "The Partnership Agreements" and
"Principal Security Holders." Their respective designees are John W. Watkins,
Richard H. Witmer, Jr., James A. Conroy and L. Watts Hamrick, III. FVP GP's
designee is Mr. Vaughn.
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<PAGE> 73
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to FrontierVision Inc.'s
Chief Executive Officer and to each of its other most highly compensated
officers receiving compensation in excess of $100,000 for services rendered
during the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===============================================
ANNUAL COMPENSATION
-------------------
NAME AND
PRINCIPAL POSITION
------------------
YEAR SALARY BONUS
---- ------ -----
<S> <C> <C> <C>
James C. Vaughn 1995 $169,635 $110,000
President
and Chief Executive Officer
John S. Koo 1995 93,416 90,000
Senior Vice President,
Chief Financial Officer and
Secretary
</TABLE>
- ----------------------
(1) Bonus paid for the employment contract year ending April 16, 1996. Mr.
Vaughn and Mr. Koo deferred $35,000 and $50,000, respectively, of the bonus
to the Deferred Compensation Plan described below.
401(k) PLAN
The Company established the FrontierVision Operating Partners 401(k) Plan (the
"401(k) Plan") effective January 1, 1996. In general, all employees of the
Company, except certain employees covered by a collective bargaining agreement,
may participate in the 401(k) Plan immediately upon employment with the
Company. Employees who participate in the 401(k) Plan may elect to defer and
have contributed to the 401(k) Plan an amount up to 15% of such employees'
eligible compensation, on a pre-tax basis. The Company makes a matching
contribution to a participating employee's account under the 401(k) Plan in an
amount equal to 100% of the amount of eligible compensation deferred and
contributed to the employee's account, up to a maximum of 3% of such employee's
eligible compensation. The Company in its discretion may also make an
additional company contribution for any year. The Company's matching
contribution and any additional contribution to the 401(k) Plan are subject to
a five-year vesting schedule, based upon each participating employee's years of
employment with the Company. Such contributions vest at the rate of 20% per
year of service, so that an employee's account will be fully (100%) vested
after five years of service.
DEFERRED COMPENSATION PLAN
FVP established the FrontierVision Partners, L.P. Executive Deferred
Compensation Plan (the "Deferred Compensation Plan") effective January 1, 1996
to allow key employees the opportunity to defer the payment of compensation to
a later date and to participate in any appreciation of FVP's business. The
Deferred Compensation Plan is administered by FVP's Advisory Committee.
Participation in the Deferred Compensation Plan is limited to James C. Vaughn,
John S. Koo and other key executives of FVP or its affiliates approved by the
Compensation Committee of the Advisory Committee (the "Compensation
Committee").
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<PAGE> 74
Under the Deferred Compensation Plan, eligible employees may elect to defer the
payment of a portion of their compensation each year up to an amount determined
by the Compensation Committee. Any amount deferred is credited to a
bookkeeping account, which is credited with interest at the rate of 12% per
annum. Each participant's account also has a phantom equity component through
which the account will be credited with earnings in excess of 12% per annum to
the extent the Net Equity Value of FVP appreciates in excess of 12% per annum
during the term of the deferral. Net Equity Value of FVP is determined by
multiplying each cable television system's EBITDA for the most recent fiscal
quarter by the weighted average multiple of EBITDA paid by FVP to acquire each
cable television system; provided that if substantially all of the assets or
partnership interests of FVP are sold, Net Equity Value shall be based upon
such actual sale price adjusted to reflect any prior distributions to the
partners and any payments during the term of the deferral to the holders of
certain subordinated notes issued to the limited partners of FVP. See
"Prospectus Summary--The Transactions." Accounts shall be paid following (i)
the sale of all of FVP's partnership interests or upon liquidation of FVP,
other than sales or liquidations which are part of a reorganization, or (ii)
the death or disability of the participant prior to termination of employment
with FVP. The Compensation Committee may agree to pay the account in the event
the participant incurs a severe financial hardship or if the participant agrees
to an earlier payment. There are four employees currently participating in the
Deferred Compensation Plan, including Messrs. Vaughn and Koo.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
A Compensation Committee of the Advisory Committee of FVP, consisting of
Messrs. Watkins and Witmer, as representatives of J.P. Morgan & Co.
Incorporated and Brown Brothers Harriman & Co., respectively, sets the
compensation of the executive officers of the Company. See "Certain
Relationships and Related Transactions."
EMPLOYMENT AGREEMENT
James C. Vaughn has entered into an employment agreement with FVP, dated as of
April 17, 1995 (the "Employment Agreement"). The agreement provides that Mr.
Vaughn will be employed as President and Chief Executive Officer of FVP. The
agreement establishes a base salary to be paid to Mr. Vaughn each year which is
subject to annual adjustment to reflect increases in the Consumer Price Index
for All Urban Consumers, as published by the Bureau of Labor Statistics of the
United States Department of Labor (or, in the event of the discontinuance
thereof, another appropriate index selected by FVP, with the approval of the
Advisory Committee). Mr. Vaughn's base salary may from time to time be
increased if FVP shall deem it advisable to do so. For 1995, Mr. Vaughn's base
salary was $275,000. In addition, he is entitled to annual bonuses up to
$75,000, subject to the attainment of certain performance objectives set forth
in the Employment Agreement. Pursuant to the Employment Agreement, for 1995,
Mr. Vaughn received a $75,000 bonus. If FVP terminates Mr. Vaughn's employment
without "cause" (as defined in the Employment Agreement), then Mr. Vaughn is
entitled to receive a severance payment equal to 25% of his then base salary.
Mr. Vaughn has agreed not to compete with FVP for the term of his employment
with FVP and for an additional period of two years thereafter and to keep
certain information in connection with FVP confidential.
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<PAGE> 75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's sole general partner (owning 99.9% of the partnership interests
therein) is FVP. The Company's sole limited partner (owning 0.1% of the
partnership interests therein) is FrontierVision Operating Partners, Inc.,
which is a wholly owned subsidiary of FVP. FVP's sole general partner (owning
1% of the partnership interests therein) is FVP GP. FVP's limited partners
(owning 99% of the partnership interests therein) consist of J.P. Morgan
Investment Corporation, an affiliate of J.P. Morgan Securities Inc., First
Union Capital Partners, Inc., an affiliate of First Union Capital Markets
Corp., and various institutional investors and accredited investors. FVP GP's
sole general partner (owning 1% of the partnership interests therein) is
FrontierVision Inc., which is owned by James C. Vaughn and John S. Koo. FVP
GP's limited partners (owning 99% of the partnership interests therein) consist
of J.P. Morgan Investment Corporation, First Union Capital Partners, Inc.,
various institutional investors, James C. Vaughn and John S. Koo. See
"Principal Security Holders."
J.P. Morgan Investment Corporation and First Union Capital Partners, Inc. have
committed approximately $25,339,224 and $15,203,534, respectively, to FVP.
FrontierVision Inc. has committed approximately $12,335 to FVP, representing
commitments of approximately $8,224 and $4,112 by James C. Vaughn and John S.
Koo, respectively, who are directors of FrontierVision Inc. Such capital
commitments are contributed as equity to FVOP in connection with the closing of
acquisitions by FVOP. As of June 30, 1996, J.P. Morgan Investment Corporation
and First Union Capital Partners, Inc. have paid $22,966,588 and $13,779,953 of
such commitments, respectively, to fund the closing of acquisitions by FVOP,
for escrow deposits for acquisitions by FVOP under contract and for FVOP
working capital requirements. In addition, concurrently with or prior to the
completion of the Offering, FVP will consummate the Rights Offering, pursuant
to which it is anticipated that J.P. Morgan Investment Corporation and First
Union Capital Partners, Inc. will acquire additional partnership interests in
FVP.
J.P. Morgan Investment Corporation and First Union Capital Partners, Inc. are
"Special Class A" limited partners of FVP. Upon the termination of FVP and in
connection with distributions to its partners in respect of their partnership
interests, J.P. Morgan Investment Corporation, First Union Capital Partners,
Inc. and FVP GP will be entitled to receive "carried interest" distributions or
will be allocated a portion of 15% of any remaining capital to be distributed
by FVP after certain other distributions are made. See "The Partnership
Agreements." J.P. Morgan Securities Inc. acted as placement agent for the
initial offering of limited partnership interests of FVP (other than with
respect to the investment made by J.P. Morgan Investment Corporation) and the
placement of debt securities of FVP and in connection with those activities
received customary fees and reimbursement of expenses.
Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan
Securities Inc., The Chase Manhattan Bank, an affiliate of Chase Securities
Inc., and CIBC Inc., an affiliate of CIBC Wood Gundy Securities Corp., are
agents and lenders under the Senior Credit Facility and have received customary
fees for acting in such capacities.
In addition, the Underwriters will receive the compensation described under the
caption "Underwriting" in connection with the Offering. There are no other
arrangements between the Underwriters and their affiliates and the Company or
any of its affiliates pursuant to which the Underwriters or their affiliates
will receive any additional compensation from the Company or any of its
affiliates.
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<PAGE> 76
PRINCIPAL SECURITY HOLDERS
The following table sets forth, as of March 31, 1996, (i) the units of general
partnership interest and limited partnership interest of the Company
beneficially owned by the directors and executive officers of FrontierVision
Inc. and each person who is known to the Company to own beneficially more than
5.0% of any class of the Company's partnership interests and (ii) the units of
the equity securities of FrontierVision Inc., FVP GP, FVP and the Company owned
by each director or executive officer of FrontierVision Inc. named in the
Summary Compensation Table and by all executive officers of the Company as a
group. For a more detailed discussion of the ownership of the Company, see
"Certain Relationships and Related Transactions."
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS TYPE OF INTEREST % OF CLASS
- ------------------------------------- ---------------- ----------
<S> <C> <C>
FrontierVision Partners, L.P.(1) General Partner Interest in the Company 99.90%
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
FVP GP, L.P.(1) General Partner Interest in FVP 1.00%
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
J.P. Morgan Investment Corporation Limited Partnership Interest in FVP 20.47%
101 California Street, Suite 3800 Limited Partnership Interest in FVP GP 13.62%
San Francisco, CA 94111
1818 II Cable Corp. Limited Partnership Interest in FVP 20.18%
c/o Brown Brothers Harriman & Co. Limited Partnership Interest in FVP GP 13.62%
59 Wall Street
New York, NY 10005
Olympus Cable Corp. Limited Partnership Interest in FVP 20.18%
Metro Center - One Station Place Limited Partnership Interest in FVP GP 13.62%
Stamford, CT 06920
First Union Capital Partners, Inc. Limited Partnership Interest in FVP 12.28%
One First Union Center, 18th Floor Limited Partnership Interest in FVP GP 8.17%
Charlotte, NC 28288
James C. Vaughn Stockholder of FrontierVision Inc. 66.67%
1777 South Harrison Street, Suite P-200 Limited Partnership Interest in FVP GP 39.20%
Denver, Colorado 80210
John S. Koo Stockholder of FrontierVision Inc. 33.33%
1777 South Harrison Street, Suite P-200 Limited Partnership Interest in FVP GP 11.76%
Denver, Colorado 80210
All other executive officers
and directors as a group 0.00%
</TABLE>
- ----------------------
(1) FVOP's sole general partner (owning 99.9% of the partnership interests
therein) is FVP, a Delaware limited partnership, and FVOP's sole limited
partner (owning 0.1% of the partnership interests therein) is
FrontierVision Operating Partners, Inc., a
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<PAGE> 77
Delaware corporation which is a wholly owned subsidiary of FVP. FVP's sole
general partner (owning 1% of the partnership interests therein) is FVP GP,
a Delaware limited partnership, and FVP's limited partners (owning 99% of
the partnership interests therein) are various institutional investors and
accredited investors. FVP GP's sole general partner (owning 1% of the
partnership interests therein) is FrontierVision Inc., which is owned by
James C. Vaughn and John S. Koo, and FVP GP's limited partners (owning 99%
of the partnership interests therein) consist of various institutional
investors, James C. Vaughn and John S. Koo. See "The Partnership
Agreements--FVP Partnership Agreement."
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<PAGE> 78
OWNERSHIP STRUCTURE
The following chart illustrates the ownership structure of the Company.
<TABLE>
<S> <C>
---------------------------------------------------
| James C. Vaughn |
| John S. Koo |
---------------------------------------------------
| (100% interest)
V
- --------------------------------------------------- ---------------------------------------------------
| Institutional Investors | | |
| James C. Vaughn | | FrontierVision Inc. |
| John S. Koo | | |
- --------------------------------------------------- ---------------------------------------------------
| Limited Partners | General Partner
| (99.0% interest) | (1.0% interest)
| V
| ---------------------------------------------------
----------------------------------------------} | FVP GP, L.P. |
| ("FVP GP") |
- --------------------------------------------------- ----------------------------------------------------
| Institutional Investors | | General Partner
| Other Limited Partners | | (1.0% interest)
- --------------------------------------------------- |
| Limited Partners V
| (99.0% interest) ----------------------------------------------------
----------------------------------------------} | FrontierVision Partners, L.P. |
| ("FVP") |
|-------------------------------------------------| |
| (100% interest) ----------------------------------------------------
| | General Partner
| V (99.9% interest)
V ----------------------------------------------------
- --------------------------------------------------- | FrontierVision Operating Parners, L.P. |
| Frontier Vision Operating Partners, Inc. |------------} | ("FVOP" or the "Company") |
- --------------------------------------------------- ----------------------------------------------------
Limited | (100% interest)
Partner V
(0.1% interest) ----------------------------------------------------
| FrontierVision Corporation |
| ("Capital") |
----------------------------------------------------
</TABLE>
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<PAGE> 79
THE PARTNERSHIP AGREEMENTS
The following is a summary of certain material terms of the Agreement of
Limited Partnership of FVOP, as amended (the "Company Partnership Agreement"),
the First Amended and Restated Agreement of Limited Partnership of FVP, as
amended (the "FVP Partnership Agreement") and the First Amended and Restated
Agreement of Limited Partnership of FVP GP, as amended (the "FVP GP Partnership
Agreement" and together with the Company Partnership Agreement and FVP
Partnership Agreement, the "Partnership Agreements"). This summary reflects
certain amendments to certain of the Partnership Agreements which will be made
at or prior to the closing of the offering of the Notes. Complete copies of
the form of Partnership Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus is a part and are available in
the manner described in "Additional Information." All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
respective Partnership Agreement.
THE COMPANY PARTNERSHIP AGREEMENT
Organization and Duration. The Company was formed as a limited partnership
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act, as amended (the "Act"), and a certificate of limited partnership of the
Company was filed with the Secretary of State of Delaware on July 14, 1995.
The purpose of the Company, as set forth in the Company Partnership Agreement,
is to conduct and promote the business of acquiring, investing in, disposing
of, operating, managing and financing cable systems and to engage in all
activities necessary, desirable or incidental for such purpose.
The Company will be dissolved and its affairs shall be wound up upon the
earliest to occur of (i) June 30, 2007, (ii) all of the partners of the Company
approve such action in writing, (iii) the Company sells or otherwise disposes
of its interest in all or substantially all of its property, (iv) an event of
withdrawal of the General Partner has occurred under the Act or (v) an entry of
a decree of judicial dissolution has occurred under the Act.
Control of Operations. The Company Partnership Agreement provides that the
powers of the General Partner include all powers, statutory and otherwise,
possessed by general partners under the laws of Delaware, including the right
and power to manage and control the business and affairs of the Company and to
delegate to one or more other persons such right and power. Upon the
occurrence and continuance of any Event of Default under and as defined in the
Senior Credit Facility, Chase Manhattan Bank, N.A. (the "Administrative Agent")
shall be entitled to be admitted (or to have a designee of its choice admitted)
as a new general partner of the Company (the "New General Partner"). On and
after the admission of the New General Partner to the Company, the New General
Partner shall have all powers, statutory and otherwise, possessed by general
partners under the laws of Delaware and shall have the authority to manage the
business and affairs of the Company and the General Partner shall have no
further powers or privileges with respect to the management of the Company.
Capital Contributions. Under the Company Partnership Agreement, the partners
have made certain capital contributions to the Company. Each partner of the
Company may, but is not required to, make additional capital contributions to
the Company. The Company Partnership Agreement provides that upon the
admission of any additional Limited Partners or Substituted Limited Partners to
the Company, the Company's Limited Partner shall withdraw from the Company and
shall be entitled to receive the return of its capital contribution, without
interest or deduction. In the event of the admission of the New General
Partner to the Company, no capital contribution by the New General Partner
shall be required. Following the admission of the New General Partner to the
Company, if requested by the Administrative Agent, the partnership interest
held by the General Partner shall be converted into a limited partnership
interest and in that connection, the New General Partner may make such
additional capital contributions and alter the allocation of the Company
profits and losses among the partners in such manner as it determines to be
appropriate to preserve the status of the Company as a partnership for federal
income tax purposes.
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<PAGE> 80
Withdrawal or Removal of Partners. In general, no right is given to any
partner of the Company to withdraw from the Company. The General Partner may
admit (i) additional Limited Partners, (ii) an assignee of the Limited
Partner's partnership interest in the Company as a Substituted Limited Partner
of the Company and (iii) one or more additional general partners to the
Company. In addition, upon the occurrence and continuance of any Event of
Default under and as defined in the Senior Credit Facility, the Administrative
Agent shall be entitled to be admitted (or to have a designee of its choice
admitted) as a New General Partner.
Assignment of Partnership Interests. Under the Company's Partnership
Agreement, the Limited Partner may assign all or any part of its partnership
interest in the Company only with the consent of the General Partner. The
Limited Partner has no right to grant an assignee of its partnership interest
in the Company the right to become a Substituted Limited Partner of the
Company. Following the admission of the New General Partner to the Company,
neither the General Partner nor the Limited Partner may transfer its
partnership interest in the Company without the prior written consent of the
New General Partner.
Class A Partnership Interests. Concurrently with or prior to the consummation
of the Offering, it is anticipated that UVC will convert $5.0 million aggregate
principal amount of the UVC Note into limited partnership interests of the
Company represented by the Class A Partnership Interests and the balance of the
UVC Note will be repaid. Such conversion and repayment of the UVC Note are
both included as part of the Transactions. The Class A Partnership Interests
will be redeemable in whole or in part, at the option of the Company at any
time, at a redemption price equal to 100% of the aggregate capital contribution
represented thereby plus a return on the undistributed portion thereof at a
rate of 17% per annum, compounded annually (the "Liquidation Value"). The
Class A Partnership Interests also will be redeemable in full at their
Liquidation Value upon consummation of the sale of all or substantially all of
the Company's assets following repayment of all of the Company's indebtedness.
In addition, the Class A Partnership Interests will be redeemable in full at
their Liquidation Value, at the option of the holders thereof (within six
months of notice to the Company) following the earlier to occur of (i) the
twelfth anniversary of the issue date of such Interests or (ii) the fifth
anniversary of the issue date if, as of such date, the Company has no unmatured
indebtedness for borrowed money outstanding (which indebtedness was part of a
major senior or subordinated debt financing).
FVP PARTNERSHIP AGREEMENT
Organization and Duration. FVP was formed as a limited partnership pursuant to
the provisions of the Act, and a certificate of limited partnership of FVP was
filed with the Secretary of State of Delaware on April 17, 1995. The principal
purpose of FVP, as set forth in the FVP Partnership Agreement, is to (i)
acquire, invest in, own, finance, operate, improve, develop, maintain, promote,
sell, dispose of and otherwise exploit cable television systems and properties
and interests therein, (ii) conduct related business activities, including
telephony and other communications businesses and activities that are related
to FVP's cable television businesses and activities, directly or indirectly
through other entities, alone or with others, and (iii) do any and all acts
necessary, desirable or incidental to the accomplishment of such purpose.
FVP will be dissolved and its affairs wound up upon the earliest to occur of
(i) June 30, 2007, (ii) the Incapacity, withdrawal, removal or other event of
withdrawal (as defined in the Act) of a General Partner, (iii) on or after the
time when all of the Capital Commitments and Loan Amounts have been paid, upon
the sale or other disposition by FVP of all or substantially all of the
Investments it then owns and (iv) the entry of a decree of judicial dissolution
under the Act. Thereafter, the term of FVP can be extended by (i) the General
Partner of FVP for up to two additional one-year periods from such date if the
General Partner determines, in each instance, that such extension is in the
best interests of FVP and the Advisory Committee approves such extension or
(ii) the General Partner for up to two additional one-year periods from such
date if the Advisory Committee requests such extension. In each case, such
extension shall not be later than 30 days prior to the last day of the term, as
then extended, or until dissolution prior thereto. In the case of dissolution
described in clause (ii), if at such time there is at least one remaining
General Partner, the
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remaining General Partner(s) may unanimously elect to carry on the business of
FVP. In addition, within 90 days thereafter, Class A Limited Partners
representing at least a majority in Interest of the remaining partners (based
on their profits interests and capital interests), or such greater percentage
in Interest as may be required under the Act, may agree to continue the
business of FVP and to the appointment of one or more additional general
partners to be effective as of the date of such event.
Control of Operations. The FVP Partnership Agreement provides that the General
Partner has the full, exclusive and complete right, power and discretion to
operate, manage and control the affairs and business of FVP and to make all
decisions affecting FVP's affairs and business, subject to the terms and
provisions of the FVP Partnership Agreement. Among, but not limited to, the
limitations on its power, the General Partner does not have the right: (i) to
possess any FVP property or assign rights to such property for other than a
partnership purpose; (ii) to perform any act or employ any assets of FVP in
contravention of the FVP Partnership Agreement; (iii) to take any action which
requires approval of the Advisory Committee, unless such action shall first
have been so approved; (iv) to permit FVP to take any action or operate in any
manner as would cause FVP to be classified as an "investment company" for
purposes of the Investment Company Act of 1940, as amended, or as would cause
all or any portion of the assets of FVP to constitute "plan assets" for federal
income tax purposes; (v) to admit a person as a Partner except as otherwise
provided in the FVP Partnership Agreement; (vi) to transfer its Interest as
General Partner, or (vii) to amend the FVP Partnership Agreement, except as
provided by the FVP Partnership Agreement.
Advisory Committee. The FVP Partnership Agreement provides for the
establishment of an Advisory Committee to consult with and advise the General
Partner with respect to FVP's business and overall strategy. Under the FVP
Partnership Agreement, the Advisory Committee has broad authority to review and
approve or disapprove matters relating to all material aspects of FVP's
business, including, but not limited to, determinations with respect to (i) the
acquisition by FVP of any Investment (including any cable television system
acquisition), (ii) the sale, exchange or other disposition by FVP of
Investments, (iii) financing or refinancing of FVP, (iv) borrowings, loans or
guarantees by FVP relating to indebtedness for borrowed money, (v) capital
calls under the FVP Partnership Agreement, (vi) the admission of additional
partners to FVP or additional partners to the General Partner and their
obligations and liabilities thereto, (vii) the issuance of additional Interests
in the General Partner and the amendment of the allocation provisions of the
General Partnership Agreement, (viii) the issuance of additional shares or
transfer of capital stock of FrontierVision, Inc. or the merger or
consolidation of FrontierVision, Inc., (ix) the creation and issuance of
additional classes or series of Limited Partnership Interests and (x) the
termination of the Vaughn Employment Agreement and/or the Koo Employment
Agreement. Upon termination of the Vaughn Employment Agreement, the General
Partner may be removed from FVP. In addition, the failure of the General
Partner to follow any such direction of the Advisory Committee in connection
with such determinations shall constitute a material breach of the FVP
Partnership Agreement whereby the General Partner may be removed from FVP. As
provided in the FVP Partnership Agreement, the approval of seventy-five percent
(75%) of the members of the Advisory Committee that are entitled to vote on the
matter is required in order for the Company to effect any cable television
system acquisition. The Advisory Committee is to consist of four
representatives of the Attributable Class A Limited Partners and one
representative of the General Partner. Subject to certain conditions, each of
J.P. Morgan Investment Corporation, Brown Brothers Harriman & Co., Olympus
Growth Fund II, L.P. and First Union Capital Partners, Inc. shall be entitled
to designate one member of the Advisory Committee.
Voting Rights. Except as to matters for which consent or approval is expressly
required under the FVP Partnership Agreement, the Limited Partners of FVP have
no right to vote on any partnership matters. Where consent of a majority or
specified percentage in Interest of the Limited Partners of FVP or of a class
or classes of Limited Partners is required, such consent will be determined by
reference to the aggregate Capital Commitments of the Limited Partners entitled
to approve the act or thing for which approval is sought in accordance with the
terms of the FVP Partnership Agreement.
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Amendments and Modifications. In general, the FVP Partnership Agreement is
subject to modification or amendment only with the written consent of the
General Partner and a majority in Interest of the Class A and Class B Limited
Partners of FVP; provided, however, the FVP Partnership Agreement may be
amended from time to time by the General Partner without the consent of any of
the Limited Partners to (i) add to the representations, duties or obligations
of the General Partner or surrender any right or power granted to the General
Partner by the FVP Partnership Agreement, (ii) admit one or more additional
Limited Partners or Substituted Limited Partners, or withdraw one or more
Limited Partners in accordance with the FVP Partnership Agreement, (iii)
provide any necessary information regarding any Partner, (iv) adjust certain
allocations of net profit and loss with the approval of the Advisory Committee
and (v) reflect any change in the amount of the Capital Commitments of any
Partner in accordance with the terms of the FVP Partnership Agreement;
provided, however, such amendment shall not be adopted if, in the opinion of
counsel for FVP, such amendment alters, or results in the alteration of, the
limited liability of the Limited Partners or the status of FVP as a partnership
for federal income tax purposes.
Notwithstanding the foregoing, no amendment to the FVP Partnership Agreement
may add to, detract from or otherwise modify the purposes of FVP. In addition,
amendments with respect to certain liabilities or responsibilities of certain
Limited Partners require the consent of certain Limited Partners.
Capitalization and Certain Distributions. In connection with its initial
formation, FVP issued to its Limited Partners units consisting of limited
partnership interests in FVP, 12% Senior Subordinated Notes due 2004 and 14%
Junior Subordinated Notes due 2004. Pursuant to such transaction, and under
the FVP Partnership Agreement, each General Partner and Limited Partner of FVP
has made certain capital contributions to FVP. The General Partner is required
under the FVP Partnership Agreement to make such Capital Commitments to FVP as
are necessary to maintain at all times a Capital Commitment equal to not less
than one percent (1%) of the total Capital Commitments of all Partners. The
Limited Partners are not required to make additional capital contributions to
FVP in excess of their respective Capital Commitments. Except for provisions
allowing for the return of capital to Partners upon dissolution of FVP, the FVP
Partnership Agreement provides that no Partner of FVP shall have the right to
withdraw or demand return of its capital contribution.
In consideration of significant Capital Commitments to FVP during its initial
formation, the FVP Partnership Agreement provides that certain "Special"
Limited Partners and the General Partner are entitled to receive a portion of
15% of any remaining capital to be distributed by FVP after certain
distributions are made to the Class A and Class B Limited Partners and the
General Partner in accordance with the FVP Partnership Agreement. The Special
Class A and the Special Class B Limited Partners will be allocated 8% (in the
aggregate) of such remaining capital, in proportion to the amount of their
respective Capital Commitments. The General Partner will be allocated 7% (in
the aggregate) of such remaining capital; provided, however, that such
percentage shall be subject to adjustment by the General Partner, with the
approval of the Advisory Committee, under certain circumstances pursuant to the
terms of the FVP Partnership Agreement.
Admission of Additional Partners. The General Partner is authorized, subject
to certain conditions and the approval of the Advisory Committee, to cause FVP
to (i) admit additional Limited Partners to the partnership, (ii) permit any
existing Limited Partner to increase its Capital Commitment or (iii) create and
issue such additional classes or series of Limited Partnership Interests having
such designations, preferences and relative, participating or other special
rights, powers and duties as the General Partner, with the approval of the
Advisory Committee, shall determine.
Preemptive Rights. The FVP Partnership Agreement provides that, except under
certain circumstances, the General Partner, without the consent of a majority
in Interest of the Class A Limited Partners, shall not be able to (i) issue,
sell or grant (x) Limited Partnership Interests in FVP, (y) warrants, options,
or other rights to purchase Limited Partnership Interests in FVP or (z)
securities convertible or exchangeable for Limited Partnership Interests in FVP
or (ii) permit any Limited Partner to increase its Capital Commitment to FVP
until the Capital Commitments of all of the Class A and Class B Limited
Partners have been fully drawn
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upon or expired. Except under certain circumstances, after the Capital
Commitments of all of the Class A and Class B Limited Partners have been fully
drawn upon or have expired, if FVP proposes to admit additional Limited
Partners to the partnership or permit any Limited Partner to increase its
Capital Commitment to the partnership pursuant to the FVP Partnership
Agreement, the General Partner must give notice to each Limited Partner of such
proposed action. Thereafter, each Limited Partner will have the right to
acquire its pro rata share of any such additional Limited Partnership Interests
or increase its Capital Commitment subject to the provisions of the FVP
Partnership Agreement.
Rights of First Refusal; Tag-Along Rights. The FVP Partnership Agreement
provides that in the event of a proposed transfer of a Limited Partnership
Interest or Note by a Limited Partner (to the extent permitted under the FVP
Partnership Agreement), such Limited Partner must provide 45 days' written
notice to the General Partner and to all of the Class A and Class B Limited
Partners of such proposed transfer and the proposed cash purchase price.
During the first 30 days of such period, the General Partner and each of the
Class A and Class B Limited Partners (other than any Defaulting Partner) will
have the right to propose to acquire such Interest or Note, or some portion
thereof, for the proposed cash purchase price. If the Partners as a group
propose to acquire more than the Interest or Note, then each such Partner shall
have the right to propose to acquire its pro rata portion of the Interest or
Note; provided, however, that the Limited Partner that proposes such transfer
shall not be obligated to sell any portion of the Interest or Note to any
Partner unless the Partners have collectively proposed to purchase all of the
Interest or Note.
In the case of a proposed transfer in a single transaction or a series of
related transactions of fifty percent (50%) or more of the outstanding Limited
Partnership Interests, if the Partners do not exercise their rights of first
refusal, then, as a further condition to the transfer by a Limited Partner,
such Limited Partner shall obtain for each other Class A and Class B Limited
Partner the right to sell the same proportion of its Limited Partnership
Interests as that being sold by the selling Limited Partner at the same
purchase price, subject to certain adjustments.
Liability of General Partner. In general, under the FVP Partnership Agreement,
FVP will indemnify and hold harmless, out of its assets, the General Partner,
its partners and their respective officers, directors, employees, agents or
stockholders (including when any of the foregoing is serving at the request of
the General Partner on behalf of FVP as a partner, officer, director, employee
or agent of any other Person) against losses, damages, expenses (including
reasonable attorneys' fees), judgments and settlement amounts incurred by such
party by reason of actions or omissions in connection with activities performed
on behalf of FVP and not constituting fraud, breach of fiduciary duty, willful
misconduct or gross negligence. In the event that the General Partner of FVP
ceases to be a General Partner, it shall remain liable for obligations and
liabilities incurred on account of its activities as General Partner prior to
the time it ceased to be a General Partner, but shall be free of any obligation
or liability as a General Partner incurred on account of the activities of FVP
from and after the time it ceased to be a General Partner.
Withdrawal or Removal of Partners. The General Partner may not voluntarily
dissolve, retire or withdraw as a General Partner of FVP. In addition, the
General Partner may not directly or indirectly assign, sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of all or any fraction of
its Interest as a General Partner of FVP. Subject to certain procedures, the
General Partner may be removed at any time after the occurrence of a Vaughn
Expiration Date (as defined below) or for "cause," in each case with the
consent of a majority in Interest of the Attributable Class A Limited Partners
with the approval of the Advisory Committee. In addition, in the event that
FVP shall or would suffer an FCC Regulatory Issue due to a GP Principal or any
of its Affiliates, at the request of the Advisory Committee, the General
Partner shall cause the GP Principal to divest all direct and indirect
Interests in FVP.
Under the FVP Partnership Agreement, "cause" is defined as one or more of the
following: (i) any action by the General Partner or GP Principal which
constitutes dishonesty, a violation of law or a fraud against FVP; (ii) the
indictment of the General Partner or GP Principal for a felony; (iii) willful
misconduct, drunkenness or abuse of any controlled substance by the General
Partner or any GP Principal; (iv) any material violation
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by the General Partner or any GP Principal of its fiduciary obligations to FVP
or the Partners; (v) any material breach by the General Partner or any GP
Principal of the FVP Partnership Agreement or any material breach by
FrontierVision, Inc. or any GP Principal of the General Partner Partnership
Agreement or (vi) in the event that FVP shall or would suffer an FCC Regulatory
Issue due to the General Partner, any GP Principal or any of their Affiliates,
unless such FCC Regulatory Issue is cured within 15 days after the General
Partner becomes aware thereof. Under the FVP Partnership Agreement, "Vaughn
Expiration Date" means the earliest of the following dates: (i) the date on
which Mr. Vaughn is neither a General Partner nor a GP Principal; (ii) the date
on which the Vaughn Employment Agreement is terminated pursuant to its terms,
and (iii) the date on which Mr. Vaughn ceases to own beneficially for his own
account, directly or indirectly, at least one of the following: (x) at least
two-thirds of the General Partner's share of distributions under the FVP
Partnership Agreement or (y) at least two-thirds of the Interests of the
General Partner that correlate to the General Partner's share of distributions
pursuant to the FVP Partnership Agreement.
Upon the removal of the General Partner, at the election of a majority in
Interest of the Attributable Class A Limited Partners with the approval of the
Advisory Committee, FVP shall redeem the Interest of the removed General
Partner for a price equal to the fair market value thereof as determined
pursuant to the FVP Partnership Agreement. In the absence of such election and
approval, the General Partner's Interest in FVP shall be converted to a
nonvoting, nonconvertible Limited Partnership Interest. Upon the removal of
the General Partner, a majority in Interest of the Attributable Class A Limited
Partners with the approval of the Advisory Committee shall have the power to
appoint a new General Partner.
Put and Call Rights. In the event of the Incapacity of a Limited Partner, to
the fullest extent permitted by law, the General Partner may require the
transfer of the Interest in and/or certain debt securities of FVP held by such
Limited Partner. The General Partner shall provide at least 60 days' notice of
such transfer. "Incapacity" is defined by the FVP Partnership Agreement to
mean, as to any person, (i) the adjudication of incompetence or insanity of
such person, or the Bankruptcy of such person, or (ii) the death, dissolution
or termination (other than by merger or consolidation), as the case may be, of
such person. In addition, the General Partner, with the approval of the
Advisory Committee, shall also have the right to cause any Defaulting Partner
to transfer its Limited Partnership Interest in accordance with the FVP
Partnership Agreement.
Under certain circumstances where FVP would suffer an FCC Regulatory Issue due
to a Limited Partner or an Attributable Person through such Limited Partner,
such Limited Partner may be required to use all commercially reasonable efforts
to sell such portion of its Limited Partnership Interests as may be necessary
to cure such FCC Regulatory Issue. If such Limited Partner is unable to sell
its Limited Partnership Interest within 180 days of the date that the General
Partner requests that such Interest be sold (or within the time established by
the FCC), then for a specified period, the General Partner, with the approval
of the Advisory Committee, may elect on behalf of FVP to make Buyout Payments
to such Limited Partner in accordance with the FVP Partnership Agreement. The
economic interest of such Limited Partner shall be deemed to have been
converted into debt and such Limited Partner shall immediately cease to be a
Partner.
Liability of Limited Partners. Limited Partners of FVP do not have any
personal liability for the repayment or discharge of the debts and obligations
of FVP; provided, however, that each Limited Partner shall be liable to FVP for
its Unused Capital Commitment and Loan Amount in accordance with the terms of
the FVP Partnership Agreement.
Assignment of Partnership Interests. Under the FVP Partnership Agreement, the
General Partner may not directly or indirectly assign, sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of all or any fraction of
its Interest as a General Partner of FVP.
A Limited Partner may transfer all or any fraction of such Limited Partner's
Limited Partnership Interest (subject in certain cases to the rights of first
refusal discussed above and more fully set forth in the FVP
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Partnership Agreement) to another person only if such transfer meets the
conditions set forth in the FVP Partnership Agreement.
FVP GP PARTNERSHIP AGREEMENT
Organization and Duration. FVP GP was formed as a limited partnership pursuant
to the provisions of the Delaware Revised Uniform Limited Partnership Act, as
amended, and a certificate of limited partnership of FVP GP was filed with the
Secretary of State of Delaware on April 17, 1995. The purpose of FVP GP, as
set forth in the FVP GP Partnership Agreement, is to (i) serve as general
partner of FVP and (ii) do all other lawful things necessary, desirable or
incidental to the accomplishment of such purposes.
FVP GP will be dissolved and its affairs wound up upon the earliest to occur of
(i) June 30, 2007, (ii) the Incapacity, withdrawal, removal or other event of
withdrawal (as defined in the Act) of the General Partner or (iii) the entry of
a decree of judicial dissolution under the Act. In the case of dissolution
described in clause (ii), if at such time there is at least one remaining
General Partner, the remaining General Partner(s) may unanimously elect to
carry on the business of FVP GP. In addition, within 90 days thereafter, Class
X Limited Partners and Class Y Limited Partners representing at least a
majority in Interest of the remaining Partners (based on their profits
interests and capital interests), or such greater percentage in Interest as may
be required under the Act, may agree to continue the business of FVP GP and to
the appointment of one or more additional general partners to be effective as
of the date of such event.
Control of Operations. The FVP GP Partnership Agreement provides that the
General Partner has the full, exclusive and complete right, power and
discretion to operate, manage and control the affairs and business of FVP GP
and to make all decisions affecting FVP GP's affairs and business, subject to
certain customary exceptions specified in the FVP GP Partnership Agreement.
Voting Rights. Except as to matters for which consent or approval is expressly
required under the FVP GP Partnership Agreement, the Limited Partners of FVP GP
have no right to vote on any partnership matters. Where consent of a majority
or specified percentage in Interest of the Limited Partners of FVP GP or of a
class or classes of Limited Partners is required, such consent will be
determined by reference to the aggregate capital commitments of the Limited
Partners entitled to approve the act or thing for which approval is sought in
accordance with the terms of the FVP GP Partnership Agreement.
Amendments and Modifications. In general, the FVP GP Partnership Agreement is
subject to modification or amendment only with the written consent of the
General Partner and a majority in Interest of the Class X and Class Z Limited
Partners of FVP GP and a majority in Interest of the Class Y Limited Partners;
provided, however, the FVP GP Partnership Agreement may be amended from time to
time by the General Partner without the consent of any of the Limited Partners
to (i) add to the representations, duties or obligations of the General Partner
or surrender any right or power granted to the General Partner by the FVP GP
Partnership Agreement, (ii) admit one or more additional Limited Partners or
Substituted Limited Partners, or withdraw one or more Limited Partners in
accordance with the FVP GP Partnership Agreement, (iii) provide any necessary
information regarding any Partner, (iv) adjust certain allocations of net
profit and loss with the consent of a majority in Interest of the Class X
Limited Partners and (v) reflect any change in the amount of the Capital
Commitments of any Partner in accordance with the terms of the FVP GP
Partnership Agreement; provided, however, such amendment shall not be adopted
if, in the opinion of counsel for FVP GP, such amendment alters, or results in
the alteration of, the limited liability of the Limited Partners or the status
of FVP GP as a partnership for federal income tax purposes.
Notwithstanding the foregoing, no amendment to the FVP GP Partnership Agreement
may add to, detract from or otherwise modify the purposes of FVP GP. In
addition, amendments with respect to certain liabilities or responsibilities of
certain Limited Partners require the consent of certain Limited Partners.
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Capital Contributions. Under the FVP GP Partnership Agreement, the Partners
have made certain capital contributions to FVP GP. The General Partner is
required under the FVP GP Partnership Agreement to make such Capital
Commitments to FVP GP as are necessary to maintain at all times a Capital
Commitment equal to not less than one percent (1%) of the total Capital
Commitments of all Partners. The Limited Partners are not required to make
additional capital contributions to FVP GP. Except for provisions allowing for
the return of capital to Partners upon dissolution of FVP GP, the FVP GP
Partnership Agreement provides that no Partner of FVP GP shall have the right
to withdraw or demand return of its capital contribution.
Rights of First Refusal. The FVP GP Partnership Agreement provides that in the
event of a proposed transfer of a Limited Partnership Interest by a Limited
Partner (to the extent permitted by the FVP GP Partnership Agreement), such
Limited Partner must provide 45 days' written notice to the General Partner and
to all of the Limited Partners of such proposed transfer and the proposed cash
purchase price. During the first 30 days of such period, the General Partner
and each of the Limited Partners (other than any Defaulting Partner) will have
the right to propose to acquire such Interest or some portion thereof for the
proposed cash purchase price. If the Partners as a group propose to acquire
more than the Interest, then each such Partner shall have the right to propose
to acquire its pro rata portion of the Interest; provided, however, that the
Limited Partner that proposes such transfer shall not be obligated to sell any
portion of the Interest to any Partner unless the Partners have collectively
proposed to purchase all of the Interest.
Liability of General Partner. In general, under the FVP GP Partnership
Agreement, FVP GP will indemnify and hold harmless, out of its assets, the
General Partner, its partners and their respective officers, directors,
employees, agents or stockholders (including when any of the foregoing is
serving at the request of the General Partner on behalf of FVP GP or FVP as a
partner, officer, director, employee or agent of any other Person) against
losses, damages, expenses (including reasonable attorneys' fees), judgments and
settlement amounts incurred by such party by reason of actions or omissions in
connection with activities performed on behalf of FVP GP and not constituting
fraud, breach of fiduciary duty, willful misconduct or gross negligence. In
the event that the General Partner of FVP GP ceases to be a General Partner, it
shall remain liable for obligations and liabilities incurred on account of its
activities as General Partner prior to the time it ceased to be a General
Partner, but shall be free of any obligation or liability as a General Partner
incurred on account of the activities of FVP GP from and after the time it
ceased to be a General Partner.
Withdrawal or Removal of Partners. The General Partner may not voluntarily
dissolve, retire or withdraw as a General Partner of FVP GP. In addition, the
General Partner may not directly or indirectly assign, sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of all or any fraction of
its Interest as a General Partner of FVP GP. Subject to certain procedures,
the General Partner may be removed at any time after the occurrence of a Vaughn
Expiration Date or for "cause," in each case by the consent of a majority in
Interest of the Attributable Class X and Class Y Limited Partners. In
addition, in the event that FVP GP shall or would suffer an FCC Regulatory
Issue due to a GP Principal or any of its Affiliates, the General Partner shall
cause the GP Principal to divest all direct or indirect Interests in FVP GP.
Under the FVP GP Partnership Agreement, "cause" is defined as under the FVP
Partnership Agreement. Under the FVP GP Partnership Agreement, "Vaughn
Expiration Date" means the earliest of the following dates: (i) the date on
which Mr. Vaughn is neither a General Partner nor a GP Principal, (ii) the date
on which the Vaughn Employment Agreement is terminated pursuant to its terms
and (iii) the date on which Mr. Vaughn ceases to own beneficially for his own
account, directly or indirectly, at least one of the following: (x) at least
two-thirds of the Special Distribution (as defined in the FVP GP Partnership
Agreement) or (y) at least two-thirds of the Interests in FVP GP that correlate
to the Special Distribution.
Upon the removal of the General Partner, at the election of a majority in
Interest of the Attributable Class X Limited Partners, FVP GP shall redeem the
Interest of the removed General Partner for a price equal to the fair market
value thereof as determined pursuant to the FVP GP Partnership Agreement. In
the absence of such election and approval, the General Partner's Interest in
FVP shall be converted to that of a nonvoting,
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nonconvertible Limited Partnership Interest. Upon the removal of the General
Partner, a majority in Interest of the Attributable Class X Limited Partners
shall have the power to appoint a new General Partner.
Put and Call Rights. In the event of the Incapacity of a Limited Partner, to
the fullest extent permitted by law, the General Partner may require the
transfer of the Interest of such Limited Partner. The General Partner shall
provide at least 60 days' notice of such transfer. "Incapacity" is defined by
the FVP GP Partnership Agreement to mean, as to any person, (i) the
adjudication of incompetence or insanity of such person, or the Bankruptcy of
such person or (ii) the death, dissolution or termination (other than by merger
or consolidation), as the case may be, of such person. In addition, the
General Partner shall also have the right to cause any Defaulting Partner (in
the case of a default by a Class X or Class Z Limited Partner) to transfer its
Limited Partnership Interest in accordance with the FVP GP Partnership
Agreement. A majority in Interest of the Class X Limited Partners shall have
the right to cause any Defaulting Partner (in the case of a default by a Class
Y Limited Partner) to transfer its Limited Partnership Interest in accordance
with the FVP GP Partnership Agreement.
Under certain circumstances where FVP GP would suffer an FCC Regulatory Issue
due to a Limited Partner or an Attributable Person through such Limited
Partner, such Limited Partner may be required to use all commercially
reasonable efforts to sell such portion of its Limited Partnership Interests as
may be necessary to cure such FCC Regulatory Issue. If such Limited Partner is
unable to sell its Limited Partnership Interest within 180 days of the date
that the General Partner requests that such Interest be sold (or within the
time established by the FCC), then for a specified period, the General Partner
(with the consent of a majority in Interest of the Class X Limited Partners if
the Limited Partner is a Class Y Limited Partner) may elect on behalf of FVP GP
to make Buyout Payments to such Limited Partner in accordance with the FVP GP
Partnership Agreement. The economic interest of such Limited Partner shall be
deemed to have been converted into debt and such Limited Partner shall
immediately cease to be a partner.
Liability of Limited Partners. Limited Partners of FVP GP do not have any
personal liability for the repayment or discharge of the debts and obligations
of FVP GP; provided, however, that Limited Partners shall be liable to FVP GP
for their Unused Capital Commitments in accordance with the terms of the FVP GP
Partnership Agreement.
Assignment of Partnership Interests. Under the FVP GP Partnership Agreement,
the General Partner may not directly or indirectly assign, sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of all or any fraction of
its Interest as a General Partner of FVP GP.
A Limited Partner may transfer all or any fraction of such Limited Partner's
Limited Partnership Interest (subject in certain cases to the rights of first
refusal discussed above and more fully set forth in the FVP GP Partnership
Agreement) to another person only if such transfer meets the conditions set
forth in the FVP GP Partnership Agreement.
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CREDIT ARRANGEMENTS OF THE COMPANY
THE SENIOR CREDIT FACILITY
On April 9, 1996, the Company entered into the $265.0 million Amended and
Restated Credit Agreement with The Chase Manhattan Bank, as Administrative
Agent, J.P. Morgan Securities Inc., as Syndication Agent, CIBC Inc., as
Managing Agent, and the other lenders signatory thereto. The Company used
these proceeds to refinance an existing $130.0 million senior credit facility,
to finance the purchase of the Cox Systems and for general business purposes.
As of March 31, 1996, borrowings under the Senior Credit Facility totaled
approximately $116.8 million and are expected to be approximately $199.7
million after giving pro forma effect to the Offering and the other
Transactions.
The Senior Credit Facility includes a $75.0 million, 8.25-year reducing
revolving credit facility ("Revolving Credit Facility"), a $100.0 million,
8.25-year term loan ("Senior Term Loan") and a $90.0 million, 9.25-year term
loan ("Tranche B Loan"). The Company has outstanding borrowings of $20.0
million as of March 31, 1996 under the Revolving Credit Facility bearing
interest at varying rates, based upon different borrowing options and financial
ratios, and maturing on June 30, 2004. The weighted average interest rate at
March 31, 1996 on the outstanding borrowings under the Revolving Credit
Facility was approximately 8.19%. The Company has outstanding borrowings of
$100.0 million under the Senior Term Loan bearing interest at varying rates,
based upon different borrowing options and financial ratios, and maturing on
June 30, 2004. The weighted average interest rate at March 31, 1996 on the
outstanding borrowings under the Senior Term Loan was approximately 8.19%. The
Company has outstanding borrowings of $90.0 million under the Tranche B Loan
bearing interest at varying rates, based upon different borrowing options and
financial ratios, and maturing on June 30, 2005. The weighted average interest
rate at March 31, 1996 on the outstanding borrowings under the Tranche B Loan
was approximately 8.59%. The Company has entered into interest rate protection
agreements to hedge its underlying Treasury rate exposure for $110.0 million of
borrowings through November 1999.
The Senior Credit Facility is secured by a pledge of all limited and general
partnership interests in the Company and in any subsidiaries of the Company and
a first priority lien on all the tangible and intangible assets of the Company
and each of its subsidiaries. In addition, in the event of the occurrence and
continuance of an event of default under the Senior Credit Facility, the
Administrative Agent is entitled to replace the general partner of the Company
with its designee. See "The Partnership Agreements--The Company Partnership
Agreement."
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DESCRIPTION OF THE NOTES
As used below in this "Description of the Notes" section, the "Company" means
FrontierVision Operating Partners, L.P., but not any of its subsidiaries,
unless otherwise specified. The Notes are to be issued under an Indenture, to
be dated as of , 1996 (the "Indenture"), among the Issuers and
, as Trustee (the "Trustee"). The Indenture is subject to and governed by the
Trust Indenture Act of 1939, as amended. The statements under this caption
relating to the Notes and the Indenture are summaries and do not purport to be
complete, and where reference is made to particular provisions of the
Indenture, such provisions, including the definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference. A copy of the proposed form of
Indenture has been filed with the Commission as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Notes are joint and several obligations of the Company and Capital. The
Notes will be general unsecured senior subordinated obligations of the Issuers,
will be limited to $200 million aggregate principal amount and will rank
subordinate in right of payment to all existing and future Senior Indebtedness.
The Notes will rank pari passu in right of payment with all other senior
subordinated indebtedness of the Company. At March 31, 1996, as adjusted to
give effect to the Rights Offering, the initial borrowings under the New Credit
Agreement and the transactions described herein under "Use of Proceeds," the
Company would have had approximately $199.7 million of Senior Indebtedness
outstanding. Secured creditors of the Company will have a claim on the assets
which secure such obligations prior to claims of the holders of the Notes
against those assets. Capital has nominal assets and does not conduct any
operations.
The Notes will mature on , 2006 and will bear interest at the rate per
annum shown on the front cover of this Prospectus from the date of issuance or
from the most recent interest payment date to which interest has been paid or
provided for. Interest will be payable semiannually on and
of each year, commencing , 1997, to the Person in whose name a Note
is registered at the close of business on the preceding or
(each, a "Record Date"), as the case may be. Interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months. Holders must
surrender the Notes to the paying agent for the Notes to collect principal
payments. The Issuers will pay principal and interest by check and may mail
interest checks to a holder's registered address.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Issuers may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Initially, the Trustee
will act as paying agent and registrar for the Notes. The Notes may be
presented for registration of transfer and exchange at the offices of the
registrar for the Notes.
OPTIONAL REDEMPTION
The Notes are not redeemable prior to , 2001, except as set
forth below. The Notes will be subject to redemption, at the option of the
Issuers, in whole or in part, at any time on or after , 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
holder of Notes to be redeemed at his address appearing in the register for the
Notes, in amounts of $1,000 or an integral multiple of $1,000, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
interest to but excluding the date fixed for redemption (subject to the right
of holders of record on the relevant Record Date to receive interest due on an
interest payment date that is on or prior to the date fixed for redemption), if
redeemed during the 12-month period beginning of the years indicated:
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<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 %
2002 %
2003 %
2004 and thereafter 100.00%
</TABLE>
In addition, prior to , 1999, the Issuers may redeem up to 35% of the
principal amount of the Notes with the net cash proceeds received by the
Company from one or more Public Equity Offerings or Strategic Equity
Investments, at a redemption price (expressed as a percentage of the principal
amount) of % of the principal amount thereof, plus accrued and unpaid
interest to the date fixed for redemption; provided, however, that at least 65%
in aggregate principal amount of the Notes originally issued remains
outstanding immediately after any such redemption (excluding any Notes owned by
the Issuers or any of their Affiliates). Notice of redemption pursuant to this
paragraph must be mailed to holders of Notes not later than 60 days following
the consummation of such Public Equity Offering or Strategic Equity Investment.
Selection of Notes for any partial redemption shall be made by the Trustee, in
accordance with the rules of any national securities exchange on which the
Notes may be listed or, if the Notes are not so listed, pro rata or by lot or
in such other manner as the Trustee shall deem appropriate and fair. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. Notice of redemption will be mailed before the date fixed
for redemption to each holder of Notes to be redeemed at his registered
address. On and after the date fixed for redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
The Notes will not have the benefit of any sinking fund.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes is
subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash of all Senior Indebtedness.
Upon any payment or distribution of assets or securities of either of the
Issuers of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities), upon
any dissolution or winding-up or total liquidation or reorganization of either
of the Issuers, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Indebtedness shall first be paid
in full in cash, or payment provided for, before the holders of the Notes or
the Trustee on behalf of such holders shall be entitled to receive any payment
by the Issuers of the principal of, premium, if any, or interest on the Notes,
or any payment to acquire any of the Notes for cash, property or securities, or
any distribution with respect to the Notes of any cash, property or securities.
Before any payment may be made by, or on behalf of, the Issuers of the
principal of, premium, if any, or interest on the Notes upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets or securities of either of the Issuers of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities), to which the holders of the Notes
or the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Issuers or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee
or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Indebtedness in full in cash after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
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No direct or indirect payment (including any payment made to the holders of the
Notes under the terms of Indebtedness subordinated to the Notes, but excluding
any payment or distribution of Permitted Junior Securities) by or on behalf of
the Issuers of principal of, premium, if any, or interest on the Notes, whether
pursuant to the terms of the Notes, upon acceleration or otherwise, will be
made if, at the time of such payment, there exists a default in the payment of
all or any portion of the obligations on any Designated Senior Indebtedness,
whether at maturity, on account of mandatory redemption or prepayment,
acceleration or otherwise, and such default shall not have been cured or waived
or the benefits of this sentence waived by or on behalf of the holders of such
Designated Senior Indebtedness. In addition, during the continuance of any
non-payment default or non-payment event of default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
immediately accelerated, and upon receipt by the Trustee of written notice (a
"Payment Blockage Notice") from the holder or holders of such Designated Senior
Indebtedness or the trustee or agent acting on behalf of such Designated Senior
Indebtedness, then, unless and until such default or event of default has been
cured or waived or has ceased to exist or such Designated Senior Indebtedness
has been discharged or repaid in full, no direct or indirect payment (including
any payment made to the holders of the Notes under the terms of Indebtedness
subordinated to the Notes, but excluding any payment or distribution of
Permitted Junior Securities) will be made by or on behalf of the Issuers of
principal of, premium, if any, or interest on the Notes, except from those
funds held in trust for the benefit of the holders of any Notes, pursuant to
the procedures set forth under "--Satisfaction and Discharge of Indenture;
Defeasance" below, to such holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such notice by the Trustee and
ending 179 days thereafter. Notwithstanding anything in the subordination
provisions of the Indenture or the Notes to the contrary, in no event will a
Payment Blockage Period extend beyond 179 days from the date the Payment
Blockage Notice in respect thereof was given. Not more than one Payment
Blockage Period may be commenced with respect to the Notes during any period of
360 consecutive days. No default or event of default that existed or was
continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period (to the extent the holder of Designated Senior Indebtedness, or trustee
or agent, giving notice commencing such Payment Blockage Period had, or should
have had, knowledge of such existing or continuing default or event of default)
may be, or be made, the basis for the commencement of any other Payment
Blockage Period by the holder or holders of such Designated Senior Indebtedness
or the trustee or agent acting on behalf of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default has been cured or waived for a period of not
less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the Notes
by reason of the provisions of the Indenture described under this
"Subordination" heading will not be construed as preventing the occurrence of
an Event of Default described in clause (a), (b) or (c) of the first paragraph
under "--Events of Default."
By reason of the subordination provisions described above, in the event of
insolvency of either of the Issuers, funds which would otherwise be payable to
holders of the Notes will be paid to the holders of Senior Indebtedness to the
extent necessary to pay the Senior Indebtedness in full, and the Issuers may be
unable to fully meet their obligations with respect to the Notes. Subject to
the restrictions set forth in the Indenture, in the future the Issuers may
issue additional Senior Indebtedness.
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Indenture will provide that the Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness) or issue any
Disqualified Equity Interests except for Permitted Indebtedness; provided,
however, that the Company or any Restricted Subsidiary may Incur Indebtedness
and the Company or any Restricted Subsidiary may issue Disqualified Equity
Interests if, at the time of and immediately after giving pro forma
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effect to such Incurrence of Indebtedness or issuance of Disqualified Equity
Interests and the application of the proceeds therefrom, the Debt to Operating
Cash Flow Ratio would be less than or equal to (i) 7.0 to 1.0 if the date of
such Incurrence is on or before December 31, 1997 and (ii) 6.75 to 1.0
thereafter.
The foregoing limitations will not apply to the Incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(a) Indebtedness under the Notes and the Indenture;
(b) Indebtedness and Disqualified Equity Interests of the
Company and the Restricted Subsidiaries outstanding on
the Issue Date;
(c) Indebtedness under the Senior Credit Facility in an
aggregate principal amount at any one time outstanding
not to exceed the sum of (A) $ million, which
amount shall be reduced by (x) any permanent reduction
of commitments thereunder and (y) any other repayment
accompanied by a permanent reduction of commitments
thereunder (other than in connection with any
refinancing thereof) plus (B) any amounts outstanding
under the Senior Credit Facility that utilizes
clause (i) below;
(d) (x) Indebtedness of any Restricted Subsidiary owed to
and held by the Company or any Wholly Owned Restricted
Subsidiary and (y) Indebtedness of the Company owed to
and held by any Wholly Owned Restricted Subsidiary which
is unsecured and subordinated in right of payment to the
payment and performance of the Issuers' obligations
under any Senior Indebtedness, the Indenture and the
Notes; provided, however, that an Incurrence of
Indebtedness that is not permitted by this clause (d)
shall be deemed to have occurred upon (i) any sale or
other disposition of any Indebtedness of the Company or
a Wholly Owned Restricted Subsidiary referred to in this
clause (d) to a Person (other than the Company or a
Wholly Owned Restricted Subsidiary), (ii) any sale or
other disposition of Equity Interests of a Wholly Owned
Restricted Subsidiary which holds Indebtedness of the
Company or another Wholly Owned Restricted Subsidiary
such that such Wholly Owned Restricted Subsidiary ceases
to be a Wholly Owned Restricted Subsidiary or (iii)
designation of a Wholly Owned Restricted Subsidiary
which holds Indebtedness of the Company as an
Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Indebtedness
of the Company;
(f) Interest Rate Protection Obligations of the Company or
any Restricted Subsidiary relating to Indebtedness of
the Company or such Restricted Subsidiary, as the case
may be (which Indebtedness (i) bears interest at
fluctuating interest rates and (ii) is otherwise
permitted to be Incurred under this covenant); provided,
however, that the notional principal amount of such
Interest Rate Protection Obligations does not exceed the
principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(g) Purchase Money Indebtedness and Capitalized Lease
Obligations of the Company or any Restricted Subsidiary
which do not exceed $ million in the aggregate at
any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests of the
Company or any Restricted Subsidiary to the extent
representing a replacement, renewal, refinancing or
extension (collectively, a "refinancing") of outstanding
Indebtedness or Disqualified Equity
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Interests of the Company or any Restricted Subsidiary
Incurred in compliance with the Debt to Operating Cash
Flow Ratio of the first paragraph of this covenant or
clause (a) or (b) of this paragraph of this covenant;
provided, however, that (i) Indebtedness or Disqualified
Equity Interests of the Company may not be refinanced
under this clause (h) with Indebtedness or Disqualified
Equity Interests of any Restricted Subsidiary, (ii) any
such refinancing shall not exceed the sum of the
principal amount (or, if such Indebtedness or
Disqualified Equity Interests provide for a lesser
amount to be due and payable upon a declaration of
acceleration thereof at the time of such refinancing, an
amount no greater than such lesser amount) of the
Indebtedness or Disqualified Equity Interests being
refinanced plus the amount of accrued interest or
dividends thereon and the amount of any reasonably
determined prepayment premium necessary to accomplish
such refinancing and such reasonable fees and expenses
incurred in connection therewith, (iii) Indebtedness
representing a refinancing of Indebtedness other than
Senior Indebtedness shall have a Weighted Average Life
to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being
refinanced, and (iv) Indebtedness that is pari passu
with the Notes may only be refinanced with Indebtedness
that is made pari passu with or subordinate in right of
payment to the Notes and Subordinated Indebtedness or
Disqualified Equity Interests may only be refinanced
with Subordinated Indebtedness or Disqualified Equity
Interests; and
(i) in addition to the items referred to in clauses (a)
through (h) above, Indebtedness of the Company
(including any Indebtedness under the Senior Credit
Facility that utilizes this clause (i)) having an
aggregate principal amount not to exceed $ million
at any time outstanding.
Limitation on Senior Subordinated Indebtedness. The Indenture will provide
that (i) the Issuers will not, directly or indirectly, Incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the Notes
and expressly rank subordinate in right of payment to any Senior Indebtedness
and (ii) the Company will not permit any Subsidiary Guarantor to and no
Subsidiary Guarantor will, directly or indirectly, Incur any Indebtedness that
by its terms would expressly rank senior in right of payment to the Subsidiary
Guarantee of such Subsidiary Guarantor and expressly rank subordinate in right
of payment to any Guarantor Senior Indebtedness of such Subsidiary Guarantor.
Limitation on Restricted Payments. The Indenture will provide that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary
or make any payment or distribution to the direct or indirect
holders (in their capacities as such) of Equity Interests of
the Company or any Restricted Subsidiary (other than payments
or distributions made to the Company or a Wholly Owned
Restricted Subsidiary and dividends or distributions payable
solely in Qualified Equity Interests of the Company or in
options, warrants or other rights to purchase Qualified Equity
Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary
(other than any such Equity Interests owned by the Company or
a Wholly Owned Restricted Subsidiary);
(iii) purchase, redeem, defease or retire for value more than one
year prior to the stated maturity thereof any Subordinated
Indebtedness (other than any Subordinated Indebtedness held by
a Wholly Owned Restricted Subsidiary); or
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(iv) make any Investment (other than Permitted Investments) in any
Person (other than in the Company, a Wholly Owned Restricted
Subsidiary or a Person that becomes a Wholly Owned Restricted
Subsidiary, or is merged with or into or consolidated with the
Company or a Wholly Owned Restricted Subsidiary (provided the
Company or a Wholly Owned Subsidiary is the survivor), as a
result of such Investment)
(such payments or any other actions (other than Permitted Investments)
described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"),
unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or after giving effect to such
Restricted Payment;
(b) immediately after giving effect to such Restricted Payment,
the Company would be able to incur $1.00 of Indebtedness
(other than Permitted Indebtedness) under the Debt to
Operating Cash Flow Ratio of the first paragraph of
"--Limitation on Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments declared or
made on or after the Issue Date does not exceed an amount
equal to the sum of (1) the difference between (x) the
Cumulative Available Cash Flow determined at the time of such
Restricted Payment and (y) 140% of cumulative Consolidated
Interest Expense of the Company determined for the period
commencing on the Issue Date and ending on the last day of the
latest fiscal quarter for which consolidated financial
statements of the Company are available preceding the date of
such Restricted Payment, plus (2) the aggregate net proceeds
(with the value of any non-cash proceeds to be the Fair Market
Value thereof as determined by an Independent Financial
Advisor) received by the Company either (x) as capital
contributions to the Company after the Issue Date or (y) from
the issue and sale (other than to a Restricted Subsidiary) of
its Qualified Equity Interests after the Issue Date (excluding
the net proceeds from any issuance and sale of Qualified
Equity Interests financed, directly or indirectly, using funds
borrowed from the Company or any Restricted Subsidiary until
and to the extent such borrowing is repaid), plus (3) the
principal amount (or accrued amount, if less) of any
Indebtedness of the Company or any Restricted Subsidiary
Incurred after the Issue Date which has been converted into or
exchanged for Qualified Equity Interests of the Company, plus
(4) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the
Issue Date, an amount (to the extent not included in the
computation of Cumulative Available Cash Flow) equal to the
lesser of: (i) the return of capital with respect to such
Investment and (ii) the amount of such Investment which was
treated as a Restricted Payment, in either case, less the cost
of the disposition of such Investment, plus (5) the Company's
proportionate interest in the lesser of the Fair Market Value
or the net worth of any Unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the Issue Date
in accordance with "--Designation of Unrestricted
Subsidiaries" below not to exceed in any case the Designation
Amount with respect to such Restricted Subsidiary upon its
Designation, minus (6) the Designation Amount with respect to
any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance
with "--Designation of Unrestricted Subsidiaries" below.
The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of
the Indenture, (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the retirement of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent issue and sale
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(other than to a Restricted Subsidiary) of, Qualified Equity Interests of the
Company; provided, however, that any such net cash proceeds and the value of
any Equity Interests issued in exchange for such retired Equity Interests are
excluded from clause (c)(2) of the preceding paragraph (and were not included
therein at any time), (iii) so long as no Default or Event of Default shall
have occurred and be continuing, the purchase, redemption, retirement or other
acquisition of Subordinated Indebtedness made in exchange for, or out of the
net cash proceeds of, a substantially concurrent issue and sale (other than to
a Restricted Subsidiary) of (x) Qualified Equity Interests of the Company;
provided, however, that any such net cash proceeds and the value of any Equity
Interests issued in exchange for Subordinated Indebtedness are excluded from
clauses (c)(2) and (c)(3) of the preceding paragraph (and were not included
therein at any time) or (y) other Subordinated Indebtedness having no stated
maturity for the payment of principal thereof prior to the final stated
maturity of the Notes, (iv) the payment of any dividend or distribution on
Equity Interests of the Company or any Restricted Subsidiary to the extent
necessary to permit the direct or indirect beneficial owners of such Equity
Interests to pay federal and state income tax liabilities arising from income
of the Company or such Restricted Subsidiary and attributable to them solely as
a result of the Company or such Restricted Subsidiary (and any intermediate
entity through which such holder owns such Equity Interests) being a
partnership or similar pass-through entity for federal income tax purposes, (v)
so long as no Default or Event of Default has occurred and is continuing, any
Investment made out of the net cash proceeds of the substantially concurrent
issue and sale (other than to a Restricted Subsidiary) of Qualified Equity
Interests of the Company; provided, however, that any such net cash proceeds
are excluded from clause (c)(2) of the preceding paragraph (and were not
included therein at any time) or (vi) the purchase, redemption or other
acquisition, cancellation or retirement for value of Equity Interests, or
options, warrants, equity appreciation rights or other rights to purchase or
acquire Equity Interests, of the Company or any Restricted Subsidiary, or
similar securities, held by officers or employees or former officers or
employees of the Company or any Restricted Subsidiary (or their estates or
beneficiaries under their estates), upon death, disability, retirement or
termination of employment not to exceed $ in any calendar year.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i) and (vi) of the immediately
preceding paragraph shall be included as Restricted Payments and amounts
expended pursuant to clauses (ii) through (v) shall be excluded. The amount of
any non-cash Restricted Payment shall be deemed to be equal to the Fair Market
Value thereof at the date of the making of such Restricted Payment.
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. The
Indenture will provide that in the event that any Restricted Subsidiary (other
than a Subsidiary Guarantor), directly or indirectly, guarantees any
Indebtedness of the Company other than the Notes (the "Other Indebtedness") the
Company shall cause such Restricted Subsidiary to concurrently guarantee (a
"Subsidiary Guarantee") the Company's Obligations under the Indenture and the
Notes to the same extent that such Restricted Subsidiary guaranteed the
Company's Obligations under the Other Indebtedness (including waiver of
subrogation, if any); provided, however, that if such Other Indebtedness is (i)
Senior Indebtedness, the Subsidiary Guarantee shall be subordinated in right of
payment to all Guarantor Senior Indebtedness (which shall include such
guarantee of such Other Indebtedness) pursuant to the subordination provisions
of the Indenture (which subordination shall be substantially identical to the
subordination provisions of the Indenture applicable to the Notes), (ii) Senior
Subordinated Indebtedness, the Subsidiary Guarantee shall be pari passu in
right of payment with the guarantee of the Other Indebtedness, or (iii)
Subordinated Indebtedness, the Subsidiary Guarantee shall be senior in right of
payment to the guarantee of the Other Indebtedness (which guarantee of such
Subordinated Indebtedness shall provide that such guarantee is subordinated to
the Subsidiary Guarantees to the same extent and in the same manner as the
Notes are subordinated to Senior Indebtedness); provided, further, however,
that each Subsidiary issuing a Subsidiary Guarantee will be automatically and
unconditionally released and discharged from its obligations under such
Subsidiary Guarantee upon the release or discharge of the guarantee of the
Other Indebtedness that resulted in the creation of such Subsidiary Guarantee,
except a discharge or release by, or as a result of, any payment under the
guarantee of such Other Indebtedness by such Subsidiary Guarantor. The Company
shall cause each Restricted Subsidiary issuing a Subsidiary Guarantee to (i)
execute and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory
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to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary (which opinion may be subject to customary assumptions
and qualifications). Thereafter, such Restricted Subsidiary shall (unless
released in accordance with the terms of the Indenture) be a Subsidiary
Guarantor for all purposes of the Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions to the Company or any other Restricted Subsidiary
on its Equity Interests or with respect to any other interest or participation
in, or measured by, its profits, or pay any Indebtedness owed to the Company or
any other Restricted Subsidiary, (b) make loans or advances to, or guarantee
any Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Senior Credit Facility or other
agreements of the Company or the Restricted Subsidiaries outstanding on the
Issue Date, in each case as in effect on the Issue Date, and any amendments,
restatements, renewals, replacements or refinancings (collectively, a
"refinancing") thereof; provided, however, that such refinancings are no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the Senior Credit Facility on the Issue Date or in the
Indenture, (ii) applicable law, (iii) any instrument governing Indebtedness or
Equity Interests of an Acquired Person acquired by the Company or any
Restricted Subsidiary as in effect at the time of such acquisition (except to
the extent such Indebtedness was Incurred by such Acquired Person in connection
with, as a result of or in contemplation of such acquisition); provided,
however, that such encumbrances and restrictions are not applicable to the
Company or any Restricted Subsidiary, or the properties or assets of the
Company or any Restricted Subsidiary, other than the Acquired Person, (iv)
customary non-assignment provisions in leases or cable television franchises
entered into in the ordinary course of business and consistent with past
practices, (v) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only imposes encumbrances and restrictions on
the property so acquired, (vi) any agreement for the sale or disposition of the
Equity Interests or assets of any Restricted Subsidiary; provided, however,
that such encumbrances and restrictions described in this clause (vi) are only
applicable to such Restricted Subsidiary or assets, as applicable, and any such
sale or disposition is made in compliance with "--Disposition of Proceeds of
Asset Sales" below to the extent applicable thereto, (vii) refinancing
Indebtedness permitted under clause (h) of "--Limitation on Indebtedness"
above; provided, however, that the encumbrances and restrictions contained in
the agreements governing such Indebtedness are no more restrictive in the
aggregate than those contained in the agreements governing the Indebtedness
being refinanced immediately prior to such refinancing, (viii) the Indenture or
(ix) any such encumbrance or restriction existing under any other agreement,
instrument or document hereafter in effect; provided, however, that the terms
and conditions of any such encumbrance or restriction are not more restrictive
than those contained in the Senior Credit Facility as in effect on the Issue
Date.
Limitation on Liens. The Indenture will provide that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, Incur any
Liens of any kind against or upon any of their respective properties or assets
now owned or hereafter acquired, or any proceeds therefrom or any income or
profits therefrom, to secure any Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with such Indebtedness with a Lien on the same properties and assets securing
such Indebtedness for so long as such Indebtedness is secured by such Lien,
except for (i) Liens securing Senior Indebtedness or any guarantee of Senior
Indebtedness by any Restricted Subsidiary and (ii) Permitted Liens.
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Disposition of Proceeds of Asset Sales. The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Asset Sale unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of and (b) either (i) at least 75% of such consideration
consists of cash or Cash Equivalents or (ii) at least 75% of such consideration
consists of (x) properties and capital assets (including franchises and
licenses required to own or operate such properties) to be used in the same
lines of business being conducted by the Company or any Restricted Subsidiary
at such time or (y) Equity Interests in one or more Persons which thereby
become Wholly Owned Restricted Subsidiaries whose assets consist primarily of
such properties and capital assets. The amount of any (i) liabilities of the
Company or any Restricted Subsidiary that are actually assumed by the
transferee in such Asset Sale and for which the Company and the Restricted
Subsidiaries are fully released shall be deemed to be cash for purposes of
determining the percentage of cash consideration received by the Company or the
Restricted Subsidiaries and (ii) notes or other similar obligations received by
the Company or the Restricted Subsidiaries from such transferee that are
immediately converted (or are converted within thirty days of the related Asset
Sale) by the Company or the Restricted Subsidiaries into cash shall be deemed
to be cash, in an amount equal to the net cash proceeds realized upon such
conversion, for purposes of determining the percentage of cash consideration
received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to
repay Senior Indebtedness and permanently reduce any related commitment;
provided, however, that if Indebtedness under the revolving credit portion of
the Senior Credit Facility is repaid, the Company need not reduce the
commitments for such revolving credit portion, or (ii) commit in writing to
acquire, construct or improve properties and capital assets (including
franchises and licenses required to own or operate any such assets or
properties) to be used in the same line of business being conducted by the
Company or any Restricted Subsidiary at such time and so apply such Net Cash
Proceeds within 365 days of the receipt thereof.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not so
applied within 365 days of such Asset Sale (such Net Cash Proceeds, the
"Unutilized Net Cash Proceeds"), the Company shall, within 30 days of such
365th day, make an Offer to Purchase from all holders of Notes up to a maximum
principal amount (expressed as a multiple of $1,000) of Notes equal to such
Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of purchase; provided, however, that the Offer to Purchase may be
deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in
excess of $5.0 million, at which time the entire amount of such Unutilized Net
Cash Proceeds, and not just the amount in excess of $5.0 million, shall be
applied as required pursuant to this paragraph. In the event that any other
Indebtedness of the Company which ranks pari passu with the Notes requires the
repayment or prepayment thereof, or an offer to purchase to be made to
repurchase such Indebtedness, upon the consummation of any Asset Sale, the
Company may apply the Unutilized Net Cash Proceeds otherwise required to be
applied to an Offer to Purchase to repay, prepay or offer to purchase such
other Indebtedness and to an Offer to Purchase pro rata based upon the
aggregate principal amount of the Notes then outstanding and the aggregate
principal amount (or accreted amount, if less) of such other Indebtedness then
outstanding. The Offer to Purchase shall remain open for a period of 20
business days or such longer period as may be required by law. To the extent
an Offer to Purchase is oversubscribed, Notes shall be purchased among holders
on a proportionate basis (based on the relative aggregate principal amounts
validly tendered for purchase by holders thereof). To the extent the Offer to
Purchase is not fully subscribed to by the holders of the Notes, the Company
may retain and utilize any portion of the Unutilized Net Cash Proceeds not
applied to repurchase the Notes for any purpose consistent with the other terms
of the Indenture.
In the event that the Company makes an Offer to Purchase the Notes, the Company
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act and any violation of the provisions of the Indenture relating to such
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Offer to Purchase occurring as a result of such compliance shall not be deemed
an Event of Default or an event that with the passing of time or giving of
notice, or both, would constitute an Event of Default.
Limitation on Transactions with Affiliates and Related Persons. The Indenture
will provide that the Company will not, and will not permit, cause or suffer
any Restricted Subsidiary to, directly or indirectly, conduct any business or
enter into any transaction (or series of related transactions) with or for the
benefit of any of their respective Affiliates or any beneficial holder of 10%
or more of the Equity Interests of the Company or any officer, director or
employee of the Company or any Restricted Subsidiary (each an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms which are no
less favorable to the Company or such Restricted Subsidiary, as the case may
be, than would be available in a comparable transaction with an unaffiliated
third party, (b) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments or other consideration having a Fair
Market Value in excess of $5.0 million, a majority of the disinterested members
of the Board of Directors of FV Inc. shall have approved such transaction and
determined that such transaction complies with the foregoing provisions and (c)
if such Affiliate Transaction (or series of related Affiliate Transactions)
involves aggregate payments or other consideration having a Fair Market Value
of $25.0 million or more, the Company has obtained a written opinion from an
Independent Financial Advisor stating that the terms of such Affiliate
Transaction to the Company or the Restricted Subsidiary, as the case may be,
are fair from a financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and the Wholly
Owned Restricted Subsidiaries, (ii) customary directors' fees, indemnification
and similar arrangements, consulting fees, employee salaries, bonuses, or
employment agreements, compensation or employee benefit arrangements, and
incentive arrangements with any officer, director or employee of the Company
entered into in the ordinary course of business (including customary benefits
thereunder) and payments under any indemnification arrangements permitted by
applicable law, (iii) the Agreement of Limited Partnership of the Company as in
effect on the Issue Date, including any amendment or extension thereof that
does not otherwise violate any other covenant set forth in the Indenture, and
any transactions undertaken pursuant to any other contractual obligations in
existence on the Issue Date, (iv) the issue and sale by the Company to its
partners or stockholders of Qualified Equity Interests, (v) any Restricted
Payments made in compliance with "--Limitation on Restricted Payments" above
(including without limitation the making of any payments or distributions
permitted to be made in accordance with clauses (i) through (vi) of the
penultimate paragraph of " --Limitation on Restricted Payments"), (vi) loans
and advances to officers, directors and employees of the Company and the
Restricted Subsidiaries for travel, entertainment, moving and other relocation
expenses, in each case made in the ordinary course of business and consistent
with past business practices, (vii) customary commercial banking, investment
banking, underwriting, placement agent or financial advisory fees paid in
connection with services rendered to the Company and its Subsidiaries in the
ordinary course, (viii) the Incurrence of intercompany Indebtedness permitted
pursuant to clause (d) under the definition of "Permitted Indebtedness" set
forth under "--Limitation on Indebtedness," (ix) the pledge of Equity Interests
of Unrestricted Subsidiaries to support the Indebtedness thereof and (x) the
Senior Credit Facility.
Designation of Unrestricted Subsidiaries. The Indenture will provide that the
Company may designate any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such
Designation;
(b) at the time of and after giving effect to such Designation,
the Company could incur $1.00 of additional Indebtedness under
the Debt to Operating Cash Flow Ratio of the first paragraph
of "--Limitation on Indebtedness" above; and
(c) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation
(assuming the effectiveness of such Designation)
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pursuant to the first paragraph of "--Limitation on Restricted
Payments" above in an amount (the "Designation Amount") equal
to the Company's proportionate interest in the Fair Market
Value of such Subsidiary on such date.
Neither the Company nor any Restricted Subsidiary shall at any time (x) provide
credit support for, subject any of its property or assets (other than the
Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary, except, in the
case of clause (x) or (y), to the extent otherwise permitted under the terms of
the Indenture, including, without limitation, pursuant to "--Limitation on
Restricted Payments" and "--Limitation on Indebtedness" above.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such
Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if
Incurred at such time, have been permitted to be Incurred for
all purposes of the Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Limitation on Conduct of Business of Capital. The Indenture will provide that
Capital will not own any operating assets or other properties or conduct any
business other than to serve as an Issuer and an obligor on the Notes.
CHANGE OF CONTROL
The Indenture will provide that within 30 days following the date of
consummation of a transaction resulting in a Change of Control, the Company
will commence an Offer to Purchase all outstanding Notes at a purchase price in
cash equal to 101% of their principal amount plus accrued interest to the
Purchase Date. Such Offer to Purchase will be consummated not earlier than 30
days and not later than 60 days after the commencement thereof. Each holder
shall be entitled to tender all or any portion of the Notes owned by such
holder pursuant to the Offer to Purchase, subject to the requirement that any
portion of a Note tendered must bear an integral multiple of $1,000 principal
amount.
In the event that the Company makes an Offer to Purchase the Notes, the Company
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act and any violation of the provisions of the Indenture relating to such Offer
to Purchase occurring as a result of such compliance shall not be deemed an
Event of Default or an event that with the passing of time or giving of notice,
or both, would constitute an Event of Default.
With respect to the sale of assets referred to in the definition of "Change of
Control," the phrase "all or substantially all" of the assets of the Company or
the General Partner will likely be interpreted under applicable state law and
will be dependent upon particular facts and circumstances. As a result, there
may be a degree of uncertainty in ascertaining whether a sale or transfer of
"all or substantially all" of the assets of the Company or the General Partner
has occurred. In addition, no assurances can be given that the Company will be
able to acquire Notes tendered upon the occurrence of a Change of Control. The
ability of
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the Company to pay cash to the holders of Notes upon a Change of Control may be
limited by its then existing financial resources. The Senior Credit Facility
contains certain covenants prohibiting, or requiring waiver or consent of the
lenders thereunder prior to, the repurchase of the Notes upon a Change of
Control, and future debt agreements of the Company may provide the same. If
the Company does not obtain such waiver or consent or repay such Indebtedness,
the Company will remain prohibited from repurchasing the Notes. In such event,
the Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would in turn constitute a default under the
Senior Credit Facility and possibly other Senior Indebtedness. In such
circumstances, the subordination provisions of the Indenture would likely
restrict payments to the holders of the Notes. None of the provisions relating
to a repurchase upon a Change of Control are waivable by the Board of Directors
of FV Inc. or the Trustee.
The foregoing provisions will not prevent the Issuers from entering into a
transaction of the types described under the definition of "Change of Control"
with management or their affiliates. In addition, such provisions may not
necessarily afford the holders of the Notes protection in the event of a highly
leveraged transaction, including a reorganization, restructuring, merger or
similar transaction involving the Issuers that may adversely affect the holders
of the Notes because such transactions may not involve a shift in voting power
or beneficial ownership, or, even if they do, may not involve a shift of the
magnitude required under the definition of Change of Control to trigger the
provisions.
PROVISION OF FINANCIAL INFORMATION
The Indenture will provide that whether or not the Issuers are subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
the Issuers shall file with the Commission the annual reports, quarterly
reports and other documents which the Issuers would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Issuers were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Issuers would have been required so to file such documents
if the Issuers were so required. The Issuers shall also in any event (a)
within 15 days of each Required Filing Date (i) transmit by mail to all holders
of Notes, as their names and addresses appear in the note register, without
cost to such holders, and (ii) file with the Trustee, copies of the annual
reports, quarterly reports and other documents which the Issuers are required
to file with the Commission pursuant to the preceding sentence, and (b) if,
notwithstanding the preceding sentence, filing such documents by the Issuers
with the Commission is not permitted under the Exchange Act, promptly upon
written request supply copies of such documents to any prospective holder of
Notes. The Company shall not be obligated to file any such reports with the
Commission if the Commission does not permit such filings for all companies
similarly situated other than due to any action or inaction by the Company.
MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that the Issuers will not consolidate with or merge
with or into (whether or not such Issuer is the Surviving Person) any other
entity and the Issuers will not and will not permit any of their respective
Restricted Subsidiaries to sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of such Issuer's properties and assets
(determined, in the case of the Company, on a consolidated basis for the
Company and the Restricted Subsidiaries) to any entity in a single transaction
or series of related transactions, unless: (a) either (i) such Issuer shall be
the Surviving Person or (ii) the Surviving Person (if other than such Issuer)
shall be, in the case of Capital, a corporation or, in any other case, a
corporation, partnership, limited liability company, limited liability limited
partnership or trust organized and validly existing under the laws of the
United States of America or any State thereof or the District of Columbia, and
shall, in any such case, expressly assume by a supplemental indenture the due
and punctual payment of the principal of, premium, if any, and interest on all
the Notes and the performance and observance of every covenant of the Indenture
to be performed or observed on the part of the Issuers; (b) immediately
thereafter, no Default or Event of Default shall have occurred and be
continuing; (c) immediately after giving effect to any such transaction
involving the Incurrence by the Company or any
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Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and
treating any Indebtedness not previously an obligation of the Company or any
Restricted Subsidiary in connection with or as a result of such transaction as
having been Incurred at the time of such transaction), the Surviving Person
could Incur, on a pro forma basis after giving effect to such transaction as if
it had occurred at the beginning of the latest fiscal quarter for which
consolidated financial statements of the Company are available, at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Debt
to Operating Cash Flow Ratio of the first paragraph of "--Limitation on
Indebtedness" above; and (d) immediately thereafter the Surviving Person shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of such Issuer immediately prior to such transaction.
Subject to the requirements of the immediately preceding paragraph, the
Indenture will provide that in the event of a sale of all or substantially all
of the assets of any Subsidiary Guarantor or all of the Equity Interests of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, then the
Surviving Person of any such merger or consolidation, or such Subsidiary
Guarantor, if all of its Equity Interests are sold, shall be released and
relieved of any and all obligations under the Subsidiary Guarantee of such
Subsidiary Guarantor if (i) the Person or entity surviving such merger or
consolidation or acquiring the Equity Interests of such Subsidiary Guarantor is
not a Restricted Subsidiary, and (ii) the Net Cash Proceeds from such sale are
used after such sale in a manner that complies with the provisions of
"--Covenants--Disposition of Proceeds of Asset Sales" above. Except as
provided in the preceding sentence, the Indenture will provide that no
Subsidiary Guarantor shall consolidate with or merge with or into another
Person, whether or not such Person is affiliated with such Subsidiary Guarantor
and whether or not such Subsidiary Guarantor is the Surviving Person, unless
(i) the Surviving Person is a corporation, partnership, limited liability
company, limited liability limited partnership or trust organized or existing
under the laws of the United States, any State thereof or the District of
Columbia, (ii) the Surviving Person (if other than such Subsidiary Guarantor)
assumes all the Obligations of such Subsidiary Guarantor under the Notes and
the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, (iii) at the time of and immediately after such
Disposition, no Default or Event of Default shall have occurred and be
continuing, and (iv) the Surviving Person will have Consolidated Net Worth
(immediately after giving pro forma effect to the Disposition) equal to or
greater than the Consolidated Net Worth of such Subsidiary Guarantor
immediately preceding the transaction; provided, however, that clause (iv) of
this paragraph shall not be a condition to a merger or consolidation of a
Subsidiary Guarantor if such merger or consolidation only involves the Company
and/or one or more Wholly Owned Restricted Subsidiaries.
In the event of any transaction (other than a lease) described in and complying
with the conditions listed in the immediately preceding paragraphs in which an
Issuer or any Subsidiary Guarantor is not the Surviving Person and the
Surviving Person is to assume all the Obligations of such Issuer or any such
Subsidiary Guarantor under the Notes and the Indenture pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, such Issuer or such
Subsidiary Guarantor, as the case may be, and such Issuer or such Subsidiary
Guarantor, as the case may be, shall be discharged from its Obligations under
the Indenture, the Notes or its Subsidiary Guarantee, as the case may be.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(a) failure to pay principal of (or premium, if any, on) any Note
when due (whether or not prohibited by the provisions of the
Indenture described under "--Subordination" above);
(b) failure to pay any interest on any Note when due, continued
for 30 days (whether or not prohibited by the provisions of
the Indenture described under "--Subordination" above);
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(c) default in the payment of principal of and interest on Notes
required to be purchased pursuant to an Offer to Purchase as
described under "--Covenants--Disposition of Proceeds of Asset
Sales" and "--Change of Control" above when due and payable
(whether or not prohibited by the provisions of the
Indenture described under "--Subordination" above);
(d) failure to perform or comply with any of the provisions
described under "--Merger, Sale of Assets, etc.," "--Change of
Control" and "--Covenants--Disposition of Proceeds of Asset
Sales" above;
(e) failure to perform any other covenant or agreement of the
Issuers or any Subsidiary Guarantor under the Indenture or the
Notes continued for 30 days after written notice to the
Issuers by the Trustee or holders of at least 25% in aggregate
principal amount of outstanding Notes;
(f) default under the terms of one or more instruments evidencing
or securing Indebtedness of the Company or any Restricted
Subsidiary having an outstanding principal amount of $10
million or more individually or in the aggregate that has
resulted in the acceleration of the payment of such
Indebtedness or failure to pay principal when due at the
stated maturity of any such Indebtedness;
(g) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any Restricted Subsidiary in an
amount of $10 million or more (net of any amounts covered by
reputable and creditworthy insurance companies) which remains
undischarged or unstayed for a period of 60 days after the
date on which the right to appeal has expired;
(h) any holder or holders of at least $10 million in aggregate
principal amount of Indebtedness of the Company or any
Restricted Subsidiary, after a default under such
Indebtedness, shall notify the Trustee of the intended sale or
disposition of any assets of the Company or any Restricted
Subsidiary with an aggregate Fair Market Value (as determined
in good faith by the Board of Directors of FV Inc.) of at
least $2 million that have been pledged to or for the benefit
of such holder or holders to secure such Indebtedness or shall
commence proceedings, or take any action (including by way of
setoff), to retain in satisfaction of such Indebtedness or to
collect on, seize, dispose of or apply in satisfaction of such
Indebtedness, such assets of the Company or any Restricted
Subsidiary (including funds on deposit or held pursuant to
lock-box and other similar arrangements) which continues for
five business days after notice has been given to the Company
and the representative of such Indebtedness and Indebtedness
under the Senior Credit Facility;
(i) certain events of bankruptcy, insolvency or reorganization
affecting either of the Issuers or any Significant Restricted
Subsidiary; and
(j) any Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary
Guarantee and the Indenture) or is declared null and void and
unenforceable or found to be invalid or any Subsidiary
Guarantor denies its liability under its Subsidiary Guarantee
(other than by reason of a release of such Subsidiary
Guarantor from its Subsidiary Guarantee in accordance with the
terms of the Indenture and such Subsidiary Guarantee).
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default (as defined) shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders, unless such holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the
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Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
If an Event of Default (other than an Event of Default with respect to either
of the Issuers described in clause (i) above) shall occur and be continuing,
the Trustee or the holders of at least 25% in aggregate principal amount
of the outstanding Notes by notice in writing to the Company (and to the
Trustee if given by the holders) may declare the unpaid principal of and
accrued interest to the date of acceleration on all the outstanding Notes to be
due and payable immediately and, upon any such declaration, such principal
amount and accrued interest shall become immediately due and payable; provided,
however, that so long as the Senior Credit Facility shall be in full force and
effect, if an Event of Default shall have occurred and be continuing (other
than as specified in clause (i) above), the Notes shall not become due and
payable until the earlier to occur of (x) five business days following
delivery of a written notice of such acceleration of the Notes to the agent
under the Senior Credit Facility and (y) the acceleration of any Indebtedness
under the Senior Credit Facility. If an Event of Default specified in
clause (i) above with respect to either of the Issuers occurs, the outstanding
Notes will ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any holder.
After such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "--Modification and Waiver"
below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes, give
the holders thereof notice of all uncured Defaults or Events of Default known
to it; provided, however, that, except in the case of an Event of Default or a
Default in payment with respect to the Notes or a Default or Event of Default
in complying with "--Covenants--Merger, Sale of Assets, Etc." above, the
Trustee shall be protected in withholding such notice if and so long as the
Board of Directors or responsible officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the holders
of the Notes.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
The Issuers will be required to furnish to the Trustee annually a statement as
to the performance by them of certain of their obligations under the Indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND PARTNERS
The Indenture will provide that no director, officer, employee, incorporator,
or limited or general partner of the Issuers or any of their Subsidiaries shall
have any liability for any obligation of the Issuers or any of their
Subsidiaries under the Indenture or the Notes or for any claim based on, in
respect of, or by reason of, any such obligation or the creation of any such
obligation. Each holder by accepting a Note waives and releases such Persons
from all such liability and such waiver and release is part of the
consideration for the issuance of the Notes.
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SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Issuers may terminate their substantive obligations in respect of the Notes
by delivering all outstanding Notes to the Trustee for cancellation and paying
all sums payable by them on account of principal of, premium, if any, and
interest on all Notes or otherwise. In addition to the foregoing, the Issuers
may, provided that no Default or Event of Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default or Event of
Default specified in clause (i) of "--Events of Default" above, any time on or
prior to the 91st calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until after such
91st day)) and provided that no default under any Senior Indebtedness would
result therefrom, terminate their substantive obligations in respect of the
Notes (except for their obligations to pay the principal of (and premium, if
any, on) and the interest on the Notes) by (i) depositing with the Trustee,
under the terms of an irrevocable trust agreement, money or United States
Government Obligations sufficient (without reinvestment) to pay all remaining
Indebtedness on the Notes, (ii) delivering to the Trustee either an Opinion of
Counsel or a ruling directed to the Trustee from the Internal Revenue Service
to the effect that the holders of the Notes will not recognize income, gain or
loss for federal income tax purposes solely as a result of such deposit and
termination of obligations, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Issuers' exercise of their option under this
paragraph will not result in any of the Issuers, the Trustee or the trust
created by the Issuers' deposit of funds pursuant to this provision becoming or
being deemed to be an "investment company" under the Investment Company Act of
1940, as amended, and (iv) complying with certain other requirements set forth
in the Indenture. In addition, the Issuers may, provided that no Default or
Event of Default has occurred and is continuing or would arise therefrom (or,
with respect to a Default or Event of Default specified in clause (i) of
"--Events of Default" above, any time on or prior to the 91st calendar day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day)) and provided that no
default under any Senior Indebtedness would result therefrom, terminate all of
their substantive obligations in respect of the Notes (including their
obligations to pay the principal of (and premium, if any, on) and interest on
the Notes) by (i) depositing with the Trustee, under the terms of an
irrevocable trust agreement, money or United States Government Obligations
sufficient (without reinvestment) to pay all remaining Indebtedness on the
Notes, (ii) delivering to the Trustee either a ruling directed to the Trustee
from the Internal Revenue Service to the effect that the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes solely
as a result of such deposit and termination of obligations or an Opinion of
Counsel based upon such a ruling addressed to the Trustee or a change in the
applicable Federal tax law since the date of the Indenture to such effect,
(iii) delivering to the Trustee an Opinion of Counsel to the effect that the
Issuers' exercise of their option under this paragraph will not result in any
of the Issuers, the Trustee or the trust created by the Issuers' deposit of
funds pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (iv)
complying with certain other requirements set forth in the Indenture.
The Issuers may make an irrevocable deposit pursuant to this provision only if
at such time they are not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the Senior Indebtedness and
the Issuers have delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
The Issuers and the Subsidiary Guarantors, when authorized by a resolution of
their respective Boards of Directors, and the Trustee may amend or supplement
the Indenture or the Notes without notice to or consent of any holder: (i) to
cure any ambiguity, defect or inconsistency; provided, however, that such
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amendment or supplement does not adversely affect the rights of any holder;
(ii) to effect the assumption by a successor Person of all obligations of the
Issuers under the Notes and the Indenture in connection with any transaction
complying with "--Merger, Sale of Assets, Etc." above; (iii) to provide for
uncertificated Notes in addition to or in place of certificated Notes; (iv) to
comply with any requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act; (v) to make
any change that would provide any additional benefit or rights to the holders;
(vi) to make any other change that does not adversely affect the rights of any
holder under the Indenture; (vii) to evidence the succession of another Person
to any Subsidiary Guarantor and the assumption by any such successor of the
covenants of such Subsidiary Guarantor in the Subsidiary Guarantee; (viii) to
add to the covenants of the Issuers or the Subsidiary Guarantors for the
benefit of the holders, or to surrender any right or power conferred upon the
Issuers or any Subsidiary Guarantor under the Indenture; (ix) to secure the
Notes pursuant to the requirements of "--Covenants--Limitation on Liens" above
or otherwise; or (x) to reflect the release of a Subsidiary Guarantor from its
obligations with respect to its Subsidiary Guarantee in accordance with the
provisions of the Indenture and to add a Subsidiary Guarantor pursuant to the
requirements of the Indenture; provided, however, that the Issuers have
delivered to the Trustee an opinion of counsel stating that such amendment or
supplement complies with the provisions of the Indenture.
Modifications and amendments of the Indenture may be made by the Issuers and
the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each Note
affected thereby, (a) change the Stated Maturity of the principal of or any
installment of interest on any Note or alter the optional redemption or
repurchase provisions of any Note or the Indenture in a manner adverse to the
holders of the Notes, (b) reduce the principal amount (or the premium) of
any Note, (c) reduce the rate of or extend the time for payment of interest on
any Note, (d) change the place or currency of payment of principal of (or
premium) or interest on any Note, (e) modify any provisions of the Indenture
relating to the waiver of past defaults (other than to add sections of the
Indenture subject thereto) or the right of the holders to institute suit for
the enforcement of any payment on or with respect to any Note or the
modification and amendment of the Indenture and the Notes (other than to add
sections of the Indenture or the Notes which may not be amended, supplemented
or waived without the consent of each holder affected), (f) reduce the
percentage of the principal amount of outstanding Notes necessary for amendment
to or waiver of compliance with any provision of the Indenture or the Notes or
for waiver of any Default, (g) waive a default in the payment of principal of,
interest on, or redemption payment with respect to, any Note (except a recision
of acceleration of the Notes by the holders as provided in the Indenture and a
waiver of the payment default that resulted from such acceleration), (h) modify
the ranking or priority of the Notes or the Subsidiary Guarantee of any
Subsidiary Guarantor or modify the definition of Senior Indebtedness or
Guarantor Senior Indebtedness or amend or modify the subordination provisions
of the Indenture in any manner adverse to the holders, (i) release any
Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee
or the Indenture otherwise than in accordance with the Indenture, or (j) modify
the provisions relating to any Offer to Purchase required under the covenants
described under "--Covenants--Disposition of Proceeds of Asset Sales" or
"--Change of Control" above in a manner materially adverse to the holders.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Issuers
with certain restrictive provisions of the Indenture. Subject to certain
rights of the Trustee, as provided in the Indenture, the holders of a majority
in aggregate principal amount of the outstanding Notes, on behalf of all
holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Note tendered pursuant to an Offer to Purchase, or
a default in respect of a provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Note affected.
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THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of a Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of either
of the Issuers, any Subsidiary Guarantor or any other obligor upon the Notes,
to obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claim as security or otherwise. The
Trustee is permitted to engage in other transactions with the Issuers or an
Affiliate of either of the Issuers; provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other Person
which merges with or into or becomes a Subsidiary of such specified Person.
"Advisory Committee" means the Advisory Committee of the General Partner
established pursuant to the provisions of Article VI of the First Amended and
Restated Agreement of Limited Partnership of the General Partner, as amended to
the date of issuance of the Notes.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of transfers
of cash or other property to others or payments for property or services for
the account or use of others, or otherwise) by the Company or any Restricted
Subsidiary in any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated, merged with or into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary, (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary, (iii) any assets of
the Company or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of the Company or any Restricted
Subsidiary or (iv) any other property or asset of the Company or
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any Restricted Subsidiary outside of the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include (i) any
transaction consummated in compliance with "--Merger, Sale of Assets, etc."
above and the creation of any Lien not prohibited by the provisions described
under "--Covenants--Limitation on Liens" above, (ii) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be, and (iii) any transaction
consummated in compliance with "--Covenants--Limitation on Restricted Payments"
above. In addition, solely for purposes of "--Covenants--Disposition of
Proceeds of Asset Sales" above, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a series of
related transactions involving assets with a Fair Market Value not in excess of
$ individually or $ in any fiscal year shall be deemed not to be
an Asset Sale.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or
foreign law for the relief of debtors.
"Board of Directors" means the board of directors, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of the Company, the General Partner, FVP
GP or FV Inc., as the case may be.
"Capitalized Lease Obligation" means, with respect to any Person for any
period, an obligation of such Person to pay rent or other amounts under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of such obligation shall be the
capitalized amount shown on the balance sheet of such Person as determined in
accordance with GAAP.
"Cash Equivalents" means (A) any security, maturing not more than six months
after the date of acquisition, issued by the United States of America or an
instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (B) any
certificate of deposit, time deposit, money market account or bankers'
acceptance, maturing not more than six months after the date of acquisition,
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500.0 million, whose debt has a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc. or any successor rating agency and (C) commercial paper,
maturing not more than three months after the date of acquisition, issued by
any corporation (other than an Affiliate of the Company) organized and existing
under the laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc., or any successor rating agency.
"Change of Control" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than the Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total voting power of the outstanding Voting
Equity Interests of the Company, the General Partner, FVP GP or FV Inc., as the
case may be; (b) the Company, the General Partner, FVP GP or FV Inc., as the
case may be, consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, the General Partner, FVP GP or FV Inc., as
the case may be, in any such event pursuant to a transaction in which the
outstanding Voting Equity Interests of the Company, the General Partner, FVP GP
or FV Inc., as the case may be, are converted into or exchanged for cash,
securities or other property, other than any such transaction where the
outstanding
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Voting Equity Interests of the Company, the General Partner, FVP GP or FV Inc.,
as the case may be, are converted into or exchanged for Voting Equity Interests
(other than Disqualified Equity Interests) of the surviving or transferee
Person and, immediately after such transaction, the Permitted Holders or the
holders of the Voting Equity Interests of the Company, the General Partner, FVP
GP or FV Inc., as the case may be, immediately prior thereto own, directly or
indirectly, more than 50% of the total voting power of the outstanding Voting
Equity Interests of the surviving or transferee Person; (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company, FVP GP or FV Inc., as the
case may be (together with any new directors whose election to such Board of
Directors was approved by the Permitted Holders or by a vote of at least a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason (other than by action of the
Permitted Holders) to constitute a majority of the Board of Directors of the
Company, FVP GP or FV Inc., as the case may be, then in office in any such case
in connection with any actual or threatened solicitation to which Rule 14a-11
of Regulation 14A promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; (d) the admission of any Person
as a member of the Advisory Committee without the prior written consent of 75%
of the members of the Advisory Committee immediately prior to the time of such
proposed admission; or (e) the admission of any Person as a general partner of
the Company, the General Partner or FVP GP, as the case may be, after which the
General Partner, FVP GP or FV Inc., as the case may be, does not have the sole
power to take all of the actions it is entitled or required to take under the
limited partnership agreement of the Company, the General Partner or FVP GP, as
the case may be, as in effect on the Issue Date.
"Consolidated Income Tax Expense" means, with respect to the Company for any
period, the provision for federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all capitalized interest and all accrued interest, (ii) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and the Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP and (iii) dividends and distributions in respect of Disqualified Equity
Interests actually paid in cash by the Company during such period as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income of
the Company and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (i) all
extraordinary gains or losses and all gains and losses from the sales or other
dispositions of assets out of the ordinary course of business (net of taxes,
fees and expenses relating to the transaction giving rise thereto) for such
period, (ii) that portion of such net income derived from or in respect of
investments in Persons other than Restricted Subsidiaries, except to the extent
actually received in cash by the Company or any Restricted Subsidiary (subject,
in the case of any Restricted Subsidiary, to the provisions of clause (v) of
this definition), (iii) the portion of such net income (or loss) allocable to
minority interests in unconsolidated Persons for such period, except to the
extent actually received in cash by the Company or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of clause
(v) of this definition), (iv) net income (or loss) of any other Person combined
with the Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination and (v) the net
income of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time (regardless of any waiver) permitted, directly or
indirectly, by
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operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its Equity Interest holders.
"Consolidated Net Worth" with respect to any Person means the equity of the
holders of Qualified Equity Interests of such Person and its Restricted
Subsidiaries, as reflected in a balance sheet of such Person determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication) by the
sum of (i) Consolidated Income Tax Expense accrued according to GAAP for such
period to the extent deducted in determining Consolidated Net Income for such
period, (ii) Consolidated Interest Expense (other than dividends on Preferred
Equity Interests) for such period to the extent deducted in determining
Consolidated Net Income for such period, and (iii) depreciation, amortization
and any other non-cash items for such period to the extent deducted in
determining Consolidated Net Income for such period (other than any non-cash
item which requires the accrual of, or a reserve for, cash charges for any
future period) of the Company and the Restricted Subsidiaries, including,
without limitation, amortization of capitalized debt issuance costs for such
period, all of the foregoing determined on a consolidated basis in accordance
with GAAP minus non-cash items to the extent they increase Consolidated Net
Income (including the partial or entire reversal of reserves taken in prior
periods) for such period.
"Cumulative Available Cash Flow" means, as at any date of determination, the
positive cumulative Consolidated Operating Cash Flow realized during the period
commencing on the Issue Date and ending on the last day of the most recent
fiscal quarter immediately preceding the date of determination for which
consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Total
Consolidated Indebtedness as of the date of calculation (the "Determination
Date") to (ii) four times the Consolidated Operating Cash Flow for the latest
fiscal quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
calculating Consolidated Operating Cash Flow for the Measurement Period
immediately prior to the relevant Determination Date, (I) any Person that is a
Restricted Subsidiary on the Determination Date (or would become a Restricted
Subsidiary on such Determination Date in connection with the transaction that
requires the determination of such Consolidated Operating Cash Flow) will be
deemed to have been a Restricted Subsidiary at all times during such
Measurement Period, (II) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Operating Cash Flow) will be deemed not to
have been a Restricted Subsidiary at any time during such Measurement Period,
and (III) if the Company or any Restricted Subsidiary shall have in any manner
(x) acquired (including through an Asset Acquisition or the commencement of
activities constituting such operating business) or (y) disposed of (including
by way of an Asset Sale or the termination or discontinuance of activities
constituting such operating business) any operating business during such
Measurement Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with GAAP as if, in the case of an Asset Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement Period
and, in the case of an Asset Sale or termination or discontinuance of
activities constituting such operating business, all such transactions had been
consummated prior to the first day of such Measurement Period; provided,
however, that such pro forma adjustment shall not give effect to the Operating
Cash Flow of any Acquired Person to the extent that such Person's net income
would be excluded pursuant to clause (v) of the definition of Consolidated Net
Income.
"Default" means any event that is or with the passing of time or giving of
notice or both would be an Event of Default.
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"Designated Senior Indebtedness" means (i) any Indebtedness outstanding under
the Senior Credit Facility and (ii) any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding, together
with any commitments to lend additional amounts, of at least $25.0 million.
"Designation" has the meaning set forth under "--Covenants--Designation of
Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "--Covenants--Designation
of Unrestricted Subsidiaries" above.
"Disposition" means, with respect to any Person, any merger, consolidation or
other business combination involving such Person (whether or not such Person is
the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Notes or the date on which no Notes remain
outstanding.
"Equity Interest" in any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Equity Market Capitalization" of any Person, means the aggregate market value
of the outstanding Equity Interests (other than Preferred Equity Interests and
excluding any such Equity Interests held in treasury by such Person) of such
Person of a class that is listed or admitted to unlisted trading privileges on
a United States national securities exchange or included for trading on the
Nasdaq National Market System. For purposes of this definition the "market
value" of any such Equity Interest shall be the average of the high and low
sale prices, or if no sales are reported, the average of the closing bid and
ask prices, as reported in the composite transactions of the principal national
securities exchange on which such Equity Interests are listed or admitted to
trading or, if such Equity Interests are not listed or admitted to trading on a
national securities exchange, as reported by Nasdaq, for each trading day in a
20 consecutive trading day period ending not more than 45 days prior to the
date such Person commits to make an investment in the Equity Interests of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission thereunder.
"Fair Market Value" means, with respect to any asset, the price (after taking
into account any liabilities relating to such assets) which could be negotiated
in an arm's-length free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of which is under pressure or compulsion
to complete the transaction; provided, however, that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of FV
Inc., acting in good faith and shall be evidenced by resolutions of the Board
of Directors of FV Inc. delivered to the Trustee.
"FVP GP" means FVP GP, L.P., a Delaware limited partnership.
"FV Inc." means FrontierVision Inc., a Delaware corporation.
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"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"General Partner" means FrontierVision Partners, L.P., a Delaware limited
partnership.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have
meanings correlative to the foregoing). Indebtedness of any Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into or consolidates with the Company or any
Restricted Subsidiary), whether or not such Indebtedness was incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary (or being merged into or consolidated with the Company or any
Restricted Subsidiary), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations Incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable incurred in
the ordinary course of business and payable in accordance with industry
practices, or other accrued liabilities arising in the ordinary course of
business which are not overdue or which are being contested in good faith), (v)
every Capitalized Lease Obligation of such Person, (vi) every net obligation
under interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements of such Person, (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise, and (viii) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (i) through
(vii) above. Indebtedness (i) shall never be calculated taking into account
any cash and cash equivalents held by such Person, (ii) shall not include
obligations of any Person (x) arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business, provided
that such obligations are extinguished within two Business Days of their
incurrence unless covered by an overdraft line, (y) resulting from the
endorsement of negotiable instruments for collection in the ordinary course of
business and consistent with past business practices and (z) under stand-by
letters of credit to the extent collateralized by cash or Cash Equivalents,
(iii) which provides that an amount less than the principal amount thereof
shall be due upon any declaration of acceleration thereof shall be deemed to be
Incurred or outstanding in an amount equal to the accreted value thereof at the
date of determination, (iv) shall include the liquidation preference and any
mandatory redemption payment obligations in respect of any
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Disqualified Equity Interests of the Company or any Restricted Subsidiary and
(v) shall not include obligations under performance bonds, performance
guarantees, surety bonds and appeal bonds, letters of credit or similar
obligations, incurred in the ordinary course of business, including in
connection with the requirements of cable television franchising authorities,
and otherwise consistent with industry practice.
"Independent Financial Advisor" means a nationally recognized investment
banking firm (i) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in the Company
and (ii) which, in the judgment of the Board of Directors of FV Inc., is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person, any
liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"Interest Rate Protection Obligations" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any advance, loan, account
receivable (other than an account receivable arising in the ordinary course of
business), or other extension of credit (including, without limitation, by
means of any guarantee) or any capital contribution to (by means of transfers
of property to others, payments for property or services for the account or use
of others, or otherwise) or any purchase or ownership of any stocks, bonds,
notes, debentures or other securities of, any other Person.
"Issue Date" means the date of first issuance of the Notes under the Indenture.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrances of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash
Equivalents received by the Company or any Restricted Subsidiary in respect of
any Asset Sale, including all cash or Cash Equivalents received upon any sale,
liquidation or other exchange of proceeds of Asset Sales received in a form
other than cash or Cash Equivalents, net of (i) the direct costs relating to
such Asset Sale (including, without limitation, legal accounting and investment
banking fees, and sales commissions) and any relocation expenses Incurred as a
result thereof, (ii) taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale, (iv) amounts, in good faith, deemed appropriate by the Board
of Directors of FV Inc. to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve) and (v)
with respect to Asset Sales by Subsidiaries, the portion of such cash payments
attributable to Persons holding a minority interest in such Subsidiary.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company by
first class mail, postage prepaid, to each holder at his address appearing in
the register for the Notes on the date of the Offer offering to purchase up to
the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer
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<PAGE> 113
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase, which shall be not less than 30 days nor more than 60 days after the
date of such Offer and a settlement date (the "Purchase Date") for purchase of
Notes within five Business Days after the Expiration Date. The Company shall
notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required
by applicable law to be included therein. The Offer shall contain all
instructions and materials necessary to enable such holders to tender Notes
pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Notes registered in
the name of such holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased by
the Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(9) that each holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such
Note at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the holder thereof or his attorney duly
authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than
the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Note
the holder tendered, the certificate number of the Note the holder
tendered and a statement that such holder is withdrawing all or a
portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal
to the Purchase Amount on a pro rata basis (with such
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<PAGE> 114
adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 or integral multiples thereof shall be
purchased); and
(12) that in the case of any holder whose Note is purchased only in part, the
Company shall execute and the Trustee shall authenticate and deliver to
the holder of such Note without service charge, a new Note or Notes, of
any authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"Permitted Holders" means any of (a) the General Partner, FVP GP or FV Inc. for
so long as a majority of the voting power of the Voting Equity Interests of
such Person is beneficially owned by any of the Persons listed in the other
clauses of this definition, (b) James C. Vaughn, the President and Chief
Executive Officer of FV Inc. on the Issue Date, (c) John S. Koo, the Chief
Financial Officer of FV Inc. on the Issue Date, (d) any of J.P. Morgan
Investment Corporation, a Delaware corporation, Olympus Cable Corp., a Delaware
corporation, First Union Capital Partners, Inc., a Virginia corporation, and
1818 II Cable Corp., a Delaware corporation, (e) any Person controlling,
controlled by or under common control with any other Person described in
clauses (a) - (d) of this definition and (f) (i) the spouse or children of any
Person named in clause (b) or (c) of this definition and any trust for the
benefit of any such Persons; provided, however, that with respect to any such
trust, such Persons have the sole right to direct and control such trust and
any Voting Equity Interest owned by such trust, and (ii) any such Person's
estate, executor, administrator and heirs.
"Permitted Investments" means (a) Cash Equivalents, (b) Investments in prepaid
expenses, negotiable instruments held for collection and lease, utility and
workers' compensation, performance and other similar deposits, (c) loans and
advances to employees made in the ordinary course of business not to exceed $1
million in the aggregate at any one time outstanding, (d) Interest Rate
Protection Obligations, (e) bonds, notes, debentures or other securities
received as a result of Asset Sales permitted under "--Covenants--Disposition
of Proceeds of Asset Sales" above not to exceed 25% of the total consideration
for such Asset Sales, (f) transactions with officers, directors and employees
of the Company or any Restricted Subsidiary entered into in ordinary course of
business (including compensation or employee benefit arrangements with any such
director or employee) and consistent with past business practices, (g)
Investments existing as of the Issue Date and any amendment, extension, renewal
or modification thereof to the extent that any such amendment, extension,
renewal or modification does not require the Company or any Restricted
Subsidiary to make any additional cash or non-cash payments or provide
additional services in connection therewith, (h) any Investment for which the
sole consideration provided is Qualified Equity Interests of the Company and
(i) any Investment consisting of a guarantee by a Restricted Subsidiary of
Senior Indebtedness or any guarantee permitted under clause (e) of
"Covenants--Limitation on Indebtedness" above.
"Permitted Junior Securities" means any securities of the Company or any other
Person that are (i) equity securities without special covenants or (ii)
subordinated in right of payment to all Senior Indebtedness that may at the
time be outstanding, to substantially the same extent as, or to a greater
extent than, the Notes are subordinated as provided in the Indenture, in any
event pursuant to a court order so providing and as to which (a) the rate of
interest on such securities shall not exceed the effective rate of interest on
the Notes on the date of the Indenture, (b) such securities shall not be
entitled to the benefits of covenants or defaults materially more beneficial to
the holders of such securities than those in effect with respect to the Notes
on the date of the Indenture and (c) such securities shall not provide for
amortization (including sinking fund and mandatory prepayment provisions)
commencing prior to the date six months following the final scheduled maturity
date of the Senior Indebtedness (as modified by the plan of reorganization or
readjustment pursuant to which such securities are issued).
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<PAGE> 115
"Permitted Liens" means (a) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Restricted
Subsidiary; provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not secure any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets subject to the Liens prior to such merger or consolidation, (b) Liens
imposed by law such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business which secure payment
of obligations not more than sixty (60) days past due or which are being
contested in good faith and by appropriate proceedings, (c) Liens existing on
the Issue Date, (d) Liens securing only the Notes, (e) Liens in favor of the
Company or any Restricted Subsidiary, (f) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor, (g) easements, reservation of rights-of-way, restrictions and other
similar easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries, (h) Liens resulting from the deposit of cash or
securities in connection with contracts, tenders or expropriation proceedings,
or to secure workers' compensation, surety or appeal bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business, (i)
Liens securing Indebtedness consisting of Capitalized Lease Obligations,
Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or
other monetary obligations, in each case Incurred solely for the purpose of
financing all or any part of the purchase price or cost of construction or
installation of assets used in the business of the Company or the Restricted
Subsidiaries, or repairs, additions or improvements to such assets, provided,
however, that (I) such Liens secure Indebtedness in an amount not in excess of
the original purchase price or the original cost of any such assets or repair,
addition or improvement thereto (plus an amount equal to the reasonable fees
and expenses in connection with the incurrence of such Indebtedness), (II) such
Liens do not extend to any other assets of the Company or the Restricted
Subsidiaries (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by "--Covenants--Limitation on Indebtedness" above
and (IV) such Liens attach within 90 days of such purchase, construction,
installation, repair, addition or improvement, (j) Liens to secure any
refinancings, renewals, extensions, modifications or replacements
(collectively, "refinancing") (or successive refinancings), in whole or in
part, of any Indebtedness secured by Liens referred to in the clauses above so
long as such Lien does not extend to any other property (other than
improvements thereto), and (k) Liens securing letters of credit entered into in
the ordinary course of business and consistent with past business practice.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any Person,
all interest accrued or accruing on such Indebtedness after the commencement of
any Insolvency or Liquidation Proceeding against such Person in accordance with
and at the contract rate (including, without limitation, any rate applicable
upon default) specified in the agreement or instrument creating, evidencing or
governing such Indebtedness, whether or not, pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such Insolvency
or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
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"Public Equity Offering" means, with respect to any Person, a public offering
by such Person of some or all of its Qualified Equity Interests, the net
proceeds of which (after deducting any underwriting discounts and commissions)
exceed $25.0 million.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed 100.00% of the lesser of the Fair Market Value of such property or such
purchase price or cost.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Restricted Investment" means any Investment other than a Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that has not been
designated by the Board of Directors of FV Inc.'s by a resolution of the Board
of Directors of FV Inc. delivered to the Trustee as an Unrestricted Subsidiary
pursuant to "--Covenants--Designation of Unrestricted Subsidiaries" above. Any
such designation may be revoked by a resolution of the Board of Directors of FV
Inc. delivered to the Trustee, subject to the provisions of such covenant.
"Senior Credit Facility" means the Amended and Restated Credit Agreement, dated
as of April 9, 1996, between the Company, the lenders named therein, The Chase
Manhattan Bank, as Administrative Agent, J.P. Morgan Securities Inc., as
Syndication Agent, and CIBC Inc., as Managing Agent, including any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor, whether by or with the same or any other lender, creditor, group of
lenders or group of creditors, and including related notes, guarantee and
security agreements and other instruments and agreements executed in connection
therewith.
"Senior Indebtedness" means, at any date, (i) all Obligations of the Company
under the Senior Credit Facility, (ii) all Interest Rate Protection
Obligations, (iii) all obligations of the Company under stand-by letters of
credit and (iv) all other Indebtedness of the Company for borrowed money,
including principal, premium, if any, and interest (including Post-Petition
Interest) on such Indebtedness, unless the instrument under which such
Indebtedness of the Company for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to the Notes, and all renewals, extensions, modifications, amendments
or refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness
shall not include (i) to the extent that it may constitute Indebtedness, any
Obligation for federal, state, local or other taxes, (ii) any Indebtedness
among or between the Company and any Subsidiary, (iii) to the extent that it
may constitute Indebtedness, any Obligation in respect of any trade payable
Incurred for the purchase of goods or materials, or for services obtained, in
the ordinary course of business, (iv) that portion of any Indebtedness that is
Incurred in violation of the Indenture; provided, however, that such
Indebtedness shall be deemed not to have been Incurred in violation of the
Indenture for purposes of this clause (iv) if (I) the holder(s) of such
Indebtedness or their representative or the Company shall have furnished to the
Trustee an opinion of recognized independent legal counsel, unqualified in all
material respects, addressed to the Trustee (which legal counsel may, as to
matters of fact, rely upon an officers' certificate of the Company) to the
effect that the Incurrence of such Indebtedness does not violate the provisions
of the Indenture or (II) in the case of any Obligations under the Senior Credit
Facility, the holder(s) of such Obligations or their agent or representative
shall have received a representation from the Company to the effect that the
Incurrence of such Indebtedness does not violate the provisions of the
Indenture, (v) Indebtedness evidenced by the Notes, (vi) Indebtedness of the
Company that is expressly subordinate or junior in right of payment to any
other Indebtedness of the Company, (vii) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements and (viii) any obligation that by
operation of law is subordinate to any general unsecured obligations of the
Company.
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"Significant Restricted Subsidiary" means, at any date of determination, (a)
any Restricted Subsidiary that, together with its Subsidiaries that constitute
Restricted Subsidiaries (i) for the most recent fiscal year of the Company
accounted for more than 10.0% of the consolidated revenues of the Company and
the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned
more than 10.0% of the consolidated assets of the Company and the Restricted
Subsidiaries, all as set forth on the consolidated financial statements of the
Company and the Restricted Subsidiaries for such year prepared in conformity
with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all
other Restricted Subsidiaries that are not otherwise Significant Restricted
Subsidiaries and as to which any event described in clause (h) of "--Events of
Default" above has occurred, would constitute a Significant Restricted
Subsidiary under clause (a) of this definition.
"Stated Maturity," when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Strategic Equity Investment" means the issuance and sale of Qualified Equity
Interests of the Company for net proceeds to the Company of at least $25.0
million to a Person engaged primarily in the cable television, wireless cable
television, telephone, or interactive television business that has an Equity
Market Capitalization of at least $ million.
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (ii) any other Person of which at
least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Subsidiary Guarantee" means any guarantee of the Issuers' obligations under
the Indenture and the Notes issued after the Issue Date pursuant to
"--Covenants--Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries" above.
"Subsidiary Guarantor" means any Subsidiary of the Company that guarantees the
Issuers' obligations under the Indenture and the Notes issued after the Issue
Date pursuant to "--Covenants--Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries" above.
"Surviving Person" means, with respect to any Person involved in or that makes
any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Total Consolidated Indebtedness" means, as at any date of determination, an
amount equal to the aggregate amount of all Indebtedness and Disqualified
Equity Interests of the Company and the Restricted Subsidiaries outstanding as
of such date of determination.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to the provisions of "--Covenants--Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of
the Board of Directors of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required scheduled payment of principal,
including payment of final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of the
outstanding Voting Equity Interests (other than directors' qualifying shares)
of which are owned, directly or indirectly, by the Company.
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UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated , 1996 (the "Underwriting Agreement"), J.P. Morgan
Securities Inc., Chase Securities Inc., CIBC Wood Gundy Securities Corp. and
First Union Capital Markets Corp. (collectively, the "Underwriters") have
severally agreed to purchase from the Issuers, and the Issuers have agreed to
sell to them, severally, the principal amount of Notes set forth opposite their
names below. Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for the entire principal amount of
the Notes, if any Notes are purchased.
<TABLE>
<CAPTION> ============
PRINCIPAL
AMOUNT
------------
<S> <C>
J.P. Morgan Securities Inc. $
Chase Securities Inc.
CIBC Wood Gundy Securities Corp.
First Union Capital Markets Corp. ------------
Total $ 200,000,000
============
</TABLE>
The Underwriters propose initially to offer the Notes directly to the public at
the price set forth on the cover page of this Prospectus and to certain dealers
at such price less a concession not in excess of % of the principal amount
of the Notes. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of % of the principal amount of the Notes to
certain other dealers. After the initial public offering of the Notes, the
initial public offering price and such concessions may be changed.
The Issuers have agreed to indemnify jointly and severally the Underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that the Underwriters may be required to make in
respect thereof.
There is currently no trading market for the Notes, and the Issuers do not
intend to apply for listing of the Notes on a national securities exchange.
The Issuers have been advised by the Underwriters that the Underwriters
currently intend to make a market in the Notes; however, the Underwriters are
not obligated to do so and may discontinue any such market making at any time
without notice. No assurance can be given as to the development or liquidity
of any trading market for the Notes.
Certain of the Underwriters or their affiliates have provided investment
banking and other financial services to the Company in the past and may do so
in the future. In addition, affiliates of each of the Underwriters (except for
First Union Capital Markets Corp.) serve as lenders and agents under the Senior
Credit Facility and have received customary fees for acting in such capacities.
Each of such affiliates will receive its proportionate share of any repayment
by the Company of amounts outstanding under the Senior Credit Facility from the
proceeds of the Offering. See "Use of Proceeds" and "Certain Relationships and
Related Transactions."
Because an affiliate of J.P. Morgan Securities Inc. and an affiliate of First
Union Capital Markets Corp. each beneficially owns in excess of 10% of the
partnership interests of the Company, the underwriting arrangements for the
Offering must be made in compliance with certain requirements of Rule 2720 of
the Conduct Rules of the National Association of Securities Dealers, Inc. (the
"NASD"). In this regard, Chase Securities Inc. will act as "qualified
independent underwriter" within the meaning of the NASD's Conduct Rules and is
assuming the responsibilities of acting as a qualified independent underwriter
in pricing the Offering and conducting due diligence.
117
<PAGE> 120
Pursuant to the requirements of Rule 2720 of the Conduct Rules of the NASD, the
Underwriters will not confirm sales of the Notes to any accounts over which
they exercise discretionary authority without the prior written approval of the
transaction by the customer.
118
<PAGE> 121
LEGAL MATTERS
The validity of the Notes will be passed upon for the Issuers by Dow, Lohnes &
Albertson, a Professional Limited Liability Company, Washington, D.C. Certain
legal matters in connection with the Notes offered hereby will be passed upon
for the Underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
EXPERTS
The financial statements of FrontierVision Operating Partners, L.P. included
elsewhere in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto. The financial statements referred to above are included in the
Prospectus in reliance upon the authority of said firm as experts in giving
said reports.
The financial statements for United Video Cablevision, Inc. included elsewhere
in this Prospectus have been audited by Piaker & Lyons, P.C., independent
public accountants, as indicated in their report with respect thereto. The
financial statements referred to above are included in the Prospectus in
reliance upon the authority of said firm as experts in giving said reports.
The financial statements for Ashland and Defiance Clusters included elsewhere
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
registration statement and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements for C4 Media Cable Southeast, Limited
Partnership included elsewhere in this Prospectus have been audited by
Williams, Rogers, Lewis & Co., P.C., independent public accountants, as
indicated in their report with respect thereto. The consolidated financial
statements referred to above are included in the Prospectus in reliance upon
the authority of said firm as experts in giving said reports.
The financial statements of Triax Southeast Associates, L.P. included elsewhere
in this Prospectus have been audited by Arthur Andersen LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
registration statement and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of American Cable Entertainment of Kentucky-Indiana,
Inc. included elsewhere in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein
and elsewhere in the registration statement and are included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
119
<PAGE> 122
GLOSSARY
The following is a description of certain terms used in this Prospectus.
A LA CARTE -- The purchase of programming services on a per-channel or
per-program basis.
ADDRESSABILITY -- "Addressable" technology permits the cable operator to
activate remotely the cable television services to be delivered to subscribers
who are equipped with addressable converters. With addressable technology, a
cable operator can add to or reduce services provided to a subscriber from the
headend site without dispatching a service technician to the subscriber's home.
BASIC PENETRATION -- Basic subscribers as a percentage of the total number of
homes passed in the system.
BASIC SERVICE -- A package of over-the-air broadcast stations, local access
channels and certain satellite-delivered cable television services (other than
premium services).
BASIC SUBSCRIBER -- A subscriber to a cable or other television distribution
system who receives the basic level of television service and who is usually
charged a flat monthly rate for a number of channels. A home with one or more
television sets connected to a cable system is counted as one basic subscriber.
Bulk accounts are included on a "basic customer equivalent" basis in which the
total monthly bill for the account is divided by the basic monthly charge for a
single outlet in the area.
CABLE PLANT -- A network of coaxial and/or fiber optic cables that transmit
multiple channels carrying videoprogramming, sound and data between a central
facility and an individual customer's television set. Networks may allow
one-way (from a headend to a residence and/or business) or two-way (from a
headend to a residence and/or business with a data return path to the headend)
transmission.
CHANNEL CAPACITY -- The number of video programming channels that can be
carried over a communications system.
CLASSIC CABLE TELEVISION SYSTEMS -- Cable television systems that serve
primarily smaller communities where customers generally require cable
television to receive television signals as a result of an inadequate
over-the-air television signal reception due to topography or remoteness of
broadcast towers.
CLUSTERING -- A general term used to describe the strategy of operating cable
television systems in a specific geographic region, thus allowing for the
achievement of economies of scale and operating efficiencies in such areas as
system management, marketing and technical functions.
COAXIAL PLANT -- Cable consisting of a central conductor surrounded by and
insulated from another conductor. It is the standard material used in
traditional cable systems. Signals are transmitted through it at different
frequencies, giving greater channel capacity than is possible with twisted pair
copper wire, but less than is possible with optical fiber.
COST-OF-SERVICE -- A general term used to refer to the regulation of prices
charged to a customer. Existing prices are set and price increases are
regulated by allowing a company to earn a reasonable rate of return, as
determined by the regulatory authority.
DENSITY -- A general term used to describe the number of homes passed per mile
of cable plant.
120
<PAGE> 123
DIGITAL COMPRESSION -- The conversion of the standard analog video signal into
a digital signal, and the compression of that signal so as to facilitate
multiple channel transmission through a single channel's bandwidth.
DIRECT BROADCAST SATELLITE (DBS) -- A service by which packages of
satellite-delivered television programming are transmitted directly to
individual homes, each serviced by a single satellite dish.
ESMR -- Enhanced specialized mobile radio, a wireless telecommunications
service using digital technology to provide enhanced mobile telecommunications
services, including two-way radio dispatch and paging services. ESMR services
may be interconnected with the public switched telephone network.
EXPANDED BASIC SERVICE -- A package of satellite-delivered cable programming
services available only for additional subscription over and above the basic
level of television service.
FCC -- Federal Communications Commission.
FIBER OPTICS -- Technology that involves sending laser light pulses across
glass strands to transmit digital information; fiber is virtually immune to
electrical interference and most environmental factors that affect copper
wiring and satellite transmissions. Use of fiber optic technology reduces
noise on the cable system, improves signal quality and increases system channel
capacity and reliability.
FIBER OPTIC BACKBONE CABLE -- The principal fiber optic trunk lines for a cable
system which is using a hybrid fiber-coaxial architecture to deliver signals to
customers.
FIBER OPTIC TRUNK LINES -- Cables made of glass fibers through which signals
are transmitted as pulses of light to the distribution portion of the cable
television system which in turn goes to the customer's home. Capacity for a
very large number of channels can be more easily provided.
FIBER-TO-THE-FEEDER -- Network topology/architecture using a combination of
fiber optic cable and coaxial cable transmission lines to deliver signals to
customers. Initially signals are transmitted from the headend on fiber optic
trunk lines into neighborhood nodes and then from the nodes to the end user on
a combination of coaxial cable distribution/feeder and drop lines. The coaxial
feeder and drop lines typically represent the operator's "last mile" of plant
to the end user.
HEADEND -- A collection of hardware, typically including satellite receivers,
modulators, amplifiers and video cassette playback machines, within which
signals are processed and then combined for distribution within the cable
network.
HOMES PASSED -- Homes that can be connected to a cable distribution system
without further extension of the distribution network.
HSD -- Home Satellite Dish Earth Station. A large dish-shaped antenna that is
connected to an individual home in order to receive a wide variety of
television programming signals from a number of satellites.
LONG DISTANCE BACKHAUL -- Utilization of an alternate access network, provided
by a cable system or other carrier, to link long distance telephone calls with
a long distance carrier's network.
MICROWAVE LINKS -- The transmission of voice, video or data using microwave
radio frequencies, generally above 1 GHz, from one location to another.
MMDS -- Multichannel Multipoint Distribution Service. A one-way radio
transmission of programming over microwave frequencies from a fixed station
transmitting to multiple receiving facilities located at fixed points.
121
<PAGE> 124
MSO -- A term used to describe cable television companies that are "multiple
system operators."
NEW PRODUCT TIERS -- A general term used to describe unregulated cable
television services.
NODES -- An individual point of origination and termination or intersection on
the network, usually where electronics are housed.
OVERBUILD -- The construction of a second cable television system in a
franchise area in which such a system had previously been constructed.
OVER-THE-AIR BROADCAST STATIONS -- A general term used to describe signals
transmitted by local television broadcast stations, including network
affiliates or independent television stations, that can be received directly
through the air by the use of a standard rooftop receiving antenna.
PAY-PER-VIEW -- Payment made for individual movies, programs or events as
opposed to a monthly subscription for a whole channel or group of channels.
PCS -- Personal Communications Services, or PCS, is the name given to a new
generation of cellular-like telecommunications services which are expected to
provide customers new choices in wireless mobile telecommunications using
digital technology for voice and data service compared to traditional analog
technology.
PREMIUM PENETRATION -- Premium service units as a percentage of the total
number of basic service subscribers. A customer may purchase more than one
premium service, each of which is counted as a separate premium service unit.
This ratio may be greater than 100% if the average customer subscribes for more
than one premium service unit.
PREMIUM SERVICE -- An individual cable programming service available only for
additional subscription over and above the basic or expanded basic levels of
television service.
PREMIUM UNITS -- The number of subscriptions to premium services which are paid
for on an individual basis.
PRO FORMA ACQUISITION CASH FLOW -- Net income of a system, as of the date of
acquisition of such system, before interest, taxes, depreciation, amortization
and corporate general and administrative expenses.
SMATV -- Satellite Master Antenna Television system. A video programming
delivery system to multiple dwelling units utilizing satellite transmissions.
TELEPHONY -- The provision of telephone service.
TIERS -- Varying levels of cable services consisting of differing combinations
of several over-the-air broadcast and satellite-delivered cable television
programming services.
VIDEO DIALTONE -- A general term used to describe a video programming delivery
system through telephone lines.
122
<PAGE> 125
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
FrontierVision Operating Partners, L.P.
Report of Independent Public Accountants F-3
Balance Sheets as of March 31, 1996 (unaudited) and December 31, 1995 F-4
Statements of Operations for the three months ended March 31, 1996 (unaudited) and F-5
for the period from inception (April 17, 1995) through December 31, 1995
Statements of Partner's Capital for the three months ended March 31, 1996 F-6
(unaudited) and for the period from inception (April 17, 1995) through
December 31, 1995
Statements of Cash Flows for the three months ended March 31, 1996 (unaudited) and F-7
for the period from inception (April 17, 1995) through December 31, 1995
Notes to Financial Statements F-8
United Video Cablevision, Inc. (Selected Assets Acquired by FVOP)
Independent Accountants' Report F-16
Divisional Balance Sheets as of March 31, 1995 (unaudited), November 8, 1995 and F-17
December 31, 1994
Statements of Divisional Operations for the three-month period ended March 31, 1995 F-18
(unaudited), for the period from January 1, 1995 through November 8, 1995 and for
the years ended December 31, 1994 and 1993
Statements of Divisional Equity for the period from January 1, 1995 through F-19
November 8, 1995 and for the years ended December 31, 1994 and 1993
Statements of Divisional Cash Flows for the three-month period ended March 31, 1995 F-20
(unaudited), for the period from January 1, 1995 through November 8, 1995 and for
the years ended December 31, 1994 and 1993
Notes to Divisional Financial Statements F-21
Cox Communications, Inc. (Selected Assets Acquired by FVOP)
Independent Auditors' Report F-24
Combined Statements of Net Assets as of December 31, 1995, January 31, 1995 and F-25
December 31, 1994
Combined Statements of Operations for the eleven-month period ended December 31, F-26
1995, for the one-month period ended January 31, 1995 and for the years ended
December 31, 1994 and 1993
Statements of Changes in Net Assets for the eleven-month period ended December 31, F-27
1995, for the one-month period ended January 31, 1995 and for the years ended
December 31, 1994 and 1993
</TABLE>
F-1
<PAGE> 126
<TABLE>
<CAPTION>
Page
<S> <C>
Combined Statements of Cash Flows for the eleven-month period ended December 31, F-28
1995, for the one-month period ended January 31, 1995 and for the years ended
December 31, 1994 and 1993
Notes to Combined Financial Statements F-29
C4 Media Cable Southeast, Limited Partnership
Independent Auditors' Report F-37
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-38
Consolidated Statements of Loss for the years ended December 31, 1995 and 1994 F-39
Consolidated Statements of Partners' Deficit for the years ended December 31, 1995 F-40
and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and F-41
1994
Notes to Consolidated Financial Statements F-42
Triax Southeast Associates, L.P.
Report of Independent Public Accountants F-47
Balance Sheets as of March 31, 1996 (unaudited) and December 31, 1995 and 1994 F-48
Statements of Operations for the three-month periods ended March 31, 1996 and 1995 F-49
(unaudited) and for the years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital for the three-month period ended March 31, 1996 F-50
(unaudited) and for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the three-month periods ended March 31, 1996 and 1995 F-51
(unaudited) and for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements F-52
American Cable Entertainment of Kentucky-Indiana, Inc.
Independent Auditors' Report F-58
Balance Sheets as of March 31, 1996 (unaudited) and December 31, 1995 and 1994 F-59
Statements of Operations for the three-month periods ended March 31, 1996 and 1995 F-60
(unaudited) and for the years ended December 31, 1995, 1994 and 1993
Statements of Shareholders' Deficiency for the three-month period ended March 31, F-61
1996 (unaudited) and for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the three-month periods ended March 31, 1996 and 1995 F-62
(unaudited) and for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements F-63
</TABLE>
F-2
<PAGE> 127
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To FrontierVision Operating Partners, L.P.:
We have audited the accompanying balance sheet of FRONTIERVISION OPERATING
PARTNERS, L.P. (a Delaware partnership) as of December 31, 1995, and the
related statements of operations, partners' capital and cash flows for the
period from inception (April 17, 1995 -- see Note 1) through December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FrontierVision Operating
Partners, L.P. as of December 31, 1995, and the results of its operations and
its cash flows for the period from inception (April 17, 1995 -- see Note 1)
through December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
April 9, 1996.
F-3
<PAGE> 128
FRONTIERVISION OPERATING PARTNERS, L.P.
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
ASSETS 1996 1995
------ ------------ -------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 407 $ 2,650
Accounts receivable, net of allowance for doubtful
accounts of $42 and $40 354 358
Receivable from seller 117 1,667
Prepaid expenses and other 599 201
Investment in cable television systems, net:
Property and equipment 64,169 42,917
Franchise costs 80,612 50,184
Subscriber lists 27,939 29,000
Goodwill 4,125 4,094
-------- --------
Total investment in cable television systems, net 176,845 126,195
-------- --------
Deferred financing costs, net 2,767 2,853
Earnest money deposits 7,000 9,502
Other, net 169 86
-------- --------
Total assets $188,258 $143,512
======== ========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable $ 340 $ 1,606
Accrued liabilities 2,572 1,558
Subscriber prepayments and deposits 424 362
Accrued interest payable 841 420
Debt 124,072 93,159
-------- --------
Total liabilities 128,249 97,105
-------- --------
Commitments
Partners' capital:
FrontierVision Partners, L.P. 59,950 46,361
FrontierVision Operating Partners, Inc. 59 46
-------- --------
Total partners' capital 60,009 46,407
-------- --------
Total liabilities and partners' capital $188,258 $143,512
======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-4
<PAGE> 129
FRONTIERVISION OPERATING PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
For the Period
From Inception
(April 17, 1995
For the Three -- see Note 1)
Months Ended through
March 31, December 31,
1996 1995
-------------- ---------------
(Unaudited)
<S> <C> <C>
REVENUES $ 9,780 $ 4,369
EXPENSES:
Operating expenses 4,688 2,311
Corporate administrative expenses 570 127
Depreciation and amortization 3,475 2,308
Pre-acquisition expenses - 940
------- -------
Total expenses 8,733 5,686
------- -------
OPERATING INCOME (LOSS) 1,047 (1,317)
INTEREST EXPENSE, net (2,473) (1,386)
------- -------
NET LOSS $(1,426) $(2,703)
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE> 130
FRONTIERVISION OPERATING PARTNERS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
(In Thousands)
<TABLE>
<CAPTION>
FrontierVision FrontierVision Operating
Partners, L.P. Partners, Inc.
(General Partner) (Limited Partner) Total
----------------- ------------------------ ---------------
<S> <C> <C> <C>
BALANCE, at inception
(April 17, 1995 -- see Note 1) $ - $ - $ -
Capital contributions 49,061 49 49,110
Net loss (2,700) (3) (2,703)
------- --- -------
BALANCE, December 31, 1995 46,361 46 46,407
Capital contributions (unaudited) 15,014 14 15,028
Net loss (unaudited) (1,425) (1) (1,426)
------- --- -------
BALANCE, March 31, 1996
(unaudited) $59,950 $59 $60,009
======= === =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-6
<PAGE> 131
FRONTIERVISION OPERATING PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
For the Period
From Inception
(April 17, 1995
For the Three -- see Note 1)
Months Ended through
March 31, December 31,
1996 1995
------------- --------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,426) $ (2,703)
Adjustments to reconcile net loss to net cash flows from
operating activities-
Depreciation and amortization 3,475 2,377
(Increase) decrease in accounts receivable 1,671 (261)
(Increase) decrease in prepaid expenses and other (514) 75
Increase (decrease) in accounts payable and accrued liabilities (252) 1,637
Increase in subscriber prepayments and deposits 62 362
Increase in accrued interest payable 421 420
-------- ---------
Total adjustments 4,863 4,610
-------- ---------
Net cash flows from operating activities 3,437 1,907
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for capital expenditures (1,141) (573)
Earnest money deposits - (9,502)
Acquisition of cable television systems, including
purchased intangibles (50,466) (121,270)
-------- ---------
Net cash flows from investing activities (51,607) (131,345)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings 30,913 85,900
Increase in deferred financing fees (14) (2,922)
Partner capital contributions 15,028 49,110
-------- ---------
Net cash flows from financing activities 45,927 132,088
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,243) 2,650
CASH AND CASH EQUIVALENTS, at beginning period 2,650 -
-------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 407 $ 2,650
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 1,807 $ 957
======== =========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-7
<PAGE> 132
FRONTIERVISION OPERATING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995
(Amounts in thousands)
(1) THE PARTNERSHIP
Organization and Capitalization
FrontierVision Operating Partners, L.P. (the "Partnership") is a Delaware
partnership formed on July 14, 1995 for the purpose of acquiring and operating
cable television systems. As of December 31, 1995, the Partnership had
acquired operating cable television systems in Maine and Ohio (see Note 3).
The Partnership was initially capitalized in November 1995 with approximately
$38 from its sole limited partner, FrontierVision Operating Partners, Inc.
("FVOP Inc."), a Delaware corporation, and approximately $38,300 from its sole
general partner, FrontierVision Partners, L.P. ("FVP"), a Delaware partnership.
FVOP Inc. is a wholly owned subsidiary of FVP. During the period from January
1, 1996 to April 9, 1996, the Partnership received additional capital
contributions of approximately $58,500 from its partners.
Allocation of Profits, Losses and Distributions
Generally, the Partnership agreement provides that profits, losses and
distributions will be allocated to the general partner and the limited partner
pro rata based on capital contributions.
Pre-Acquisition Expenses
The Partnership had no substantive operations of its own until the date of the
acquisitions described in Note 3. However, FVP, which was formed on April 17,
1995, incurred certain general and administrative costs deemed attributable to
FVOP prior to the Partnership's legal formation. Such expenditures have been
reflected in the accompanying financial statements as pre-acquisition expenses
as if the Partnership had incurred those costs directly. In addition, the
accompanying balance sheet as of December 31, 1995 reflects earnest money
deposits paid by FVP on behalf of the Partnership related to planned
acquisitions (see Note 8). All such amounts have been reflected as capital
contributions in the accompanying financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE> 133
Revenue Recognition
Revenues are recognized in the period in which the related services are
provided to the subscribers.
Property and Equipment
Property and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are charged
to expense when incurred. The Partnership capitalized a portion of salaries
and overhead related to installation activities of approximately $39 for the
period ended December 31, 1995. Depreciation and amortization are computed
using the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995 Life
----------- ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
Property and equipment $66,592 $43,906 5-20 years
Less- Accumulated depreciation (2,423) (989)
------- -------
$64,169 $42,917
======= =======
</TABLE>
Franchise Costs, Subscriber Lists and Goodwill
Franchise costs, subscriber lists and goodwill are being amortized using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995 Life
----------- ------------ --------------
(Unaudited)
<S> <C> <C> <C>
Franchise costs $81,973 $50,748 15 years
Less- Accumulated amortization (1,361) (564)
------- -------
$80,612 $50,184
======= =======
Subscriber lists $29,707 $29,707 7 years
Less- Accumulated amortization (1,768) (707)
------- -------
$27,939 $29,000
======= =======
Goodwill $ 4,252 $ 4,140 15 years
Less- Accumulated amortization (127) (46)
------- -------
$ 4,125 $ 4,094
======= =======
</TABLE>
F-9
<PAGE> 134
Deferred Financing Costs
Deferred financing costs are being amortized using the effective interest
method over the life of the loans:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995 Life
----------- ------------ --------------
(Unaudited)
<S> <C> <C> <C>
Deferred financing costs $2,936 $2,922 1-9 years
Less- Accumulated amortization (169) (69)
------ ------
$2,767 $2,853
====== ======
</TABLE>
Cash and Cash Equivalents
For purposes of the financial statements, the Partnership considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
Income Taxes
No provision has been made for federal, state or local income taxes related to
the Partnership because they are the responsibility of the individual partners.
The principal difference between results reported for financial reporting
purposes and for income tax purposes results from differences in depreciable
lives and amortization methods utilized for tangible and intangible assets.
Interim Financial Statements
The financial statements as of March 31, 1996 and for the three months ended
March 31, 1996 are unaudited. In management's opinion, the unaudited financial
statements as of March 31, 1996 and for the three months ended March 31, 1996
include all adjustments necessary for a fair presentation. Such adjustments
were of a normal recurring nature.
New Accounting Principles
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), which is
required to be adopted by affected companies for fiscal years beginning after
December 15, 1995. SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Partnership has not
adopted the principles of this statement within the accompanying consolidated
financial statements; however, the Partnership does not believe that the
provisions of SFAS 121 would have had a material effect on the Company's
previously reported results of operations or financial condition for fiscal
1995.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which is required to be
adopted by affected companies for fiscal years beginning after December 15,
1995. The Partnership does not believe that the provisions of SFAS 123 will
have a material effect on the Company's reported results of operations.
F-10
<PAGE> 135
(3) ACQUISITIONS
On November 9, 1995, the Partnership purchased certain cable television system
assets, primarily in Maine and Ohio, from United Video Cablevision, Inc.
("UVC") for approximately $113,485 in cash plus a note payable to the seller of
$7,200 and the assumption of certain liabilities of the acquired business. The
acquisition was financed with the partner contributions and loans noted above,
together with a portion of a $130,000 credit facility (see Note 5). The
Partnership has recorded a receivable from UVC related to certain estimated
post closing adjustments to be made to the cash paid to UVC. The purchase
price was allocated to the acquired assets and liabilities as follows:
<TABLE>
<S> <C>
Current assets $ 379
Receivable from seller 1,667
Property, plant and equipment 39,828
Franchise costs 49,785
Subscriber lists 28,139
Goodwill 4,026
--------
Subtotal 123,824
Less- Current liabilities assumed (1,472)
--------
122,352
Less- Subordinated promissory note to seller (7,200)
--------
Total cash paid $115,152
========
</TABLE>
On November 21, 1995, the Partnership acquired the net assets of Longfellow
Cable Company, Inc. ("Longfellow") in Maine for approximately $6,118 in cash.
The purchase price was allocated to the acquired assets and liabilities as
follows:
<TABLE>
<S> <C>
Current assets $ 22
Property, plant and equipment 3,505
Franchise costs 963
Subscriber lists 1,568
Goodwill 114
------
Subtotal 6,172
Less- Current liabilities assumed (54)
------
Total cash paid $6,118
======
</TABLE>
F-11
<PAGE> 136
The Partnership has reported the operating results of its acquired cable
systems from the dates of acquisition. The following table shows the unaudited
pro forma results of operations as if the Partnership had acquired the UVC and
Longfellow properties on January 1, 1995. The fiscal 1995 pre-acquisition
results for Longfellow have not been audited and were provided to the
Partnership by the seller.
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------- Unaudited
Historical UVC Longfellow Pro Forma
Results Acquisition (A) Acquisition (B) Results
----------- --------------- --------------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 4,369 $ 25,417 $1,470 $ 31,256
Operating, selling, general
and administrative expenses (2,438) (14,393) (1,047) (17,878)
Depreciation and
amortization (2,308) (11,454) (585) (14,347)
Pre-acquisition expenses (940) - - (940)
------- -------- ------- --------
Operating income (loss) (1,317) (430) (162) (1,909)
Interest and other expense (1,386) (7,680) (336) (9,402)
------- -------- ------- --------
Net loss $(2,703) $ (8,110) $ (498) $(11,311)
======= ======== ======= ========
</TABLE>
(A) Period from January 1, 1995 through November 8, 1995. Includes
additional depreciation and amortization expense of $2,204, as well
as additional interest expense of $6,594 related to the UVC
acquisition.
(B) Period from January 1, 1995 through November 20, 1995. Includes
additional depreciation and amortization expense of $207, as well as
additional interest expense of $336 related to the Longfellow
acquisition.
(4) COMMITMENTS
The Partnership is committed to annual pole rentals of approximately $1,077 as
of December 31, 1995, to various utilities. These agreements are subject to
termination rights by both parties.
The Partnership leases the land upon which certain of its towers and antennae
are constructed. The annual rental commitments under these leases amount to
approximately $59 as of December 31, 1995.
The Partnership leases office space pursuant to which its commitments under
these leases are approximately $124 per year.
F-12
<PAGE> 137
(5) DEBT
The Partnership's debt was comprised of the following:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Bank Credit Facility-
Revolving credit loan, due June 30, 2004, interest
based on various floating rate options (8.69%
on $50,000 and 8.50% on $5,900 at December 31,
1995), payable monthly $ 86,800 $55,900
Term loans, due June 30, 2004, interest based on
various floating rate options (8.69% at December 31,
1995), payable monthly 30,000 30,000
Subordinated promissory note to seller, due
December 31, 2004, with interest as described below 7,200 7,200
Capital lease obligations, monthly payments of $2,
including interest at 9%, due November 1998 72 59
-------- -------
Total debt $124,072 $93,159
======== =======
</TABLE>
The Partnership has entered into a credit agreement with a maximum availability
of $130,000 (see Note 8). The Partnership has drawn $30,000 in the form of
term loans with the remainder of $100,000 available as a revolving line of
credit, of which $55,900 had been drawn as of December 31, 1995. Escalating
principal payments are due, quarterly, beginning March 31, 1998 on these term
loans. The credit facility has a termination date of June 30, 2004. The
maximum amount available under the revolving line of credit reduces over time,
beginning March 31, 1998.
Under the terms of the credit agreement, the Partnership has a mandatory
prepayment obligation upon any sale of new partnership interests and the sale
of any of its operating systems. Further, beginning with the year ended
December 31, 1998, the Partnership is required to make prepayments equal to 50%
of its excess cash flow, as defined in the credit agreement.
The agreement also requires the Partnership to maintain compliance with various
financial covenants including, but not limited to total indebtedness, debt
ratios, interest coverage ratios and earnings before interest, taxes,
depreciation and amortization.
In connection with the revolving credit loan and the term loan, the Partnership
has entered into an interest rate swap agreement, which expires November 15,
1999. Under the terms of the agreement, the Partnership has agreed to pay the
lender interest at a rate of 5.912% on a notional amount totaling $65,000. In
turn, the lender has agreed to pay the Partnership interest on a three-month
maturity basis based upon various available floating rate options on the same
notional amount. The effect of this swap agreement is to convert a portion of
the Partnership's floating rate exposure to a fixed rate facility. Through
December 31, 1995, the Partnership has recognized a reduction in interest
expense of approximately $18 as a result of this agreement.
F-13
<PAGE> 138
The subordinated promissory note to seller bears interest at 9% for the first
three years. At the end of each subsequent year, the annual interest rate
increases 2% per year. Under the terms of the subordinated promissory note,
the Partnership may issue additional subordinated promissory notes rather than
making cash interest payments. Further, in the event the Partnership's
leverage ratio exceeds defined amounts, the interest rate also increases by 2%.
Under the terms of the subordinated promissory note, the Partnership can prepay
the balance at any time.
The debt of the Partnership matures as follows:
<TABLE>
<CAPTION>
Year ended December 31-
<S> <C>
1996 $ 19
1997 20
1998 5,174
1999 6,872
2000 10,308
Thereafter 70,766
-------
$93,159
=======
</TABLE>
(6) REGULATORY MATTERS
In October 1992, Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992 Cable Act") which greatly expanded federal and local
regulation of the cable television industry. In April 1993, the Federal
Communications Commission ("FCC") adopted comprehensive regulations, effective
September 1, 1993, governing rates charged to subscribers for basic cable and
cable programming services which allowed cable operators to justify regulated
rates in excess of the FCC benchmarks through cost of service showings at both
the franchising authority level for basic service and to the FCC in response
to complaints on rates for cable programming services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided cable
operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers, and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 was enacted which, among
other things, deregulated cable rates for small systems on their programming
tiers.
F-14
<PAGE> 139
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying financial statements
because they accrue directly to the partners. Taxable losses reported to the
partners are different from that reported in the accompanying statements of
operations due primarily to differences in depreciation methods and estimated
useful lives under regulations prescribed by the Internal Revenue Service.
A reconciliation between the net loss reported for financial reporting purposes
and the net loss reported for federal income tax purposes is as follows:
<TABLE>
<S> <C>
Net loss for financial reporting purposes $ (2,703)
Excess depreciation and amortization recorded
for income tax purposes (192)
Other temporary differences 186
--------
Net loss for federal income tax purposes $ (2,709)
========
</TABLE>
(8) SUBSEQUENT EVENTS
On February 1, 1996, the Partnership acquired certain cable television assets,
primarily in Virginia and Tennessee, from C4 Media Cable Southeast L.P. ("C4"),
resulting in a cash purchase price of approximately $48,000 and the assumption
of certain related liabilities. As of December 31, 1995, the Partnership had
advanced $2,502 as an earnest money deposit related to this transaction.
The Partnership has reported the operating results of C4 from the date of
acquisition. The following table shows the unaudited pro forma results of
operations as if the Partnership had acquired C4 as of
January 1, 1996:
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, 1996 Unaudited
Historical C4 Acquisition (A) Pro Forma Results
-------------- ------------------ -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Revenues $ 9,780 $ 945 $10,725
Operating, selling, general
and administrative expenses (5,258) (531) (5,789)
Depreciation and amortization (3,475) (443) (3,918)
-------- ------ --------
Operating income (loss) 1,047 (29) 1,018
Interest and other expenses (2,473) (831) (3,304)
-------- ------ --------
Net loss $(1,426) $(860) $(2,286)
======== ====== ========
</TABLE>
(A) Period from January 1, 1996 through January 31, 1996. Includes decreased
depreciation and amortization expenses of $20, as well as additional
interest expense of $147.
On March 29, 1996, the Partnership acquired certain cable television assets,
primarily in Maine, from Americable International Maine, Inc. for approximately
$4,750 in cash and the assumption of certain related liabilities.
On April 9, 1996, the Partnership increased its bank credit facility by
$135,000, for a total availability of $265,000. A total of $190,000 of the new
bank credit facility is available as a term loan, with the remainder available
as a revolving credit facility. The revolver and $100,000 of the term loan
matures June 30, 2004. The remaining $90,000 of the term loan matures on June
30, 2005.
On April 9, 1996, the Partnership acquired certain cable television system
assets, primarily in Ohio, from Cox Communications resulting in a cash purchase
price of approximately $136,000 and the assumption of certain related
liabilities. As of December 31, 1995, the Partnership had advanced $7,000 as
an earnest money deposit related to this transaction.
(9) EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)
During May, 1996, the Partnership agreed to acquire certain cable television
assets, primarily in Kentucky and Ohio, from Triax Southeast Associates, L.P.
("Triax"), for approximately $85,000 in cash and the assumption of certain
related liabilities. The Triax acquisition is expected to close in the third
quarter of 1996.
During July 1996, the Partnership agreed to acquire certain cable television
assets, primarily in Kentucky and Ohio, from American Cable Entertainment
("ACE") for approximately $146,000 and the assumption of certain liabilities.
The ACE acquisition is expected to close in the third quarter of 1996.
In addition, the Partnership intends to file a registration statement with
respect to $200,000 of Senior Subordinated Notes due 2006.
F-15
<PAGE> 140
INDEPENDENT AUDITORS' REPORT
May 7, 1996
To the Board of Directors and Stockholders of
United Video Cablevision, Inc.:
We have audited the accompanying divisional balance sheet of UNITED
VIDEO CABLEVISION, INC. - MAINE AND OHIO DIVISIONS as of November 8, 1995 and
December 31, 1994 and the related statements of divisional operations, cash
flows and equity for the period of January 1, 1995 through November 8, 1995
and for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of the Divisions' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the divisional financial position of United
Video Cablevision, Inc. - Maine and Ohio Divisions as of November 8, 1995 and
December 31, 1994, and the results of its divisional operations and its cash
flows for the period ending November 8, 1895, and the years ending December 31,
1994 and 1993 in conformity with generally accepted accounting principles.
PIAKER & LYONS, P.C.
May 7, 1996
Vestal, NY
F-16
<PAGE> 141
UNITED VIDEO CABLEVISION, INC.-
MAINE AND OHIO DIVISIONS
DIVISIONAL BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31,
1995 November 8, December 31,
(Unaudited) 1995 1994
----------- ---- ----
<S> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 168,932 $ 75,100 $ 35,461
------------ ------------ ------------
ACCOUNTS RECEIVABLE (Note 1)
Accounts Receivable, Trade 50,510 143,673 206,676
Accounts Receivable, Other 10,773 25,980 31,034
Less: Allowance for Doubtful Accounts ( 34,920) ( 53,994) ( 34,928)
------------ ------------ ------------
NET ACCOUNTS RECEIVABLE 26,363 115,659 202,682
------------ ------------ ------------
Prepaid Expenses 249,447 165,080 108,045
------------ ------------ ------------
TOTAL CURRENT ASSETS 444,742 355,839 346,188
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT - At Cost
Land 61,556 61,556 61,223
Buildings and Improvements 1,583,165 1,586,150 1,570,888
Vehicles 2,606,808 2,608,730 2,282,936
Cable Television Distribution Systems 83,683,992 85,010,454 83,296,885
Office Furniture, Tools and Equipment 1,383,737 1,386,288 1,363,828
Less: Accumulated Depreciation (Note 1) (61,704,897) (68,243,467) (59,163,656)
------------ ------------ ------------
NET PROPERTY, PLANT AND EQUIPMENT 27,569,361 22,409,711 29,758,104
------------ ------------ ------------
INTANGIBLE ASSETS
Franchise Rights 1,984,351 1,994,336 1,984,349
Non Compete Agreements 71,753 71,753 71,753
Other Intangible Assets 1,943,836 1,943,836 1,943,836
Less: Accumulated Amortization (Note 1) ( 2,661,593) ( 2,930,019) ( 2,550,708)
------------ ------------ ------------
NET INTANGIBLE ASSETS 1,338,347 1,079,906 1,449,230
------------ ------------ ------------
TOTAL ASSETS $ 29,352,450 $ 23,845,456 $ 31,553,522
============ ============ ============
<CAPTION>
LIABILITIES AND DIVISIONAL EQUITY
<S> <C> <C> <C>
LIABILITIES
Accounts Payable $ -- $ -- $ 684,264
Subscriber Deposits and Unearned Income 383,181 341,263 401,608
Accrued Franchise Fees 143,769 424,312 469,578
Accrued Programming Fees 522,417 686,599 513,151
Other Accrued Expenses 1,302,429 1,596,134 1,154,024
------------ ------------ ------------
TOTAL LIABILITIES 2,351,796 3,048,308 3,222,623
DIVISIONAL EQUITY 27,000,654 20,797,148 28,330,899
------------ ------------ ------------
TOTAL LIABILITIES AND DIVISIONAL EQUITY $ 29,352,450 $ 23,845,456 $ 31,553,522
============ ============ ============
</TABLE>
See the accompanying notes to divisional financial statements.
F-17
<PAGE> 142
UNITED VIDEO CABLEVISION, INC. -
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL OPERATIONS
<TABLE>
<CAPTION>
For the Three
Months Ended Period from
March 31, January 1, For the Year For the Year
1995 1995 through Ended Ended
---- November 8, December 31, December 31,
(Unaudited) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C>
REVENUES (NOTE 1) $ 7,205,917 $25,417,064 $27,964,550 $27,917,090
--------- ---------- ---------- ----------
OPERATING EXPENSES
Programming 1,518,717 5,350,664 5,717,160 5,361,127
Plant and Operation 1,038,768 3,741,207 4,185,894 3,902,847
General and Administrative 1,118,097 3,754,474 4,415,919 4,628,442
Marketing and Advertising 115,571 276,712 248,572 409,890
Corporate Overhead (Note 3) 327,274 1,270,072 1,327,127 1,470,702
Depreciation and Amortization (Note 1) 2,704,439 9,625,116 11,225,978 9,960,536
--------- ---------- ---------- ----------
TOTAL EXPENSES 6,822,866 24,018,245 27,120,650 25,733,544
--------- ---------- ---------- ----------
OPERATING INCOME 383,051 1,398,819 843,900 2,183,546
--------- ---------- ---------- ----------
OTHER (INCOME) EXPENSE
Interest Expense (Note 1) 1,250,754 4,086,738 4,892,250 4,960,032
Gain on Sale of Fixed Assets (7,890) (25,034) (33,835) (3,810)
--------- ---------- ---------- ----------
TOTAL OTHER (INCOME) EXPENSE 1,242,864 4,061,704 4,858,415 4,926,222
--------- ---------- ---------- ----------
NET LOSS $ (859,813) $ (2,662,885) $ (4,014,515) $ (2,742,676)
========= ========== ========== ==========
</TABLE>
See the accompanying notes to divisional financial statements.
F-18
<PAGE> 143
UNITED VIDEO CABLEVISION, INC. -
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL CASH FLOWS
<TABLE>
<CAPTION>
For the Three Period from
Months Ended January 1, For the Year For the Year
March 31, 1995 through Ended Ended
1995 November 8, December 31, December 31,
---- 1995 1994 1993
(Unaudited) ---- ---- ----
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES
Net Loss $ ( 859,813) $( 2,662,885) $ ( 4,014,515) $(2,742,676)
------------ ------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY OPERATIONS:
Depreciation 2,593,554 9,245,805 10,771,263 9,497,062
Amortization of Intangibles 110,885 379,311 454,715 463,474
Allowance for Doubtful Accounts ( 8) 19,066 6,124 ( 3,007)
Gain on Sale of Assets ( 7,890) ( 25,034) ( 33,835) ( 33,810)
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET
OF EFFECTS FROM ACQUISITION OF CORPORATE ENTITIES:
Accounts Receivable and Other Receivables 176,327 67,957 ( 132,182) 122,248
Prepaid Expenses ( 141,402) ( 57,035) 13,897 ( 158,603)
Accounts Payable and Accrued Expenses ( 852,402) ( 113,972) ( 846,244) ( 52,046)
Subscriber Deposits and Unearned Income ( 18,427) ( 60,343) ( 45,895) ( 72,253)
----------- ------------ ----------- -----------
TOTAL ADJUSTMENTS 1,860,637 9,455,755 10,187,843 9,762,995
----------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,000,824 6,792,870 6,173,328 7,002,319
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of Property, Plant and Equipment ( 449,234) ( 2,037,144) ( 5,712,592) (5,024,998)
Acquisition of Intangible Assets -- ( 9,987) ( 216,154) ( 1,928)
Proceeds from Sale of Assets 52,313 164,766 41,789 37,600
----------- ----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ( 396,921) ( 1,882,365) ( 5,886,957) (4,989,266)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Payments to Corporate Division, Net ( 470,432) ( 4,870,866) ( 354,675) (2,084,179)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS 133,471 39,639 ( 68,304) ( 53,126)
Cash and Cash Equivalents at Beginning of Period 35,461 35,461 103,765 156,891
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 168,932 $ 75,100 $ 35,461 $ 103,765
=========== =========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid, Net of Amount Capitalized $ 1,250,754 $ 4,086,738 $ 4,892,250 $ 4,960,032
Income Taxes Paid -- -- -- --
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, the Divisions consider all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
See the accompanying notes to divisional financial statements.
F-19
<PAGE> 144
UNITED VIDEO CABLEVISION, INC. -
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL EQUITY
FOR THE PERIOD ENDED NOVEMBER 8, 1995
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
BALANCE, JANUARY 1, $28,330,899 $32,700,089 $37,526,944
Net Loss (2,662,885) (4,014,515) (2,742,676)
Payments to Corporate Division, Net (4,870,866) ( 354,675) (2,084,179)
----------- ----------- -----------
BALANCE, NOVEMBER 8, 1995 $20,797,148
===========
BALANCE, DECEMBER 31, $28,330,899 $32,700,089
=========== ===========
</TABLE>
See the accompanying notes to divisional financial statements.
F-20
<PAGE> 145
UNITED VIDEO CABLEVISION, INC. -
MAINE AND OHIO DIVISIONS
NOTES TO DIVISIONAL FINANCIAL STATEMENTS
NOVEMBER 8, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING, POLICIES
BUSINESS ACTIVITY - The accompanying divisional financial statements
include the Maine and Ohio Divisions of United Video Cablevision, Inc. (the
"Divisions"). The Divisions are engaged in providing cable television
programming services to subscribers in their franchised areas. For the purpose
of the divisional financial statements, no debt has been allocated to the
Divisions from the corporate division of United Video Cablevision, Inc. Under
the terms of the agreement with FrontierVision Operating Partners, L.P., no
such debt will be assumed.
CONCENTRATIONS OF CREDIT RISK - The Divisions' trade receivables are
comprised of amounts due from subscribers in varying regions throughout the
states. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Divisions' customer
base and geographic dispersion.
REVENUE RECOGNITION - The Divisions recognize service revenues on the
accrual basis in the month in which the service is to be provided. Payments
received in advance are included in deferred revenue until the month they
become due at which time they are recognized as income.
CAPITALIZATION AND DEPRECIATION - The Divisions have adopted the policy of
capitalizing interest costs as part of construction costs to properly reflect
the total costs of the property in accordance with Statement No. #34 of the
Financial Accounting Standards Board. The interest capitalization rate during
the period is based on the rates applicable to borrowings outstanding during
the period. For the period ended November 8, 1995, the total interest charges
amounted to $4,086,738, of which $-0- was capitalized. During 1994 and 1993,
respectively, the total interest charges amounted to $4,892,250 and $4,960,032,
of which $-0- was capitalized.
In accordance with Statement No. #51 of the Financial Accounting Standards
Board, the Divisions have adopted the policy of capitalizing certain expenses
applicable to the construction and operating of a cable television system
during the period while the cable television system is partially under
construction and partially in service. For the period ended November 8, 1995,
the total capitalized costs amounted to $314,347. During 1994 and 1993, the
total capitalized costs amounted to $244,276 and $300,429, respectively.
The Divisions, for financial reporting purposes, provide depreciation on
the straight-line method, which is considered adequate for the recovery of the
cost of the properties over their estimated useful lives. For income tax
purposes, however, the Divisions utilize both accelerated methods and the
accelerated cost recovery system. For the period ended November 8, 1995, the
provision for depreciation in the accompanying statements of operations
amounted to $9,245,805. For the years ended December 31, 1994 and 1993, the
provision amounted to $10,771,263 and $9,497,062, respectively.
F-21
<PAGE> 146
UNITED VIDEO CABLEVISION, INC. -
MAINE AND OHIO DIVISIONS
NOTES TO DIVISIONAL FINANCIAL STATEMENTS
NOVEMBER 8, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation lives for financial statement purposes are as follows:
<TABLE>
<S> <C>
Headend Equipment
Tower 12 Years
Antennae 7 Years
Other Headend Equipment 8 Years
Trunk and Distribution Equipment
Traps, Descramblers, Converters, Decoders 5 Years
Other Trunk and Distribution Equipment 8 Years
Test Equipment 5 Years
Local Origination Equipment 8 Years
Vehicles 3 Years
Furniture and Fixtures 10 Years
Leasehold Improvements 8 Years
Computer and EDP Equipment 5 Years
</TABLE>
AMORTIZATION - The Divisions are amortizing various intangible assets
acquired and incurred on a straight-line basis, generally from 5 to 40 years.
For the period ended November 8, 1995, the provision for amortization in the
accompanying statements of operations amounted to $379,311. For the years ended
December 31, 1994 and 1993, the provision amounted to $454,715 and $463,474,
respectively.
INCOME TAXES - The Divisions are a part of United Video Cablevision, Inc.
which has elected to be taxed as a small business corporation under
"Sub-Chapter S" of the Internal Revenue Code effective January 1, 1987, wherein
the stockholders of United Video Cablevision, Inc. are taxed on any earnings or
losses of the Company.
BAD DEBTS - The Divisions have adopted the reserve method for recognizing
bad debts for financial statement purposes and continue to utilize the direct
write-off method for tax purposes.
USE OF ESTIMATES - Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
NOTE 2 - COMMITMENTS
The Divisions were committed to annual pole rentals of approximately
$823,000 at November 8, 1995 and $830,000 and $832,000 at December 31, 1994
and 1993, respectively, to various utilities. These agreements are subject to
termination rights by both parties.
F-22
<PAGE> 147
The Divisions lease in various systems the land upon which their towers and
antennae are constructed. The annual rental payments under these leases
amounted to approximately $37,000 at November 8, 1995, approximately $32,000 at
December 31, 1994 and approximately $46,000 at December 31, 1993.
NOTE 3 - MANAGEMENT AGREEMENT WITH RELATED PARTY
The Divisions are being provided with certain management and technical
services by a related party by means of a management agreement. For the period
ended November 8, 1995, the allocated billings amounted to $1,270,072, and for
the years ended December 31, 1994 and 1993, billings amounted to $1,327,127 and
$1,470,702, respectively.
NOTE 4 - SALE OF DIVISIONS
On November 9, 1995, United Video Cablevision, Inc. consummated an
agreement by which it sold substantially all of the net assets and associated
current liabilities in its Maine and Ohio franchise areas (the Divisions) for
approximately $120,500,000. Upon the completion of the transaction, United
Video Cablevision, Inc. realized a gain of approximately $100,000,000.
F-23
<PAGE> 148
INDEPENDENT AUDITORS' REPORT
Cox Communications, Inc.:
We have audited the accompanying combined statements of net assets of the
combined operations of Cox Communications, Inc.'s ("CCI") cable television
systems serving 57 communities in Ashland, Kentucky and Defiance, Ohio
(collectively referred to as the "Ashland and Defiance Clusters" or
"Successor") whose assets and certain liabilities were acquired by
FrontierVision Operating Partners, L.P. on April 9, 1996, as of December 31,
1994 ("Predecessor") and 1995 ("Successor"), and the related combined
statements of operations, changes in net assets, and cash flows for the years
ended December 31, 1993 and 1994 (Predecessor), for the one-month period ended
January 31, 1995 (Predecessor), and for the eleven-month period ended December
31, 1995 (Successor). These financial statements are the responsibility of the
Ashland and Defiance Clusters' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Ashland and
Defiance Clusters at December 31, 1994 (Predecessor) and 1995 (Successor), and
the combined results of its operations and its cash flows for years ended
December 31, 1993 and 1994 (Predecessor), for the one-month period ended
January 31, 1995 (Predecessor), and for the eleven-month period ended December
31, 1995 (Successor), in conformity with generally accepted accounting
principles.
As discussed in Note 1, effective February 1, 1995, CCI acquired the Ashland
and Defiance Clusters in connection with the acquisition of Times Mirror Cable
Television, Inc.
DELOITTE & TOUCHE LLP
April 10, 1996
F-24
<PAGE> 149
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF NET ASSETS
(IN THOUSANDS)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS PREDECESSOR SUCCESSOR
----------------------------------
December 31, December 31,
1994 1995
<S> <C> <C>
CASH $ 188
ACCOUNTS RECEIVABLE - Less allowance
for doubtful accounts of $43, $37 and $52 1,563 $ 1,784
AMOUNTS DUE FROM AFFILIATE 5,848
INTERCOMPANY INCOME TAXES RECEIVABLE 1,182
NET PLANT AND EQUIPMENT 18,096 25,621
INTANGIBLE ASSETS 51,210 110,796
OTHER ASSETS 580 1,149
-------- ---------
$ 71,637 $ 146,380
======== =========
LIABILITIES AND NET ASSETS
ACCOUNTS PAYABLE $ 692 $ 580
ACCRUED EXPENSES 915 966
INTERCOMPANY INCOME TAXES PAYABLE 2,160
DEFERRED INCOME 1,142 1,355
DEFERRED INCOME TAXES 3,147 7,644
OTHER LIABILITIES 99 146
AMOUNTS DUE TO AFFILIATE 52,317
-------- ---------
Total liabilities 60,472 10,691
NET ASSETS 11,165 135,689
-------- ---------
$ 71,637 $ 146,380
======== =========
</TABLE>
See notes to combined financial statements.
F-25
<PAGE> 150
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------------------ -------------
YEAR ENDED ONE MONTH ELEVEN MONTHS
DECEMBER 31, ENDED ENDED
-------------------------- JANUARY 31, DECEMBER 31,
1993 1994 1995 1995
<S> <C> <C> <C> <C>
REVENUES $24,679 $25,235 $2,096 $24,628
COSTS AND EXPENSES
Operating 6,773 7,188 689 8,035
Selling, general, and administrative 5,398 5,507 503 4,919
Depreciation 3,413 3,293 214 5,480
Amortization 2,129 1,830 128 2,727
------- ------- ------ -------
Total costs and expenses 17,713 17,818 1,534 21,161
------- ------- ------ -------
OPERATING INCOME 6,966 7,417 562 3,467
INTEREST EXPENSE 133 434 79
OTHER - Net (4) (3) (29)
------- ------- ------ -------
INCOME BEFORE INCOME TAXES 7,095 7,849 641 3,438
INCOME TAXES 3,559 3,982 249 3,749
------- ------- ------ -------
NET INCOME (LOSS) $ 3,536 $ 3,866 $ 393 $ (311)
======= ======= ====== =======
</TABLE>
See notes to combined financial statements.
F-26
<PAGE> 151
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PREDECESSOR
- -----------
BALANCE, JANUARY 1, 1993 $ 11,303
Net income for the year ended December 31, 1993 3,536
Dividends to Affiliate (1,570)
--------
BALANCE, DECEMBER 31, 1993 13,269
Net income for the year ended December 31, 1994 3,866
Dividends to Affiliate (5,970)
--------
BALANCE, DECEMBER 31, 1994 11,165
Net income for the one month ended January 31, 1995 393
--------
BALANCE, JANUARY 31, 1995 $ 11,558
========
- --------------------------------------------------------------------------------
SUCCESSOR
- ---------
FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED FROM
TIMES MIRROR CABLE TELEVISION, INC. ON FEBRUARY 1, 1995 $136,000
Net loss for the eleven months ended December 31, 1995 (311)
--------
BALANCE, DECEMBER 31, 1995 $135,689
========
</TABLE>
- --------------------------------------------------------------------------------
See notes to combined financial statements.
F-27
<PAGE> 152
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
---------------------------------------------------------------------
YEAR ENDED ONE MONTH ELEVEN MONTHS
DECEMBER 31, ENDED ENDED
-------------------------- JANUARY 31, DECEMBER 31,
1993 1994 1995 1995
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 3,536 $ 3,866 $ 393 $ (311)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 5,542 5,123 342 8,207
Deferred income taxes 293 298 (70) (142)
(Increase) decrease in accounts receivable (45) 114 66 (287)
Increase (decrease) in accounts payable and
accrued expenses (92) (214) (360) 467
Income taxes payable (906) 1,914 31 (1,182)
Other, net (61) 162 45 274
------- ------- ----- -------
Net cash provided by operating activities 8,267 11,263 447 7,026
INVESTING ACTIVITIES:
Capital expenditures (6,075) (3,795) (65) (1,362)
Advances to Affiliate (5,848)
------- ------- ----- -------
Net cash used in investing activities (6,075) (3,795) (65) (7,210)
FINANCING ACTIVITIES:
Net change in amounts due to Affiliate (580) (1,466) (386)
Dividends paid (1,570) (5,970)
------- ------- ----- -------
Net cash used in financing activities (2,150) (7,436) (386)
------- ------- ----- -------
NET INCREASE (DECREASE) IN CASH 42 32 (4) (184)
CASH AT BEGINNING OF PERIOD 114 156 188 184
------- ------- ----- -------
CASH AT END OF PERIOD $ 156 $ 188 $ 184 $ -
======= ======= ===== =======
CASH PAID DURING THE PERIOD FOR:
Interest $ 133 $ 434 $ 79 $ -
======= ======= ===== =======
</TABLE>
See notes to combined financial statements.
F-28
<PAGE> 153
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1994,
ONE MONTH ENDED JANUARY 31, 1995, AND
ELEVEN MONTHS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
These combined financial statements represent the combined operations
of Cox Communications, Inc.'s ("CCI") cable television systems serving
57 communities in Ashland, Kentucky and Defiance, Ohio (collectively
referred to as the "Ashland and Defiance Clusters") whose assets and
certain liabilities were acquired by FrontierVision Operating
Partners, L.P. on April 9, 1996. These cable television systems were
acquired by CCI, a majority owned subsidiary of Cox Enterprises, Inc.
("CEI"), from The Times Mirror Company ("Times Mirror") in connection
with CCI's acquisition of Times Mirror Cable Television, Inc. ("TMCT")
on February 1, 1995. The operations of the Ashland and Defiance
Clusters prior to February 1, 1995 are referred to as "Predecessor"
and as "Successor" after February 1, 1995.
All significant intercompany accounts and transactions have been
eliminated in combination. The acquisition of the Ashland and
Defiance Clusters was accounted for by the purchase method of
accounting, whereby the allocable share of the TMCT purchase price was
pushed down to the assets acquired and liabilities assumed based on
their fair values at the date of acquisition as follows (thousands of
dollars):
<TABLE>
<S> <C>
Net working capital $ (2,836)
Plant and equipment 30,022
Deferred taxes related to plant and equipment write-up (4,709)
Intangible Assets 113,523
--------
$136,000
========
</TABLE>
The historical combined financial statements do not necessarily
reflect the results of operations or financial position that would
have existed had the Ashland and Defiance Clusters been an independent
company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - The Ashland and Defiance Clusters bill their
customers in advance; however, revenue is recognized as cable
television services are provided. Receivables are generally collected
within 30 days. Credit risk is managed by disconnecting services to
customers who are delinquent generally greater than 60 days. Other
revenues are recognized as services are provided. Revenues obtained
from the connection of customers to the cable television systems are
less than related direct selling costs; therefore, such revenues are
recognized as received.
Plant and Equipment - Depreciation is computed using principally the
straight-line method at rates based upon estimated useful lives of 5
to 20 years for buildings and building improvements, 5 to 12 years for
cable television systems, and 3 to 10 years for other plant and
equipment.
The costs of initial cable television connections are capitalized as
cable plant at standard rates for the Ashland and Defiance Clusters'
labor and at actual costs for materials and outside labor.
Expenditures for maintenance and repairs are charged to operating
expense as incurred. At the time of retirements, sales or other
dispositions of property, the original cost and related accumulated
depreciation are written off.
F-29
<PAGE> 154
Intangible Assets - Intangible assets consist primarily of goodwill
and franchise costs recorded in business combinations which is
amortized on a straight-line basis over 40 years. The Ashland and
Defiance Clusters assess on an on-going basis the recoverability of
intangible assets based on estimates of future undiscounted cash flows
for the applicable business acquired compared to net book value.
Income Taxes - Through January 31, 1995, the accounts of the Ashland
and Defiance Clusters were included in the consolidated federal income
tax returns and certain state income tax returns of Times Mirror.
Beginning on February 1, 1995, the accounts of the Ashland and
Defiance Clusters were included in the consolidated federal income tax
returns and certain state income tax returns of CEI. Current federal
and state income tax expenses and benefits are allocated on a separate
return basis to the Ashland and Defiance Clusters based on the current
year tax effects of the inclusion of their income, expenses, and
credits in the consolidated income tax returns of Times Mirror, CEI,
or based on separate state income tax returns.
Deferred income taxes arise from temporary differences between income
taxes and financial reporting and principally relate to depreciation
and amortization.
Fees and Taxes - The Ashland and Defiance Clusters incur various fees
and taxes in connection with the operation of their cable television
systems, including franchise fees paid to various franchise
authorities, copyright fees paid to the U.S. Copyright Tribunal, and
business and franchise taxes paid to the States of Ohio and Kentucky.
A portion of these fees and taxes are passed through to the Ashland
and Defiance Clusters' subscribers. Amounts collected from
subscribers are recorded as a reduction of operating expenses.
Pension and Postretirement Benefits - CCI generally provides defined
pension benefits to all employees based on years of service and
compensation during those years. CEI provides certain health care and
life insurance benefits to substantially all retirees and employees.
For employees and retirees of the Ashland and Defiance Clusters, these
benefits are provided through the CCI plans. Expense related to these
plans is allocated to the Ashland and Defiance Clusters through the
intercompany account. The amount of the allocations is generally based
on actuarial determinations of the effects of the Ashland and Defiance
Clusters employees' participation in the plans.
Times Mirror Cable generally provides defined pension benefits to all
employees based on years of service and the employee's compensation
during the last five years of employment. Prior to December 31, 1992,
these benefits were primarily provided under the Times Mirror Cable
Television, Inc. Pension Plan (the "Times Mirror Cable Plan") in
conjunction with the Times Mirror Employee Stock Ownership Plan. On
December 31, 1992, the Times Mirror Cable Plan was merged with the
Times Mirror Pension Plan.
Net periodic pension expense for 1993 and 1994 was estimated by an
actuary under the assumption that the Times Mirror Cable Plan
continued to be a stand-alone plan. This expense was allocated to the
Ashland and Defiance Clusters based on its salary expense as a
percentage of total TMCT salary expense.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements - In March 1995, SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed of," was issued. This Statement requires that
long-lived assets and certain intangibles be reviewed for impairment
when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, with any impairment losses
being reported in the period in which the recognition criteria are
first applied based on the fair value of the asset. Long-lived assets
and certain intangibles to be disposed of are required to be reported
at the lower of carrying amount or fair value less cost to sell. CCI,
including the Ashland and Defiance Clusters, adopted SFAS No. 121 in
the first quarter of 1996. The effect on the combined financial
statements upon adoption of SFAS No. 121 was not significant.
F-30
<PAGE> 155
3. CASH MANAGEMENT SYSTEM
The Ashland and Defiance Clusters participate in CEI's cash
management system, whereby the bank sends daily notification of checks
presented for payment. CEI transfers funds from other sources to
cover the checks presented for payment. Prior to February 1, 1995,
the Ashland and Defiance Clusters participated in a similar cash
management system with Times Mirror.
4. PLANT AND EQUIPMENT
Plant and equipment is summarized as follows (thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-----------------------------
DECEMBER 31, DECEMBER 31,
1994 1995
<S> <C> <C>
Land $ 10 $ 5
Buildings and building improvements 646 207
Transmission and distribution plant 34,543 30,235
Miscellaneous equipment 472 343
Construction in progress 59 3
-------- -------
Plant and equipment, at cost 35,730 30,793
Less accumulated depreciation (17,634) (5,172)
-------- -------
Net plant and equipment $ 18,096 $25,621
======== =======
</TABLE>
F-31
<PAGE> 156
5. INTANGIBLE ASSETS
Intangible assets are summarized as follows (thousands of dollars).
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-----------------------------
DECEMBER 31, DECEMBER 31,
1994 1995
<S> <C> <C>
Goodwill $ 60,907 $113,523
Other 134
-------- --------
Total 61,041 113,523
Less accumulated amortization (9,831) (2,727)
-------- --------
Net intangible assets $ 51,210 $110,796
======== ========
</TABLE>
6. INCOME TAXES
Income tax expense (benefit) is summarized as follows (thousands of
dollars):
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------------------------------------------
YEAR ENDED ONE MONTH ELEVEN MONTHS
DECEMBER 31, ENDED ENDED
------------------------- JANUARY 31, DECEMBER 31,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Current:
Federal $2,614 $2,866 $ 248 $3,054
State 652 818 70 837
------ ------ ----- ------
Total current 3,266 3,684 318 3,891
Deferred:
Federal 250 183 (68) (113)
State 43 115 (2) (29)
------ ------ ----- ------
Total deferred 293 298 (70) (142)
------ ------ ----- ------
Total income taxes $3,559 $3,982 $ 248 $3,749
====== ====== ===== ======
</TABLE>
F-32
<PAGE> 157
The tax effects of significant temporary differences which comprise
the net deferred tax liabilities are as follows (thousands of
dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
<S> <C> <C>
Plant and equipment $3,408 $7,942
Other (261) (298)
------ ------
Net deferred tax liability $3,147 $7,644
====== ======
</TABLE>
Income tax expense computed using the United States federal statutory
rates is reconciled to the reported income tax provisions as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------------------------------
YEAR ENDED ONE MONTH ELEVEN MONTHS
DECEMBER 31, ENDED ENDED
----------------------- JANUARY 31, DECEMBER 31,
1993 1994 1995 1995
<S> <C> <C> <C> <C>
Federal statutory income tax rate 35% 35% 35% 35%
Computed tax expense at federal
statutory rates on income before
income taxes $2,483 $2,747 $ 224 $1,203
State income taxes (net of federal
tax benefit) 424 560 33 534
Acquisition adjustments 541 543 44 2,033
1% increase in enacted tax rate 76
Other, net 35 132 (53) (21)
------ ------ ----- ------
Income tax provision $3,559 $3,982 $ 248 $3,749
====== ====== ===== ======
</TABLE>
7. RETIREMENT PLANS
As a result of the acquisition of TMCT by CCI, effective January 1,
1996, CEI established the Cox Communications, Inc. Pension Plan (the
"CCI Plan"), a noncontributory defined benefit plan for substantially
all of CCI's employees including Ashland and Defiance Clusters'
employees. The Ashland and Defiance Clusters employees will become
participants in the CCI Plan retroactive to the Merger date of
February 1, 1995. The CCI Plan will be established with a transfer of
plan assets from CEI and Times Mirror. The CCI Plan assets are
expected to have an estimated fair value equal to or greater than the
projected benefit obligation attributable to substantially all of the
Ashland and Defiance Clusters employees. Prior to February 1, 1995,
substantially all of the Ashland and Defiance Clusters' employees
participated in a similar defined benefit plan provided by TMCT.
Several of the Ashland and Defiance Clusters' employees were covered
under a separate defined benefit plan funded by the Communication
Workers of America.
F-33
<PAGE> 158
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Discount rate 7.50% 8.25% 7.25%
Rate of increase in compensation levels 6.25 6.00 5.00
Expected long-term rate of return on assets 9.75 9.50 9.00
</TABLE>
Total pension expense allocated to the Ashland and Defiance Clusters
was $53,000, $44,000, $0, and $64,000 for the years ended December 31,
1993 and 1994, for the one-month period ended January 31, 1995, and
the eleven-month period ended December 31, 1995, respectively.
Beginning February 1, 1995, CEI provides certain health care and life
insurance benefits to substantially all retirees of CEI and its
subsidiaries, Postretirement expense allocated to the Ashland and
Defiance Clusters by CEI was $14,000 for the eleven months ended
December 31, 1995.
The funded status of the portion of the postretirement plan covering
the employees of the Ashland and Defiance Clusters is not
determinable. The accumulated postretirement benefit obligation for
the postretirement plan of CEI substantially exceeded the fair value
of assets held in the plan at December 31, 1995.
Beginning February 1, 1995, substantially all of the Ashland and
Defiance Clusters employees were eligible to participate in the
savings and investment plan of CEI. Under the terms of the plan, the
Ashland and Defiance Clusters match 50% of employee contributions up
to a maximum of 6% of the employee's base salary. Prior to February 1,
1995, the Ashland and Defiance Clusters employees were eligible to
participate in a similar savings and investment plan with Times Mirror.
The Ashland and Defiance Clusters' expense under the plan was $39,000,
$43,000, $3,000, and $44,000 for the years ended December 31, 1993 and
1994, for the one-month period ended January 31, 1995, and the
eleven-month period ended December 31, 1996, respectively.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
The Ashland and Defiance Clusters borrow funds for working capital and
other needs from CEI. Certain management services are provided to the
Ashland and Defiance Clusters by CCI and CEI. Such services include
legal, corporate secretarial, tax, treasury, internal audit, risk
management, benefits administration, and other support services. Prior
to February 1, 1995, the Ashland and Defiance Clusters had similar
arrangements with Times Mirror. The Ashland and Defiance Clusters
were allocated expenses for the years ended December 31, 1993 and
1994, for the one-month period ended January 31, 1995, and the
eleven-month period ended December 31, 1995 of approximately
$1,040,000, $1,298,000, $117,000, and $1,513,000, respectively,
related to these services. Allocated expenses are based on
management's estimate of expenses related to the services provided.
Management believes that these allocations were made, on a reasonable
basis. However, the allocations are not necessarily indicative of the
level of expenses that might have been incurred had the Ashland and
Defiance Clusters contracted directly with third parties. Management
has not made a study or any attempt to obtain quotes from
third-parties to determine what the cost of obtaining such services
from third parties would have been. The fees and expenses to be paid
by the Ashland and Defiance Clusters are subject to change.
The amounts due from affiliate represent the net of various
transactions, including those described above. Prior to February 1,
1995, amounts due to Times Mirror bore interest at Times Mirror's
estimated ten-year financing rate and ranged between 6% and 8% between
1993 and 1994. Such interest charges for 1993 and 1994 were
$1,040,000 and $1,298,000, respectively. Effective February 1, 1995,
advances to affiliate are noninterest-bearing.
F-34
<PAGE> 159
In accordance with the requirements of SFAS No. 107, "Disclosures
About Fair Value of Financial Instruments," the Ashland and Defiance
Clusters have estimated the fair value of its intercompany advances.
Given the short-term nature of these advances, the carrying amounts
reported in the balance sheets approximate fair value.
9. COMMITMENTS AND CONTINGENCIES
The Ashland and Defiance Clusters lease office facilities and various
items of equipment under noncancelable operating leases. Rental
expense under operating leases amounted to $119,000 and $122,000 for
the years ended December 31, 1993 and 1994 and $163,000 for the
eleven-month period ended December 31, 1995. Future minimum lease
payments as of December 31, 1995 for all noncancelable operating
leases are as follows (thousands of dollars),
<TABLE>
<S> <C>
1996 $126
1997 103
1998 59
1999 50
2000 42
Thereafter 4
----
Total $383
====
</TABLE>
At December 31, 1995, the Ashland and Defiance Clusters had
outstanding purchase commitments totaling approximately $2 million.
The Ashland and Defiance Clusters are a party to various legal
proceedings that are ordinary and incidental to its business.
Management does not expect that any legal proceedings currently
pending will have a material adverse impact on the Ashland and
Defiance Clusters' combined financial position or combined results of
operations.
10. RATE REGULATION AND OTHER DEVELOPMENTS
In 1993 and 1994, the FCC adopted rate regulations required by the
Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"), which utilized a benchmark price cap system, or
alternatively a cost-of-service regime, for establishing the
reasonableness of existing basic and cable programming service rates.
The regulations resulted in, among other things, an overall reduction
of up to 17% in basic rates and other charges in effect on September
30, 1992, before inflationary and other allowable adjustments, if
those rates exceeded the revised per-channel benchmarks established by
the FCC and could not otherwise be justified under a cost-of-service
showing.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to
increase rates for programming annually on the basis of projected
increases in external costs rather than on the basis of cost increases
incurred in the preceding quarter.
Many franchising authorities have become certified by the FCC to
regulate rates charged by the Ashland and Defiance Clusters for basic
cable service and associated basic cable service equipment. Some local
franchising authority decisions have been rendered that were adverse
to the Ashland and Defiance Clusters. In addition, a number of such
franchising authorities and customers of the Ashland and Defiance
Clusters filed complaints with the FCC regarding the rates charged for
cable programming services.
F-35
<PAGE> 160
In September 1995, CCI and the Cable Services Bureau of the FCC
reached a settlement in the form of a resolution of all outstanding
rate complaints covering the CCI, the Ashland and Defiance Clusters,
and the former Times Mirror cable television systems. In December
1995, the FCC approved the Resolution which, among other things,
provided for refunds ($115,000 to the Ashland and Defiance Clusters'
customers) in January 1996, and the removal of additional outlet
charges for regulated services from all of the Times Mirror cable
television systems, which accounts for a majority of the refund
amounts. The resolution also finds that the Ashland and Defiance
Clusters' cable programming services tier rates as of June 30, 1995
are not unreasonable. At December 31, 1995, refunds under the
resolution were fully provided for in the Ashland and Defiance
Clusters' financial statements.
On February 1, 1996, Congress passed the Telecommunications
Competition and Deregulation Act of 1996 ("the 1996 Act") which was
signed into law by the President on February 8, 1996, The 1996 Act is
intended to promote substantial competition in the delivery of video
and other services by local telephone companies (also known as local
exchange carriers or "LECs") and other service providers, and permits
cable television operators to provide telephone services.
Among other provisions, the 1996 Act deregulates the Cable Programming
Services ("CPS") tier of large cable television operators on March 31,
1999 and upon enactment, the CPS rates of small cable television
operators where a small cable operator serves 50,000 or fewer
subscribers, revises the procedures for filing a CPS complaint, and
adds a new effective competition test.
The 1996 Act establishes local exchange competition as a national
policy by preempting laws that prohibit competition in the telephone
local exchange and by establishing uniform requirements and standards
for entry, competitive carrier interconnection, and unbundling of LEC
monopoly services. Both the FCC and state commissions have
substantial new responsibilities to promote the 1996 Act's competition
policy. Depending on the degree and form of regulatory flexibility
afforded the LECs as part of the 1996 Act's implementation, the
Ashland and Defiance Clusters' ability to offer competitive telephony
services may be adversely affected.
The 1996 Act repeals the cable television/telephone cross-ownership
ban and allows LECs and other common carriers, as well as cable
systems providing local exchange service, to provide video programming
services as either cable operators or as open video system ("OVS")
operators within their service areas upon certification from the FCC
and pursuant to regulations which the FCC is required to adopt. The
1996 Act exempts OVS operators from many of the regulatory obligations
that currently apply to cable operators such as rate regulation and
franchise fees, although other requirements are still applicable. OVS
operators, although not subject to franchise fees as defined by the
1992 Cable Act may be subject to fees charged by local franchising
authorities or other governmental entities in lieu of franchise fees.
F-36
<PAGE> 161
The Partners
C4 Media Cable Southeast, Limited Partnership
Lockney, Texas 79241
INDEPENDENT AUDITORS' REPORT
We have audited the consolidated balance sheets of C4 Media Cable Southeast,
Limited Partnership and its subsidiary (the Partnership) as of December 31,
1995, and 1994, and the related consolidated statements of loss, partners'
deficit, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our report.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of C4 Media Cable
Southeast Limited Partnership and its subsidiary as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 7
to the consolidated financial statements, the Partnership sold substantially
all assets on February 1, 1996. The sales price was not sufficient to satisfy
the liabilities of the Partnership. The remaining unpaid principal and
interest on Senior and Junior loans have been due and payable since September
30, 1990. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 7. The historical consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Williams, Rogers, Lewis & Co., P.C.
March 11, 1996
F-37
<PAGE> 162
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
------
1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash $ 203,955 204,255
Accounts Receivable, Net 168,823 141,025
Prepaid Expense and Other 211,289 201,952
----------- ----------
Total Current Assets 584,067 547,232
----------- ----------
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Plant and Equipment 41,057,969 39,251,506
Less: Accumulated Depreciation (20,386,652) (16,172,050)
----------- ----------
Net Property, Plant and Equipment 20,671,317 23,079,456
---------- ----------
OTHER ASSETS
- ------------
Deposits and Other 17,314 17,899
Franchises, Net 2,967,669 4,031,170
Acquisition Costs, Net 874,863 1,148,913
Covenant Not to Compete -0- -0-
--------- ---------
Total Other Assets 3,859,846 5,197,982
--------- ---------
Total Assets $25,115,230 28,824,670
=========== ==========
<CAPTION>
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
CURRENT LIABILITIES 1995 1994
- ------------------- ---- ----
<S> <C> <C>
Accounts Payable $ 735,138 691,305
Other Current Liabilities 393,423 568,455
Accrued Interest Payable 30,022,386 24,315,384
Notes Payable 60,165,844 60,165,844
----------- -----------
Total Liabilities 91,316,791 85,740,988
----------- -----------
MINORITY INTEREST (371,926) (268,729)
- ----------------- ----------- -----------
PARTNERS' DEFICIT
- -----------------
General Partners (65,829,635) (56,647,589)
----------- -----------
Total Liabilities and Partners' Deficit $25,115,230 28,824,670
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-38
<PAGE> 163
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF LOSS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
REVENUE
- -------
Cable Service $ 11,755,860 11,231,123
----------- -----------
EXPENSE
- --------
Programming Costs 3,003,682 2,602,692
Salaries 1,124,203 1,046,895
Other Operating Expenses 2,607,023 2,642,777
Management Fees 545,641 561,114
Depreciation 4,214,602 4,113,809
Amortization 1,337,551 1,575,551
Interest 8,208,401 7,447,251
----------- -----------
21,041,103 19,990,089
----------- -----------
Loss Before Minority Interest (9,285,243) (8,758,966)
Minority Interest in Loss
of Subsidiary 103,197 116,472
----------- -----------
NET LOSS $(9,182,046) (8,642,494)
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-39
<PAGE> 164
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Class A
General General Limited
Partners Partners Partners Total
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1993 (539,910) (47,465,185) -0- (48,005,095)
Net Loss, 1994 (86,425) ( 8,556,069) -0- ( 8,642,494)
--------- ----------- --- -----------
Balance, December 31, 1994 (626,335) (56,021,254) -0- (56,647,589)
Net Loss, 1995 (91,820) ( 9,090,226) -0- ( 9,182,046)
--------- ----------- --- -----------
Balance, December 31, 1995 $(718,155) (65,111,480) -0- (65,829,635)
========= =========== === ===========
</TABLE>
The accompanying notes am an integral part
of the financial statements.
F-40
<PAGE> 165
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES: 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
Net Loss $(9,182,046) (8,642,494)
Adjustments to reconcile net loss to net cash:
Minority interest in loss of subsidiary (103,197) (116,472)
Depreciation 4,214,602 4,113,809
Amortization 1,337,551 1,575,551
Changes in Assets and Liabilities:
Accounts receivable (27,798) 2,330
Prepaid expenses and other (8,752) (7,701)
Accounts payable 43,833 20,388
Other liabilities (175,032) 51,392
Accrued interest 5,707,002 3,928,106
----------- -----------
Net cash provided by operating activities 1,806,163 924,909
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
- ------------------------------------
Purchase of plant, equipment and other assets (1,806,463) (854,999)
----------- -----------
Net cash used in investing activities (1,806,463) (854,999)
----------- -----------
Net Increase (Decrease) in Cash (300) 69,910
Cash, Beginning of Year 204,255 134,345
----------- -----------
Cash, End of Year $ 203,955 204,255
=========== ===========
Supplemental Disclosure for Statements of Cash Flows:
Cash Paid for Interest 2,470,936 3,519,145
Non-Cash Investing Activities:
Deposit added to cost of plant and equipment -0- 39,622
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-41
<PAGE> 166
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
ENTITIES:
C4 Media Cable Southeast, Limited Partnership and its subsidiary (the
"Partnership") is a Delaware limited partnership organized to own and
operate cable television systems in various communities throughout
Virginia, Tennessee, and Georgia. The Partnership provides basic and
pay cable television service to approximately 40,500 subscribers in
these states. General partners are C4 Media Cable, Inc. and C4 Media
Cable Employees Investment Corporation. C4 Media Cable, Inc. also
participates as a limited partner. Under a letter agreement dated May
9, 1992, Philips Credit Corporation ("Philips") has exercised its
rights under certain pledge agreements to exercise voting control over
all partnership interests. Accordingly, effective October 30, 1992, C4
Media Cable, Inc. was replaced by Southeast Cable, Inc., a corporate
affiliate of Philips, as the managing general partner. The managing
general partner utilized Doucette Management Company ("DMC") as the
business manager for the Partnership until December 30, 1993 at which
time the management agreement was assigned to Cablevision of Texas III,
LP ("CAB III"). See note 4.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of C4 Media
Cable Southeast, Limited Partnership and County Cable Company, Limited
Partnership of which the Partnership is an 80% owner and general
partner. All significant intercompany transactions have been
eliminated.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION:
Property, plant and equipment used in the business are stated at cost
and depreciated over estimated useful lives generally on the straight
line method for financial statement purposes. Expenditures which
significantly increase asset values or extend useful lives are
capitalized, limited by projected recoverability of such current year
expenditures in the ordinary course of business from expected future
revenue.
The useful lives of property, plant and equipment for purposes of
computing depreciation range from 3 to 10 years.
FRANCHISES:
The company has been granted rights to operate within the
locations wherein it has cable television systems. Such franchises
grant certain operating rights and impose certain costs and
restrictions. The Partnership pays its franchise fees annually on
most of its locations based upon either gross or basic service
revenues. Franchise fee expense for the years ended December 31, 1995
and 1994 was $327,088 and $303,375, respectively.
Such franchises have varying lives and are renewable at the discretion
of the franchise's governing boards. For financial statement purposes,
franchise costs acquired in connection with the purchase of cable
systems are being amortized over the remaining average lives of the
related cable television franchises at the date of acquisition, which
approximates 7 to 13 years. Franchise amortization expense for the
years ended December 31, 1995 and 1994 was $1,063,501 in each year.
F-42
<PAGE> 167
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Page 2
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACQUISITION COSTS:
Acquisition costs are those costs incurred related to the acquisition
of new systems. For financial statement purposes, such costs are
amortized by using the straight-line method over 10 years.
Amortization expense for acquisition costs for the years ended December
31, 1995 and 1994 was $274,050, and $274,050, respectively.
COVENANTS NOT TO COMPETE:
The portion of the purchase price of systems allocated to
non-competition agreements with former owners is capitalized and
amortized by using the straight-line method over the life of the
agreements. Amortization expense for non-competition agreements for the
year ended December 31, 1994 was $238,000.
INCOME TAXES:
The partnership does not pay federal income tax, but is a pass through
entity so that partners are taxed on their share of partnership
earnings. Partnership net income or loss is allocated to each partner
under a formula established in the partnership agreement.
CASH EQUIVALENTS:
For cash flow purposes, cash equivalents are cash and cash items with
a maturity of less than 90 days.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
NOTE 2: ACCOUNTS RECEIVABLE, NET
Following is a summary of accounts receivable at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Trade Accounts $175,671 $ 146,239
Other 281 642
Related Parties (See Note 4) -0- 194,873
Less: Allowance for Doubtful Accounts
(See Note 4) (7,129) (200,729)
-------- ----------
$168,823 $ 141,025
======== ==========
</TABLE>
F-43
<PAGE> 168
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Page 3
NOTE 3: NOTES PAYABLE
Following is a summary of notes payable at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Senior loan payable to Philips, originally due September 30,
1990, interest due at prime + 2.25%, secured by substantially
all assets of the partnership and the pledge of partnership
interests. In addition, the loan is collateralized by the
pledge of all stock held in C4 Media Cable, Inc. and C4 Media
Cable, Employees Investment Corporation by the President and
Chairman of C4 Media Cable, Inc. $44,185,831 $ 44,185,831
Junior Loan payable to Philips, originally due September 30,
1990 interest due at 20%, secured by substantially all assets
of the partnership and the pledge of partnership interests.
In addition, the loan is collateralized by the pledge of all
stock held in C4 Media Cable, Inc. and C4 Media Cable
Employees Investment Corporation by the President and Chairman
of C4 Media Cable, Inc. 15,980,013 15,980,013
----------- ----------
Total $60,165,844 $ 60,165,844
=========== ==========
</TABLE>
The Philips notes contain performance covenants concerning homes
passed, subscriber levels, miles of plant, etc., some of which the
Partnership had violated as of December 31, 1995 and 1994. Philips has
not waived compliance with these provisions.
All notes payable and accrued interest to Philips were due
September 30, 1990. Philips has the right to demand payment at any
time. A significant amount of accrued interest and principle was paid
when substantially all operating assets of the Partnership were sold
February 1, 1996. See note 7.
F-44
<PAGE> 169
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Page 4
NOTE 4: RELATED PARTY TRANSACTIONS
Effective October 30, 1992, C4 Media Cable, Inc. was replaced by
Southeast Cable, Inc., a corporate affiliate of Philips, as the
managing general partner. Effective May 10, 1992 under the provisions
of an agreement with Philips, the Partnership terminated its
management agreement with C4 Media Cable, Inc. and entered into a
management agreement with DMC for a term extending to December 30,
1993. At December 30, 1993 the management agreement was assigned to
CAB III. The agreement provides for fixed fees and the reimbursement
of direct expenses incurred on behalf of the Partnership as defined in
the agreement. Management fees paid under these agreements for the
years ended December 31, 1995 and 1994 were $545,641 and $550,214,
respectively. Other fees and expense reimbursements paid under the
agreements for the years ended December 31, 1995 and 1994 were
$120,000 and are included in Other Operating Expenses.
Other related parties include Caribbean Cable TV ("CCTV") and MCT
Cablevision ("MCT"). Related party lending was done without
independent business judgment, terms, collateral or a method of
settlement. Due to the manner in which this lending was done and
questions surrounding the collectibility of these accounts, all the
related party receivables were reserved in the allowance for doubtful
accounts prior to 1994 and were written off in 1995. See note 2.
Related party receivables at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1994
----
<S> <C>
CCTV $ 23,965
MCT 35,968
C4 Media Cable, Inc. 134,940
--------
$194,873
========
</TABLE>
The Partnership purchased leasehold improvements from J-D Partnership,
Ltd. ("J-D") for the Lockney, Texas office of $5,366 on April 24, 1995.
J-D is a limited partnership 99% owned by James and Denise Doucette
(Doucette). Doucette is also the managing general partner and owns
62% of CAB III, as well as being the sole stockholder of DMC, an
S-Corporation. The Partnership paid a management fee to Doucette of
$10,900 for the year ended December 31, 1994.
NOTE 5: COMMITMENTS
The Company has certain obligations under pole rental agreements,
tower site leases, etc. for assets utilized in the operation of the
systems. These are mostly short term agreements. Expenses charged to
operations for the periods ended December 31, 1995 and 1994 were
$536,368 and $518,837, respectively, and are included in Other
Operating Expenses.
NOTE 6: CONTINGENCIES
The Company is to a significant degree self-insured for risks
consisting primarily of physical loss to property and plant. The
headend equipment is insured, but the plant itself is not and
represents a potential exposure for the Company. Management is of the
opinion that the various systems' distance from each other make the
likelihood of a complete loss to the plant unlikely.
F-45
<PAGE> 170
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Page 5
NOTE 7: SUBSEQUENT EVENT AND CONSIDERATION OF ABILITY TO
CONTINUE AS A GOING CONCERN
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business.
On February 1, 1996 substantially all assets of the Partnership were
sold to FrontierVision Operating Partners, L.P. The agreement had a
stated sales price of $48,000,000 and a net payment amount of
$46,237,708 after escrow holdback of $1,375,200 and other adjustments.
At the date of the auditors' report the Partnership was still liable
for the remaining balance of the note payable to Philips with no
significant assets to satisfy that liability, and the escrow items
remain open.
An unaudited pro forma consolidated balance sheet is presented below
giving effect to the sale as if it had occurred December 31, 1995
including escrowed items. The pro forma information is presented
for the purpose of additional analysis and is not a required part
of the basic consolidated financial statements.
Pro-forma
Unaudited
1995
----------
Current Assets $ 685,773
Other Assets 1,392,514
---------
Total Assets $ 2,078,287
=========
Current Liabilities $ 45,303,939
Partners' Deficit (43,225,652)
----------
Total Liabilities and Partners' Deficit $ 2,078,287
==========
The Partnership has been unable to pay all of its principle and
interest as required under its loan agreements since the loans
matured September 30, 1990.
These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. The historical consolidated
financial statements do not include any adjustments that might result
from this sale of assets or this uncertainty. Management has not
fully evaluated the options for the Partnership subsequent to the
sale.
F-46
<PAGE> 171
INDEPENDENT AUDITORS' REPORT
American Cable Entertainment of Kentucky-Indiana, Inc.
We have audited the accompanying balance sheets of American Cable Entertainment
of Kentucky-Indiana, Inc. (the "Company") as of December 31, 1995 and 1994 and
the related statements of operations, shareholders' deficiency and cash flows
for each of the the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of American Cable Entertainment of
Kentucky-Indiana, Inc. as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that American
Cable Entertainment of Kentucky-Indiana, Inc. will continue as a going concern.
As discussed in Note 1 to the financial statements, the Company is unable to
meet its scheduled debt maturity repayments which raises substantial doubt
about the Company's ability to continue as a going concern. Consequently, the
Company has entered into an agreement to sell all of its assets, has entered
into agreements with its creditors who have consented, under certain
circumstances, to forbear taking any action against the Company pending the
sale of the Company and has filed a prepackaged bankruptcy under Chapter 11 of
the Federal Bankruptcy Code. Management's plans in regard to these matters are
described further in Note 1. The accompanying financial statements do not
purport to reflect or provide for the consequences of the sale of the Company or
the filing of the prepackaged bankruptcy. In particular, such financial
statements do not purport to show the realizable value of assets or liabilities
on a liquidation basis nor do they include any adjustments that might result
from the outcome of these uncertainties.
DELOITTE & TOUCHE LLP
STAMFORD, CT
March 15, 1996 (Except for Note 1, as to
which the date is August 1, 1996.)
F-47
<PAGE> 172
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
- ------
MARCH 31, 1996 DECEMBER 31, DECEMBER 31,
(Unaudited) 1995 1994
----------- ---- ----
<S> <C> <C> <C>
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements $ 247,561 $ 247,561 $ 247,561
Vehicles 1,757,546 1,702,997 1,507,850
Buildings and improvements 998,414 998,414 967,794
Office furniture and equipment 802,377 802,377 733,465
CATV distribution systems and
related equipment 52,266,722 51,757,161 49,161,506
---------- ---------- ----------
Total Fixed Assets 56,072,620 55,508,510 52,618,176
Less accumulated depreciation 30,208,687 28,887,790 23,683,730
---------- ---------- ----------
Total Fixed Assets - net 25,863,933 26,610,720 28,934,446
Franchise costs - net 2,089,128 2,785,425 5,964,805
Subscriber lists - net 1,157,480 1,543,307 3,531,021
Covenant not to compete - net 60,511 80,682 242,045
---------- ---------- ----------
Investment in cable television systems - net 29,171,052 31,020,134 38,672,317
GOODWILL - net 3,553,155 3,579,784 3,686,299
DEFERRED CHARGES - net 305,879 371,691 963,949
CASH AND CASH EQUIVALENTS 1,939,451 3,704,823 3,427,849
ACCOUNTS RECEIVABLE - less allowance
for doubtful accounts of $270,636 in 1996,
$240,212 in 1995 and $195,736 in 1994 348,491 304,734 276,709
PREPAID AND OTHER 165,370 197,802 194,514
---------- ---------- ----------
TOTAL ASSETS $35,483,398 $39,178,968 $ 47,221,637
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES:
Notes and loans payable $184,976,901 $182,430,902 $167,707,411
Accrued interest-Senior debt 680,505 1,314,032 329,004
Accrued interest-Senior/Junior Subordinated
Debentures 4,545,401 3,068,862 4,345,047
Accounts payable and accrued expenses 3,005,326 4,244,348 3,973,224
Unearned income 160,554 124,109 124,344
Converter deposits 134,688 134,366 136,588
------------- ------------- -------------
Total Liabilities 193,503,375 191,316,619 176,615,618
------------- ------------- -------------
COMMITMENTS (See Note 7)
SHAREHOLDERS' DEFICIENCY:
Capital stock - all series 10,000 10,000 26
Additional paid-in capital 1,490,000 1,490,000 1,499,974
Deficit (159,519,977) (153,637,651) (130,893,981)
------------- ------------- -------------
Total shareholders' deficiency (158,019,977) (152,137,651) (129,393,981)
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 35,483,398 $ 39,178,968 $ 47,221,637
============= ============= =============
</TABLE>
See notes to financial statements
F-48
<PAGE> 173
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH ENDED ENDED ENDED
31, 1996 31, 1995 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1995 1994 1993
----------- ----------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $7,606,789 $ 6,794,072 $28,088,127 $25,879,525 $24,976,818
---------- ----------- ----------- ----------- -----------
Costs and expenses:
Operating expenses 2,804,965 2,568,180 10,880,854 9,388,813 8,699,878
Selling, general and administrative expenses 1,240,556 1,201,022 4,948,493 4,912,150 4,743,783
---------- ----------- ----------- ----------- -----------
Total costs and expenses 4,045,521 3,769,202 15,829,347 14,300,963 13,443,661
---------- ----------- ----------- ----------- -----------
Operating Income before management fees,
depreciation and amortization, and override
and forbearance expenses 3,561,268 3,024,870 12,258,780 11,578,562 11,533,157
---------- ----------- ----------- ----------- -----------
Management fees 226,204 203,822 842,644 819,095 749,305
Depreciation and amortization 2,516,958 3,061,733 11,284,315 18,054,371 18,231,734
Expenses incurred in connection with override
and forbearance agreements 510,122 0 557,664 0 0
---------- ----------- ----------- ----------- -----------
Operating Income (Loss) 307,984 ( 240,685) ( 425,843) (7,294,904) (7,447,882)
Interest expense - net 6,190,310 5,275,400 22,366,189 20,241,202 18,410,503
Net gain on sale of cable television system
and marketable securities 0 0 48,362 1,266,020 0
---------- ----------- ----------- ----------- -----------
Net Loss $(5,882,326) $(5,516,085) $(22,743,670) $(26.270,086) $(25,858,385)
============ ============ ============= ============= =============
</TABLE>
See notes to financial statements.
F-49
<PAGE> 174
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------------------
NUMBER OF
SHARES ADDITIONAL TOTAL
ISSUED AND PAR PAID-IN SHAREHOLDERS'
OUTSTANDING VALUE CAPITAL DEFICIT DEFICIENCY
----------- ----- ------- ------- ----------
CLASS CLASS
------------------ ------------------
A D A D
- - - -
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1993 255 $26 $1,499,974 $( 78,765,510) $(77,265,510)
NET LOSS ( 25,858,385) (25,858,385)
----- ---- ---------- ------------- -------------
BALANCE AT
DECEMBER 31, 1993 255 26 1,499,974 (104,623,895) (103,123,895)
NET LOSS ( 26,270,086) (26,270,086)
----- ---- ---------- ------------- -------------
BALANCE AT
DECEMBER 31, 1994 255 26 1,499,974 (130,893,981) (129,393,981)
NET LOSS (22,743,670) (22,743,670)
RECAPITALIZATION OF
COMMON STOCK (254) 99,999 (26) $10,000 ( 9,974)
----- ------ ---- ------- ---------- -------------- -------------
BALANCE AT
DECEMBER 31, 1995 1 99,999 0 10,000 1,490,000 (153,637,651) (152,137,651)
NET LOSS (Unaudited) (5,882,326) ( 5,882,326)
----- ------ ---- ------- ---------- -------------- -------------
BALANCE AT MARCH 31,
1996 (Unaudited) 1 99,999 $ 0 $10,000 $1,490,000 $(159,519,977) $(158,019,977)
==== ====== === ======= ========== ============== ==============
</TABLE>
See notes to financial statements
F-50
<PAGE> 175
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS MONTHS FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH ENDED ENDED ENDED
31, 1996 31, 1995 DECEMBER DECEMBER DECEMBER
(UNAUDITED) (UNAUDITED) 31, 1995 31, 1994 31, 1993
----------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,882,326) $(5,516,085) $(22,743,670) $(26,270,086) $(25,858,385)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation 1,322,222 1,498,448 5,257,085 6,397,956 5,452,940
Amortization 1,194,736 1,563,285 6,027,230 11,656,415 12,778,794
Accretion of discount on step coupon
senior subordinated notes 2,747,014 2,604,144 10,171,124 9,519,095 8,189,478
Accretion of discount on junior subordinated
debentures 1,476,540 1,354,645 5,416,469 4,820,269 4,231,918
Net gain on sale of cable television system,
marketable securities, and other assets ( 48,362) (1,266,020)
Change in assets and liabilities:
Decrease (increase) in accounts receivable ( 43,757) 101,994 ( 28,025) ( 94,868) 23,917
Decrease (increase) in prepaid and
other assets 32,432 ( 48,958) ( 3,288) 51,799 ( 59,414)
(Decrease) increase in accounts payable
and accrued expenses ( 1,239,022) ( 782,517) 271,124 ( 414,333) 169,808
(Decrease) increase in accrued interest-senior
debt ( 633,527) 41,215 985,028 129,505
Increase (decrease) in converter deposits 322 1,270 ( 2,222) ( 237) ( 9,384)
Increase (decrease) in unearned income 36,445 47,715 ( 235) ( 91,827) 9,518
----------- --------- ---------- ----------- -----------
Net cash (used in) provided by operating ( 988,921) 865,156 5,302,258 4,437,668 4,929,190
activities ----------- --------- ---------- ----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to reception and distribution
facilities and equipment ( 575,435) ( 656,297) (2,933,359) (3,605,498) (5,083,401)
Net proceeds from sale of assets 48,362 1,523,137
----------- --------- ---------- ----------- -----------
Net cash used in investing activities ( 575,435) ( 656,297) (2,884,997) (2,082,361) (5,083,401)
----------- --------- ---------- ----------- -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Payments on senior bank loan ( 76,340) ( 1,262,542) ( 309,165)
Payments on senior revolving credit facility ( 18,621) ( 131,616) ( 3,668)
Payments on senior secured notes ( 105,040) ( 742,447) ( 20,712)
Increase in deferred charges ( 1,015) ( 18,188) ( 186,563) ( 598)
(Decrease) increase in obligations under capital
lease ( 1,015) ( 3,682) 7,281
----------- --------- ---------- ----------- -----------
Net cash used in financing activities ( 201,016) ( 19,203) ( 2,140,287) ( 512,827) ( 598)
----------- --------- ---------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents (1,765,372) 189,656 276,974 1,842,480 ( 154,809)
Cash and cash equivalents at beginning of period 3,704,823 3,427,849 3,427,849 1,585,369 1,740,178
----------- --------- ---------- ----------- -----------
Cash and cash equivalents at end of period $ 1,939,451 $ 3,617,505 $3,704,823 $ 3,427,849 $ 1,585,369
=========== =========== ========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,992,611 $ 1,403,473 $ 6,900,613 $ 5,952,791 $ 6,038,557
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial Statements
F-51
<PAGE> 176
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED AS TO MARCH 31, 1996 AND 1995)
1. DEBT MATURITIES AND THE SALE OF THE COMPANY
During the fourth quarter of 1995 the Company's senior debt obligations
matured without being paid. In addition, the Company failed to make the
full payment of interest on the Step Coupon Senior Subordinated Notes
which became due in 1995.
Prompted by these payment defaults, effective December 31, 1995, the
Company, its shareholders, and Kentucky-Indiana Management Company, Inc.
("KYMC"), which acts as manager for the Company, entered into two
agreements: a "Forbearance Agreement" with its senior lenders; and an
"Override Agreement" with the holders of its Senior Subordinated and
Junior Subordinated Notes.
Under the terms of the Forbearance Agreement the senior lenders have
agreed to forebear in the exercise of their rights and remedies with
respect to the payment default described above as well as defaults with
respect to certain specified financial covenants, through September 30,
1996 which allows the Company time to sell its assets in an orderly
manner. It contains certain financial covenants as well as procedures
that the Company and KYMC have agreed to follow during the sales process.
Subsequent to September 30, 1996, certain financial covenants, which the
Company is currently in default upon, revert back to the terms in the
original agreements.
The Override Agreement requires that the Company undertake to sell
substantially all of its assets, and to enter into a contract for sale and
to consummate that sale in accordance with an agreed upon time schedule.
It also contains certain financial covenants and procedures to be
followed.
Effective July 15, 1996, the Company entered into an asset purchase
agreement with FrontierVision Operating Partners, L.P. ("FrontierVision")
for the sale of the assets of the Company for $146 million, subject to
certain purchase price adjustments. Due to the expected shortfall of
payments to existing creditors from the sale proceeds, the Company filed a
prepackaged bankruptcy under Chapter 11 of the Federal Bankruptcy code
with the Federal Bankruptcy court on August 1, 1996. Management
anticipates the sale to FrontierVision to be consummated in the fourth
quarter of 1996, subject to the required regulatory approvals and the
approval of the bankruptcy court. There are no assurances that this
sale will be consummated.
As a result of the matters discussed above, Management does not believe
that it is practical to estimate the fair value of the Company's debt
facilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Accordingly, the
financial statements do not reflect adjustments or provide for the
potential consequences of the sale of the Company's assets. In
particular, the financial statements do not purport to show the realizable
value of assets on a liquidation basis or their availability to satisfy
liabilities.
FORMATION OF COMPANY
On November 7, 1989 cable systems were purchased from Centel Cable
Television Company to form Simmons Cable TV of Kentucky-Indiana, Inc. (the
"Company"). The Company owns and operates cable systems in Kentucky and
Indiana. On April 12, 1994 the Company changed its name to American Cable
Entertainment of Kentucky-Indiana, Inc.
F-52
<PAGE> 177
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from those
estimates.
INVESTMENT IN CABLE TELEVISION SYSTEMS
Reception and distribution facilities and equipment additions are stated
at cost. Depreciation is provided using the straight-line method over the
useful lives of the assets (four to ten years for CATV distribution
facilities and related equipment, vehicles, building improvements and
office furniture and equipment; forty years for buildings). Included in
depreciation expense for the year ended December 31, 1994 were write-offs
related to a rebuilt cable system of $942,850.
Franchise acquisition costs are amortized over the average remaining term
of the franchises as of November 7, 1989 of seven years using the
straight-line method, Accumulated amortization of franchise costs at March
31, 1996, December 31, 1995 and 1994 aggregated $20,166,530, $19,470,233
and $16,290,853, respectively.
Covenants not to compete are amortized over the life of the agreements
(five years). Accumulated amortization of such covenants at March 31,
1996 December 31, 1995, and 1994 aggregated $746,306, $726,315 and
$564,772, respectively.
Subscriber lists are amortized over seven years. Accumulated amortization
of subscriber lists at March 31, 1996, December 31, 1995 and 1994
aggregated $12,756,520, $12,370,693 and $10,382,979, respectively.
Deferred charges consist of $882,408 of organizational costs and $3,616,230
of loan acquisition costs at December 31, 1995. The loan acquisition
costs are amortized over the average life of the related debt, and
organizational costs are amortized over five years. Accumulated
amortization at March 31, 1996, December 31, 1995 and 1994 was $4,192,759
$4,126,947 and $3,534,689, respectively.
Goodwill is amortized over forty years. Accumulated amortization of
goodwill at March 31, 1996, December 31, 1995 and 1994 aggregated
$707,454, $680,825 and $574,310,
respectively.
VALUATION OF INTANGIBLE ASSETS
The Company, on an annual basis, undertakes a review and valuation of the
net carrying value, recoverability and write-off of all categories of its
intangible assets. The Company in its valuation considers current market
values of its properties, competition, prevailing economic conditions,
government policy including taxation, and the Company's and the industry's
historical and current growth patterns, as well as the recoverability of
the cost of its intangible assets based on a comparison of estimated
undiscounted operating cash flows.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and liquid investments with a
maturity of three months or less from the date of purchase.
INCOME TAXES
The Company has elected to be taxed as an S Corporation under the Internal
Revenue Code and, accordingly, pays no federal income taxes. The income
or loss of the Company for its tax year is passed through to its
shareholder(s) and reported in the income tax returns of the
shareholder(s).
SUBSCRIPTION REVENUES
Subscription revenues received in advance of services rendered are
deferred and recorded in income in the period in which the related
services are provided.
F-53
<PAGE> 178
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations or credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's
customer base.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term maturity of
these financial instruments. Management does not believe it is
practicable to estimate the fair value of the Company's debt facilities.
(See Note 4).
3. DISPOSITIONS
On June 30, 1994 the Company sold its cable television system serving
Jackson County, Kentucky. The carrying value of the assets sold at the
date of sale, net of accumulated depreciation and amortization was as
follows:
Reception and distribution facilities and equipment $69,527
Franchise cost 55,714
Goodwill and other intangible assets 50,300
The net loss on this transaction was $157,630, recognized in 1994.
Additional proceeds of $48,362 were received in 1995 and recorded as a
gain.
On October 17, 1994 the Company tendered all of its holding in QVC, Inc.,
which resulted in a gain of $1,423,650.
These transactions are reflected in the statements of operations for the
years ended December 31, 1995 and 1994.
4. NOTES AND LOANS PAYABLE
Notes and loans payable at March 31, 1996 and December 31, 1995 and 1994
are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Senior Debt
Bank Credit Agreement (a) $ 23,351,954 $23,428,293 $24,690,835
Revolving Credit Facility (b) 5,696,095 5,714,716 5,846,332
Senior Secured Notes (c) 32,131,801 32,236,841 32,979,288
Step Coupon Senior Subordinated Notes (d) 80,763,678 78,016,664 66,137,000
Junior Subordinated Debentures (e) 43,030,789 43,030,789 38,046,675
Capitalized lease obligation 2,584 3,599 7,281
------------ ------------ ------------
$184,976,901 $182,430,902 $167,707,411
============ ============ ============
</TABLE>
(a) The Company has a credit agreement with Crestar Bank providing for total
borrowings of $25,000,000. This agreement provided for interest up to 1.5
percentage points over the bank's prime rate (or from 1.0 to 2.5
percentage points over LIBOR). Interest only was payable quarterly in
arrears on the last day of March, June, September and December, and at the
end of any LIBOR borrowing period. The total commitment terminated at its
maturity date of October 31, 1995. Upon the payment default at maturity,
the default rate of prime plus 4% was charged. Upon the effective date of
the Override Agreement, interest is payable monthly at the rate of 11.75%
per annum.
F-54
<PAGE> 179
(b) The Company has a revolving credit facility with Sanwa Business Credit
Corporation which originally provided for borrowings of up to
$15,000,000. The total commitment was reduced to $7,000,000 in early
1994, and in December 1994, the balance of the unused commitment was
terminated. The agreement provided for interest of up to 1.5 points over
the Sanwa's prime rate (or from 1.0 to 2.5 percentage points over LIBOR).
Interest was payable quarterly in arrears on the last day of March, June,
September and December, and at the end of any LIBOR borrowing period. The
total commitment terminated at its maturity date of October 31, 1995.
Upon the payment default at maturity, the default rate of prime plus 4%
was charged. Upon the effective date of the Override Agreement, interest
is payable monthly at the rate of 11.75% per annum.
(c) Senior Secured Notes were issued on November 7, 1989 bearing interest at
10.125% and matured November 7, 1995. The interest rate increased to
10.225% effective January 1, 1991. Interest only was payable quarterly in
arrears on the last day of March, June, September and December. Upon the
payment default at maturity, interest was charged at 12.25%. Upon the
effective date of the Override Agreement, interest is payable monthly at
the rate of 11.75% per annum.
(d) Step Coupon Senior Subordinated Notes due April 30, 1996 were issued on
November 7, 1989 in the principal amount of $66,137,000 with a stated
interest rate of 15.7472%. Interest accreted and compounded semi-annually
through October 31, 1994. Although interest payments of $5,125,618 were
payable semi-annually beginning April 30, 1995 until maturity, only
$700,000 of interest has been paid. These notes were issued with warrants
to purchase up to 150 shares of Class C Non-voting Common Stock for an
aggregate exercise price of $330,000. As a result of the recapitalization
(See Note 5), the number of shares the warrant holders were entitled to
purchase was increased to 58,531 shares of the Class C stock. There are
certain restrictions as to when the warrants may be exercised, and they
expire on November 7, 2001. Total proceeds from the issuance of these
warrants amounted to $200,000. Accreted interest was $14,626,678,
$11,879,664 and $1,708,540 at March 31, 1996, December 31, 1995 and
December 31, 1994, respectively.
(e) Junior Subordinated Debentures due October 31, 1997, were issued on
November 7, 1989 for $20,800,000, bearing interest at 13.1%. Interest is
deferred and compounds annually on September 30 of each year and is
payable on the maturity date. On the maturity date, the Company shall pay
as additional interest on the Notes, an amount equal to the greater of 4%
of net operating income of the Company from November 7, 1989 through and
including the maturity date, or 15% of the fair market value of the
Company, but in no event shall the amount exceed $2,153,000. Accreted and
accrued interest was $26,776,191, $25,299,651 and $19,883,183 at March 31,
1996, December 31, 1995 and December 31, 1994, respectively. These notes
were issued with warrants to purchase up to 595 shares of common stock and
up to 1,000 shares of 6% non-cumulative preferred stock. These warrants
are exercisable in whole or in part through November 7, 1999 for an
aggregate exercise price of $2,000,000. Upon exercise, the warrants can be
converted into either Class A Voting Stock or Class B Non-Voting Stock at
the option of the warrant holder. Shares will be issued in the ratio of
.595 shares of common stock to each share of preferred stock. As a result
of the recapitalization (See Note 5), the number of shares the warrant
holders were entitled to purchase was increased to 233,359 shares of common
stock, in the ratio of 233.359 shares of common stock to each share of
preferred stock. Total proceeds from the issuance of these warrants
amounted to $1,200,000.
The Senior Subordinated and Junior Subordinated Notes will continue to earn
interest at the rate of 15.5% and 13.1%, respectively, although, unless any of
certain specified defaults occur, net proceeds of a sale will be distributed as
provided for in the Override Agreement. The Company leased equipment under a
lease agreement which is classified as a capital lease. The lease term is 3
years and expires in December, 1996.
In 1989 the Company entered into an interest cap agreement and an interest
floor agreement covering $25,000,000 of borrowings which expired November 1,
1994. Under the cap agreement, Fleet Bank, (as successor to Bank of New
England), made payments to the Company on a quarterly basis in an amount equal
to $25,000,000 multiplied by the excess of the then current three month LIBOR
rate over 9%. Under the floor agreement, the Company made payments to Crestar
Bank on a quarterly basis in an amount equal to $25,000,000 multiplied by the
difference between the then current three month LIBOR rate and 8%, to the
extent that the three month LIBOR rate is less than 8%. Approximately 793,000
was charged to interest expense and paid in 1994 relating to the floor
agreement.
The Senior Debt and Senior Subordinated Notes are secured by substantially all
the assets of the Company. The Company's debt agreements contain certain
restrictive covenants requiring the maintenance of minimum subscriber levels
and certain financial ratios. The Company has not been in compliance with
certain covenants in its debt agreements, including the timely payment of
principal and interest. (See Note 1).
F-55
<PAGE> 180
DEBT MATURITIES
All of the Company's debt is due upon the consummation of the sale of the
Company in accordance with the Forbearance and Override Agreements. (see
Note 1).
5. CAPITAL STOCK
The Company's Board of Directors adopted a resolution on December 31, 1995
which, among other things, established a new class of common stock (Class
D), and authorized the exchange of the outstanding Class A shares for one
share of Class A and 99,999 shares of Class D. Additional shares of Class
B and Class C stock were authorized as well. The Company's Certificate of
Incorporation was amended on February 29, 1996 to reflect these changes.
Capital stock of the Company at December 31, 1994 and prior to the
December 31, 1995 resolution noted above, consisted of the following:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
ISSUED AND
AUTHORIZED OUTSTANDING
<S> <C> <C>
Common Stock
Class A - $.10 par value 850 255
Class B - $.10 par value 595
Class C - $.10 par value 150
6% Non-cumulative Preferred
Stock $1,000 par value 1,000
</TABLE>
Capital stock of the Company after the recapitalization consists of the
following at March 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
ISSUED AND
AUTHORIZED OUTSTANDING
<S> <C> <C>
Common Stock
Class A - $.10 par value 233,360 1
Class B - $.10 par value 231,940
Class C - $.10 par value 58,531
Class D - $.10 par value 99,999 99,999
6% Non-cumulative Preferred
Stock $1,000 par value 1,000
</TABLE>
The Class A common stock is voting. The Class B, Class C and Class
D shares are non-voting. Class B shares are convertible into Class A
shares at a rate of one for one. See Note 4 for disclosure of warrants for
unissued capital stock at December 31, 1995 and 1994.
6. TRANSACTIONS WITH RELATED PARTIES
KYMC acts as manager for the Company. In accordance with the management
agreement, KYMC is paid a management fee equal to 3% of total revenue (as
defined in the management agreement) plus out-of-pocket expenses not to
exceed 1% of total revenue. The management fee for the three months ended
March 31, 1996 and 1995 and the years ended December 31, 1995, 1994 and
1993 was $226,204, $203,822, $842,644, $819,095 and $749,305 respectively.
Included in accounts payable and accrued expenses at December 31, 1994 is
a payable in the amount of $151,190 to Scott Cable Communcations, Inc.
("Scott"), an affiliated Company, for certain administrative costs paid
by Scott on behalf of the Company.
7. COMMITMENTS
The Company rents pole space, office space and equipment under operating
leases. Future minimum payments, by year and in the aggregate, under
noncancelable operating leases with terms of one year or more are as
follows:
<TABLE>
<S> <C>
1996 $132,081
1997 104,417
1998 59,412
1999 56,006
2000 45,182
Thereafter 53,675
--------
Total $450,773
========
</TABLE>
Rent expense for the three months ended March 31, 1996 and 1995 and the
years ended December 31, 1995, 1994 and 1993 was $47,318, $49,592,
$202,652, $204,164 and $207,901 respectively.
F-56
<PAGE> 181
8. 401K RETIREMENT/SAVINGS PLAN
The Company's employees are covered by a 401(k) retirement/savings plan
covering all employees who meet service requirements. Total plan expenses
for the three months ended March 31, 1996 and 1995 and the years ended
December 31, 1995, 1994 and 1993 was $2,903, $3,749, $7,660, $5,769 and
$7,099, respectively.
9. REGULATORY MATTERS
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") which
regulates the cable television industry. Pursuant to the 1992 Cable Act,
the Federal Communications Commission (the "FCC") has issued numerous
regulations which include provisions regarding rates and other matters.
As a result of these rules, the Company was required to reduce many of its
basic service rates effective September 1, 1993, and again on August 1,
1994.
On June 5, 1995, the FCC extended regulatory relief to small cable
operators. All of the Company's cable systems qualified for this
regulatory relief, which allows for greater flexibility in establishing
rates (including increases). On February 8, 1996, Congress enacted the
1996 Telecommunications Act which, among other things, immediately
deregulated all levels of service except broadcast basic service for small
cable operators for which all of the Company's cable systems qualified.
F-57
<PAGE> 182
Report of Independent Public Accountants
To Triax Southeast Associates, L.P.:
We have audited the accompanying balance sheets of TRIAX SOUTHEAST ASSOCIATES,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for the
years ended December 31, 1995, 1994 and 1993. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triax Southeast Associates,
L.P. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years ended December 31, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 27, 1996.
F-58
<PAGE> 183
TRIAX SOUTHEAST ASSOCIATES, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------------------
1996 1995 1994
-------------- ------------- ------------
ASSETS (Unaudited)
------
<S> <C> <C> <C>
CASH $ 3,097,029 $ 3,380,723 $ 699,077
RECEIVABLES, net of allowance
of $899, $29,985 and $52,302 at March 31, 1996
and December 31, 1995 and 1994, respectively 614,170 600,866 542,832
PREPAID EXPENSES 182,064 167,908 174,821
INVENTORY 345,988 346,274 444,624
PROPERTY, PLANT AND EQUIPMENT, net 37,836,576 38,761,227 36,496,820
PURCHASED INTANGIBLES, net 9,122,683 9,542,002 10,105,115
OTHER ASSETS, net 881,012 933,591 1,118,718
----------- ----------- -----------
TOTAL ASSETS $52,079,522 $53,732,591 $49,582,007
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
ACCRUED INTEREST EXPENSE $ 254,654 $ 258,223 $ 168,559
ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES 1,426,853 1,710,636 1,962,757
SUBSCRIBER PREPAYMENTS AND DEPOSITS 65,564 71,105 42,470
PAYABLE TO AFFILIATES 237,573 239,021 227,355
DEBT 41,614,901 42,546,539 35,787,218
----------- ----------- -----------
TOTAL LIABILITIES 43,599,545 44,825,524 38,188,359
PARTNERS' CAPITAL:
General Partner (55,200) (50,929) (26,063)
Limited Partners 8,535,177 8,957,996 11,419,711
----------- ----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $52,079,522 $53,732,591 $49,582,007
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-59
<PAGE> 184
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------------- --------------------------------------------
1996 1995 1995 1994 1993
---------- ----------- ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $4,722,028 $4,074,693 $17,780,041 $15,057,652 $7,810,891
---------- ---------- ----------- ----------- ----------
EXPENSES:
Programming 952,906 774,240 3,400,604 2,661,058 1,128,730
Operating, selling, general and
administrative 1,304,712 1,176,782 5,104,803 4,489,003 2,268,325
Overhead expenses paid to affiliate 57,263 48,569 211,993 176,705 74,393
Management fees paid to affiliate 236,101 203,737 888,996 752,882 390,545
Depreciation and amortization 1,802,557 1,721,795 7,344,035 6,252,573 3,307,310
---------- ---------- ----------- ----------- ----------
4,353,539 3,925,123 16,950,431 14,332,221 7,169,303
Operating Income 368,489 149,570 829,610 725,431 641,588
Interest Expense, net 795,579 786,377 3,316,191 2,359,980 1,056,256
---------- ---------- ----------- ----------- ----------
NET LOSS $ (427,090) $ (636,807) $(2,486,581) $(1,634,549) $ (414,668)
========== ========== =========== =========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-60
<PAGE> 185
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
--------- ---------- -----------
<S> <C> <C> <C>
Balances, December 31, 1992 $ (5,571) $ 6,448,436 $ 6,442,865
Contributions --- 7,000,000 7,000,000
Net loss (4,147) (410,521) (414,668)
-------- ----------- -----------
Balances, December 31, 1993 (9,718) 13,037,915 13,028,197
Net loss (16,345) (1,618,204) (1,634,549)
-------- ----------- -----------
Balances, December 31, 1994 (26,063) 11,419,711 11,393,648
Net loss (24,866) (2,461,715) (2,486,581)
-------- ----------- -----------
Balances, December 31, 1995 (50,929) 8,957,996 8,907,067
Net loss (unaudited) (4,271) (422,819) (427,090)
-------- ----------- -----------
Balances, March 31, 1996 (unaudited) $(55,200) $ 8,535,177 $ 8,479,977
======== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-61
<PAGE> 186
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
-------------------------- --------------------------------------
1996 1995 1995 1994 1993
----------- ---------- ---------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (427,090) $ (636,807) $(2,486,581) $(1,634,549) $ (414,668)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization 1,802,557 1,721,795 7,344,035 6,252,573 3,307,310
(Increase) decrease in receivables, net (13,304) (123,877) (58,034) 6,042 (345,197)
(Increase) decrease in prepaid expenses (14,156) (80,613) 6,913 (128,309) (20,657)
(Decrease) increase in accrued interest expense (3,569) (7,355) 89,664 26,923 (45,894)
(Decrease) increase in accounts payable
and other accrued expenses (283,783) (215,102) (252,121) 803,714 274,125
(Decrease) increase in subscriber
prepayments and deposits (5,541) 86,978 28,635 (3,886) 17,495
(Decrease) increase in payable to affiliates (1,448) (7,908) 11,666 72,286 30,849
---------- ----------- ----------- ----------- ------------
Net cash flows from operating activities 1,053,666 737,111 4,684,177 5,394,794 2,803,363
---------- ----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties, including
purchased intangibles (184,000) (6,186,668) (6,065,116) (74,203) (25,342,487)
Purchase of property, plant and equipment (405,880) (807,155) (2,369,183) (3,643,894) (1,269,346)
(Increase) in inventory 286 45,971 98,350 263,815 (610,502)
Increase in franchise costs and other assets (128) (10,631) (10,387) (121,663) ---
---------- ----------- ----------- ----------- ------------
Net cash flows from investing activities (589,722) (6,958,483) (8,346,336) (3,575,945) (27,222,335)
---------- ----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings --- 5,584,000 9,400,000 1,000,000 19,400,000
Repayment of borrowings (715,000) --- (2,880,000) (2,500,000) (1,400,000)
Partners' contributions --- --- --- --- 7,000,000
Cash paid for loan costs --- (88) (66,520) (117,107) (340,789)
Repayment of capital lease obligations (32,638) (22,261) (109,675) (60,007) (24,725)
---------- ----------- ----------- ----------- ------------
Net cash flows from financing activities (747,638) 5,561,651 6,343,805 (1,677,114) 24,634,486
---------- ------------ ----------- ----------- ------------
NET INCREASE IN CASH (283,694) (659,721) 2,681,646 141,735 215,514
CASH, beginning of period 3,380,723 699,077 699,077 557,342 341,828
---------- ----------- ----------- ----------- ------------
CASH, end of period $3,097,029 $ 39,356 $ 3,380,723 $ 699,077 $ 557,342
========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 837,740 $ 793,732 $ 3,268,546 $ 2,333,057 $ 1,102,150
========== =========== =========== =========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisitions with capital leases $ --- $ --- $ 164,996 $ 233,047 $ 66,236
========== =========== =========== =========== ============
Note issued for acquisition of properties $ --- $ --- $ 184,000 $ --- $ ---
========== =========== =========== =========== ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-62
<PAGE> 187
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
(1) THE PARTNERSHIP
Organization and Capitalization
Triax Southeast Associates, L.P. (the "Partnership") is a Delaware limited
partnership formed January 23, 1992 for the purpose of acquiring, constructing,
owning, and operating cable television systems, located primarily in Kentucky,
North Carolina, West Virginia and Ohio. The Partnership was capitalized and
commenced operations on July 28, 1992, with $7,000,000 of limited partner
contributions and a $70,000 demand non-interest bearing note from its general
partner, Triax Southeast General Partner, L.P. ("Southeast, G.P."). Triax
Investors Southeast, L.P. ("Investors"), a limited partnership in which Triax
Southeast Associates, Inc. ("Southeast Inc."), a Delaware corporation, is the
general partner, contributed $1,000,000 to the Partnership.
Southeast Inc. is a wholly owned subsidiary of Triax Communications Corporation
("TCC"), a Delaware corporation. Southeast Inc. contributed capital of
$1,000,000 and a $59,500 demand non-interest bearing note to Investors for a
general partnership interest. In addition, Southeast Inc. contributed a $700
demand non-interest bearing note to Southeast, G.P. for a general partnership
interest. Investors contributed a $59,500 demand non-interest bearing note for
a limited partner interest in Southeast, G.P.
On December 15, 1993, the Partnership Agreement was amended to reflect
additional capital contributions of $7,000,000 by certain limited partners.
Southeast Inc. contributed $1,250,000 to Investors, who in turn contributed an
additional $1,250,000 to the Partnership.
The Partnership Agreement, as amended, provides that at any time after April
30, 1997, upon notice from a majority of the limited partners that they desire
to cause a sale of the Partnership's assets and business (or all of the
interests in the Partnership), TCC may purchase all of the Partnership's assets
and business (or all of the interests in the Partnership), subject to the
approval of the majority of limited partners. In addition, after July 31,
1998, each limited partner who has made capital contributions in excess of
$1,000,000 may cause the sale of the Partnership's assets and business and
liquidation of the Partnership. The above dates may be extended to 1998 or
1999 to coincide with the revised termination date of one of the limited
partner's partnership agreement, if and when the limited partner extends the
termination date.
Allocation of Profits, Losses and Distributions
Profits
The Partnership Agreement, as amended, provides that profits will be allocated
as follows: (i) 1% to the general partner and 99% to the limited partners until
profits allocated to them equal losses previously allocated; (ii) to the
limited partners until the limited partners have been allocated profits equal
to a 12% per annum cumulative preferred return on their capital contributions
plus the amount of losses previously allocated; then, (iii) 20% to the general
partner and 80% to the limited partners.
F-63
<PAGE> 188
Losses
The Partnership Agreement, as amended, provides that losses will be allocated
1% to the general partner and 99% to the limited partners, except no losses
shall be allocated to any limited partner which would cause the limited
partner's capital account to become negative by an amount greater than the
limited partner's share of the Partnership's "minimum gain" (the excess of the
Partnership's nonrecourse debt over its adjusted basis in the assets encumbered
by nonrecourse debt), as defined, plus any amount of Partnership debt assumed
by the limited partner or any amount the limited partner is obligated to
contribute to the Partnership; then 100% to the general partner.
Distributions
The Partnership Agreement, as amended, provides that Distributable Cash, as
defined, will be distributed as follows: (i) to the partners in proportion to
their Capital Contribution Accounts, as defined, until the balances are reduced
to zero; (ii) to the limited partners until the limited partners have received
a 12% per annum cumulative preferred return on their capital contributions and
then, (iii) 20% to the general partner and 80% to the limited partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of March 31, 1996 and for the three months ended
March 31, 1996 and 1995 are unaudited. In management's opinion, the unaudited
financial statements as of March 31,1996 and for the three months ended March
31, 1996 and 1995 include all adjustments necessary for a fair presentation.
Such adjustments were of a normal recurring nature.
Revenue Recognition
Revenues are recognized in the period the related services are provided to the
subscribers.
Income Taxes
No provision has been made for federal, state or local income taxes because
they are the responsibility of the individual partners. The principal
difference between net income or loss for income tax and financial reporting
purposes results from the use of accelerated depreciation for tax purposes.
Inventory
Inventory is carried at historical cost, which approximates market value, and
consists primarily of installation materials.
F-64
<PAGE> 189
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are charged
directly to expense when incurred. The Partnership capitalized a portion of
technician and installer salaries to property , plant, and equipment which
amounted to approximately $105,000 for the three months ended March 31,1996 and
$283,000 and $422,000 for the years ended December 31, 1995 and 1994,
respectively. Depreciation and amortization are computed using the straight-
line method over the following estimated useful lives:
<TABLE>
<CAPTION>
March 31, December 31,
------------ ---------------------------
1996 1995 1994 Life
------------ ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Property, plant and equipment $ 51,594,347 $ 51,188,466 $43,704,363 5-10 years
Less: Accumulated depreciation (13,757,771) (12,427,239) (7,207,543)
------------ ------------ -----------
$ 37,836,576 $ 38,761,227 $36,496,820
============ ============ ===========
</TABLE>
Purchased Intangibles
Purchased intangibles are being amortized using the straight-line method over
the following estimated useful lives:
<TABLE>
<CAPTION>
March 31, December 31,
------------ ---------------------------
1996 1995 1994 Life
------------ ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Franchise costs $13,026,848 $13,026,720 $11,832,807 10 years
Noncompete agreements 850,000 850,000 1,700,000 3 years
----------- ----------- -----------
13,876,848 13,876,720 13,532,807
Less: Accumulated amortization (4,754,165) (4,334,718) (3,427,692)
----------- ----------- -----------
$ 9,122,683 $ 9,542,002 $10,105,115
=========== =========== ===========
</TABLE>
During 1995, the Partnership wrote-off approximately $1,000,000 of noncompete
agreements, and the associated accumulated amortization, as the noncompete
agreements had expired.
Impairment of Long-Lived Assets
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of" ("SFAS 121"). SFAS 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS 121 is required to be adopted by the Company in fiscal 1996.
Management believes the adoption of SFAS 121 will not have a material impact on
the financial statements.
Other Assets
Other assets are being amortized using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
March 31, December 31,
------------ ---------------------------
1996 1995 1994 Life
------------ ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Loan costs $1,111,608 $1,111,608 $1,084,999 5 years
Organization costs 441,435 441,435 441,435 5 years
Other 3,875 3,875 --- 10 years
---------- ---------- ----------
1,556,918 1,556,918 1,526,434
Less: Accumulated amortization (675,906) (623,327) (407,716)
---------- ---------- ----------
$ 881,012 $ 933,591 $1,118,718
========== ========== ==========
</TABLE>
F-65
<PAGE> 190
(3) ACQUISITIONS
On February 28, 1995, the Partnership acquired certain cable television systems
and related assets of Rodgers Cable TV, Inc. ("Rodgers"). The purchase price
of approximately $5,700,000, including closing costs, was accounted for by the
purchase method of accounting and allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $4,580,000
Franchise costs 1,019,400
Non-compete 100,600
----------
Total cash paid $5,700,000
==========
</TABLE>
On March 31, 1995, the Partnership acquired cable television systems and
related assets of Green Tree Cable T.V., Inc. The purchase price of
approximately $570,000, including closing costs, was accounted for by the
purchase method of accounting. The Partnership issued a note payable for
$184,000 to the Seller, in partial satisfaction of the total purchase price.
On December 15, 1993, the Partnership acquired cable television systems and
related assets of C4 Media Cable South, L.P. for approximately $17 million, and
on December 21, 1993, acquired additional cable television system assets and
related liabilities of Charter Cable, Inc. for approximately $6.5 million.
Acquisition-related fees totalled approximately $700,000. The acquisitions
were financed by additional limited partners' contributions of $7 million, the
drawdown by the Partnership of $17.6 million under its amended Revolving Credit
and Term Loan and available cash of $750,000. The acquisitions were accounted
for by the purchase method of accounting and allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $20,144,000
Franchise costs 2,756,000
Non-compete 600,000
-----------
Total cash paid $23,500,000
===========
</TABLE>
(4) DEBT
Debt consisted of the following at March 31, 1996, and December 31, 1995 and
1994, respectively.
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------------
1996 1995 1994
------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Revolving Credit and Term Loan, interest payable
quarterly based on varying interest rate options $41,305,000 $42,020,000 $35,500,000
Note Payable to seller --- 184,000 ---
Vehicle leases 309,901 342,539 287,218
----------- ----------- -----------
$41,614,901 $42,546,539 $35,787,218
=========== =========== ===========
</TABLE>
The Revolving Credit and Term Loan Agreement, as amended through February 28,
1995 (the "Revolver"), is collateralized by all property, plant and equipment,
inventory and accounts receivable of the Partnership and all rights under
present and future permits, licenses and franchises. On September 30, 1995,
the outstanding principal was converted into a term loan with quarterly
payments from December 31, 1995 through June 30, 2002. Commencing in 1996,
within 120 days after the close of the fiscal year, the Partnership must make a
mandatory prepayment in an amount equal to 50% of the excess cash flow, as
defined, for the prior year. A commitment fee of 1/2% per annum is charged on
the daily unused portion of the commitment amount.
The Partnership entered into LIBOR interest rate agreements with the banks
related to the Revolver. The Partnership fixed the interest rate on $21
million at 7.58% for the period from December 5, 1995 through March 4, 1996, on
$16 million at 7.56% for the period from December 18, 1995 through March 18,
1996, and on $4.5 million at 7.38% for the period from January 4, 1996 through
April 3, 1996. The remaining outstanding balance bears interest at prime plus
1%.
F-66
<PAGE> 191
On July 1, 1994 the Partnership paid $135,000 for an interest rate cap of 7% on
the LIBOR rate on $18 million effective July 1, 1994 through July 1, 1996, and
on March 27, 1995, paid $62,000 for an interest rate cap of 7.5% on the LIBOR
rate on $10 million effective March 27, 1995 through March 27, 1997.
The loan agreement contains certain covenants, the more significant of which
include leverage and interest coverage ratios and limitations on capital
expenditures.
Debt maturities required as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Amount
------ --------
<S> <C>
1996 $ 3,174,759
1997 4,731,241
1998 5,578,235
1999 6,842,304
2000 7,920,000
Thereafter 14,300,000
----------
$42,546,539
==========
</TABLE>
(5) RELATED PARTY TRANSACTIONS
TCC provides management services to the Partnership for a fee equal to 5% of
gross revenues, as defined. The Partnership incurred management fees totaling
$236,101 and $203,737 for the three months ended March 31, 1996 and 1995,
respectively, and $888,996, $752,882 and $390,545 in 1995, 1994 and 1993,
respectively.
TCC also allocates certain overhead expenses to the Partnership, which
primarily relate to employment costs, which expenses are limited to 1.25% of
gross revenues. These overhead expenses amounted to $57,293 and $48,569 for the
three months ended March 31, 1996 and 1995, respectively, and $211,993,
$176,705 and $74,393 in 1995, 1994 and in 1993, respectively.
TCC was paid acquisition fees of $235,000 in 1993 related to the acquisition of
certain assets. Such fees are included in purchased intangibles in the
accompanying balance sheets. TCC may be paid a disposition fee of 1% of the
sales price of the Partnership after certain approvals of the limited partners,
and after certain other conditions are met.
The Partnership purchases programming from TCC at TCC's cost, which includes
volume discounts TCC might earn.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximates fair value
because of the nature of the investments and the length of maturity of the
investments.
The estimated fair value of the Partnership's debt instruments are based on
borrowing rates that would be equal to existing rates, therefore, there is no
material difference in the fair market value and the current value.
F-67
<PAGE> 192
(7) REGULATORY MATTERS
In October 1992, Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992 Cable Act") which greatly expanded federal and local
regulation of the cable television industry. In April 1993, the Federal
Communications Commission ("FCC") adopted comprehensive regulations, effective
September 1, 1993, governing rates charged to subscribers for basic cable and
cable programming services (other than programming offered on a per-channel or
per-program basis). The FCC implemented regulation which allowed cable
operators to justify regulated rates in excess of the FCC benchmarks through
cost of service showings at both the franchising authority level for basic
service and to the FCC in response to complaints on rates for cable programming
services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided cable
operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers, and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable. In February 1996, the Telecommunications Act of 1996 was enacted
which, among other things, deregulated cable rates for small systems on their
programming tiers.
To date, the FCC's regulations have not had a material adverse effect on the
Partnership due to the lack of certifications by the local franchising
authorities.
F-68
<PAGE> 193
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION ALTERNATE
[LOGO] DATED AUGUST 2, 1996
FRONTIERVISION OPERATING PARTNERS, L.P.
FRONTIERVISION CAPITAL CORPORATION
$
% Senior Subordinated Notes due 2006
Interest payable and
ISSUE PRICE: %
This Prospectus relates to offers and sales by J.P. Morgan Securities Inc. of
% Senior Subordinated Notes due 2006 (the "Notes") which have been issued by
FrontierVision Operating Partners, a Delaware limited partnership ("FVOP" or
the "Company"), and FrontierVision Capital Corporation, a Delaware corporation
("Capital") which is a wholly owned subsidiary of FVOP. The Notes are the
joint and several obligations of FVOP and Capital (collectively, the
"Issuers"). The Notes were originally purchased by J.P. Morgan Securities Inc.
directly from the Issuers as part of the original offering of the Notes
described herein.
The Notes mature on , 2006, unless previously redeemed. Interest on
the Notes is payable semiannually on each and ,
commencing , 1997. The Notes are not redeemable prior
to , 2001, except as set forth below. The Notes will
be redeemable at the option of the Issuers, in whole or in part, at any time on
or after , 2001, at the redemption prices set forth herein, together
with accrued and unpaid interest to the redemption date. In addition, prior to
, 1999, the Issuers may redeem up to 35% of the principal amount of the Notes
with the net cash proceeds received from one or more Public Equity Offerings or
Strategic Equity Investments (as such terms are defined) at a redemption price
of % of the principal amount thereof, together with accrued and unpaid
interest to the redemption date; provided, however, that at least 65% in
aggregate principal amount of the Notes originally issued remains outstanding
immediately after any such redemption.
Upon a Change of Control (as defined), the Issuers will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Issuers and will rank
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined) of the Issuers. The Notes will rank pari passu in right of
payment with any other senior subordinated indebtedness of the Issuers. At
March 31, 1996, as adjusted to give effect to the Rights Offering (as defined)
and to the transactions described herein under "Use of Proceeds," the Company
would have had approximately $199.7 million of Senior Indebtedness outstanding.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------
This Prospectus has been prepared for and is to be used by J.P. Morgan
Securities Inc. in connection with offers and sales of the Notes related to
market-making transactions in the over-the-counter market at negotiated prices
related to prevailing market prices at the time of sale. J.P. Morgan
Securities Inc. may act as principal or agent in such transactions. See "Plan
of Distribution."
J.P. MORGAN & CO.
, 1996
A-1
<PAGE> 194
ALTERNATE
PLAN OF DISTRIBUTION
This Prospectus is to be used by J.P. Morgan Securities Inc. in connection with
offers and sales of the Notes in market-making transactions in the
over-the-counter market at negotiated prices related to prevailing market
prices at the time of sale. J.P. Morgan Securities Inc. may act as principal
or agent in such transactions and has no obligation to make a market in the
Notes and may discontinue its market-making activities at any time without
notice, at its sole discretion. The Issuers have agreed to indemnify J.P.
Morgan Securities Inc. against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that J.P. Morgan Securities
Inc. may be required to make in respect thereof.
An affiliate of J.P. Morgan Securities Inc. beneficially owns approximately
20.47% of the partnership interests of the Company. See "Certain Relationships
and Related Transactions--Ownership of Equity Interests in FVP GP, FVP and
FVOP," "Principal Security Holders" and "The Partnership Agreement."
A-2
<PAGE> 195
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION ALTERNATE
[LOGO] DATED AUGUST 2, 1996
FRONTIERVISION OPERATING PARTNERS, L.P.
FRONTIERVISION CAPITAL CORPORATION
$
% Senior Subordinated Notes due 2006
Interest payable and
ISSUE PRICE: %
This Prospectus relates to offers and sales by First Union Capital Markets
Corp. of % Senior Subordinated Notes due 2006 (the "Notes") which have
been issued by FrontierVision Operating Partners, a Delaware limited
partnership ("FVOP" or the "Company"), and FrontierVision Capital Corporation,
a Delaware corporation ("Capital") which is a wholly owned subsidiary of FVOP.
The Notes are the joint and several obligations of FVOP and Capital
(collectively, the "Issuers"). The Notes were originally purchased by First
Union Capital Markets Corp. directly from the Issuers as part of the original
offering of the Notes described herein.
The Notes mature on , 2006, unless previously redeemed. Interest on
the Notes is payable semiannually on each and ,
commencing , 1997. The Notes are not redeemable prior
to , 2001, except as set forth below. The Notes will
be redeemable at the option of the Issuers, in whole or in part, at any time on
or after , 2001, at the redemption prices set forth herein, together
with accrued and unpaid interest to the redemption date. In addition, prior to
, 1999, the Issuers may redeem up to 35% of the principal amount of the Notes
with the net cash proceeds received from one or more Public Equity Offerings or
Strategic Equity Investments (as such terms are defined) at a redemption price
of % of the principal amount thereof, together with accrued and unpaid
interest to the redemption date; provided, however, that at least 65% in
aggregate principal amount of the Notes originally issued remains outstanding
immediately after any such redemption.
Upon a Change of Control (as defined), the Issuers will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Issuers and will rank
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined) of the Issuers. The Notes will rank pari passu in right of
payment with any other senior subordinated indebtedness of the Issuers. At
March 31, 1996, as adjusted to give effect to the Rights Offering (as defined)
and to the transactions described herein under "Use of Proceeds," the Company
would have had approximately $199.7 million of Senior Indebtedness outstanding.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------
This Prospectus has been prepared for and is to be used by First Union Capital
Markets Corp. in connection with offers and sales of the Notes related to
market-making transactions in the over-the-counter market at negotiated prices
related to prevailing market prices at the time of sale. First Union Capital
Markets Corp. may act as principal or agent in such transactions. See "Plan of
Distribution."
FIRST UNION CAPITAL MARKETS CORP.
, 1996
A-3
<PAGE> 196
ALTERNATE
PLAN OF DISTRIBUTION
This Prospectus is to be used by First Union Capital Markets Corp. in
connection with offers and sales of the Notes in market-making transactions in
the over-the-counter market at negotiated prices related to prevailing market
prices at the time of sale. First Union Capital Markets Corp. may act as
principal or agent in such transactions and has no obligation to make a market
in the Notes and may discontinue its market-making activities at any time
without notice, at its sole discretion. The Issuers have agreed to indemnify
First Union Capital Markets Corp. against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments that First
Union Capital Markets Corp. may be required to make in respect thereof.
An affiliate of First Union Capital Markets Corp. beneficially owns
approximately 12.28% of the partnership interests of the Company. See "Certain
Relationships and Related Transactions--Ownership of Equity Interests in FVP
GP, FVP and FVOP," "Principal Security Holders" and "The Partnership
Agreement."
A-4
<PAGE> 197
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses, other than
underwriting discounts and commissions, payable by the Registrants in
connection with the Offering. All amounts are estimated except the filing
fees:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . . $68,966
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,500
Printing and Engraving Fees . . . . . . . . . . . . . . . . . . . . . . . *
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . *
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Fees of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . *
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ *
=======
</TABLE>
- --------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 5.6 of the First Amended and Restated Agreement of Limited Partnership
of FVP, dated as of August 11, 1995 (the "FVP Partnership Agreement"), provides
that in the absence of fraud, breach of fiduciary duty, willful misconduct or
gross negligence, FVP GP, its partners, their respective officers, directors,
employees, agents or stockholders (including when any of the foregoing is
serving at the request of FVP GP on behalf of FVP as a partner, officer,
director, employee or agent of any other Person) (as such term is defined in
the FVP Partnership Agreement) (in each case, the "Indemnitee") shall not be
liable to any other partner of FVP or FVP (i) for any mistake in judgment, (ii)
for any action taken or omitted to be taken in good faith and in a manner
reasonably believed by such Person to be in the best interests of FVP and to be
within the scope of its authority under the FVP Partnership Agreement, or (iii)
for any loss due to the mistake, action, inaction, negligence, dishonesty,
fraud or bad faith of any broker or other agent, provided that such broker or
other agent shall have been selected and supervised by FVP GP or other
Indemnitee with reasonable care. In addition, Indemnitee will be indemnified
and held harmless by FVP against losses, damages and expenses for which such
Person has not otherwise been reimbursed actually and reasonably incurred by
such Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than any
action by or in the name of FVP), by reason of any action taken or omitted to
be taken in connection with or arising out of such Person's activities on
behalf of FVP or in furtherance of FVP, if such actions were taken or omitted
to be taken in good faith and in a manner reasonably believed by such Person to
be in the best interests of FVP and within the scope of the FVP Partnership
Agreement, provided, that any Person entitled to indemnification shall obtain
the written consent of FVP GP (which consent will not be given without the
approval of the Advisory Committee) prior to entering into any compromise or
settlement which would result in an obligation of FVP to indemnify such Person.
Section 5.6 of the First Amended and Restated Agreement of Limited Partnership
of FVP GP, dated as of August 11, 1995 (the "FVP GP Partnership Agreement"),
provides that in the absence of fraud, breach of fiduciary duty, willful
misconduct or gross negligence, FrontierVision, Inc., its officers, directors,
employees, agents or stockholders (including when any of the foregoing is
serving at the request of FrontierVision, Inc. on behalf of FVP GP or FVP as a
partner, officer, director, employee or agent of any other Person) (as such
term is defined in the FVP GP Partnership Agreement) (in each case, the
"Indemnitee") shall not be liable to
II-1
<PAGE> 198
any other partner of FVP GP or FVP GP (i) for any mistake in judgment, (ii) for
any action taken or omitted to be taken in good faith and in a manner
reasonably believed by such Person to be in the best interests of FVP GP and to
be within the scope of its authority under the FVP GP Partnership Agreement, or
(iii) for any loss due to the mistake, action, inaction negligence dishonesty,
fraud or bad faith of any broker or other agent, provided that such broker or
other agent shall have been selected and supervised by FrontierVision, Inc. or
other Indemnitee with reasonable care. In addition, Indemnitees will be
indemnified and held harmless by FVP GP against losses, damages and expenses
for which such person has not otherwise been reimbursed actually and reasonably
incurred by such Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding (other
than any action by or in the name of FVP GP), by reason of any action taken or
omitted to be taken in connection with or arising out of such Person's
activities on behalf of FVP GP or in furtherance of FVP GP, if such actions
were taken or omitted to be taken in good faith and in a manner reasonably
believed by such person to be in the best interests of FVP GP and within the
scope of the FVP GP Partnership Agreement, provided, that any Person entitled
to indemnification shall obtain the written consent of FrontierVision Inc.
(which consent will not be given without the consent of a majority in interest
of the Class X Limited Partners (as such term is defined in the FVP GP
Partnership Agreement)) prior to entering into any compromise or settlement
which would result in an obligation of FVP GP to indemnify such person.
Section 102(b)(7) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation (in its original certificate of
incorporation or an amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise or perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provisions shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Tenth of FrontierVision, Inc.'s Certificate of Incorporation and
Article Eleventh of Capital's Certificate of Incorporation each limit the
liability of directors thereof to the extent permitted by Section 102(b)(7) of
the DGCL.
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties to which they may be made parties by reason of their being or
having been directors, officers, employees or agents and shall so indemnify
such persons if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a summary of securities sold by the Registrants during the
past three years without registration under the Act:
1. On July 15, 1995, in connection with the formation of the Company, the
Company issued to FVP a 99.9% general partner interest in the Company for cash
consideration of $99.90. Simultaneously, the Company issued to FrontierVision
Operating Partners, Inc. a 0.1% limited partnership interest for cash
consideration of $.10.
2. On July 26, 1996, in connection with the formation of Capital, Capital
issued to the Company 100 shares of the voting common stock of Capital, one
cent ($.01) par value per share, for cash consideration of $100.00.
II-2
<PAGE> 199
In the foregoing instances, the issuance of the general partner interest in the
Company and the limited partnership interest in the Company and the issuance of
the voting common stock of Capital were deemed to be exempt from the
registration requirements of the Act as a transaction not involving any public
offering, pursuant to Section 4(2) of the Act. The recipients of securities in
each such transaction represented their intentions to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof. All recipients had adequate access, through their
relationships with the Company and Capital, to information about the Company
and Capital.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
*1 -- Form of Underwriting Agreement.
3.1 -- The Company's Agreement of Limited Partnership.
3.2 -- Certificate of Limited Partnership of the
Company.
3.3 -- First Amended and Restated Agreement of Limited
Partnership of FVP.
3.4 -- Certificate of Limited Partnership of FVP.
3.5 -- First Amended and Restated Agreement of Limited
Partnership of FVP GP.
3.6 -- Certificate of Limited Partnership of FVP GP.
3.7 -- Certificate of Incorporation of FrontierVision
Inc.
3.8 -- Bylaws of FrontierVision Inc.
3.9 -- Certificate of Incorporation of FrontierVision
Capital Corporation.
3.10 -- Bylaws of FrontierVision Capital Corporation.
*4.1 -- Form of Indenture by and among the Registrants
and , as Trustee, relating to the Notes.
*4.2 -- Form of Note (included as part of Exhibit 4.1).
*5 -- Opinion of Dow, Lohnes & Albertson.
10.1 -- Senior Credit Facility.
10.2 -- Employment Agreement of James C. Vaughn.
10.3 -- Asset Purchase Agreement dated July 20, 1995
between United Video Cablevision, Inc. and
FrontierVision Operating Partners, L.P.
*10.4 -- Asset Acquisition Agreement (July 27, 1995
Auction Sale) dated as of July 27, 1995 among
Stephen S. Gray in his capacity as Receiver of
Longfellow Cable Company, Inc., Carrabassett
Electronics and Carrabassett Cable Company, Inc.
and FrontierVision Operating Partners, L.P.
10.5 -- Asset Purchase Agreement dated October 27, 1995
among C4 Media Cable Southeast, Limited
Partnership, County Cable Company, L.P. and
FrontierVision Operating Partners, L.P.
10.6 -- Asset Purchase Agreement dated November 17, 1995
among Cox Communications Ohio, Inc., Times
Mirror Cable Television of Defiance, Inc.,
Chillicothe Cablevision, Inc., Cox
Communications Eastern Kentucky, Inc. and
FrontierVision Operating Partners, L.P.
10.7 -- Asset Purchase Agreement dated February 27, 1996
between Americable International Maine, Inc. and
FrontierVision Operating Partners, L.P.
10.8 -- Asset Purchase Agreement dated May 16, 1996
among Triax Southeast Associates, L.P., Triax
Southeast General Partner, L.P. and
FrontierVision Operating Partners, L.P.
10.9 -- Asset Purchase and Sale Agreement dated June 21,
1996 between Helicon Partners I, LP and
FrontierVision Operating Partners, L.P.
10.10 -- Asset Purchase Agreement dated July 15, 1995
between American Cable Entertainment of
Kentucky-Indiana, Inc. and FrontierVision
Operating Partners, L.P.
10.11 -- Asset Purchase Agreement dated as of July 30,
1996 between Shenandoah Cable Television Company
and FrontierVision Operating Partners, L.P.
II-3
<PAGE> 200
*10.12 -- Purchase Agreement dated as of August ___, 1996
between Penn/Ohio Cablevision, L.P. and
FrontierVision Operating Partners, L.P.
10.13 -- Asset Purchase Agreement dated July 19, 1996
between Phoenix Grassroots Cable Systems, L.L.C.
and FrontierVision Operating Partners, L.P.
FrontierVision Operating Partners, L.P.
12 -- Statement of Computation of Ratios.
23.1 -- Consent of Arthur Andersen LLP (FrontierVision
Operating Partners, L.P.).
23.2 -- Consent of Piaker & Lyons, P.C. (United Video
Cablevision, Inc.).
23.3 -- Consent of Williams, Rogers, Lewis & Co., I.C.
(C4 Media Cable Southeast, Limited Partnership).
23.4 -- Consent of Arthur Andersen LLP (Triax Southeast
Associates, L.P.).
23.5 -- Consent of Deloitte & Touche LLP (American Cable
Entertainment of Kentucky-Indiana, Inc.).
23.6 -- Consent of Deloitte & Touche LLP (Ashland and
Defiance, Ohio Clusters).
*23.7 -- Consent of Dow, Lohnes & Albertson (contained in
Exhibit 5).
25 -- Powers of attorney (included on signature page
to this Registration Statement).
*26 -- Statement of Eligibility on Form T-1 of
, as Trustee.
27 -- Financial Data Schedule.
- -------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, FVP,
FVP GP, FrontierVision Inc. and Capital pursuant to the provisions described
under Item 14 above or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Each of the Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the Registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
such time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE> 201
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, FRONTIERVISION OPERATING PARTNERS, L.P. HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, ON THE 2ND DAY OF AUGUST 1996.
<TABLE>
<S> <C>
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Partners, L.P., its general partner,
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general partner
By: /s/ James C. Vaughn
-------------------------------------------------
James C. Vaughn
President and Chief Executive Officer
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW CONSTITUTES AND APPOINTS JAMES C. VAUGHN AND JOHN S. KOO AND
EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER
OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD,
IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS OR POST-EFFECTIVE
AMENDMENTS TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO
ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING
AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR THEIR SUBSTITUTE
OR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ James C. Vaughn President, Chief Executive August 2, 1996
---------------------------------------- Officer and Director of
James C. Vaughn FrontierVision Inc. (Principal
Executive Officer)
/s/ John S. Koo Senior Vice President, Chief August 2, 1996
---------------------------------------- Financial Officer, Secretary and
John S. Koo Director of FrontierVision Inc.
(Principal Financial Officer)
/s/ James W. McHose Vice President and Treasurer of August 2, 1996
---------------------------------------- FrontierVision Inc. (Principal
James W. McHose Accounting Officer)
</TABLE>
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<PAGE> 202
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, FRONTIERVISION CAPITAL CORPORATION HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, ON THE DAY OF AUGUST, 1996.
FRONTIERVISION CAPITAL CORPORATION
By: /s/ James C. Vaughn
--------------------------------------
James C. Vaughn
President
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW CONSTITUTES AND APPOINTS JAMES C. VAUGHN AND JOHN S. KOO, AND
EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER
OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD,
IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS OR POST-EFFECTIVE
AMENDMENTS TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO
ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING
AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR THEIR SUBSTITUTE
OR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ James C. Vaughn President and Director of August 2, 1996
---------------------------------------- FrontierVision Capital
James C. Vaughn Corporation (Principal Executive
Officer)
/s/ John S. Koo Senior Vice President, Chief August 2, 1996
------------------------------------ Financial Officer, Secretary and
John S. Koo Director of FrontierVision
Capital Corporation (Principal
Financial Officer)
/s/ James W. McHose Vice President and Treasurer of August 2, 1996
------------------------------------- FrontierVision Capital
James W. McHose Corporation (Principal Accounting
Officer)
</TABLE>
II-6
<PAGE> 203
EXHIBIT INDEX
Exhibit Description
- ------- -----------
*1 -- Form of Underwriting Agreement.
3.1 -- The Company's Agreement of Limited Partnership.
3.2 -- Certificate of Limited Partnership of the Company.
3.3 -- First Amended and Restated Agreement of Limited Partnership
of FVP.
3.4 -- Certificate of Limited Partnership of FVP.
3.5 -- First Amended and Restated Agreement of Limited Partnership
of FVP GP.
3.6 -- Certificate of Limited Partnership of FVP GP.
3.7 -- Certificate of Incorporation of FrontierVision Inc.
3.8 -- Bylaws of FrontierVision Inc.
3.9 -- Certificate of Incorporation of FrontierVision Capital
Corporation.
3.10 -- Bylaws of FrontierVision Capital Corporation.
*4.1 -- Form of Indenture by and among the Registrants and , as
Trustee, relating to the Notes.
*4.2 -- Form of Note (included as part of Exhibit 4.1).
*5 -- Opinion of Dow, Lohnes & Albertson.
10.1 -- Senior Credit Facility.
10.2 -- Employment Agreement of James C. Vaughn.
10.3 -- Asset Purchase Agreement dated July 20, 1995 between United
Video Cablevision, Inc. and FrontierVision Operating Partners,
L.P.
*10.4 -- Asset Acquisition Agreement (July 27, 1995 Auction Sale) dated
as of July 27, 1995 among Stephen S. Gray in his capacity as
Receiver of Longfellow Cable Company, Inc., Carrabassett
Electronics and Carrabassett Cable Company, Inc. and
FrontierVision Operating Partners, L.P.
10.5 -- Asset Purchase Agreement dated October 27, 1995 among C4 Media
Cable Southeast, Limited Partnership, County Cable Company, L.P.
and FrontierVision Operating Partners, L.P.
10.6 -- Asset Purchase Agreement dated November 17, 1995 among Cox
Communications Ohio, Inc., Times Mirror Cable Television of
Defiance, Inc., Chillicothe Cablevision, Inc., Cox
Communications Eastern Kentucky, Inc. and FrontierVision
Operating Partners, L.P.
10.7 -- Asset Purchase Agreement dated February 27, 1996 between
Americable International Maine, Inc. and FrontierVision
Operating Partners, L.P.
10.8 -- Asset Purchase Agreement dated May 16, 1996 among Triax
Southeast Associates, L.P., Triax Southeast General Partner,
L.P. and FrontierVision Operating Partners, L.P.
10.9 -- Asset Purchase and Sale Agreement dated June 21, 1996 between
Helicon Partners I, LP and FrontierVision Operating Partners,
L.P.
10.10 -- Asset Purchase Agreement dated July 15, 1995 between American
Cable Entertainment of Kentucky-Indiana, Inc. and FrontierVision
Operating Partners, L.P.
10.11 -- Asset Purchase Agreement dated as of July 30, 1996 between
Shenandoah Cable Television Company and FrontierVision Operating
Partners, L.P.
*10.12 -- Purchase Agreement dated as of August ___, 1996 between
Penn/Ohio Cablevision, L.P. and FrontierVision Operating
Partners, L.P.
10.13 -- Asset Purchase Agreement dated July 19, 1996 between Phoenix
Grassroots Cable Systems, L.L.C. and FrontierVision Operating
Partners, L.P.
12 -- Statement of Computation of Ratios.
23.1 -- Consent of Arthur Andersen LLP (FrontierVision Operating
Partners, L.P.).
23.2 -- Consent of Piaker & Lyons, P.C. (United Video Cablevision, Inc.).
23.3 -- Consent of Williams, Rogers, Lewis & Co., I.C., (C4 Media Cable
Southeast, Limited Partnership).
23.4 -- Consent of Arthur Andersen LLP (Triax Southeast Associates,
L.P.).
23.5 -- Consent of Deloitte & Touche LLP (American Cable Entertainment
of Kentucky-Indiana, Inc.).
23.6 -- Consent of Deloitte & Touche LLP (Ashland and Defiance, Ohio
Clusters).
*23.7 -- Consent of Dow, Lohnes & Albertson (contained in Exhibit 5).
25 -- Powers of attorney (included on signature page to this
Registration Statement).
*26 -- Statement of Eligibility on Form T-1 of , as Trustee.
27 -- Financial Data Schedule.
- ----------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
FRONTIERVISION OPERATING PARTNERS, L.P.
This Agreement of Limited Partnership of FrontierVision Operating
Partners, L.P. is entered into by and between FrontierVision Partners, L.P., a
Delaware limited partnership (the "General Partner"), and FrontierVision
Operating Partner, Inc., a Delaware corporation, as limited partner (the
"Limited Partner").
The General Partner and the Limited Partner hereby form a limited
partnership pursuant to and in accordance with the Delaware Revised Uniformed
Limited Partnership Act (6 Del. C. Section Section 17-101, et seq.) (the
"Act"), and hereby agree as follows:
1. Name. The name of the limited partnership formed hereby is
FrontierVision Operating Partners, L.P. (the "Partnership").
2. Purpose. The Partnership is organized for the object and
purpose of, and the nature of the business to be conducted and promoted by the
Partnership is, acquiring, investing in, disposing of, operating, managing and
financing cable systems and engaging in any and all activities necessary,
desirable or incidental to the foregoing.
3. Registered Office. The registered office of the Partnership
in the State of delaware is c/o The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Kent County, Dover, Delaware 19904.
4. Registered Agent. The name and address of the registered
agent of the Partnership for service of process on the Partnership in the State
of Delaware is The Prentice-Hall Corporation System, Inc. 32 Loockerman Square,
Suite L-100, Kent County, Dover, Delaware 19904.
5. Partners. The names and mailing addresses of the General
Partner and the Limited Partner are as follows:
General Partner
FrontierVision Partners, L.P.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
<PAGE> 2
Limited Partner
FrontierVision Operating Partners, Inc.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
6. Powers. The powers of the General Partner include all powers,
statutory and otherwise, possessed by general partners under the laws of the
State of Delaware.
7. Term. The Partnership shall dissolve, and its affairs shall
be wound up either (i) on December 31, 2004 or (ii) at such earlier time as (a)
all of the partners of the Partnership approve in writing, (b) the Partnership
sells or otherwise disposes of its interest in all or substantially all of its
property, (c) an event of withdrawal of the General Partner has occurred under
the Act or (d) an entry of a decree of judicial dissolution has occurred under
Section Section 17-802 of the Act.
8. Capital Contributions. The partners of the Partnership have
contributed the following amounts, in cash, and no other property, to the
Partnership:
<TABLE>
<S> <C>
General Partner
---------------
FrontierVision Partners, L.P. $99.99
Limited Partner
---------------
FrontierVision Operating Partners, Inc. $.01
</TABLE>
9. Additional Contributions. Each partner of the Partnership
may, but is not required to, make additional capital contributions to the
Partnership.
10. Allocation of Profit and Losses. The Partnership's profits
and losses shall be allocated in proportion to the capital contributions of the
partners of the Partnership.
11. Distributions. At the time determined by the General Partner,
but at least once during each fiscal year of the Partnership, the General
Partner shall cause the Partnership to distribute any cash held by it which is
not reasonably necessary for the operation of the Partnership. Cash available
for distribution shall be distributed to the partners of the Partnership in the
same proportion as their then capital account balance.
12. Assignments. The Limited Partner may assign all or any part
of its partnership interest in the Partnership only with the consent of its
partnership interest in the Partnership only with
2
<PAGE> 3
the consent of the General Partner. The Limited Partner has no right to grant
an assignee of its partnership interest in the Partnership the right to become
a substituted limited partner of the Partnership.
13. Withdrawal. Except as provided in the following Section 14,
no right is given to any partner of the Partnership to withdraw from the
Partnership.
14. Additional Partners.
(a) Without the approval of the Limited Partner, the
General Partner may admit additional limited partners to the Partnership. The
General Partner may admit an assignee of the Limited Partner's partnership
interest in the Partnership as a substituted limited partner of the
Partnership. The General Partner may admit one or more additional general
partners, without the consent of the Limited Partner. Upon the admission of
any additional limited partners or substituted limited partners to the
Partnership, the Limited Partner shall withdraw from the Partnership and shall
be entitled to receive forthwith the return of his capital contribution,
without interest or deduction.
(b) After the admission of any additional limited
partners, substituted limited partners or additional general partners pursuant
to this Section 14, the Partnership shall continue as a limited partnership
under the Act.
(c) The admission of additional limited partners,
substituted limited partners or additional general partners to the Partnership
pursuant to this Section 14 shall be accomplished by the amendment of this
Agreement of Limited Partnership and, if required by the Act, the filing of an
appropriate amendment of the Partnership's Certificate of Limited Partnership
in the office of the Secretary of State of the State of Delaware.
15. Governing Law. This Agreement shall be governed by, and
construed under, the laws of the State of Delaware, all rights and remedies
being governed by said laws.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, intending to be bound hereby,
have duly executed this Agreement of Limited Partnership as of the 14th day of
July, 1995.
GENERAL PARTNER:
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general
partner
By: /s/ John S. Koo
--------------------------------
John S. Koo
Senior Vice President
LIMITED PARTNER:
FRONTIERVISION OPERATING
PARTNERS, INC.
By: /s/ John S. Koo
--------------------------------
John S. Koo
Senior Vice President
4
<PAGE> 5
AMENDMENT NO. 1
TO THE
AGREEMENT OF LIMITED PARTNERSHIP OF
FRONTIERVISION OPERATING PARTNERS, L.P.
Amendment No. 1 dated as of July 15, 1995 to the Agreement of
Limited Partnership (the "Agreement") dated as of July 14, 1995 by and between
FrontierVision Partners, L.P., a Delaware limited partnership, as general
partner (the "General Partner"), and FrontierVision Operating Partners, Inc., a
Delaware corporation, as limited partner (the "Limited Partner").
The undersigned desire to amend section 8 of the Agreement relating to capital
commitments.
The undersigned agree as follows:
1. Section 8 of the Agreement is hereby amended to read
in its entirety as follows:
"8. Capital Contributions. The partners of the Partnership
have contributed the following amounts, in cash, and no other property, to the
Partnership:
General Partner
FrontierVision Partners, L.P. $99.90
Limited Partner
FrontierVision Operating Partners, Inc. $.10"
2. All terms and conditions of the Agreement, as amended
hereby, shall remain in full force and effect.
<PAGE> 6
3. This Amendment No. 1 shall be governed by, and
construed under, the laws of the State of Delaware, all rights and remedies
being governed by said laws.
IN WITNESS WHEREOF, the undersigned, intending to be bound
hereby, have duly executed this Amendment No. 1 as of the date first set forth
above.
GENERAL PARTNER:
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general
partner
By: FrontierVision Inc., its sole
general partner
By:/s/ JAMES C. VAUGHN
---------------------------
James C. Vaughn
President
LIMITED PARTNER:
FRONTIERVISION OPERATING PARTNERS,
INC.
By:/s/ JAMES C. VAUGHN
---------------------------
James C. Vaughn
President
2
<PAGE> 7
AMENDMENT NO. 2 TO THE
AGREEMENT OF LIMITED PARTNERSHIP OF
FRONTIERVISION OPERATING PARTNERS, L.P.
Amendment No. 2 dated as of November 8, 1995 to the Agreement of
Limited Partnership (the "Agreement") dated as of July 14,1995 by and between
FrontierVision Partners, L.P., a Delaware limited partnership, as general
partner (the "General Partner"), and FrontierVision-Operating Partners, Inc., a
Delaware corporation, as limited partner (the "Limited Partner"), as amended by
Amendment No. I to the Agreement dated as of July 15, 1995.
The undersigned hereby amend the Agreement as follows:
1. Existing Section 15 of the Agreement is renumbered as Section
16.
2. Section 15 is hereby amended to read in its entirety as
follows:
"15. Notwithstanding any other provision contained in this
Partnership Agreement to the contrary (but subject to
clause (c) below):
(a) Each Partner hereby (w) acknowledges the
collateral assignment by each other Partner of its partnership
interest in the Partnership pursuant to that certain Partner
Pledge Agreement dated as of November 9, 1995 (as modified and
supplemented and in effect from time to time, the "Partner
Pledge Agreement") between each Partner and The Chase
Manhattan Bank (National Association), as Administrative
Agent, (x) in connection with the exercise by the
Administrative Agent of any of its rights and remedies under
the Partner Pledge Agreement, consents to the assignment of
either of such partnership interests to any other Person (and
to the substitution of such other Person as a general or
limited partner, as the case may be, holding the partnership
interest so assigned) and (y) agrees that no such assignment
(and substitution) shall effect a termination or dissolution
of the Partnership (so long as both partnership interests are
not assigned to the same person).
(b) Without limiting the generality of the foregoing,
each Partner hereby agrees that upon the occurrence and
continuance of any Event of Default under and as defined in
the Credit Agreement referred to in the Partner Pledge
Agreement:
<PAGE> 8
(i) the Administrative Agent shall be
entitled to be admitted (or to have a designee of its
choice admitted) as a new general partner of the
Partnership (such new general partner being
hereinafter referred to as the "New General Partner")
and, each Partner hereby consents to such admission
and agrees to execute and deliver such instruments,
if any, as shall be necessary to effect the
foregoing;
(ii) in connection with the admission of the
New General Partner to the Partnership, no capital
contribution by the New General Partner shall be
required;
(iii) as provided in the Partner Pledge
Agreement, the New General Partner shall not have any
liability with respect to the obligations of the
Partnership under the Credit Agreement;
(iv) on and after the admission of the New
General Partner to the Partnership, the allocation of
profit and loss of the Partnership and any
distributions of any cash held by the Partnership
shall be made as if the General Partner, the New
General Partner and the Limited Partner had
contributed 99.8%, .01% and .01%, respectively, of
the total capital contributions of all of the
Partners to the Partnership;
(v) on and after the admission of the New
General Partner to the Partnership, the New General
Partner shall have all powers, statutory and
otherwise, possessed by general partners under the
laws of the State of Delaware and shall have the sole
authority to manage the business and affairs of the
Partnership (and, notwithstanding any other provision
contained herein or in any such laws, the General
Partner shall have no further powers or privileges
with respect to the management of the Partnership;
(vi) if requested by the Administrative Agent
following the admission of the New General Partner to
the Partnership, the partnership interest in the
Partnership held by the General partner shall be
converted into a limited partnership interest
(provided that, as contemplated by the Partner Pledge
Agreement, the General Partner shall remain obligated
in respect of its guarantee in the Partner Pledge
Agreement) and in that connection, the New General
Partner may make such additional capital
contributions, and alter the allocation of
partnership profits and losses among the partners, in
such manner as it shall determine to be appropriate
to preserve the status of the Partnership as a
partnership for Federal income tax purposes; and
-2-
<PAGE> 9
(vii) following the admission of the New
General Partner to the Partnership (and without
limiting similar restrictions contained in the
Partner Pledge Agreement), neither the General
Partner nor the Limited Partner may transfer either
of their partnership interests in the Partnership
without the prior written consent of the New General
Partner.
(c) Any substitution of a Person for the General
Partner pursuant to clause (a) above, and any addition of a
New General Partner pursuant to clause (b) above, shall be
subject to compliance with the applicable provisions of
Section 6.12 of the Partner Pledge Agreement with respect to
obtaining necessary regulatory approvals prior to taking any
action that would effect a change of control of the
Partnership.
3. All terms and conditions of the Agreement as amended hereby
shall remain in full force and effect.
4. This Amendment No. 2 shall be governed by, and construed
under, the laws of the State of Delaware, all rights and remedies being
governed by said laws.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the undersigned, intending to be bound hereby,
have duly executed this Amendment No. 2 as of the date first set forth above.
GENERAL PARTNER
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general partner
By: FRONTIERVISION INC., its sole general partner
By: /s/ John S. Koo
-------------------------------------
John S. Koo, Senior Vice President and
Chief Financial Officer
LIMITED PARTNER:
FRONTIERVISION OPERATING PARTNERS, INC.
By: /s/ John S. Koo
------------------------------------
John S. Koo, Senior Vice President
-3-
<PAGE> 10
AMENDMENT NO. 3 TO THE
AGREEMENT OF LIMITED PARTNERSHIP OF
FRONTIERVISION OPERATING PARTNERS, L.P.
This Amendment No. 3 to the Agreement of Limited Partnership of
FrontierVision Operating Partners, L.P. dated as of July 14, as amended by
Amendment No. 1 dated as of July 15, 1995, and Amendment No. 2 dated as of
November 8, 1995 (the "Agreement") is dated as of the date set forth below.
1. Section 7 of the Agreement is hereby amended to read in its
entirety as follows: "Term. The Partnership shall dissolve,
and its affairs shall be wound up on June 30, 2007, or on such
earlier date as shall constitute the last day of the term of
its General Partner, FrontierVision Partners, L.P."
2. Except as expressly amended hereby, the Agreement is, and
shall remain in full force and effect.
3. This Amendment No. 3 shall be governed by, and construed
under, the laws of the State of Delaware, all rights and
remedies being governed by said laws.
[SIGNATURES ON NEXT PAGE]
<PAGE> 11
IN WITNESS WHEREOF, the undersigned, intending to be bound thereby,
have duly executed this Amendment No. 3 as of April 9, 1996.
GENERAL PARTNER
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general partner
By: FRONTIERVISION INC., its sole general partner
By: /s/ John S. Koo
----------------------------------------------
John S. Koo, Senior Vice President and
Chief Financial Officer
LIMITED PARTNER:
FRONTIERVISION OPERATING PARTNERS, INC.
By: /s/ John S. Koo
---------------------------------------------
John S. Koo, Senior Vice President
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF LIMITED PARTNERSHIP
OF
FRONTIERVISION OPERATING PARTNERS, L.P.
This Certificate of Limited Partnership of FrontierVision Operating
Partners, L.P. (the "Partnership") is being duly executed and filed by the
undersigned, as Senior Vice-President of FrontierVision Inc., the general
partner of FVP GP, L.P., the general partner of FrontierVision Partners, L.P.,
to form a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. Sections 17-101 et seq.).
1. The name of the limited partnerhsip formed hereby is
FrontierVision Operating Partners, L.P.
2. The address of the registered office of the Partnership in the
State of Delaware is at c/o The Prentice Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Kent County, Dover Delaware 19904, and the name
and address of the registered agent for service of process on the Partnership
in the State of Delaware is The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Kent County, Dover Delaware, 19904.
3. The name and mailing address of the general partner of the
Partnership are:
FrontierVision Partners, L.P.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
GENERAL PARTNER:
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole
general partner
By: FrontierVision Inc., its
sole general partner
By /s/ John S. Koo
------------------------
Name: John S. Koo
Title: Senior Vice President
<PAGE> 1
EXHIBIT 3.3
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
THE LIMITED PARTNERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR UNDER THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. SUCH
LIMITED PARTNERSHIP INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT AND THE APPLICABLE STATE OR FOREIGN SECURITIES LAWS, PURSUANT
TO REGISTRATION THEREUNDER OR EXEMPTION THEREFROM. IN ADDITION, TRANSFER OR
OTHER DISPOSITION OF SUCH LIMITED PARTNERSHIP INTERESTS IS FURTHER RESTRICTED
AS PROVIDED IN THIS AGREEMENT. PURCHASERS OF LIMITED PARTNERSHIP INTERESTS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Formation and Continuation . . . . . . . . . . . . . . . . . . 11
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Place of Business and Office; Registered Agent . . . . . . . . 11
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Qualification in Other Jurisdictions . . . . . . . . . . . . . 12
ARTICLE III
PARTNERS AND CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Partnership Capital . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Admission of Additional Limited Partners . . . . . . . . . . . 17
3.5 Liability of Partners . . . . . . . . . . . . . . . . . . . . . 19
3.6 Default in Payment . . . . . . . . . . . . . . . . . . . . . . 20
3.7 Nonconforming Partners . . . . . . . . . . . . . . . . . . . . 23
3.8 Conversion of Certain Limited Partnership Interests . . . . . . 26
3.9 Nondisclosure Partners . . . . . . . . . . . . . . . . . . . . 28
3.10 Fund Investors; Special Purpose Corporations . . . . . . . . . 31
ARTICLE IV
DISTRIBUTIONS; ALLOCATION OF PROFITS AND LOSSES . . . . . . . . . . . . . 38
4.1 Distributions -- General Principles . . . . . . . . . . . . . . 38
4.2 Amounts and Priority of Distributions . . . . . . . . . . . . . 39
4.3 Definitions and Rules Relating to Preferred Returns . . . . . . 42
4.4 Capital Accounts and Adjusted Capital Accounts; Allocations. . 43
4.5 Tax Advances . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE V
RIGHTS AND DUTIES OF THE GENERAL PARTNER . . . . . . . . . . . . . . . . 48
5.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.2 Duties and Obligations of the General Partner . . . . . . . . 51
5.3 Other Businesses of Partners . . . . . . . . . . . . . . . . . 52
5.4 Authority of Partners to Deal with Partnership . . . . . . . 53
5.5 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . 53
5.6 Exculpation and Indemnification. . . . . . . . . . . . . . . . 54
i
<PAGE> 3
TABLE OF CONTENTS (cont'd)
Page
----
ARTICLE VI
THE ADVISORY COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.1 Establishment of the Advisory Committee . . . . . . . . . . . . 55
6.2 Functions of the Advisory Committee . . . . . . . . . . . . . . 56
ARTICLE VII
TRANSFERABILITY OF GENERAL PARTNER'S INTEREST . . . . . . . . . . . . . . 60
7.1 Assignment of the General Partner's Interest . . . . . . . . . 60
7.2 Removal of the General Partner . . . . . . . . . . . . . . . . 60
7.3 Liability of Person Ceasing to be General Partner . . . . . . . 63
ARTICLE VIII
TRANSFERABILITY OF LIMITED PARTNERSHIP INTERESTS . . . . . . . . . . . . 63
8.1 Restrictions on Transfers of Interests . . . . . . . . . . . . 63
8.2 Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.3 Substituted Limited Partners . . . . . . . . . . . . . . . . . 67
8.4 Incapacity of a Limited Partner; Transfer Procedures . . . . . 68
8.5 Transfers During a Fiscal Year . . . . . . . . . . . . . . . . 69
ARTICLE IX
DISSOLUTION, LIQUIDATION AND
TERMINATION OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . 70
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE X
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . 72
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . 74
ARTICLE XI
CONSENTS, VOTING AND MEETINGS . . . . . . . . . . . . . . . . . . . . . . 74
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . 74
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.3 Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.4 Submissions to Limited Partners . . . . . . . . . . . . . . . 75
ARTICLE XII
POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . 76
ii
<PAGE> 4
TABLE OF CONTENTS (cont'd)
Page
----
ARTICLE XIII
RECORDS AND ACCOUNTING; REPORTS; FISCAL AFFAIRS . . . . . . . . . . . . . 77
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . 77
13.2 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . 77
13.3 Tax Information . . . . . . . . . . . . . . . . . . . . . . . 78
13.4 Interim Reports . . . . . . . . . . . . . . . . . . . . . . . 78
13.5 Partnership Funds . . . . . . . . . . . . . . . . . . . . . . 79
13.6 Other Information . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE XIV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERS . . . . . . . . 79
14.1 Representations, Warranties and Covenants of the Limited
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14.2 Representations, Warranties and Covenants of the General
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
14.3 Representations, Warranties and Covenants of All Partners . . 82
ARTICLE XV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
15.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS . . . . . . . . . . 84
15.3 JUDICIAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . 84
15.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 84
15.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . 84
15.6 Binding Provisions . . . . . . . . . . . . . . . . . . . . . 84
15.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 85
15.8 Reproduction of Documents . . . . . . . . . . . . . . . . . . 85
15.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 85
15.10 No Right to Partition . . . . . . . . . . . . . . . . . . . . 85
15.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 85
15.12 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
15.13 Exculpation of Certain Partners . . . . . . . . . . . . . . . 86
iii
<PAGE> 5
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
FRONTIERVISION PARTNERS, L.P., dated as of August 11, 1995, among FVP GP,
L.P., a Delaware limited partnership, as General Partner, John S. Koo, as the
withdrawing limited partner of the Partnership (the "Withdrawing Limited
Partner"), and each of those additional parties that shall be admitted as
Limited Partners.
W I T N E S S E T H:
FVP GP, L.P., as general partner of the Partnership, and Allan H.
Cohen, as a limited partner, entered into an agreement of limited partnership
dated as of April 14, 1995 and formed a limited partnership under the laws of
the State of Delaware under the name FrontierVision Partners, L.P. John S.
Koo was subsequently admitted as a limited partner of the Partnership and,
immediately thereafter, Allan H. Cohen withdrew as a limited partner of the
Partnership.
The parties now wish (i) to amend and restate as hereinafter set
forth the original agreement of limited partnership; (ii) to admit additional
Limited Partners to the Partnership and, immediately after the admission of
one such additional limited partner, the Withdrawing Limited Partner shall be
deemed to have withdrawn from the Partnership; and (iii) to continue the
business of the Partnership.
In consideration of the mutual covenants and agreements herein
made and intending to be legally bound, the parties hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall, unless
the context otherwise requires, have the meanings specified in this Article I.
"Adjusted Capital Account" shall mean, with respect to any
Partner, the balance in such Partner's Capital Account as of the end of the
relevant Fiscal Year or period, adjusted as follows:
<PAGE> 6
(i) Credit to such Capital Account the sum of (x) any amount
which such Partner is obligated or has agreed to contribute (but has not
yet contributed) to the Partnership and (y) the amount which such Partner
is deemed to be obligated to restore pursuant to the penultimate sentence
of Treas. Reg. Section 1.704-2(g)(1) and the penultimate sentence of
Treas. Reg. Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
subclauses (4), (5) and (6) of Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
"Advisory Committee" shall mean that committee selected, and
performing the functions, as provided in Article VI.
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"Agreement" shall mean this First Amended and Restated Agreement
of Limited Partnership, as originally executed and as amended, modified,
supplemented or restated from time to time, as the context requires.
"Alien" shall mean a foreign government or its representative.
"Attributable Limited Partner" shall mean any Limited Partner that
is not a Non-Attributable Limited Partner.
"Attributable Person" shall have the meaning specified in
paragraph 14.3.1.
"Bankruptcy" shall mean, with respect to a Person, (i) that such
Person has (A) made an assignment for the benefit of creditors; (B) filed a
voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or
had entered against such Person an order of relief in any bankruptcy or
insolvency proceeding; (D) filed a petition or an answer seeking for such
Person any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation or filed an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against such Person in
any proceeding of such nature; or (E) sought, consented to, or acquiesced in
the appointment of a trustee, receiver or liquidator of such Person or of all
or any substantial part of such Person's properties; (ii) 90 days have elapsed
after the commencement of any proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation and such
proceeding
2
<PAGE> 7
has not been dismissed; or (iii) 60 days have elapsed since the appointment
without such Person's consent or acquiescence of a trustee, receiver or
liquidator of such Person or of all or any substantial part of such Person's
properties and such appointment has not been vacated or stayed or the
appointment is not vacated within 60 days after the expiration of such stay.
"Capital Account" shall mean the capital account of each Partner
as determined and maintained by the Partnership in accordance with paragraph
4.4 hereof.
"Capital Call Expiration Date" shall have the meaning specified in
paragraph 3.3.1(b).
"Capital Commitment" of a Partner shall mean the amount set forth
under the caption "Capital Commitment" opposite the name of such Partner on
Schedule A, as it may be amended from time to time pursuant to paragraph
10.1.2, but shall be reduced by the amount, if any, of such Partner's Unused
Capital Commitment after the Capital Call Expiration Date.
"Capital Contributions" of a Partner shall mean the total amount
of contributions such Partner has made to the Partnership pursuant to
paragraph 3.3.1 as of the date in question, including any Deemed Capital
Contribution as provided in paragraph 3.3.1(c).
"Class A Limited Partner" shall mean any Partner holding a Class A
Limited Partnership Interest, including, without limitation, a Special Class A
Limited Partner.
"Class A Limited Partnership Interest" shall mean, with respect to
any Partner, the Interest of a Limited Partner designated as a Class A Limited
Partnership Interest on Schedule A hereto, including, without limitation, a
Special Class A Limited Partnership Interest.
"Class B Limited Partner" shall mean any Partner holding a Class B
Limited Partnership Interest, including, without limitation, a Special Class B
Limited Partner.
"Class B Limited Partnership Interest" shall mean, with respect to
any Partner, the Interest of a Limited Partner designated as a Class B Limited
Partnership Interest on Schedule A hereto, including, without limitation, a
Special Class B Limited Partnership Interest.
"Class C Limited Partner" shall mean any Partner holding a Class C
Limited Partnership Interest.
"Class C Limited Partnership Interest" shall mean, with respect to
any Partner, the Interest of a Limited Partner desig-
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nated as a Class C Limited Partnership Interest on Schedule A hereto.
"Class C LP Special Allocation Percentage" shall have the meaning
specified in paragraph 4.2.2(b).
"Cluster" shall have the meaning specified in paragraph 3.10.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor federal income tax code.
"Communications Act" means the Communications Act of 1934, as
amended from time to time.
"Consent" shall mean the approval of a Person, given as provided
in paragraph 11.1, to do the act or thing for which the approval is solicited,
or the act of granting such approval, as the context may require. Reference
to the Consent of a majority or specified percentage in Interest of the
Limited Partners or of a class or classes of Limited Partners shall mean,
except as set forth in paragraphs 3.2.4, 3.2.6 and 3.6, the Consent of Limited
Partners entitled to approve the act or thing for which approval is solicited
in accordance with the terms of this Agreement whose aggregate Capital
Commitments represent more than fifty percent (50%) or not less than the
specified percentage, as the case may be, of the aggregate Capital Commitments
of all such Limited Partners; provided, however, that in determining the
giving or withholding of any Consent of the Limited Partners, the Capital
Commitments of any Limited Partner who also is the General Partner, any
general partner of the General Partner, any shareholder of a corporation that
is a general partner of a General Partner or that becomes a General Partner,
and any other Affiliate of the General Partner or of any such general partner
or shareholder shall not be counted (and, accordingly, shall also be excluded
in calculating the aggregate Capital Commitments); and provided, further, that
the immediately preceding proviso shall in no event apply to any Class X
Limited Partner of the General Partner.
"Convertible Securities" shall have the meaning specified in
paragraph 3.4.2.
"Deemed Capital Contribution" shall have the meaning specified in
paragraph 3.3.1(c).
"Defaulting Partner" shall have the meaning specified in paragraph
3.6.1.
"Disposition" of an Investment shall mean the sale, exchange, or
other disposition by the Partnership of all or any portion of that Investment,
and shall include the receipt by the
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Partnership of a liquidating dividend or other like distribution (including
such a distribution resulting from a refinancing).
"Disposition Proceeds" shall mean the proceeds realized from any
Disposition less all expenses related thereto as determined in accordance with
generally accepted accounting principles consistently applied.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Partner" shall mean any Limited Partner that is an employee
benefit plan subject to ERISA, a "benefit plan investor" within the meaning of
the Plan Asset Regulations or a Governmental Plan.
"Excess Capital Account" shall mean, with respect to a Partner,
the excess, if any, of (i) the positive balance of such Partner's Adjusted
Capital Account over (ii) such Partner's Priority Capital.
"Fair Market Value" shall mean the value of Partnership assets
and, when the reference so requires, of Investments, as determined from time
to time by the General Partner and approved by the Advisory Committee.
"FCC" means the Federal Communications Commission (or any
successor thereto).
"FCC Disclosure Requirement" shall have the meaning specified in
paragraph 3.9.
"FCC Regulatory Issue" shall mean any event, occurrence or
circumstance that would cause the Partnership and/or any Operating Entity to
be in violation of the Communications Act or the rules or regulations
promulgated thereunder (with or without an actual finding thereof by the FCC).
"Fiscal Quarter" shall mean the calendar quarter or, in the case
of the first and last fiscal quarters, the fraction thereof commencing on the
date on which the Partnership is formed under the Partnership Act or ending on
the date on which the winding up of the Partnership is completed, as the case
may be.
"Fiscal Year" shall mean the calendar year or, in the case of the
first and the last fiscal years, the fraction thereof commencing on the date
on which the Partnership is formed under the Partnership Act or ending on the
date on which the winding up of the Partnership is completed, as the case may
be.
"FrontierVision Inc." shall mean FrontierVision Inc., a Delaware
corporation, which is the general partner of the General Partner.
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"Fund Investor" shall have the meaning specified in paragraph
3.10.
"General Partner" shall mean FVP GP, L.P., a Delaware limited
partnership, and/or any other Person which becomes a successor or additional
general partner of the Partnership as provided herein, in such Person's
capacity as a general partner of the Partnership.
"General Partner Partnership Agreement" shall mean the First
Amended and Restated Agreement of Limited Partnership of the General Partner,
dated as of August 11, 1995, as originally executed and as amended, modified,
supplemented or restated from time to time, as the context requires.
"Governmental Plan" shall mean a "governmental plan" within the
meaning of Section 3(32) of ERISA.
"GP Principal" shall mean any general partner of the General
Partner and any shareholder of a corporation that is a general partner of a
General Partner or that becomes a General Partner, and shall include James C.
Vaughn and John S. Koo.
"GP Reduction Percentage" shall have the meaning specified in
paragraph 4.2.2(a)(ii).
"GP Special Allocation Percentage" shall have the meaning
specified in paragraph 4.2.2(a).
"Incapacity" shall mean, as to any Person, (i) the adjudication of
incompetence or insanity of such Person, or the Bankruptcy of such Person, or
(ii) the death, dissolution or termination (other than by merger or
consolidation), as the case may be, of such Person.
"Indemnitee" shall have the meaning specified in paragraph 5.6.1.
"Initial Offering Expiration Date" shall mean the date which is
the earlier of (i) October 31, 1995 and (ii) the date on which the General
Partner shall have given written notices of capital calls pursuant to
paragraph 3.3.1(a) of this Agreement and/or requests for Loans pursuant to
Section 1.7(a) of the Purchase Agreement in an aggregate amount exceeding $15
million; provided, however, that such date may be extended by the General
Partner with the approval of seventy-five percent (75%) of the members of the
Advisory Committee.
"Interest" shall mean the entire interest(s) of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the
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obligations of such Partner to comply with all the terms and provisions of
this Agreement.
"Investment" shall have the meaning specified in paragraph 2.4.
"JPMIC" shall mean J.P. Morgan Investment Corporation, a Delaware
corporation.
"Junior Subordinated Notes" shall have the meaning specified in
the Purchase Agreement.
"Koo Employment Agreement" shall mean the employment agreement,
dated as of April 17, 1995, by and between the Partnership and John S. Koo, as
originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
"Koo Termination Event" shall have the meaning specified in
paragraph 4.2.2(d).
"Limited Partner" shall mean any Person that is a limited partner
of the Partnership at the time of reference thereto, in such Person's capacity
as a limited partner of the Partnership.
"Limited Partnership Interests" shall mean, collectively, the
Class A Limited Partnership Interests, the Class B Limited Partnership
Interests and the Class C Limited Partnership Interests and such other classes
or series of Interests of Limited Partners as may from time to time be created
and issued in accordance with the terms of this Agreement.
"Liquidating Trustee" shall mean the General Partner or, if there
is none, a Person selected by a majority in Interest of the Attributable Class
A Limited Partners, to act as a liquidating trustee as provided in paragraph
9.2.1.
"Loan" shall have the meaning specified in the Purchase Agreement.
"Loan Amount" of a Partner shall mean the aggregate amount such
Partner is required to loan to the Partnership pursuant to the Purchase
Agreement.
"Net Profits" and "Net Losses" for any Fiscal Year or other period
shall mean, respectively, an amount equal to the Partnership's income or loss
for such Fiscal Year or period, as computed for federal income tax purposes
with the following adjustments:
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(i) Any income of the Partnership which is exempt from federal
income tax shall increase such taxable income or shall reduce such loss;
(ii) Any expenditures of the Partnership which are described in
Code Section 705(a)(2)(B), or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treas. Reg. Section 1.704-1(b)(2)(iv)(h)(i)(1),
shall reduce such taxable income or shall increase such loss;
(iii) Any item which is specially allocated pursuant to
paragraphs 4.4.4 or 4.4.5 hereof shall not be taken into account in
computing such income or loss;
(iv) For purposes of computing gain or loss (whether realized
by reason of a sale or distribution) and depreciation and amortization,
the basis of any property shall be equal to the amount shown on the
Partnership's books; and
(v) Any deemed gain or deemed loss for book purposes resulting
from the distribution of appreciated or depreciated property, or the
adjustment of the value of such property on the Partnership's books,
shall be taken into account in computing such income or loss.
"Non-Attributable Limited Partner" shall have the meaning
specified in paragraph 3.2.4.
"Nonconforming Partner" shall have the meaning specified in
paragraph 3.7.
"Nondisclosure Information" shall have the meaning specified in
paragraph 3.9.
"Nondisclosure Partner" shall have the meaning specified in
paragraph 3.9.
"Nonrecourse Deductions" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(b).
"Notes" shall have the meaning specified in the Purchase
Agreement.
"Operating Entity" shall mean any partnership, limited liability
company, corporation or other entity formed or controlled, directly or
indirectly, by the Partnership to carry out the purposes of the Partnership as
set forth in paragraph 2.4.
"Partner" shall mean the General Partner or any of the Limited
Partners and "Partners" shall mean the General Partner and all of the Limited
Partners.
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"Partner Nonrecourse Deduction" shall have the meaning set forth
in Treas. Reg. Section 1.704-2(i).
"Partner Nonrecourse Loan" shall mean a loan made to, or credit
arrangement for the benefit of, the Partnership by a Partner or by a person
related to a Partner (as defined in Treas. Reg. Section 1.752-4(b)) which by
its terms exculpates the Partners from personal liability on the debt, but
under which such Partner or related person bears the ultimate economic risk of
loss within the meaning of Treas. Reg. Section 1.752-2.
"Partnership" shall mean the limited partnership governed hereby,
as such limited partnership may from time to time be constituted.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. Section 17-101, et seq., as amended from time to
time, and any successor to said Act.
"Partnership Minimum Gain" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(d).
"Person" shall mean any individual, partnership (general or
limited), corporation, unincorporated organization or association, limited
liability company, trust or other entity.
"Plan Asset Regulations" shall mean the regulations issued by the
U.S. Department of Labor at Section 2510.3-101 of Part 2510 of Chapter XXV,
Title 29 of the Code of Federal Regulations, as such regulations may be
amended from time to time.
"Priority Capital" shall mean, with respect to a Partner at any
particular time, the sum of (i) the excess of (x) such Partner's 12% Preferred
Return over (y) the unpaid principal of, and the accrued and unpaid interest
on, such Partner's Senior Subordinated Notes and (unless they are treated as
equity for federal income tax purposes pursuant to paragraph 4.4.8(b)) Junior
Subordinated Notes, plus (ii) such Partner's Unused Capital Commitment.
"Priority Capital Account" shall mean, with respect to a Partner,
the excess, if any, of the balance of such Partner's Adjusted Capital Account
over such Partner's Unrecouped Capital Contributions.
"Purchase Agreement" shall mean the Limited Partnership Interest
and Notes Purchase Agreement dated as of July 28, 1995, by and between the
Partnership, the General Partner and the Class A and Class B Limited Partners.
"Regulation Y Limited Partner" shall have the meaning specified in
paragraph 3.8.6.
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"Regulatory Disability" shall have the meaning specified in
paragraph 3.6.6.
"Repurchase Amount" shall have the meaning specified in paragraph
3.9.4.
"Repurchase Payments" shall have the meaning specified in
paragraph 3.9.3(e).
"Required Transfer Date" shall have the meaning specified in
paragraph 8.4.1.
"Senior Subordinated Notes" shall have the meaning specified in
the Purchase Agreement.
"SPC" shall have the meaning specified in paragraph 3.10.
"Special Class A Limited Partner" and "Special Class B Limited
Partner" shall mean any Class A or Class B Limited Partner holding a Special
Class A or Special Class B Limited Partnership Interest.
"Special Class A Limited Partnership Interest" and "Special Class
B Limited Partnership Interest" shall mean any Class A Limited Partnership
Interest or Class B Limited Partnership Interest designated as "Special" on
Schedule A hereto.
"Substituted Limited Partner" shall mean any Person admitted to
the Partnership as a Limited Partner pursuant to the provisions of paragraph
8.3.
"Tax Advances" shall have the meaning specified in paragraph 4.5.
"Transfer" shall have the meaning specified in paragraph 8.1.1.
"Treas. Reg." and "Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"12% Preferred Return" shall have the meaning specified in
paragraph 4.3.1.
"Unrecouped Capital Contributions" shall mean, with respect to a
Partner, the amount of such Partner's Capital Commitment less the cumulative
amount of distributions made pursuant to paragraphs 4.2.1(a) and 9.2.4(ii)
(but only to the extent in accordance with paragraph 4.2.1(a)) to such
Partner.
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"Unused Capital Commitments" shall have the meaning specified in
paragraph 3.3.2.
"UVC Closing" shall mean the closing of the acquisition by the
Partnership of the cable television systems owned and operated by United Video
Cablevision, Inc. in the States of Maine and Ohio.
"Vaughn Employment Agreement" shall mean the employment agreement,
dated as of April 17, 1995, by and between the Partnership and James C.
Vaughn, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
"Vaughn Expiration Date" shall have the meaning specified in
paragraph 7.2.1.
"Vaughn Termination Event" shall have the meaning specified in
paragraph 4.2.2(c).
ARTICLE II
ORGANIZATION
2.1 Formation and Continuation. The parties have formed and
hereby continue the Partnership as a limited partnership pursuant to the
provisions of the Partnership Act. The rights and liabilities of the Partners
shall be as provided in the Partnership Act, except as herein otherwise
expressly provided.
2.2 Name. The name of the Partnership heretofore formed and
hereby continued is FrontierVision Partners, L.P. However, the business of
the Partnership may be conducted, upon compliance with all applicable laws,
under any other name designated in writing by the General Partner to the
Limited Partners, provided such name contains the words "limited partnership"
or the abbreviation "L.P."
2.3 Place of Business and Office; Registered Agent. The
Partnership shall maintain a registered office in the State of Delaware at c/o
The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100,
Dover, Kent County, Delaware 19904. The Partnership shall maintain its
principal office at 1777 South Harrison Street, Suite P200, Denver, Colorado
80210. The General Partner may at any time change the location of the
Partnership's offices and may establish additional offices. Notice of any
such change shall be given to the Limited Partners. The name and address of
the Partnership's registered agent for service of process on the Partnership
in the State of Delaware is The Prentice-Hall Corporation System, Inc., 32
Loockerman Square,
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Suite L-100, Dover, Kent County, Delaware 19904 or such other agent as the
General Partner may from time to time designate.
2.4 Purpose. The principal purpose of the Partnership is to
acquire, invest in, own, finance, operate, improve, develop, maintain,
promote, sell, dispose of and otherwise exploit cable television systems and
properties and interests therein ("Investments") and to conduct related
businesses and activities (including, without limitation, telephony and other
communications businesses and activities that are related to the Partnership's
cable television businesses and activities), in each case, directly or
indirectly through other entities, alone or with others. The Partnership may
engage in any and all activities, and shall have the power to do any and all
acts, necessary, desirable or incidental to the accomplishment of the
foregoing. Without limiting the generality of the foregoing, (i) the
Partnership shall have any and all of the powers that may be exercised by the
General Partner on behalf of the Partnership pursuant to Article V and (ii)
the Partnership, and the General Partner on behalf of the Partnership, may
enter into and perform the Purchase Agreement without any further act, vote or
approval of any Partner.
2.5 Term. The term of the Partnership commenced on April 17,
1995, and shall continue in full force and effect until June 30, 2002, which
period (i) may be extended by the General Partner for up to two additional
one-year periods from such date if the General Partner determines, in each
instance, that such extension is in the best interests of the Partnership and
the Advisory Committee approves such extension and (ii) shall be extended by
the General Partner for up to two additional one-year periods from such date
if the Advisory Committee requests such extension, in each case not later than
thirty (30) days prior to the last day of the term, as then extended, or until
dissolution prior thereto pursuant to the provisions hereof.
2.6 Qualification in Other Jurisdictions. The General Partner
shall cause the Partnership to be qualified or registered under assumed or
fictitious names or foreign limited partnership statutes or similar laws in
any jurisdiction in which the Partnership owns property or transacts business
to the extent, in the reasonable judgment of the General Partner, such
qualification or registration is necessary or advisable in order to protect
the limited liability of the Limited Partners or to permit the Partnership
lawfully to own property or transact business. The General Partner shall have
the power and authority to execute, file and publish all such certificates,
notices, statements or other instruments, and any and all amendments thereto,
necessary to permit the Partnership to conduct business as a limited
partnership in all jurisdictions where the Partnership elects to do business.
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ARTICLE III
PARTNERS AND CAPITAL
3.1 General Partner.
3.1.1 The General Partner shall be FVP GP, L.P. and/or any other
Person which becomes a successor or additional General Partner as provided
herein. The name(s), address(es) and Capital Commitment(s) of the General
Partner(s) are set forth in Schedule A hereto, as amended from time to time.
The Capital Commitment(s) of the General Partner(s) shall at all times be an
amount equal to not less than one percent (1%) of the total Capital
Commitments of all Partners, including the General Partner(s), and shall be
payable on the same terms as provided herein with respect to the Class A and
Class B Limited Partners.
3.1.2 No General Partner, as such, shall be required to lend any
funds to the Partnership, except as provided in the Purchase Agreement, or to
make any payment to the Partnership with respect to its Capital Commitment
that exceeds its Unused Capital Commitment as of the date of the payment.
3.2 Limited Partners.
3.2.1 The names, addresses, class of Interests owned and Capital
Commitments of the Limited Partners are set forth in Schedule A hereto, as the
same may be amended from time to time in accordance with this Agreement. On
the date hereof, each Person listed as a Limited Partner on the Schedule A
hereto which is dated as of the date hereof shall, upon the execution and
delivery by such Limited Partner of a counterpart of this Agreement, be
admitted to the Partnership as a Limited Partner. Upon the admission of any
such Person as a Limited Partner of the Partnership, the Withdrawing Limited
Partner shall be deemed to have withdrawn from the Partnership.
3.2.2 Any Partner may lend money to, borrow money from, act as
surety, guarantor or endorser for, guarantee or assume one or more specific
obligations of, provide collateral for, and transact other business with, the
Partnership, and shall have the same rights and obligations with respect
thereto as a Person who is not a Partner. However, no Limited Partner shall
be required to lend any funds to the Partnership, except as provided in the
Purchase Agreement, or to make any payment to the Partnership with respect to
its Capital Commitment that exceeds its Unused Capital Commitment as of the
date of the payment.
3.2.3 No Limited Partner shall participate in the control of the
business of the Partnership, and no Limited
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Partner shall have any right or authority to act for or bind the Partnership.
3.2.4 Any Limited Partner may, upon notice to the General
Partner, elect to be, any Limited Partner may, pursuant to paragraph 3.7.3(a),
be deemed to be, and any Limited Partner that is an Alien or Nondisclosure
Partner automatically shall be, a "Non-Attributable Limited Partner", in which
case, such Limited Partner shall be subject to the restrictions set forth in
this paragraph 3.2.4. In addition to, and not in limitation of, the
restrictions set forth in paragraph 3.2.3, and notwithstanding anything in
this Agreement or any other agreement between the Partnership and any of the
Partners to the contrary, no Non-Attributable Limited Partner shall have any
involvement in any material respect in the management or operation of any of
the Partnership's cable television enterprises. In particular, but without
limitation, no Non-Attributable Limited Partner shall:
(i) serve as a General Partner;
(ii) act as an employee, agent or independent contractor of
the Partnership in any function or capacity which directly or indirectly
relates to the Partnership's FCC regulated activities, or perform any
service materially related to such activities, other than as a lender or
surety;
(iii) communicate with the General Partner or any FCC
regulated entity in which the Partnership holds an interest on matters
pertaining to the day-to-day operations of any FCC regulated entity or be
entitled to vote on such matters;
(iv) vote on the admission of a new general partner unless
such vote is subject to veto by the existing General Partner, if any (and
in furtherance, and not in limitation, of the foregoing, each Non-
Attributable Limited Partner hereby agrees that it shall not be a Limited
Partner for purposes of a vote to select a new general partner of the
Partnership pursuant to Section 17-801(3) of the Partnership Act); or
(v) vote to remove the General Partner unless the General
Partner is (A) subject to bankruptcy proceedings as described in
Section 17-402(a)(4)-(5) of the Partnership Act; (B) adjudicated
incompetent by a court of competent jurisdiction; or (C) found by a
neutral arbiter to have engaged in malfeasance, criminal conduct or
wanton or willful neglect.
The foregoing restrictions apply to the constituent Persons (e.g., directors,
officers, partners) of any Non-Attributable Limited Partner that is not a
natural person. The foregoing provisions of this paragraph 3.2.4 are intended
to assure
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adequate insulation for purposes of the attribution rules of the FCC as
described in the FCC's Attribution Reconsideration Order, 58 R.R.2d 604
(1985), and Further Attribution Reconsideration Order, 1 FCC Rcd 802 (1986),
and shall be interpreted and applied in a manner consistent with this purpose.
Except as set forth in this paragraph 3.2.4, or otherwise expressly provided
in this Agreement, an Interest held by a Non-Attributable Limited Partner
shall be identical in all respects to other Limited Partnership Interests of
the same class. Any election made by a Limited Partner to be treated as a
Non-Attributable Limited Partner shall be revocable only with the Consent of
the General Partner and the approval of the Advisory Committee.
3.2.5 Unless admitted to the Partnership as a General Partner or
a Limited Partner, as provided in this Agreement, no Person shall be
considered a Partner. The Partnership and the General Partner need deal only
with Persons so admitted as Partners. Any distribution by the Partnership to
the Person shown on the Partnership records as a Partner or to its legal
representatives, or to the assignee of the right to receive Partnership
distributions as provided herein, shall relieve the Partnership and the
General Partner of all liability to any other Person who may be interested in
such distribution by reason of any other assignment by the Partner or by
reason of the Partner's Incapacity, or for any other reason.
3.2.6 The General Partner or any Affiliate of the General Partner
may also be a Limited Partner, upon acquiring the Interest of a Limited
Partner or otherwise; provided, however, that neither the General Partner, any
general partner of the General Partner, any shareholder of a corporation that
is a general partner of a General Partner or that becomes a General Partner
nor any other Affiliate of the General Partner shall be entitled to
participate in any Consent of the Limited Partners, and the Capital Commitment
applicable to the Interest of the General Partner as a Limited Partner and of
any such Affiliate as a Limited Partner shall not be counted in any
computations required in any such Consent; and provided, further, that the
immediately preceding proviso shall in no event apply to any Class X Limited
Partner of the General Partner.
3.3 Partnership Capital.
3.3.1 (a) Each Partner shall make payments from time to time
with respect to its Capital Commitment, on the date specified in a written
notice given by the General Partner, which date shall be not less than twenty
(20) days nor more than thirty (30) days after such notice has been given.
Each such notice shall require the prior approval of the Advisory Committee.
Each such notice shall state the amount being requested from the Partner to
whom such notice is given and the total amount being requested from all
Partners and that such payment is required (x) in connection with an
Investment (in which case such notice also
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shall indicate the anticipated closing date of such Investment, the identity
of the Investment and a brief description of the nature of the Investment and
the business to which it relates), (y) to pay Partnership expenses in
accordance with paragraph 5.5.1 or (z) to perform the Partnership's
obligations under any guaranty given by the Partnership or borrowings made by
the Partnership as permitted under paragraph 5.1.2 (in which case such notice
shall also indicate the anticipated date of performance and the Investment, if
any, to which such guaranty or borrowings relate). No Partner, as such, shall
be required to make any payment with respect to its Capital Commitment that
(i) exceeds such Partner's Unused Capital Commitment at the time of payment or
(ii) relates to a capital call made subsequent to the Capital Call Expiration
Date. The aggregate payments required to be made by the Partners pursuant to
this paragraph 3.3.1(a) shall be called by the General Partner and shall be
paid by the Partners in proportion to their respective Unused Capital
Commitments.
(b) No such notice of a capital call pursuant to paragraph
(a) above may be given after June 30, 1997; provided, however, that such date
may be extended by the General Partner for up to one additional year, if the
General Partner determines that such extension is in the best interests of the
Partnership and the Advisory Committee unanimously approves such extension not
later than May 31, 1997. (Such expiration date, as extended, is herein
referred to as the "Capital Call Expiration Date".) Unless the Advisory
Committee shall otherwise approve, (i) no notice of a capital call pursuant to
paragraph (a) above shall be given for an aggregate amount from all Partners
that, together with requests for Loans pursuant to the Purchase Agreement
being made at the same time, is less than $5,000,000 and (ii) notices of
capital calls and requests for Loans shall not be given more frequently than
once every two months.
(c) JPMIC shall be deemed to have made payments with
respect to its Capital Commitment from time to time (each a "Deemed Capital
Contribution") in an amount equal to 3.0 percent of the payments made in
respect of their Capital Commitments by all Limited Partners (other than
JPMIC) that are admitted to the Partnership on or before the Initial Offering
Expiration Date, by their transferees and, in the case of a Fund Investor that
owns a SPC that is admitted to the Partnership on or before the Initial
Offering Expiration Date, by any other SPC of that Fund Investor.
Accordingly, whenever payments are required to be made by the Partners
pursuant to paragraph 3.3.1(a), the amount JPMIC actually will be required to
pay will be its proportionate share (based on respective Unused Capital
Commitments) reduced by the amount of its Deemed Capital Contribution.
3.3.2 The "Unused Capital Commitment" of a Partner as of a date
means the amount of such Partner's Capital Commitment reduced by the amount of
all Capital Contributions made, or
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deemed to have been made, by that Partner pursuant to paragraph 3.3.1 as of
that date.
3.3.3 No Partner shall be paid interest on any Capital
Contribution to the Partnership or on such Partner's Capital Account.
3.3.4 No Partner shall have any right to demand the return of its
Capital Contributions, other than upon dissolution of the Partnership pursuant
to Article IX.
3.3.5 No Partner shall have the right to demand or receive
property other than cash in return for its Capital Contributions, subject,
however, to the provisions of paragraph 3.10.
3.4 Admission of Additional Limited Partners.
3.4.1 Subject to the limitations set forth in this paragraph
3.4.1 and in paragraphs 3.4.2 and 3.4.3 below, the General Partner, with the
approval of the Advisory Committee (but without the approval of the Limited
Partners), is authorized to cause the Partnership to admit additional Limited
Partners to the Partnership or to permit any existing Limited Partner to
increase its Capital Commitment or to create and issue such additional classes
or series of Limited Partnership Interests, having such designations,
preferences and relative, participating or other special rights, powers and
duties, as the General Partner, with the approval of the Advisory Committee,
shall determine, including, without limitation: (i) the right of any such
class or series of Limited Partnership Interest to share in Partnership
distributions; (ii) the allocation to any such class or series of Limited
Partnership Interest of items of Partnership income, gains, losses and
deductions; (iii) the rights of any such class or series of Limited
Partnership Interest upon dissolution or liquidation of the Partnership; and
(iv) the right of any such class or series of Limited Partnership Interest to
vote on matters relating to the Partnership and this Agreement; provided,
however, that without the Consent of a majority in Interest of the Class A
Limited Partners, (x) the holders of such newly issued Limited Partnership
Interests (other than Class A or Class B Limited Partnership Interests) shall
not have the right to vote with the Class A Limited Partners or Class B
Limited Partners on any matter as to which such Limited Partners have a class
vote and shall not have any class or other special voting or "blocking" rights
and (y) the rights to allocations and distributions and other economic rights
associated with such newly issued Limited Partnership Interests shall not be
senior in any respect to (but may be pari passu with or junior to) such rights
as are associated with the Class A and Class B Limited Partnership Interests;
and provided, further, that without the consent of JPMIC, no additional
Limited Partner shall be admitted to the Partnership if, as a result of such
admission, the Partnership
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would have more than 44 Limited Partners, plus two additional SPCs for each
Fund Investor. Upon the issuance pursuant to this paragraph 3.4.1 of any
class or series of Limited Partnership Interest or the increase in any Capital
Commitment of an existing Limited Partner, the General Partner (pursuant to
the General Partner's power of attorney from the Limited Partners), with the
approval of the Advisory Committee, but without the approval of any Limited
Partner, may amend any provision of this Agreement, and execute, swear to,
acknowledge, deliver, file and record, if required, such documents, to the
extent necessary or desirable to reflect the admission of any additional
Limited Partner to the Partnership or the increase in any existing Limited
Partner's Capital Commitment to the Partnership or the authorization and
issuance of such class or series of Limited Partnership Interest, and the
related rights and preferences thereof.
3.4.2 Subject to paragraph 3.4.4, until the Capital Commitments
of all of the Class A and Class B Limited Partners have been fully drawn upon
or have expired, without the Consent of a majority in Interest of the Class A
Limited Partners, the General Partner shall not, and shall not have the power
or authority to, issue, sell or grant Limited Partnership Interests in the
Partnership or warrants, options or other rights to purchase Limited
Partnership Interests in the Partnership or securities convertible into or
exchangeable for Limited Partnership Interests in the Partnership
(collectively, the "Convertible Securities") or permit any Limited Partner to
increase its Capital Commitment to the Partnership.
3.4.3 Subject to paragraph 3.4.4, after the Capital Commitments
of all of the Class A and Class B Limited Partners have been fully drawn upon
or have expired, each Class A and Class B Limited Partner shall have the
right, on the same terms as those proposed for the issuance of any additional
Limited Partnership Interests (or any Convertible Securities) or any increase
in a Limited Partner's Capital Commitment and during a reasonable period of
time no less than 30 days after the General Partner has given notice to each
Limited Partner of such proposed action, to (i) purchase its pro rata share of
any such additional Limited Partnership Interests (or Convertible Securities)
based on the ratio that such Limited Partner's Capital Commitment bears to the
aggregate Capital Commitments of all Partners as of the date of the notice
from the General Partner of the proposed issuance of additional Limited
Partnership Interests (or Convertible Securities) or (ii) increase its Capital
Commitment in an amount equal to the percentage which such Limited Partner's
Capital Commitment bears to the Capital Commitment of all Partners as of the
date of the notice from the General Partner of the proposed increase of any
Limited Partner's Capital Commitment, as the case may be. At the option of
each Partner, the right of such Partner granted under this paragraph 3.4.3
shall be exercisable for nonvoting Limited Partnership Interests (or
Convertible Securities relating thereto).
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3.4.4 The restrictions and limitations of paragraphs 3.4.2 and
3.4.3 shall not apply to: (i) the issuance or sale of Class A or Class B
Limited Partnership Interests to new Limited Partners on or prior to the
Initial Offering Expiration Date or the increase on or prior to the Initial
Offering Expiration Date by any existing Class A or Class B Limited Partner of
its Capital Commitment to the Partnership until, after giving effect to (x)
the aggregate Capital Commitments of such additional Limited Partners, (y)
such increased Capital Commitments of existing Limited Partners and (z) the
aggregate Capital Commitments of the then Partners, the aggregate amount of
the Capital Commitments of all Partners equals $17,171,717; (ii) the issuance
or grant of Class C Limited Partnership Interests to employees of the
Partnership or of any Operating Entity or subsidiary of the Partnership; (iii)
the issuance or sale of Limited Partnership Interests to a seller or its
designee in connection with the Partnership's acquisition of one or more cable
television systems or properties or interests therein or any assets thereof;
(iv) the issuance of Class A or Class B Limited Partnership Interests upon
conversion of Class B or Class A Limited Partnership Interests; (v) the
issuance of Limited Partnership Interests pursuant to the terms of Convertible
Securities which shall have been issued, sold or granted in compliance with
paragraphs 3.4.1 through 3.4.3; and (vi) any increase in the Capital
Commitments and Loan Amounts of the Limited Partners in accordance with
paragraph 3.6.4.
3.4.5 No additional Limited Partner shall be admitted to the
Partnership pursuant to this paragraph 3.4 unless and until the conditions of
paragraph 8.1.3(i)-(v) are satisfied (with such conditions being interpreted
as applying to the admission of an additional Limited Partner rather than to a
Transfer) and such prospective additional Limited Partner has executed a
counterpart of this Agreement.
3.4.6 Each Limited Partner hereby consents to the admission to
the Partnership of any additional Limited Partner in accordance with the
provisions of this paragraph 3.4 and to the issuance to any such Person of
Limited Partnership Interests.
3.5 Liability of Partners.
3.5.1 In no event shall any Limited Partner (or former Limited
Partner) have any liability for the repayment or discharge of the debts and
obligations of the Partnership (although its share of any undistributed assets
and profits of the Partnership shall be available for such repayment or
discharge) or, subject to paragraph 3.5.2, be obligated to make any
contribution to the Partnership in addition to its Unused Capital Commitment;
provided, however, that such Limited Partner shall be liable to the
Partnership for its Unused Capital Commitment to the extent a call for a
payment is made in accordance with paragraph 3.3.1 and for its Loan Amount to
the extent a call for
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payment is made in accordance with Section 1.7 of the Purchase Agreement.
3.5.2 In accordance with the Partnership Act, a limited partner
of a partnership may, under certain circumstances, be required to return to
such partnership, for the benefit of partnership creditors, amounts previously
wrongfully distributed to such partner. It is the intent of the Partners that
no distribution to any Limited Partner pursuant to paragraph 4.2.1 shall be
deemed to be a return of money or other property paid or distributed in
violation of the Partnership Act. The payment or distribution of any such
money or other property to a Limited Partner shall be deemed to be a
compromise within the meaning of Section 17-502(b) of the Partnership Act and,
except as otherwise provided by applicable law, the Limited Partner receiving
any such money or property shall not be required to return any such money or
property to the Partnership or any creditor of the Partnership. However, if
any court of competent jurisdiction holds that, notwithstanding the provisions
of this Agreement, any Limited Partner is obligated to make any such payment,
such obligation shall be the obligation of such Limited Partner and not of the
General Partner.
3.5.3 Neither the General Partner nor any of its Affiliates shall
have any liability to any Limited Partner in respect of any amounts
outstanding in the Capital Account of a Limited Partner, including, but not
limited to, Capital Contributions.
3.6 Default in Payment.
3.6.1 In the event any Partner shall default in any payment with
respect to its Capital Commitment when required to be made, or shall fail to
make any Loan when required to be made under the Purchase Agreement, other
than as a result of a Regulatory Disability (as such term is defined in
paragraph 3.6.6), and shall fail to make such payment or Loan within ten (10)
days after notice of default shall be given it by the General Partner (a
"Default Notice"), then such Partner shall be a defaulting Partner (a
"Defaulting Partner"), and the General Partner, with the approval of the
Advisory Committee, may elect to have any or all of the following provisions
of this paragraph 3.6.1 apply:
A Defaulting Partner: (i) in addition to, and not in
limitation of, the restrictions on Transfer set forth in this Agreement,
shall not be entitled to Transfer such Defaulting Partner's Interest
without the written consent of the General Partner and the approval of
the Advisory Committee, such consent and approval to be given or withheld
by the General Partner and the Advisory Committee in each of its sole
discretion; (ii) shall not be entitled (but may be required) to make
further payments with respect to its
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Capital Commitment pursuant to clause (x) of paragraph 3.3.1(a) and as a
result shall suffer a permanent reduction in the Defaulting Partner's
proportionate Interest (the obligation of such Defaulting Partner to make
payments with respect to its Capital Commitment pursuant to clause (y)
and clause (z) of paragraph 3.3.1(a), and, to the extent provided by law,
the liability of such Defaulting Partner to the creditors of the
Partnership, shall remain unchanged as if such default had not occurred);
(iii) shall not be entitled (but may be required) to participate in
Investments thereafter made by the Partnership (and, if it is not so
permitted to participate, shall not be entitled to any distribution with
respect to such Investments); (iv) shall lose its right, if any, to
participate in any Consent of the Limited Partners (and the Capital
Commitment of such Partner shall not be counted in determining the
existence of a quorum, the giving or withholding of any Consent or the
aggregate Capital Commitments); and (v) shall lose its right, if any, to
have a designee on the Advisory Committee, or to attend as an observer
meetings of the Advisory Committee or of the Board of Directors of the
general partner of the General Partner or committees thereof.
3.6.2 After the date which is the tenth (10th) day after the date
of any Default Notice, the General Partner, with the approval of the Advisory
Committee, may elect to have the following provisions apply:
(A) The Defaulting Partner shall pay over to the
other Partners (except any other Defaulting Partner), as partial
recompense for damages suffered, and the Partnership shall
withhold (for the account of such other Partners) from any
distribution or loan repayment which would otherwise be made to
such Partner on or after such date an amount equal to the
following percentages (the "Default Percentage") of such
distribution or loan repayment: (i) 50%, if on the date of
default such Defaulting Partner has contributed and loaned to the
Partnership, in the aggregate, less than 25% of the sum of its
Capital Commitment and Loan Amount; (ii) 33%, if on the date of
default such Defaulting Partner has contributed and loaned to the
Partnership 25% or more and less than 50% of the sum of its
Capital Commitment and Loan Amount; and (iii) 25%, if on the date
of default such Defaulting Partner has contributed and loaned to
the Partnership 50% or more of the sum of its Capital Commitment
and Loan Amount.
(B) The amounts withheld from the Defaulting Partner
by the Partnership pursuant to subparagraph (A) above shall be
distributed among the other Partners (other than any other
Defaulting Partner) in proportion to their respective Capital
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Commitments or, in the case of a distribution upon liquidation, in
proportion to the liquidating distributions to them pursuant to
paragraph 9.2.4.
3.6.3 The General Partner, with the approval of the Advisory
Committee, also shall have the right to cause any Defaulting Partner to
Transfer its Limited Partnership Interest and/or Notes effective immediately
upon written notice, in which case (i) the procedure set forth in paragraph
8.4.2 for Transfer shall apply, with the date of the Defaulting Partner's
receipt of such notice being treated as the "Required Transfer Date" and (ii)
the provisions of paragraphs 3.6.1 and 3.6.2 shall not apply to the
Transferred Interest and/or Notes, provided, however, that the Defaulting
Partner shall pay over to the other Partners (other than any other Defaulting
Partner), in proportion to their respective Capital Commitments, as partial
recompense for damages suffered, the Default Percentage of the amount paid by
the transferee for such Interest and/or Notes.
3.6.4 The General Partner may offer to all Class A and Class B
Limited Partners the opportunity to increase their Capital Commitments and
Loan Amounts, and to make additional Capital Contributions and Loans, to the
extent necessary to make up any shortfall resulting from the Defaulting
Partner's default. All Class A and Class B Limited Partners shall have the
right to participate on a pro rata basis, based on their respective Capital
Commitments. If the Class A and Class B Limited Partners do not so elect to
make additional Capital Contributions and Loans in an amount sufficient to
make up the shortfall, then the General Partner may deliver a new notice to
each Limited Partner requiring an additional payment with respect to its
Capital Commitment, and each such Partner shall make such additional payment
within twenty (20) days after having been given such new notice; provided that
no Limited Partner shall be obligated to contribute an additional amount to
the extent that (i) such additional amount would exceed such Limited Partner's
Unused Capital Commitment or (ii) any "24.9% Partner" shall have elected
pursuant to the following sentence to be excused from making an additional
payment. No Limited Partner (a "24.9% Partner") shall be obligated to
contribute an additional amount to the extent that such 24.9% Partner's
aggregate Capital Contributions and Loan Amounts to the Partnership would as a
result of such additional payment exceed 24.9% of the aggregate Capital
Contributions and Loan Amounts of all Partners to the Partnership.
3.6.5 Nothing contained in this paragraph 3.6 shall reduce
(except, in the case of a non-Defaulting Partner, to the extent of additional
payments made pursuant to paragraph 3.6.4) or increase the Unused Capital
Commitment of any Limited Partner or increase the obligations of any non-
Defaulting Partner. Each of the Partners hereby acknowledges and accepts the
application to it of the remedies provided in this paragraph 3.6 in
recognition of the risk and speculative damages its default would cause
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<PAGE> 27
the other Partners, and further agrees that the availability of such remedies
shall not preclude any other remedies which may be available at law, in
equity, by statute or otherwise. No Limited Partner shall, however, in any
event be liable to the Partnership or the other Partners for an aggregate
amount in excess of its Capital Commitment.
3.6.6 If any default described in paragraph 3.6.1 is by reason of
the Regulatory Disability of a Limited Partner, then such Limited Partner
shall deliver to the Partnership a certificate describing in reasonable detail
such Regulatory Disability. The Partnership and such Limited Partner shall
consult with one another to consider the options available to the Partnership
and such Limited Partner, and shall have a period of 60 days from receipt of
such certificate to take such commercially reasonable action as may be
necessary to cure such Regulatory Disability. If such Regulatory Disability
is cured to the reasonable satisfaction of the Limited Partner, then the
Limited Partner shall make the required payment with respect to its Capital
Commitment and/or required Loan, as applicable. If such cure cannot be
effected after application of the best commercially reasonable efforts of both
such Limited Partner and the Partnership, then such Limited Partner shall be
released from its obligation (i) to make further payments with respect to its
Capital Commitment, and, as a result, such Limited Partner's Capital
Commitment shall then be permanently reduced to an amount equal to its Capital
Contributions theretofore made and/or (ii) to make further Loans, in which
case such Partner's Notes shall then be permanently reduced to an amount equal
to the Loans theretofore made by such Partner. The provisions of this
paragraph 3.6.6 shall be the sole and exclusive remedy of the Partnership, the
General Partner and all other Persons against any Limited Partner for any
default in any payment with respect to its Capital Commitment or any failure
to make any Loan by reason of a Regulatory Disability. A Limited Partner will
suffer a "Regulatory Disability", as that term is used in this paragraph
3.6.6, if by reason of the regulatory status of such Limited Partner or of the
Partnership, there is a reasonable likelihood that the continuation of such
Limited Partner as a limited partner of the Partnership, or the making by such
Limited Partner of an additional Capital Contribution or Loan to the
Partnership, will result in a violation of applicable law or governmental
rules, regulations or policies.
3.7 Nonconforming Partners. If the Partnership shall suffer an
FCC Regulatory Issue due to the status or condition of a Limited Partner or an
Attributable Person through such Limited Partner or due to such Limited
Partner or any such Attributable Person having taken or failed to take any
action, then, unless the FCC Regulatory Issue is attributable to an action
voluntarily taken by the Partnership or the General Partner with knowledge of
facts and circumstances actually disclosed to the Partnership by such Limited
Partner (or without such knowledge if the General
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Partner failed to make reasonable inquiry of the Limited Partner before taking
such action), such Limited Partner shall be considered to be a "Nonconforming
Partner" and the following shall apply.
3.7.1 The Partnership and the Nonconforming Partner each shall
advise the other promptly after it becomes aware of such FCC Regulatory Issue.
3.7.2 The Nonconforming Partner, the Partnership and the General
Partner shall cooperate with each other and use all commercially reasonable
efforts to cure such FCC Regulatory Issue, which shall include but not be
limited to: (i) the Partnership, the General Partner and the Nonconforming
Partner seeking such waivers, consents, approvals and rulings ("Approvals") as
are necessary to cure such FCC Regulatory Issue; (ii) such Nonconforming
Partner having the right to elect to be deemed to be a Non-Attributable
Limited Partner under this Agreement; and (iii) if such Nonconforming Partner
(or any Person that controls or acts as investment advisor to or is a family
member of such Nonconforming Partner) is entitled to designate a member of the
Advisory Committee, such Nonconforming Partner or other Person having the
right to elect to cease to be so entitled. Subject to paragraph 3.7.4, the
Partnership and the Nonconforming Partner shall each bear their own costs in
such efforts.
3.7.3 If the General Partner and the Nonconforming Partner cannot
agree on a satisfactory resolution of, or otherwise successfully cure, such
FCC Regulatory Issue, then
(a) the Nonconforming Partner shall be deemed to be a Non-
Attributable Limited Partner under this Agreement, if and to the extent such
status will cure such FCC Regulatory Issue;
(b) if the Nonconforming Partner (or any Person that
controls or acts as investment advisor to or is a family member of such
Nonconforming Partner) is entitled to designate a member of the Advisory
Committee, such Nonconforming Partner or other Person shall cease to have such
right, if and to the extent doing so will resolve such FCC Regulatory Issue;
(c) if the application of clauses (a) and/or (b) will not cure
such FCC Regulatory Issue, then (i) the Nonconforming Partner shall use all
commercially reasonable efforts to sell such portion of its Limited
Partnership Interests and/or Notes as may be necessary to cure such FCC
Regulatory Issue; (ii) the Partnership and the General Partner shall not
unreasonably withhold their consent to such sale; (iii) to the extent
requested by such Nonconforming Partner, the General Partner and the
Partnership shall assist the Nonconforming Partner in selling such Interest
and/or Notes in a prompt and
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orderly manner (provided that neither the Partnership nor the General Partner
shall be obligated to incur any costs or financial obligations to third
parties in the course of such assistance); and (iv) to the extent requested by
such Nonconforming Partner, the General Partner and the Partnership shall
provide such financial and other information concerning the Partnership as may
reasonably be requested by any prospective purchaser of such Interest and/or
Notes; and
(d) if the Nonconforming Partner is unable so to sell its
Limited Partnership Interest and/or Notes (or appropriate portion thereof)
within 180 days of the date the General Partner requests that such Interest
and/or Notes be sold (or, if applicable, the period of time established by the
FCC to cure the FCC Regulatory Issue, provided that the Partnership shall seek
such extensions thereof as shall be commercially reasonable), then, at the
election of the General Partner,
(i) if the Partnership does not elect to make the
"Buyout Payment Election" (as hereinafter defined), the Nonconforming
Partner shall immediately cease to be a Limited Partner, and the
Partnership shall treat the Nonconforming Partner as if it were an
unadmitted assignee of the Limited Partnership Interest of such
Nonconforming Partner but shall make distributions to such Nonconforming
Partner of those amounts otherwise payable with respect to such Limited
Partnership Interest hereunder; and the Nonconforming Partner shall not
be required to make any further payments in respect of its Unused Capital
Commitment; provided, however, that the General Partner shall have the
right at any time to restore the Nonconforming Partner to the status of a
Limited Partner, in which case the provisions of this paragraph 3.7 shall
cease to apply; and
(ii) for a period of 90 days following the expiration
of the period pursuant to the prefatory paragraph of this paragraph
3.7.3(d) in which the Nonconforming Partner may sell its Interest (or
portion thereof) pursuant to paragraph 3.7.3(c), the General Partner,
with the approval of the Advisory Committee, may elect on behalf of the
Partnership by notice to the Nonconforming Partner (the "Buyout Payment
Election"), to make "Buyout Payments" pursuant to paragraph 3.7.5 to the
Nonconforming Partner in complete satisfaction of the Nonconforming
Partner's Interest, whereupon the economic interest of the Nonconforming
Partner shall be deemed to have been converted from a Limited Partnership
Interest to debt and the Nonconforming Partner shall immediately cease to
be a Partner; the Nonconforming Partner shall not be required to make any
further payments in respect of its Unused Capital Commitment; and the
Partnership shall have no obligation to make any payments to the
Nonconforming Partner in respect of
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its Capital Contributions or Capital Account, or to make other
distributions hereunder.
3.7.4 In the event (and only in the event) such FCC Regulatory
Issue shall be attributable to the bad faith of the Nonconforming Partner or
its Affiliates, the Nonconforming Partner shall be liable in damages to the
Partnership for all reasonable costs and liabilities that the Partnership may
incur as a result of such FCC Regulatory Issue. The remedies set forth in
this paragraph 3.7 shall be the sole and exclusive remedies of the Partnership
against a Nonconforming Partner for damages arising from an FCC Regulatory
Issue.
3.7.5 For purposes of this paragraph 3.7, Buyout Payments shall
be made in four installments, each equal to one-fourth of the Buyout Amount
(as hereinafter defined), payable on the next four consecutive anniversaries
following the Buyout Payment Election, plus interest accrued from the date of
the Buyout Payment Election through the date of each such installment on the
unpaid balance of such Buyout Amount at the lowest rate permitted under Code
Section 1274 so as to avoid the imputation of interest income, but in no event
less than the "applicable federal rate." As used in this paragraph 3.7, the
"Buyout Amount" shall be an amount equal to the fair market value of such
Nonconforming Partner's Limited Partnership Interest. The Partnership may, at
its sole election, prepay all or any portion of the Buyout Payments and
interest accrued thereon at any time without penalty. The Partnership shall
prepay all of the outstanding Buyout Amount, together with interest thereon,
upon the earlier of the sale of all or substantially all of the Limited
Partnership Interests or the liquidation of the Partnership. For purposes of
this paragraph 3.7.5, the fair market value of a Nonconforming Partner's
Limited Partnership Interest shall be agreed upon by the General Partner and
the Nonconforming Partner, and if such agreement is not achieved, then the
fair market value of such Interest shall be determined in accordance with the
method of appraisal described in paragraph 7.2.4, with the General Partner and
the Nonconforming Partner each selecting one appraiser. One-half of the costs
of the appraisal shall be borne by the Partnership and one-half shall be borne
by the Nonconforming Partner.
3.8 Conversion of Certain Limited Partnership Interests.
3.8.1 Subject to and upon compliance with the provisions of this
paragraph 3.8, any Limited Partner shall be entitled to convert, at any time
and from time to time, any or all of the Class A Limited Partnership Interests
held by such Limited Partner into the same amount of Class B Limited
Partnership Interests.
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3.8.2 Subject to and upon compliance with the provisions of this
paragraph 3.8, any Limited Partner shall be entitled to convert, at any time
and from time to time, any or all of the Class B Limited Partnership Interests
held by such Limited Partner into the same amount of Class A Limited
Partnership Interests; provided, however, that no such Limited Partner shall
be entitled to convert any such Class B Limited Partnership Interests into
Class A Limited Partnership Interests to the extent that, as a result of such
conversion, such Limited Partner and its Affiliates, directly or indirectly,
would own, control or have the power to vote a greater number of Class A
Limited Partnership Interests than such Limited Partner and its Affiliates
shall be permitted to own, control or have power to vote under any law,
regulation, rule or other requirement of any governmental authority at the
time applicable to such Limited Partner or its Affiliates. A certificate of a
Limited Partner stating that it is entitled to convert Class B Limited
Partnership Interests into Class A Limited Partnership Interests under this
paragraph 3.8.2 shall be conclusive and may be relied upon by the Partnership.
3.8.3 Each conversion of Class A Limited Partnership Interests
into Class B Limited Partnership Interests or Class B Limited Partnership
Interests into Class A Limited Partnership Interests, respectively, shall be
effected by the Limited Partner that holds the Limited Partnership Interests
to be converted (the "Converting Interests") giving written notice to the
Partnership, stating that such Limited Partner desires to convert the
Converting Interests into an equal amount of Limited Partnership Interests of
the class into which such Interests may be converted (the "Converted
Interests"). The Partnership shall promptly notify each Regulation Y Limited
Partner of its receipt of such notice. Promptly after the receipt of such
written notice, the Partnership will amend Schedule A hereto to reflect the
conversion, and will deliver a certificate to the Limited Partner which
requested such conversion certifying that such conversion has been effected,
together with an amended copy of Schedule A hereto; provided, however, that if
such conversion is subject to paragraph 3.8.4 hereof, the Partnership shall
not effect such conversion until the expiration of the Deferral Period
referred to therein. Such conversion, to the extent permitted by law, shall
be deemed to have been effected as of the close of business on the date on
which such notice shall have been received by the Partnership, and at such
time the rights of the Limited Partner that holds the Converting Interests, as
a holder of such Interests, shall cease (except that, in the case of a
conversion subject to paragraph 3.8.4 below, the conversion shall be deemed
effective upon the expiration of the Deferral Period referred to therein), and
such Limited Partner upon such conversion shall be deemed to have become the
Limited Partner of record of the Converted Interests. Upon the conversion of
Limited Partnership Interests in accordance with this paragraph 3.8.3, such
Converted Interests shall be deemed to be duly authorized, validly issued
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and, except for any unfunded or Unused Capital Commitment of such Limited
Partner, fully paid and nonassessable.
3.8.4 The Partnership shall not convert or directly or indirectly
redeem, purchase or otherwise acquire any Limited Partnership Interests or
take any other action affecting the voting rights of any Limited Partnership
Interests, if such action will increase the percentage of any class of
outstanding voting securities owned or controlled by any Regulation Y Limited
Partner (other than any such Regulation Y Limited Partner which requested that
the Partnership take such action, or which otherwise waives in writing its
rights under this 3.8.4) unless the Partnership gives written notice (the
"Deferral Notice") of such action to each Regulation Y Limited Partner. The
Partnership will defer making any such conversion, redemption, purchase or
other acquisition, or taking any such other action for a period of 30 days
(the "Deferral Period") after giving the Deferral Notice in order to allow
each Regulation Y Limited Partner to determine whether it wishes to convert or
take any other action with respect to the Limited Partnership Interests it
owns, controls or has the power to vote, and if any such Regulation Y Limited
Partner then elects to convert any Class A Limited Partnership Interests owned
by such Regulation Y Limited Partner, it shall notify the Partnership in
writing within 20 days of the giving of the Deferral Notice, in which case the
Partnership shall (i) defer taking the pending action until the end of the
Deferral Period, (ii) promptly notify from time to time each other Regulation
Y Limited Partner of each proposed conversion and the proposed transactions
and (iii) effect the conversions requested by all Regulation Y Limited
Partners in response to the notices issued pursuant to this 3.8.4 at the end
of the Deferral Period.
3.8.5 The conversion of Limited Partnership Interests shall be
made without charge to the Limited Partner converting Limited Partnership
Interests; provided, however, that such Limited Partner shall be responsible
for its own legal and accounting fees and expenses and any issuance, transfer
or other taxes incurred as a result of such conversion.
3.8.6 As used in this paragraph 3.8, "Regulation Y Limited
Partner" shall mean (i) any Limited Partner that is subject to the provisions
of Regulation Y of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 225) or any successor to such regulation ("Regulation Y"), (ii)
any Affiliate of any such Regulation Y Limited Partner that is a transferee of
any Limited Partnership Interest and (iii) any Person to which such Regulation
Y Limited Partner or any of its Affiliates has transferred such Limited
Partnership Interest if such Person (or any Affiliate of such Person) is
subject to the provisions of Regulation Y.
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3.9 Nondisclosure Partners. Certain Limited Partners (each a
"Nondisclosure Partner") have advised the Partnership in writing prior to
becoming Limited Partners that they are prohibited by agreement or otherwise
from disclosing certain information (the "Nondisclosure Information")
regarding such Nondisclosure Partners. Each such Nondisclosure Partner has a
Capital Commitment to the Partnership of $5,000,000 or less, and has elected
to be a Non-Attributable Limited Partner. Each such Nondisclosure Partner,
the Partnership and the General Partner have concluded that the Nondisclosure
Information is not required to be disclosed under the Communications Act and
the rules and regulations thereunder and the interpretations thereof as in
effect on the date hereof. However, if, by reason of a change in the
Communications Act or the rules and regulations thereunder or the
interpretations thereof, or for other reasons, the FCC shall require
disclosure of the Nondisclosure Information of any Nondisclosure Partner (an
"FCC Disclosure Requirement"), then the following shall apply; provided,
however, that the Nondisclosure Partner in its sole discretion may elect at
any time prior to the application to it of the provisions of paragraph
3.9.3(e) to disclose the Nondisclosure Information, in which case this
paragraph 3.9 thereafter shall cease to apply to such Nondisclosure Partner
with respect to such Nondisclosure Information.
3.9.1 The Partnership and the Nondisclosure Partner each shall
advise the other promptly after it becomes aware of such FCC Disclosure
Requirement.
3.9.2 The Nondisclosure Partner, the Partnership and the General
Partner shall cooperate with each other and use all commercially reasonable
efforts to resolve such FCC Disclosure Requirement, except that the
Nondisclosure Partner shall not be required to disclose the Nondisclosure
Information. Such efforts shall include but not be limited to (i) the
Partnership, the General Partner and the Nondisclosure Partner seeking such
waivers, consents, approvals and rulings as are necessary to resolve such FCC
Disclosure Requirement, (ii) such Nondisclosure Partner having the right to
elect to be deemed to be a Non-Attributable Limited Partner under this
Agreement, and (iii) if such Nondisclosure Partner (or any Person that
controls or acts as investment advisor to or is a family member of such
Nondisclosure Partner) is entitled to designate a member of the Advisory
Committee, such Nondisclosure Partner or other Person having the right to
elect to cease to be so entitled. The Partnership and the Nondisclosure
Partner each shall bear its own costs in such efforts.
3.9.3 If the General Partner and the Nondisclosure Partner cannot
agree on a satisfactory resolution of such FCC Disclosure Requirement, then
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<PAGE> 34
(a) the Nondisclosure Partner shall be deemed to be a Non-
Attributable Limited Partner under this Agreement, if and to the extent such
status will resolve such FCC Disclosure Requirement;
(b) if the Nondisclosure Partner (or any Person that
controls or acts as investment advisor to or is a family member of such
Nondisclosure Partner) is entitled to designate a member of the Advisory
Committee, such Nondisclosure Partner or other Person shall cease to have such
right, if and to the extent doing so will resolve such FCC Disclosure
Requirement;
(c) the Nondisclosure Partner's Capital Commitment shall
be reduced to the amount of its Capital Contributions (with a corresponding
reduction in its Interest in the Partnership), and the Nondisclosure Partner's
Loan Amount shall be reduced to the amount of the Loans theretofore made by it
(with a corresponding reduction in the face amount of its Notes), if and to
the extent such reductions will resolve such FCC Disclosure Requirement;
(d) if the application of clauses (a), (b) and/or (c) will
not resolve such FCC Disclosure Requirement, then (i) the Nondisclosure
Partner shall use all commercially reasonable efforts to sell such portion of
its Limited Partnership Interest and/or Notes as may be necessary to resolve
such FCC Disclosure Requirement; (ii) the Partnership and the General Partner
shall not unreasonably withhold their consent to such sale; (iii) to the
extent requested by such Nondisclosure Partner, the General Partner and the
Partnership shall assist the Nondisclosure Partner in selling such Interest
and/or Notes in a prompt and orderly manner (provided that neither the
Partnership nor the General Partner shall be obligated to incur any costs or
financial obligations to third parties in the course of such assistance); and
(iv) to the extent requested by such Nondisclosure Partner, the General
Partner and the Partnership shall provide such financial and other information
concerning the Partnership as may reasonably be requested by any prospective
purchaser of such Interest and/or Notes; and
(e) if the Nondisclosure Partner is unable so to sell its
Limited Partnership Interest and/or Notes (or appropriate portion thereof)
within 90 days of the date the General Partner requests that such Interest
and/or Notes be sold (or, if applicable, the period of time established by the
FCC to resolve the FCC Disclosure Requirement, provided that the Partnership
shall seek such extensions thereof as shall be commercially reasonable), then:
(i) if doing so will resolve the FCC Disclosure
Requirement, the Nondisclosure Partner shall cease to be a Limited
Partner, and the Partnership shall treat the Nondisclosure Partner as if
it were an unadmitted
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<PAGE> 35
assignee of the Limited Partnership Interest of such Nondisclosure
Partner but shall make distributions to such Nondisclosure Partner of
those amounts otherwise payable with respect to such Limited Partnership
Interest hereunder; and the Nondisclosure Partner shall not be required
to make any further payments in respect of its Unused Capital Commitment;
and
(ii) if the application of clause (i) will not resolve the
FCC Disclosure Requirement, then the Partnership shall make "Repurchase
Payments" pursuant to paragraph 3.9.4 to the Nondisclosure Partner in
complete satisfaction of the Nondisclosure Partner's Interest, whereupon
the economic interest of the Nondisclosure Partner shall be deemed to
have been converted from a Limited Partnership Interest to debt and the
Nondisclosure Partner shall immediately cease to be a Partner; the
Nondisclosure Partner shall not be required to make any further payments
in respect of its Unused Capital Commitment; and the Partnership shall
have no obligation to make any payments to the Nondisclosure Partner in
respect of its Capital Contributions or Capital Account, or to make other
distributions hereunder.
3.9.4 For purposes of this paragraph 3.9, Repurchase Payments
shall be made in four installments, each equal to one-fourth of the Repurchase
Amount (as hereinafter defined), payable on the next four consecutive
anniversaries following the date of the election pursuant to clause (ii) of
paragraph 3.9.3(e), plus interest accrued from the date of such election
through the date of each such installment on the unpaid balance of such
Repurchase Amount at the lowest rate permitted under Code Section 1274 so as
to avoid the imputation of interest income, but in no event less than the
"applicable federal rate." As used in this paragraph 3.9, the "Repurchase
Amount" shall be an amount equal to the lesser of (i) the balance in such
Nondisclosure Partner's Capital Account on the date of the election pursuant
to clause (ii) of paragraph 3.9.3(e) or (ii) the fair market value of such
Nondisclosure Partner's Limited Partnership Interest. The Partnership may, at
its sole election, prepay all or any portion of the Repurchase Payments and
interest accrued thereon at any time without penalty. The Partnership shall
prepay all of the outstanding Repurchase Amount, together with interest
thereon, upon the earlier of the sale of all or substantially all of the
Limited Partnership Interests or the liquidation of the Partnership. For
purposes of this paragraph 3.9.4, the fair market value of a Nondisclosure
Partner's Limited Partnership Interest shall be agreed upon by the General
Partner and the Nondisclosure Partner, and if such agreement is not achieved,
then the fair market value of such Interest shall be determined in accordance
with the method of appraisal described in paragraph 7.2.4, with the General
Partner and the Nondisclosure Partner each selecting one appraiser. One-half
of the costs of the
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appraisals shall be borne by the Partnership and one-half shall be borne by
the Nondisclosure Partner.
3.10 Fund Investors; Special Purpose Corporations. The
Partnership intends to create through acquisitions, dispositions, exchanges
and improvements geographic "clusters" of cable television systems (each a
"Cluster"), each of which may prove to be an attractive acquisition candidate
for a larger communications company that wishes to expand into the particular
geographic region. Two investors in the Partnership are special purpose
corporations, each of whose obligations have been guaranteed by its principal
shareholder (each such principal shareholder a "Fund Investor"). Such special
purpose corporations have been admitted as Limited Partners of the
Partnership, but have advised the Partnership that the Fund Investors may wish
to cause future investments in the Partnership to be made through one or more
additional special purpose corporations. (Each such special purpose
corporation is referred to herein as a "SPC".) No additional SPC will be
admitted as a Limited Partner of the Partnership without the prior written
consent of the General Partner, which consent may be withheld in the sole
discretion of the General Partner. If a Fund Investor elects to use more than
one SPC, then each such SPC's investment in the Partnership is intended to
correspond as closely as practicable to the Fund Investor's share of the
Partnership's direct or indirect interest in one Cluster. After any
indebtedness of the Partnership and its Operating Entities for borrowed money,
other than the Junior Subordinated Notes, has been repaid, and prior to any
subsequent sale to a buyer of a Cluster, or of an Operating Entity that holds
a Cluster, each Fund Investor may wish to have its indirect interest in such
Cluster, or in the Operating Entity that holds such Cluster, distributed to
the appropriate SPC. The Fund Investor may wish then to sell its stock in the
SPC to the buyer, at the same time that the Partnership sells its direct
interest in the Cluster, or in the Operating Entity that holds such Cluster,
to that buyer. In addition, in the event that the Partnership is reorganized
as a corporation (for example, in contemplation of an initial public
offering), the Fund Investor may wish to exchange its stock in the SPCs for
stock in such corporation or to merge its SPCs into such corporation. The
Partnership and the General Partner have agreed to assist the Fund Investors
in achieving their objectives and preserving any economic benefits accruing to
them as the result of the use of the special purpose corporation structure,
but in any event only to the extent practicable and not adverse in any
material respect to the other Partners of the Partnership; provided, however,
that the General Partner may in its sole discretion withhold its consent to
the admission of a SPC as a Limited Partner of the Partnership. To that end,
the General Partner, the Partnership and the SPC's on behalf of the Fund
Investors have agreed as provided below in this paragraph 3.10.
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<PAGE> 37
3.10.1 Each SPC will be a single-purpose corporation, whose sole
purpose and business shall be to make an investment in the Partnership. If a
Fund Investor elects to use more than one SPC, then each SPC's investment in
the Partnership is intended to correspond as closely as practicable to the
Fund Investor's share of the Partnership's direct and indirect investment in a
Cluster. Each Fund Investor has guaranteed to the Partnership the liabilities
and obligations of each of its SPC's to the Partnership. Except as otherwise
expressly provided in this paragraph 3.10, for all purposes of this Agreement
and the Purchase Agreement (including, without limitation, all provisions
relating to voting, Consents and rights afforded Limited Partners with Capital
Commitments that exceed a certain amount), all of the SPCs of a Fund Investor
collectively shall be treated as one Limited Partner with a Capital Commitment
and with Capital Contributions equal to the aggregate Capital Commitments and
Capital Contributions of all such SPCs, and with all determinations to be made
at the direction of the first SPC admitted as a Limited Partner on behalf of
all SPCs of such Fund Investor.
3.10.2 The Partnership intends initially to make Investments in
all Clusters through one operating partnership wholly-owned by the
Partnership. After the Partnership has completed its acquisition program
(which currently is estimated to be completed in two to three years), if a
Fund Investor has elected to use more than one SPC, and the General Partner
has consented to the admission of additional SPCs as Limited Partners of the
Partnership, then the Partnership will begin to divide its operations into
three or more operating partnerships, with each operating partnership intended
to correspond to a Cluster. Each SPC recognizes that cable systems owned by
the Partnership may from time to time be moved from one Cluster to another and
may be sold by the Partnership and/or exchanged for other cable systems.
3.10.3 At the time the General Partner gives notice to the SPC of
a Fund Investor pursuant to paragraph 3.3.1 of a required payment with respect
to its Capital Commitment, or a notice pursuant to Section 1.7 of the Purchase
Agreement of a required Loan, the General Partner will provide an estimate of
the allocation of the payment and/or Loan among existing and new Clusters.
The SPCs owned by a Fund Investor (including any new SPCs formed for a new
Cluster) may then make payments pursuant to paragraph 3.3.1 and/or Loans
pursuant to Section 1.7 of the Purchase Agreement in accordance with the
General Partner's allocation.
3.10.4 After such time as an SPC has advised the Partnership that
a Fund Investor intends to use more than one SPC, and the General Partner has
consented to the admission of additional SPCs as Limited Partners of the
Partnership, the Partnership shall maintain a separate set of books and
records with respect to each Cluster. In order to calculate the distributions
and the allocations of Net Profits and Net Losses
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<PAGE> 38
to which the SPCs of a Fund Investor are entitled, the Partnership shall first
calculate the distributions and the allocations of Net Profits and Net Losses
to which a single SPC of the Fund Investor would have been entitled if the
Fund Investor had invested in the Partnership through a single SPC. Each
distribution and allocation so calculated (or particular items of income or
loss) shall then be divided among the SPCs of such Fund Investor so that, to
the extent practicable, distributions and allocations derived from a Cluster
are made to the SPC that corresponds to that Cluster. All calculations
pursuant to this paragraph 3.10.4 shall be made by the General Partner in its
good faith discretion, after consultation with the affected Limited Partners
that are SPCs. There shall be established for each SPC a Capital Account
initially reflecting its Capital Contributions and adjusted from time to time
to reflect its share of Net Profits and Net Losses, special allocations and
distributions. At all times the aggregate distributions made to the SPCs of a
Fund Investor, the aggregate allocation of Net Profits and Net Losses to all
SPCs of a Fund Investor and the aggregate Capital Account and Adjusted Capital
Account of all SPCs of a Fund Investor shall equal the distributions that
would have been made to a single SPC of such Fund Investor, the Net Profits
and Net Losses that would have been allocated to a single SPC of such Fund
Investor, and the Capital Account and Adjusted Capital Account that a single
SPC of such Fund Investor would have had, if such Fund Investor had invested
in the Partnership through a single SPC.
3.10.5 It is contemplated that the net proceeds of the sales of
Clusters, or of Operating Entities that hold Clusters, first will be applied
to the repayment of any indebtedness of the Partnership and its Operating
Entities for borrowed money, other than the Junior Subordinated Notes. After
such indebtedness has been repaid, if the General Partner, with the approval
of the Advisory Committee, determines to sell all or substantially all of the
assets of a Cluster, or of the Operating Entity that holds a Cluster, upon the
request of an SPC, the Partnership shall use commercially reasonable efforts
to arrange for the sale to be accomplished as follows (it being understood
that (i) even if a Fund Investor uses a single SPC, paragraphs (a) and (b)
below shall apply with respect to the sale of the last Cluster or all or
substantially all of the assets of the Partnership and (ii) the actions
described in this paragraph 3.10.5 shall not be taken unless the buyer has
agreed to buy and the Fund Investor has agreed to sell the stock and debt of
the relevant SPC):
(a) The Partnership first shall distribute (an "SPC
Distribution") to the SPC that corresponds to that Cluster an interest in the
Cluster, or in the Operating Entity that holds the Cluster, having a fair
market value (as determined by the General Partner in its good faith
discretion) equal to the amount of cash and/or the fair market value of
securities that would have been paid to a single SPC of the Fund Investor in
respect of
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all of its Junior Subordinated Notes (and not just the Junior Subordinated
Notes held by the SPC that corresponds to the Cluster) and/or would have been
distributed to a single SPC of the Fund Investor in respect of its Limited
Partnership Interest (and not just the Limited Partnership Interest held by
the SPC that corresponds to the Cluster) if (i) the Fund Investor had invested
in the Partnership through a single SPC and (ii) the Cluster, or the Operating
Entity that holds the Cluster, had been directly sold to the buyer, and the
Partnership had used the net proceeds of such sale to repay the Junior
Subordinated Notes and to make distributions to its Partners. Each such SPC
Distribution shall be treated for all purposes of this Agreement and the
Purchase Agreement (x) first, as a repayment of the principal of, and accrued
interest on, the Junior Subordinated Notes held by the SPC that corresponds to
the Cluster and (y) to the extent of the excess of the fair market value of
the SPC Distribution over the principal of, and accrued interest on, such
Junior Subordinated Notes, as a cash distribution pursuant to paragraph 4.2.1.
(b) The buyer shall then purchase from the Partnership its
interest in the Cluster or in the Operating Entity that holds the Cluster, and
from the Fund Investor the stock and debt of the relevant SPC. The net
proceeds of such sale received by the Partnership shall be used exclusively to
repay the Junior Subordinated Notes of, and thereafter to make distributions
to, the Partners other than the SPCs of the Fund Investors, and the SPCs of
the Fund Investors shall not share in such proceeds.
(c) Since the SPC will be receiving the SPC Distribution
pursuant to subparagraph (a), while the other Limited Partners will be
receiving a repayment of Junior Subordinated Notes and/or a distribution
pursuant to subparagraph (b), the ratio of Capital Contributions to Junior
Subordinated Notes for the SPCs of a Fund Investor may no longer be the same
as such ratio for the other Partners. To the extent necessary so that such
ratio for the SPCs of the Fund Investors will be the same as such ratio for
the other Limited Partners, the SPCs of the Fund Investors shall convert
Junior Subordinated Notes into Limited Partnership Interests.
Each SPC recognizes that the amount its stockholders and debtholders will
receive for the stock and debt of such SPC may be less than the amount such
SPC would receive for a direct interest in a Cluster or in an Operating Entity
that holds a Cluster. The SPCs acknowledge and agree that their stockholders
and debtholders will bear the entire difference, if any, between (x) the
amount a buyer is willing to pay for the assets of a Cluster, or a direct
interest in the Operating Entity that holds a Cluster, as compared to (y) the
amount a buyer is willing to pay for the Partnership's interest in the Cluster
or in the
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Operating Entity that holds the Cluster, together with the stock and debt of
the SPCs.
3.10.6 Each SPC acknowledges that although the Partnership and
the General Partner have agreed to use commercially reasonable efforts to
arrange for sales as described in this paragraph 3.10, they will not be
required to do so if the Advisory Committee, in its good faith discretion (and
with the representatives of both Fund Investors abstaining), determines that
such a sale is not practicable or would adversely affect in any material
respect the other Limited Partners. In such event, the Partnership may sell
the assets of a Cluster or the Partnership's interest in the Operating Entity
that holds the Cluster, without making a SPC Distribution. In addition, the
General Partner in its sole discretion may withhold its consent to the
admission of a SPC as a Limited Partner.
3.10.7 The following examples are intended to illustrate, but not
to limit, the application of this paragraph 3.10.
Example One. Assume (i) the aggregate Capital Commitments of
all Partners is $10 million; (ii) the aggregate Capital Commitment of the SPCs
of a Fund Investor is $2.5 million; (iii) no Loans have been made; (iv) $5
million of capital is called for Cluster One, $2.5 million is called for
Cluster Two and $2.5 million is called for Cluster Three, all on August 1,
1995; (v) the Fund Investor forms three SPCs, which contribute $1.25 million
(SPC One), $0.625 million (SPC Two) and $0.625 million (SPC Three),
respectively, to the Partnership on August 1, 1995; and (vi) the General
Partner, with the approval of the Advisory Committee, determines to sell
Cluster One on August 1, 1996 to a buyer that offers to buy the assets of
Cluster One for $7 million, or the stock of SPC One plus the Partnership's
interest in the Operating Entity that holds Cluster One, for $6.75 million.
If the assets of Cluster One had been sold, and a single SPC had been used,
that SPC would have been entitled to receive, pursuant to paragraph 4.2.1(a),
$1.75 million, which is the amount that for all purposes of Article 4 shall be
deemed to have been distributed to all SPCs of the Fund Investor. The actual
amount to be received by the Fund Investor for its stock in SPC One would be
$1.5 million, representing the amount a single SPC would have received if the
assets of Cluster One had been sold ($1.75 million), less the discount charged
by the buyer ($0.25 million).
Example Two. Assume the same facts as Example One, only one
year later, the General Partner, with the approval of the Advisory Committee,
determines to sell Cluster Two on August 1, 1997 to a buyer that offers to buy
the assets of Cluster Two for $4.704 million or the stock of SPC Two, plus the
Partnership's interest in the Operating Entity that holds Cluster Two for
$4.429 million. If the assets of Cluster Two had been
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sold, and a single SPC had been used, that SPC would have been entitled to
receive pursuant to paragraphs 4.2.1(a) and (b) $1.176 million, which is the
amount that for all purposes of Article 4 shall be deemed to have been
distributed to all SPCs of the Fund Investor. The actual amount to be
received by the Fund Investor for its stock in SPC Two would be $0.901
million, representing the amount a single SPC would have received if the
assets of Cluster Two had been sold ($1.176 million) less the discount charged
by the buyer ($0.275 million).
Example Three. Assume the same facts as Example Two, only one
day later (i.e., August 2, 1997), the General Partner, with the approval of
the Advisory Committee, determines to sell Cluster Three to a buyer that
offers to buy the assets of Cluster Three for $2.5 million, or the stock of
SPC Three plus the Partnership's interest in the Operating Entity that holds
Cluster Three, for $2.4 million. Also assume, for simplicity, that the SPCs
of the Fund Investor are not Special Limited Partners. If the assets of
Cluster Three had been sold, and a single SPC had been used, that SPC would
have been entitled to receive pursuant to paragraph 4.2.1(c) $0.531 million,
which is the amount that for all purposes of Article 4 shall be deemed to have
been distributed to the SPCs of the Fund Investor. The actual amount to be
received by the Fund Investor for its stock in SPC Three would be $0.431
million, representing the amount a single SPC would have received if the
assets of Cluster Three had been sold ($0.531 million) less the discount
charged by the buyer ($0.1 million).
3.10.8. In the event that the Partnership is reorganized as a
corporation (for example, in contemplation of an initial public offering), at
the request of a Fund Investor, the Partnership and the General Partner will
use commercially reasonable efforts to permit the Fund Investor to exchange
its stock in the SPCs for stock in such corporation or to merge its SPCs into
such corporation. The amount of stock in the new corporation that a Fund
Investor receives in respect of its stock in a SPC will be determined by
agreement of the Fund Investor, on the one hand, and the General Partner, with
the approval of a majority of the members of the Advisory Committee other than
Fund Investors, on the other. If the Fund Investor and the General Partner
(with the approval of such members of the Advisory Committee) are unable to
agree, then they shall submit the issue as to the appropriate amount of stock
to an independent nationally recognized investment banking firm, whose
determination shall be final and binding. Each SPC recognizes that the amount
of stock in the new corporation that its stockholders will receive for the
stock of a SPC may be less than the amount of stock in the new corporation the
SPC would have received in respect of the SPC's interest in the Partnership.
The SPCs acknowledge and agree that their stockholders will bear the entire
difference, if any, between (x) the value of the new corporation if the SPCs
themselves receive stock in such
37
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corporation (rather than the stock of the SPCs being exchanged for stock of
the new corporation, or the SPCs being merged into the new corporation, as
applicable), as compared to (y) the value of the new corporation if stock of
the SPCs is exchanged for stock in such corporation or if the SPCs are merged
into such corporation, as applicable.
ARTICLE IV
DISTRIBUTIONS; ALLOCATION OF PROFITS AND LOSSES
4.1 Distributions -- General Principles.
4.1.1 Each distribution made by the Partnership, whether derived
from operating cash flow, from the Disposition of all or any portion of an
Investment, from the financing or refinancing of an Investment or otherwise
shall be made in accordance with this Article IV.
4.1.2 Except as otherwise provided below, the General Partner
shall have discretion to determine the amounts available for distribution,
subject to approval by the Advisory Committee. The General Partner shall
periodically review any reserves created and may in its discretion increase
such reserves or release any excess amounts in such reserves for distribution
in accordance with this Article IV, subject in each case to approval of the
Advisory Committee. Notwithstanding anything to the contrary contained in
this Agreement, distributions to Partners shall be subject to the restrictions
contained in Section 17-607 of the Partnership Act.
4.1.3 The Partnership shall use commercially reasonable efforts
to make distributions to Partners with respect to each Fiscal Year in an
aggregate amount that, when added to any payments by the Partnership of any
principal of or interest on the Notes, equals not less than one-third of the
sum of (i) the Partnership's net taxable income for federal income tax
purposes for such Fiscal Year plus (ii) any interest deduction taken by the
Partnership for interest accrued on the Notes in determining such net taxable
income. Disposition Proceeds from an Investment (after payment of the
principal of, and accrued interest on, the Notes and less reasonable reserves
established by the General Partner, with the approval of the Advisory
Committee) shall be distributed within 60 days after the date such Disposition
Proceeds are received by the Partnership; provided, however, the General
Partner may, with the approval of the Advisory Committee, elect to retain in
the Partnership all or any portion of such Disposition Proceeds. All other
distributions shall be made at such times and intervals as the General Partner
shall determine, and the Advisory Committee shall approve.
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4.1.4 The General Partner may elect, with the approval of the
Advisory Committee, to distribute to the Partners securities, assets or other
property in kind. Each distribution in kind of securities, assets or other
property shall be distributed in accordance with paragraph 4.2 as if there had
been a sale of such property for an amount of cash equal to the Fair Market
Value of such property followed by an immediate distribution of such cash
proceeds. Distributions consisting of cash, securities, assets and/or other
property shall be made, to the extent practicable, in pro rata portions as to
each Partner receiving such distributions. For purposes of the preceding
sentence, securities, assets or other property having a different tax basis
than like securities, assets or other property shall be considered to be
securities, assets or other property of a different type. Notwithstanding the
foregoing, in no event shall any distribution of securities, assets or other
property be made to any Limited Partner to the extent such Limited Partner
would be prohibited by applicable law or regulation from holding such
securities, assets or other property. In such event, the General Partner,
with the approval of the Advisory Committee, shall vary the method of
distribution in such equitable manner as it may, in its good faith discretion,
determine. In the event of any proposed distribution of voting securities, to
the extent practicable, each Limited Partner shall be offered the opportunity
to acquire comparable nonvoting securities or convertible nonvoting
securities, as such Limited Partner may elect.
4.2 Amounts and Priority of Distributions.
4.2.1 Each distribution shall be divided among the Limited
Partners and the General Partner as follows:
(a) First, 99% to the Class A and Class B Limited Partners in
proportion to their respective Capital Contributions (including, without
limitation, any Deemed Capital Contributions), and 1% to the General Partner,
until the Class A and Class B Limited Partners have received pursuant to this
paragraph 4.2.1(a) an amount equal to their total Capital Contributions
(including, without limitation, any Deemed Capital Contributions);
(b) Second, 99% to the Class A and Class B Limited Partners in
proportion to their respective 12% Preferred Returns (as defined in paragraph
4.3.1), and 1% to the General Partner, until the Class A and Class B Limited
Partners have received an amount equal to their 12% Preferred Returns; and
(c) Thereafter, (i) 85% to the Class A and Class B Limited
Partners and the General Partner, in proportion to their respective Capital
Commitments; (ii) the "GP Special Allocation Percentage" (as hereinafter
defined) as of the date of the distribution to the General Partner; (iii) 8%
to the Special
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Class A and Special Class B Limited Partners, in the proportions set forth in
Schedule A hereto; and (iv) the "Class C LP Special Allocation Percentage" as
of the date of the distribution to the Class C Limited Partners, to be shared
by such Class C Limited Partners in such proportions as the General Partner
shall have determined, and the Advisory Committee shall have approved.
4.2.2(a) The "GP Special Allocation Percentage" initially shall
mean 7%, and shall be subject to adjustment as follows:
(i) The General Partner, with the approval of the
Advisory Committee, from time to time shall issue Class C Limited
Partnership Interests to employees of the Partnership or of any Operating
Entity or subsidiary of the Partnership, and shall fix the right of each
such Class C Limited Partnership Interest to receive distributions
pursuant to paragraph 4.2.1(c); provided, however, that in no event shall
all such Class C Limited Partnership Interests be entitled to receive
more than 1% of the aggregate distributions made pursuant to paragraph
4.2.1(c) (except by reason of any allocation to the Class C Limited
Partnership Interests of all or any part of any "GP Reduction Percentage"
(as hereinafter defined)). The Class C Limited Partnership Interests so
issued shall be subject to such conditions, restrictions and vesting
schedules as shall be determined by the General Partner and approved by
the Advisory Committee. The percentage of the aggregate distributions
made pursuant to paragraph 4.2.1(c) that is allocated to the Class C
Limited Partners pursuant to this paragraph 4.2.2(a)(i) shall result in a
corresponding reduction in the GP Special Allocation Percentage. By way
of illustration, and not of limitation, if pursuant to this paragraph
4.2.2(a)(i) the Class C Limited Partnership Interests are allocated 1% of
the aggregate distributions made pursuant to paragraph 4.2.1(c) (i.e.,
the maximum amount that may be allocated pursuant to this paragraph
4.2.2(a)(i)), then the GP Special Allocation Percentage would be reduced
by 1%, and the resulting GP Special Allocation Percentage would be 6%.
(ii) The GP Special Allocation Percentage shall be
further reduced upon the occurrence of a "Vaughn Termination Event" or a
"Koo Termination Event" (as each is hereinafter defined). Upon the
occurrence of a Vaughn Termination Event or a Koo Termination Event, the
GP Special Allocation shall be reduced by an amount (the "GP Reduction
Percentage") equal to the product of the GP Special Allocation
Percentage, before giving effect to any reductions pursuant to this
paragraph 4.2.2(a)(ii), and a fraction, the numerator of which is the
product of (x) 4, in the case of a Vaughn Termination Event, or 2, in the
case of a Koo
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Termination Event, and (y) the applicable decimal shown in the following
table, and the denominator of which is 6.
<TABLE>
<CAPTION>
Date of
Termination Event Decimal
----------------- -------
Type A Type B
------ ------
Termination Event Termination Event
----------------- -----------------
<S> <C> <C>
7/1/95 - 6/30/96 1.00 - [x][0.375] 1.00 - [x][0.20]
7/1/96 - 6/30/97 0.625 - [x][0.25] 0.80 - [x][0.20]
7/1/97 - 6/30/98 0.375 - [x][0.125] 0.60 - [x][0.20]
7/1/98 - 6/30/99 0.25 - [x][0.125] 0.40 - [x][0.20]
7/1/99 - 6/30/2000 0.125 - [x][0.125] 0.20 - [x][0.20]
On or after 7/1/2000 0 0
</TABLE>
where "x" is a fraction, the numerator of which is the number of days
elapsed between July 1 of the applicable period and the date of the
Vaughn Termination Event or Koo Termination Event, and the denominator of
which is 365. Any GP Reduction Percentage shall be available for
reallocation to the General Partner and/or any Class C Limited Partners,
in such amounts and subject to such conditions, restrictions and vesting
schedules, as shall be determined by the General Partner and approved by
the Advisory Committee. By way of illustration, and not of limitation,
if no Class C Limited Partnership Interests have been issued, and a
Vaughn Type A Termination Event (as hereinafter defined) occurs on
December 31, 1997, then the GP Special Allocation Percentage would be
reduced by an amount calculated as follows:
7% x 4 x {0.375 - [182/365][0.125]} = 1.46%
------------------------------
6
Accordingly, the GP Reduction Percentage would be 1.46% and the resulting
GP Special Allocation Percentage would be 5.54%. Such 1.46% would be
available for reallocation to the General Partner or the Class C Limited
Partners, as determined by the General Partner and approved by the
Advisory Committee.
(iii) In the event of a reduction in the GP Special
Allocation Percentage pursuant to paragraph 4.2.2(a)(ii), followed by an
event giving rise to a reduction pursuant to paragraph 4.2.2(a)(i), the
GP Special Allocation Percentage (including the GP Reduction Percentage)
shall be recalculated for all subsequent distributions, with all
reductions pursuant to paragraph 4.2.2(a)(i) being deemed to have
occurred and been applied before the reduction pursuant to paragraph
4.2.2(a)(ii).
(b) The "Class C LP Special Allocation Percentage"
initially shall be 0, and shall be subject to adjustment as provided in
paragraphs 4.2.2(a)(i) and (ii) above.
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<PAGE> 46
(c) A "Vaughn Termination Event" shall mean either a
"Vaughn Type A Termination Event" or a "Vaughn Type B Termination Event." A
"Vaughn Type B Termination Event" shall mean any of the following: (i) the
termination by the Partnership of James C. Vaughn's employment with the
Partnership for "cause" (as defined in the Vaughn Employment Agreement); (ii)
the voluntary termination by Mr. Vaughn of his employment with the
Partnership; (iii) the Partnership's election not to renew the Vaughn
Employment Agreement on a year-to-year basis (but otherwise on the same terms)
for reasons that would constitute "cause"; (iv) Mr. Vaughn's failure to accept
the Partnership's renewal of the Vaughn Employment Agreement on a year-to-year
basis (but otherwise on the same terms); and (v) the removal of FVP GP, L.P.
as a General Partner of the Partnership for "cause" (as defined in paragraph
7.2.1). A "Vaughn Type A Termination Event" shall mean (x) any termination of
Mr. Vaughn's employment with the Partnership, whether by the Partnership or
Mr. Vaughn, whether voluntarily or involuntarily, and whether with or without
reason, other than a termination that constitutes a Vaughn Type B Termination
Event; or (y) any removal of FVP GP, L.P. as a General Partner of the
Partnership, whether with or without reason, other than a removal that
constitutes a Vaughn Type B Termination Event.
(d) A "Koo Termination Event" shall mean either a "Koo Type A
Termination Event" or a "Koo Type B Termination Event." A "Koo Type B
Termination Event" shall mean any of the following: (i) the termination by
the Partnership of John S. Koo's employment with the Partnership for "cause"
(as defined in the Koo Employment Agreement); (ii) the voluntary termination
by Mr. Koo of his employment with the Partnership; (iii) the Partnership's
election not to renew the Koo Employment Agreement on a year-to-year basis
(but otherwise on the same terms) for reasons that would constitute "cause";
(iv) Mr. Koo's failure to accept the Partnership's renewal of the Koo
Employment Agreement on a year-to-year basis (but otherwise on the same
terms); and (v) the removal of FVP GP, L.P. as a General Partner of the
Partnership for "cause" (as defined in paragraph 7.2.1). A "Koo Type A
Termination Event" shall mean (x) any termination of Mr. Koo's employment with
the Partnership, whether by the Partnership or Mr. Koo, whether voluntarily or
involuntarily, and whether with or without reason, other than a termination
that constitutes a Koo Type B Termination Event; or (y) any removal of FVP GP,
L.P. as a General Partner of the Partnership, whether with or without reason,
other than a removal that constitutes a Koo Type B Termination Event.
4.3 Definitions and Rules Relating to Preferred Returns.
4.3.1 "12% Preferred Return" shall mean, with respect to a Class
A or Class B Limited Partner at any particular time, an amount equal to the
amount that would be required to be
42
<PAGE> 47
distributed to such Partner at that time (including, without limitation, the
return of such Partner's Capital Contributions (including Deemed Capital
Contributions)) in order for the following rate of return to equal 12%: the
rate of return (calculated as provided in paragraph 4.3.2 below) which (x) the
total amount of principal and interest that has been paid to such Partner by
the Partnership under the Notes as of that time, plus the total amount that
has been distributed by the Partnership to such Partner in respect of its
Interest as of that time, represents on (y) the total amount of Loans made by
such Partner to the Partnership as of that time, plus the total amount of
Capital Contributions (including, without limitation, Deemed Capital
Contributions) made by such Partner to the Partnership as of that time. For
purposes of calculating the 12% Preferred Return, the General Partner in its
discretion may assume that Capital Contributions made by the Partners pursuant
to paragraph 3.3.1, and Loans made by the Partners pursuant to the Purchase
Agreement, have been made on the date specified in the written notice given by
the General Partner requiring such Capital Contributions or Loans.
4.3.2 The rate of return referred to above is an annual rate.
Rate of return shall be calculated with annual compounding, taking into
account the periods of time from the date the first relevant Capital
Contribution or Loan (including, without limitation, Deemed Capital
Contributions) was made to the dates of each relevant Capital Contribution and
Loan subsequently made and of each relevant distribution and payment of
principal and interest. All calculations shall be performed on the basis of a
360-day year comprised of twelve 30-day months.
4.4 Capital Accounts and Adjusted Capital Accounts; Allocations.
4.4.1 (a) There shall be established for each Partner on the
books of the Partnership a Capital Account initially reflecting an amount
equal to its Capital Contribution. The Capital Accounts shall be adjusted
from time to time to reflect the Partners' allocable shares of Net Profits or
Net Losses, special allocations pursuant to paragraph 4.4.4, distributions
pursuant to paragraphs 4.2 and 9.2.4(ii) and as otherwise required by the Code
and Regulations, including but not limited to the rules of Treas. Reg.
Section 1.704-1(b)(2)(iv).
(b) If allocations are required pursuant to paragraph 4.4.5(b)
or (c) hereof, then the adjustments to the Capital Accounts of the Partners in
respect of the property described therein shall be made in accordance with
Treas. Reg. Section 1.704-1(b)(2)(iv)(g) for allocations to them of
depreciation, depletion, amortization and gain or loss as computed for book
purposes, and no further adjustments shall be made to the Capital Accounts to
reflect the Partners' shares of the corresponding tax items. For purposes of
computing such adjustments to the Capital
43
<PAGE> 48
Accounts, the General Partner will utilize the method of computing
depreciation, depletion or amortization with respect to such property as is
utilized for federal income tax purposes except that the property's value for
book purposes will be used rather than its adjusted tax basis.
(c) The General Partner shall at all times during the
existence of the Partnership maintain a minimum Capital Account balance equal
to 1% of the total positive Capital Account balances of all Partners having
positive balances in their Capital Accounts.
(d) The Partnership shall establish and maintain an Adjusted
Capital Account for each Partner in its workpapers (and not on its books).
4.4.2 Net Profits for any Fiscal Year or period shall be
allocated as follows:
(a) first, to those Partners, if any, having negative balances
in their respective Adjusted Capital Accounts, an amount equal, and in
proportion, to such negative balances;
(b) second, to the Partners in an amount equal, and in
proportion, to the excess, if any, of each respective Partner's Unrecouped
Capital Contributions over such Partner's Adjusted Capital Account until the
positive balance in each Partner's Adjusted Capital Account equals the amount
of such Partner's Unrecouped Capital Contributions;
(c) third, to the Partners in an amount equal, and in
proportion, to the excess, if any, of each respective Partner's Priority
Capital over such Partner's Adjusted Capital Account until the positive
balance in each Partner's Adjusted Capital Account equals the amount of such
Partner's Priority Capital; and
(d) thereafter, to the Partners in such amount and manner as
may be required so that, to the maximum extent possible, the amount of each
Partner's Adjusted Capital Account (prior to the applicable distribution, if
any) is such that if a distribution were to be made to each Partner in an
amount equal to such Partner's Excess Capital Account, such distribution would
be equal to the amount distributed and/or distributable to such Partner under
paragraph 4.2.1(c).
4.4.3 Net Losses for any Fiscal Year or period shall be allocated
as follows:
(a) first, to the Partners in such amount and manner as may be
required so that, to the maximum extent possible, the amount of each Partner's
Adjusted Capital Account (prior to the applicable distribution, if any) is
such that if a
44
<PAGE> 49
distribution were to be made to each Partner in an amount equal to such
Partner's Excess Capital Account, such distribution would be equal to the
amount distributed and/or distributable to such Partner under paragraph
4.2.1(c);
(b) second, to the Partners in an amount equal, and in
proportion, to the amounts of their respective Excess Capital Accounts until
no Partner has an Excess Capital Account;
(c) third, to the Partners in an amount equal, and in
proportion, to the amounts of their respective Priority Capital Accounts until
no Partner has a Priority Capital Account;
(d) fourth, to the Partners in an amount equal, and in
proportion, to the positive balances of their respective Adjusted Capital
Accounts, until the balance of each Partner's Adjusted Capital Account is
reduced to zero; and
(e) thereafter, 100 percent to the General Partner.
4.4.4 Notwithstanding any other provision of this Agreement, the
following allocations shall be made prior to any other allocations under this
Agreement and in the following order of priority:
(a) (i) If there is a net decrease in Partnership Minimum
Gain during any Fiscal Year or period so that an allocation is required
by Treas. Reg. Section 1.704-2(f), items of income and gain shall be
allocated to the Partners in the manner and to the extent required by
such Regulation. This provision is intended to be a minimum gain
chargeback within the meaning of Treas. Reg. Section 1.704-2(f)(1) and
shall be interpreted and applied consistently therewith.
(ii) If there is a net decrease in the minimum gain
attributable to a Partner Nonrecourse Loan during any Fiscal Year or
period so that an allocation is required by Treas. Reg. Section 1.704-
2(i)(4) (minimum gain chargeback attributable to a partner nonrecourse
debt), items of income and gain shall be allocated in the manner and to
the extent required by such Regulation.
(b) If, at the close of any Fiscal Year, allocations of Net
Profits or Net Losses pursuant to the other provisions of this paragraph 4.4
or distributions made or to be made pursuant to paragraph 4.2.1 or paragraph
9.2.4(ii) would not prevent or would cause any Limited Partner to have a
negative Adjusted Capital Account balance, then gross income of the
Partnership for such year and each subsequent year (if necessary) shall be
allocated to such Partner to the extent required to eliminate, as quickly as
possible, such negative Adjusted Capital Account balance. This paragraph
4.4.4(b) is intended to comply
45
<PAGE> 50
with the qualified income offset requirement of Treas. Reg.
Section 1.704-1(b)(2)(ii)(d).
(c) Nonrecourse Deductions, if any, for any Fiscal Year or
period shall be allocated in the following order of priority:
(i) first, to the Partners up to an amount equal, and in
proportion, to the allocation of Net Profits for such Fiscal Year or
period pursuant to paragraph 4.4.2 hereof; and
(ii) thereafter, to the Partners in proportion to their
respective Capital Contributions.
(d) Any Partner Nonrecourse Deduction shall be allocated to
the Partner who bears the economic risk of loss with respect to the loan
giving rise to such deduction within the meaning of Treas. Reg.
Section 1.752-2.
(e) Interest expense incurred by the Partnership with
respect to interest on Senior Subordinated Notes held by a Partner, or by an
Affiliate of such Partner, shall be allocated to such Partner, to the extent
not otherwise allocated to such Partner pursuant to paragraph 4.4.4(d).
4.4.5 (a) For federal, state and local income tax purposes, all
items of taxable income, gain, loss, and deduction for each Fiscal Year or
period shall be allocated among the Partners in accordance with the manner in
which the corresponding items were allocated under paragraphs 4.4.2, 4.4.3 and
4.4.4, except as provided in paragraph 4.4.5(b) and (c) hereof.
(b) If property is contributed to the Partnership by a Partner
and there is a difference between the basis of such property to the
Partnership for federal income tax purposes and the fair market value at the
time of its contribution, then items of income, gain, deduction and loss with
respect to such property, as computed for federal income tax purposes (but not
for book purposes), shall be allocated (in any permitted manner determined by
the General Partner with the approval of the Advisory Committee) among the
Partners so as to take account of such book/tax difference as required by Code
Section 704(c).
(c) If property (other than property described in paragraph
4.4.5(b) hereof) of the Partnership is reflected in the Capital Accounts of
the Partners and on the books of the Partnership at a book value that differs
from the adjusted basis of such property for federal income tax purposes by
reason of a revaluation of such property, then items of income, gain,
deduction and loss with respect to such property, as computed for federal
income tax purposes (but not for book purposes), shall be allocated (in any
permitted manner determined by the General
46
<PAGE> 51
Partner with the approval of the Advisory Committee) among the Partners in a
manner that takes account of the difference between the adjusted basis of such
property for federal income tax purposes and its book value in the same manner
as differences between adjusted basis and fair market value are taken into
account in determining the Partners' shares of tax items under Code Section
704(c).
4.4.6 Without altering the overall amount of Net Profits or gross
income allocable to any Partner, Net Profits or gross income taxable as
ordinary income under Sections 1245 and 1250 of the Code, or similar
provisions of the Code (the "Depreciation Recapture"), shall, to the extent
possible, be allocated to those Partners to whom allowances for depreciation
or amortization giving rise to Depreciation Recapture were allocated.
4.4.7 If, at any time, the allocation provisions of
paragraphs 4.4.2, 4.4.3 and 4.4.4 do not result in the General Partner
receiving in the aggregate an allocation of at least 1% of all the Partnership
items of income, gain, loss or deduction for the Fiscal Year, then the General
Partner shall be allocated pro rata so much of each of those items as will
cause it in the aggregate to be allocated at all times 1% of those items.
4.4.8 (a) The foregoing provisions are intended to comply with
Treas. Reg. Section 1.704-1(b), and shall be interpreted and applied as
provided in such Treasury Regulations. If the General Partner shall
reasonably determine that the manner in which the Capital Accounts or Adjusted
Capital Accounts, or any increases or decreases thereto, are computed, or the
manner in which any allocations are made under paragraph 4.4, should be
adjusted in order to comply with Section 704(b) and Section 704(c) of the Code
and the Regulations thereunder, the General Partner shall, subject to the
approval of the Advisory Committee, make such modifications, provided that the
General Partner shall not modify the manner of making distributions pursuant
to this Agreement. Without limiting the generality of the foregoing, the
General Partner shall apply paragraphs 4.4.2 and 4.4.3, in conjunction with
paragraph 4.4.4, in a manner that does not result in the duplication of the
allocation of items of income, gain, deduction or loss. All elections,
decisions and other matters concerning the allocations hereunder among the
Partners, and accounting procedures, not specifically and expressly provided
for by the terms of this Agreement, including, but not limited to, the
election pursuant to section 754 of the Code (or corresponding provisions of
subsequent law) to adjust the basis of the Partnership's assets as provided by
sections 734 and 743 of the Code, shall be determined by the General Partner,
but shall be subject in the case of any material election, decision or other
matter, to the approval of the Advisory Committee.
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<PAGE> 52
(b) If the General Partner shall determine, and the
Advisory Committee shall approve, that the Junior Subordinated Notes should be
treated as equity for federal income tax purposes, then for purposes of
computing the allocations contained in this paragraph 4.4, appropriate
adjustments shall be made by the General Partner, subject to the approval of
the Advisory Committee, to each Partner's Capital Account, Adjusted Capital
Account, Excess Capital Account, Priority Capital, Priority Capital Account,
Unrecouped Capital Contributions, Capital Commitment and Capital
Contributions.
4.5 Tax Advances. To the extent the Partnership is required by
law to withhold or to make tax payments on behalf of or with respect to any
Partner (e.g., backup withholding or withholding with respect to Partners that
are neither citizens nor residents of the United States) ("Tax Advances"), the
General Partner may withhold such amounts and make such tax payments as so
required. All Tax Advances (other than Tax Advances withheld from
distributions) made on behalf of a Partner, together with interest thereon at
the "applicable federal rate," shall, at the option of the General Partner,
(i) be promptly paid to the Partnership by the Partner on whose behalf such
Tax Advances were made or (ii) be repaid by reducing the amount of the current
or next succeeding distribution or distributions which would otherwise have
been made to such Partner or, if such distributions are not sufficient for
that purpose, by so reducing the liquidation proceeds otherwise payable to
such Partner. Whenever the General Partner selects option (ii) pursuant to
the preceding sentence for repayment of a Tax Advance by a Partner, for all
other purposes of this Agreement such Partner shall be treated as having
received all distributions (whether before or upon liquidation) unreduced by
the amount of such Tax Advance. Each Partner hereby agrees to indemnify and
hold harmless the Partnership from and against any liability with respect to
Tax Advances required on behalf of or with respect to such Partner.
ARTICLE V
RIGHTS AND DUTIES OF THE GENERAL PARTNER
5.1 Management.
5.1.1 Except as otherwise expressly provided herein, the General
Partner is hereby vested with the full, exclusive and complete right, power
and discretion to operate, manage and control the affairs and business of the
Partnership and to make all decisions affecting Partnership affairs and
business, as deemed proper, convenient or advisable by the General Partner to
carry on the business of the Partnership as described in paragraph 2.4, and
the General Partner shall have all of the rights and powers of a general
partner of a limited partnership under the Partnership Act and otherwise as
provided by law.
48
<PAGE> 53
Without limiting the generality of the foregoing, all of the Partners hereby
specifically agree and Consent that the General Partner may, on behalf of the
Partnership, at any time, and without further notice to or Consent from any
Limited Partner (but subject to such approvals of the Advisory Committee as
may be required pursuant to paragraph 6.2), do the following:
(a) make Investments consistent with the purposes of the
Partnership;
(b) sell, exchange or otherwise dispose of all or any part
of any Investment, whether for cash, securities, property or on such terms as
the General Partner shall determine to be appropriate;
(c) borrow money or guarantee loans, to the extent permitted
by paragraph 5.1.2;
(d) perform, or arrange for the performance of, the
management and administrative services necessary for the operations of the
Partnership and, subject to paragraph 5.1.1(k), manage the investment of the
Partnership's funds prior to their investment in Investments;
(e) manage Investments, including, but not limited to,
administering Investments and the ultimate realization of those Investments
and providing managerial assistance to the Persons in which the Partnership
holds Investments;
(f) incur all expenditures permitted by this Agreement and,
to the extent that funds of the Partnership are available, pay all expenses,
debts and obligations of the Partnership;
(g) employ and dismiss from employment any and all
employees, consultants, agents, attorneys, accountants and professional
advisors;
(h) enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements or other instruments as the General
Partner shall determine to be appropriate in furtherance of the purposes of
the Partnership;
(i) pay, collect, compromise, arbitrate, resort to legal
action for or otherwise adjust claims or demands of or against the
Partnership;
(j) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to,
the purposes of the Partnership (as set forth in paragraph 2.4), to the extent
the same may be lawfully carried on or performed by a partnership
49
<PAGE> 54
under the laws of each state in which the Partnership is then formed or
qualified;
(k) pending investment in Investments, payment of
Partnership expenses in accordance with paragraph 5.5.1 or cash distributions
to the Partners, make temporary investments of Partnership capital in (i)
United States government and agency obligations, (ii) commercial paper rated
not lower than P-2 with maturities of not more than six (6) months and one (1)
day, (iii) interest-bearing deposits in United States banks with an
unrestricted surplus of at least $250,000,000, maturing within one (1) year,
or (iv) money market mutual funds with assets of not less than $750,000,000,
substantially all of which assets consist of items described in one or more of
the foregoing clauses (i), (ii) and (iii);
(l) admit additional Limited Partners or permit any existing
Limited Partner to increase its Capital Commitment, on the terms and
conditions set forth in this Agreement;
(m) admit an assignee of all or any fraction of a Limited
Partner's Interest to be a Substituted Limited Partner in the Partnership
pursuant to and subject to the terms of paragraph 8.3; and
(n) act as the "tax matters partner" of the Partnership, as
such term is defined in Section 6231(a)(7) of the Code, and exercise any
authority permitted the tax matters partner under the Code.
5.1.2 Subject to such approvals of the Advisory Committee as may
be required pursuant to paragraph 6.2, the General Partner shall have the
right, at its option, to cause the Partnership (i) to borrow money from any
Person (including a Partner) for any Partnership purpose, including, without
limitation, in connection with the Partnership's acquisition of Investments,
or (ii) to guarantee loans made to any Person in which the Partnership
acquires or proposes to acquire Investments (or to any subsidiary thereof).
The Partnership may secure such borrowings or guarantees with Partnership
assets, including an assignment by the Partnership of its right to receive the
Unused Capital Commitments or Loan Amounts from time to time of all of the
Partners, and such lenders may be granted the right to cause the Partnership
to deliver the written notice contemplated by clause (z) of paragraph 3.3.1(a)
of this Agreement, or clause (z) of Section 1.7(a) of the Purchase Agreement
if such borrowings or the borrowings so guaranteed are not repaid in
accordance with the terms thereof. The General Partner shall give the Limited
Partners prompt notice of any guaranty given by the Partnership, including the
amount of the Partnership's potential liability thereunder, the final maturity
thereof and the amount of any fee received by the Partnership in connection
therewith.
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5.1.3 Third parties dealing with the Partnership may rely
conclusively upon any certificate of the General Partner to the effect that it
is acting on behalf of the Partnership. The signature of the General Partner
shall be sufficient to bind the Partnership in every manner to any agreement
or on any document, including, but not limited to, documents drawn or
agreements made in connection with the acquisition or disposition of any
Investments or other properties in furtherance of the purposes of the
Partnership.
5.1.4 Notwithstanding the provisions of paragraph 5.1.1, the
General Partner shall not do any of the following:
(a) conduct the operations of the Partnership or do any act in
a manner inconsistent with the provisions of this Agreement;
(b) take any action which would make it impossible to carry on
the ordinary operations of the Partnership, except as otherwise provided in
this Agreement;
(c) possess Partnership property, or assign any rights in
Partnership property, for other than a Partnership purpose;
(d) take any action which requires approval of the Advisory
Committee, unless such action shall first have been so approved;
(e) permit the Partnership to take any action or operate in
any manner as (i) would cause the Partnership to be classified as an
"investment company" for purposes of the Investment Company Act of 1940 (as
amended from time to time) or (ii) would cause all or any portion of the
assets of the Partnership to constitute "plan assets" under ERISA or the Code;
(f) admit a Person as a Partner, except as otherwise provided
in this Agreement;
(g) transfer its Interest as General Partner of the
Partnership; or
(h) amend this Agreement, except as otherwise provided in
Article X.
5.2 Duties and Obligations of the General Partner.
5.2.1 The General Partner shall take all actions and perform all
duties and obligations which may be necessary or appropriate in connection
with the management, conduct and operation of the business and affairs of the
Partnership in accordance with the terms and provisions of this Agreement and
applicable laws and regulations.
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<PAGE> 56
5.2.2 The General Partner will use its reasonable best efforts to
find opportunities for investment in Investments.
5.2.3 The General Partner shall take all action which may be
necessary or appropriate for the continuation of the Partnership's valid
existence and authority to do business as a limited partnership under the laws
of the State of Delaware and of each other jurisdiction in which such
authority to do business is, in the judgment of the General Partner, necessary
or advisable to protect the limited liability of the Limited Partners or to
enable the Partnership to conduct the business in which it is engaged.
5.2.4 The General Partner shall at all times conduct its affairs
and the affairs of all of its Affiliates and of the Partnership in such a
manner that, except as otherwise provided herein, neither any Limited Partner,
any Affiliate of any Limited Partner nor any member of the Advisory Committee
will have any personal liability to third parties with respect to any
Partnership liability or obligation.
5.2.5 The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any federal,
state or local tax returns required to be filed by the Partnership. The
General Partner shall cause the Partnership to pay any taxes payable by the
Partnership (it being understood that the expenses of preparation and filing
of such tax returns, and the amounts of such taxes, are expenses of the
Partnership and not of the General Partner); provided, however, that the
General Partner shall not be required to cause the Partnership to pay any tax
so long as the General Partner or the Partnership is in good faith and by
appropriate legal proceedings contesting the validity, applicability or amount
thereof and such contest does not materially endanger any right or interest of
the Partnership.
5.2.6 The General Partner shall be under a fiduciary duty to
conduct the affairs of the Partnership and its dealings with the Limited
Partners in the best interests of the Partnership and the Limited Partners,
including the safekeeping and use of all Partnership funds and assets for the
exclusive benefit of the Partnership.
5.3 Other Businesses of Partners.
5.3.1 The General Partner shall be a single-purpose entity, whose
sole purpose and activity shall be to act as general partner of the
Partnership. FrontierVision Inc. shall be a single-purpose entity, whose sole
purpose and activity shall be to act as general partner of the General
Partner. The General Partner shall, and shall cause each GP Principal to,
devote to the Partnership and to Persons in which the Partnership acquires or
holds Investments such time as shall be necessary to conduct
52
<PAGE> 57
the Partnership business and affairs in an appropriate manner, which in the
case of James C. Vaughn and John S. Koo and any other person designated by the
Advisory Committee shall be his full business time except, in the case of Mr.
Vaughn, for his responsibilities in assisting in the sale of the partnership
interests of Triax Associates V, L.P. Until the earlier of (i) the expiration
of the term of the Partnership (including any extension thereof) and (ii) the
dissolution of the Partnership, the General Partner shall not, and shall cause
each GP Principal not to, directly or indirectly, acquire, for its or his own
account, an investment which is of a character and in an amount consistent
with the purposes of the Partnership or be a general partner or principal of
any other entity having purposes substantially similar to the principal
purpose of the Partnership described in paragraph 2.4. Any Class A or Class B
Limited Partner may engage in or possess any interest in other business
ventures of any kind, nature or description, independently or with others,
whether such ventures are competitive with the Partnership or otherwise.
Neither the Partnership nor any Partner shall have any rights or obligations
by virtue of this Agreement or the partnership relationship created hereby in
or to such independent ventures or the income or profits or losses derived
therefrom. The Limited Partners Consent that the General Partner may offer to
any Limited Partner, outside the Partnership and in its individual capacity,
the opportunity to make loans to any Person in which the Partnership acquires
or holds investments, and no other Partner shall have any right to
participate, or any interest, therein by virtue of this Agreement or the
partnership relationship created hereby.
5.4 Authority of Partners to Deal with Partnership.
5.4.1 Without limiting the other powers set forth herein, the
General Partner is expressly authorized, in the name and on behalf of the
Partnership, to enter into the Vaughn Employment Agreement and the Koo
Employment Agreement, and to perform and observe each and every one of the
covenants, promises, obligations, duties and liabilities applicable to the
Partnership as set forth in such agreements.
5.4.2 Except as expressly provided in Article IV and in the Vaughn
Employment Agreement and the Koo Employment Agreement, neither the General
Partner nor any GP Principal nor any of its Affiliates shall receive, directly
or indirectly, any salary, fees, profits, distributions or compensation from
the Partnership, other than salaries, bonuses and other benefits that are
approved by the Advisory Committee.
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5.5 Partnership Expenses.
5.5.1 The Partnership shall pay all expenses of operating and
maintaining the Partnership and its assets and business (which expenses shall
include, without limitation, legal and accounting fees of the Partnership).
5.6 Exculpation and Indemnification.
5.6.1 In the absence of fraud, breach of fiduciary duty, willful
misconduct (which shall include, but not be limited to, any willful breach of
this Agreement) or gross negligence, neither the General Partner nor its
partners, nor their respective officers, directors, employees, agents or
stockholders (including when any of the foregoing is serving at the request of
the General Partner on behalf of the Partnership as a partner, officer,
director, employee or agent of any other Person) (in each case, an
"Indemnitee") shall be liable to any other Partner or the Partnership (i) for
any mistake in judgment, (ii) for any action taken or omitted to be taken in
good faith and in a manner reasonably believed by such Person to be in the
best interests of the Partnership and to be within the scope of its authority
conferred by this Agreement, or (iii) for any loss due to the mistake, action,
inaction, negligence, dishonesty, fraud or bad faith of any broker or other
agent, provided that such broker or other agent shall have been selected and
supervised by the General Partner or other Indemnitee with reasonable care.
5.6.2 The Partnership shall, to the fullest extent permitted by
law, out of its assets and not out of the assets of the General Partner,
indemnify and hold harmless each of the Indemnitees and the Liquidating
Trustee (and each of their respective heirs and legal and personal
representatives) who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than any action by or
in the name of the Partnership), by reason of any action taken or omitted to
be taken in connection with or arising out of such Person's activities on
behalf of the Partnership or in furtherance of the interests of the
Partnership, if such actions were taken or omitted to be taken in good faith
and in a manner reasonably believed by such Person to be in the best interests
of the Partnership and to be within the scope of the authority conferred by
this Agreement, against losses, damages and expenses for which such Person has
not otherwise been reimbursed (including reasonable attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by such Person in connection with such action, suit or proceeding;
provided, that any Person entitled to indemnification from the Partnership
hereunder shall obtain the written consent of the General Partner (which
consent shall not be given without approval of the Advisory Committee) prior
to entering into any compromise or settlement which would result in
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an obligation of the Partnership to indemnify such Person. The Partnership,
in the discretion of the General Partner (but subject to the approval of the
Advisory Committee), may advance monies of the Partnership to any Indemnitee
who is or may be subject to a claim for which indemnification may be required
under this paragraph 5.6.2 to cover attorneys' and accountants' fees and
disbursements and other similar defense costs or expenses. Such advances
shall be conditioned on receipt by the Partnership of an undertaking by the
Indemnitee to return monies so advanced if it ultimately is determined that
indemnification is not required under this paragraph 5.6.2.
5.6.3 The Partnership shall have the power to purchase and maintain
insurance on behalf of any present or future Indemnitee, Liquidating Trustee
or member of the Advisory Committee (each an "Insured Party") against any
liability asserted against such Insured Party by reason of actions or
omissions or alleged actions or omissions taken or omitted to be taken by the
Insured Party in connection with the Partnership and its business and affairs
(including insurance against liability for any breach or alleged breach of its
fiduciary responsibilities), whether or not the Partnership would have the
power to indemnify such Insured Party against such liability under this
Article V.
ARTICLE VI
THE ADVISORY COMMITTEE
6.1 Establishment of the Advisory Committee. The Partnership shall
establish an Advisory Committee consisting of four (4) representatives of the
Attributable Class A Limited Partners and one (1) representative of the
General Partner. The General Partner shall appoint individuals designated as
follows as representatives of the Attributable Class A Limited Partners on the
Advisory Committee (except that no individual so designated shall be appointed
to or shall serve on the Advisory Committee if his appointment or service
would result in an FCC Regulatory Issue): (i) JPMIC shall be entitled to
designate one member of the Advisory Committee, so long as the aggregate
Capital Commitments and Loan Amounts to the Partnership of JPMIC and its
Affiliates equals or exceeds $15 million and neither JPMIC nor any of its
Affiliates is a Defaulting Partner; (ii) Olympus Growth Fund II, L.P. shall be
entitled to designate one member of the Advisory Committee, so long as the
aggregate Capital Commitments and Loan Amounts to the Partnership of the SPCs
owned by it equals or exceeds $15 million and no such SPC is a Defaulting
Partner; (iii) T. Michael Long and Lawrence C. Tucker together shall be
entitled to designate one member of the Advisory Committee, so long as the
aggregate Capital Commitments and Loan Amounts of the SPCs owned by 1818 Fund
II, L.P. equals or exceeds $15 million and no such SPC is a Defaulting
Partner; and (iv) First Union Capital Partners, Inc. shall be entitled to
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designate one member of the Advisory Committee, so long as the aggregate
Capital Commitments and Loan Amounts to the Partnership of First Union Capital
Partners, Inc. and its Affiliates equals or exceeds $15 million and neither
First Union Capital Partners, Inc. nor any of its Affiliates is a Defaulting
Partner. Each of the foregoing Persons shall at all times have the right to
remove, with or without cause, the member of the Advisory Committee designated
by such Person and to designate a member in his place. If any of the
foregoing Persons shall lose the right to appoint a member of the Advisory
Committee, that member of the Advisory Committee thereafter shall be
designated by a majority in Interest of the Attributable Class A Limited
Partners. No Non-Attributable Limited Partner shall be entitled to designate
a member of the Advisory Committee. No member of the Advisory Committee and
no Limited Partner that designates, or whose controlling Person or investment
advisor designates, a member of the Advisory Committee shall be deemed to be
an Affiliate of the Partnership or the General Partner solely by reason of
such membership.
6.2 Functions of the Advisory Committee.
6.2.1 The Advisory Committee generally will consult with and advise
the General Partner with respect to the Partnership's business and overall
strategy. In addition, the General Partner shall present to the Advisory
Committee for its review, and the Advisory Committee may approve or disapprove
(and unless the Advisory Committee approves, the General Partner shall not act
with respect to), each of the following matters:
(a) the acquisition by the Partnership of any Investment
(including the determination of whether the Investment will be made directly
by the Partnership or through an Operating Entity) or the formation by the
Partnership of any Operating Entity or the entering by the Partnership into
any joint venture or business combination;
(b) the sale, exchange or other disposition by the Partnership
or any Operating Entity of all or substantially all of any Investment;
(c) any financing or refinancing of the Partnership or any
Operating Entity, except for financings and refinancings in an aggregate
amount outstanding at any one time of up to $1,000,000;
(d) any borrowings, loans or guarantees by the Partnership or
any Operating Entity relating to indebtedness for borrowed money (other than
bonds and letters of credit posted in the ordinary course of business in an
aggregate amount outstanding at any one time of up to $1,000,000); any
assignment by the Partnership of its right to receive Unused Capital
Commitments or Loan Amounts as security for borrowings, loans or guarantees;
any
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prepayments of term borrowings by an amount in excess of $1,000,000 in the
aggregate, including, without limitation, any prepayments (regardless of
amount) under the Notes; and any subordination agreement relating to the
Notes;
(e) any capital call pursuant to clause (x) of paragraph
3.3.1(a) or any request for a Loan pursuant to clause (x) of Section 1.7(a) of
the Purchase Agreement;
(f) except as expressly contemplated by clause (i) of
paragraph 3.4.4 and Section 1.6 of the Purchase Agreement, the admission of
additional Partners to the Partnership or additional partners to the General
Partner, the increase by any existing Partner in its Capital Commitment or
Loan Amount, any reallocation from Junior Subordinated Notes to Capital Commit
ments as provided for in Section 1.10 of the Purchase Agreement, the issuance
of additional interests in the General Partner, the amendment of the
allocation provisions of the General Partner Partnership Agreement, the
issuance of any additional shares of stock of FrontierVision Inc., the
transfer of any shares of capital stock of FrontierVision Inc. or the merger
or consolidation of FrontierVision, Inc., the issuance or sale of interests in
any Operating Entity, and the creation and issuance of additional classes or
series of Limited Partnership Interests;
(g) any extension by the General Partner of the Capital Call
Expiration Date pursuant to paragraph 3.3.1(b) or Loan Request Expiration Date
pursuant to Section 1.7(b) of the Purchase Agreement;
(h) the election by the General Partner to retain in the
Partnership all or any portion of Disposition Proceeds from an Investment;
(i) the election by the General Partner to distribute to the
Partners securities, assets or other property in kind;
(j) the commencement by the Partnership or any Operating
Entity of legal proceedings, other than legal proceedings of a type
customarily commenced in the cable television industry in the ordinary course
of business and that are not, in the aggregate, material;
(k) the selection of the Partnership's accountants, and any
material accounting and tax methods;
(l) the annual budget and business plan for the Partnership or
any Operating Entity (drafts of which shall be presented to the Advisory
Committee no later than 60 days prior to the beginning of each Fiscal Year),
and any material amendments thereto or deviations therefrom;
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(m) determinations of Fair Market Value;
(n) any transaction or agreement between the Partnership or
any Operating Entity and the General Partner, any GP Principal or their
Affiliates;
(o) the matters as to which Advisory Committee approval is
specifically required under this Agreement, including, without limitation,
Article I (definitions of Fair Market Value and Initial Offering Expiration
Date) and the following paragraphs: 2.5, 3.2.4, 3.3.1, 3.4.1, 3.6.1,
3.7.3(d), 4.1.2, 4.1.3, 4.1.4, 4.2.1(c), 4.2.2(a), 4.4.5(b), 4.4.5(c), 4.4.8,
5.4.2, 5.6.2, 7.2.1, 7.2.2, 7.2.3, 8.1.2, 8.1.3, 9.2.2, 9.2.5, 10.1.2, 13.2,
15.1 and 15.12.
In addition, the Advisory Committee shall have the authority to make all
determinations as to whether the Vaughn Employment Agreement and/or the Koo
Employment Agreement (i) shall be terminated pursuant to its terms (including,
without limitation, for "cause", as therein defined) or (ii) shall be renewed
at the end of its then current term. The Advisory Committee also shall have
the authority to make a determination that a sale, exchange or other
disposition of an Investment should be pursued by the Partnership. If the
Advisory Committee makes any such determination, the Advisory Committee shall
direct the General Partner to act in accordance with such determination, and
the General Partner shall be obligated, within five days thereafter, to
initiate such action and thereafter diligently to pursue such action. The
failure of the General Partner to follow any such direction of the Advisory
Committee shall constitute a material breach of this Agreement. Neither the
Advisory Committee nor any member thereof shall have the power to bind or to
act for or on behalf of the Partnership in any manner, and in no event shall a
member of the Advisory Committee be considered a general partner of the
Partnership by agreement, estoppel or otherwise as a result of the performance
of functions hereunder.
6.2.2 The Advisory Committee shall meet with the General Partner no
less frequently than quarterly. In addition to such quarterly meetings, the
General Partner shall have the option to call other meetings of the Advisory
Committee at such times as shall be necessary to permit the General Partner to
take timely actions with respect to the matters referred to above requiring
prior approval of the Advisory Committee. Meetings of the Advisory Committee
may be held in person or by telephonic means. The Advisory Committee may also
act by written consent provided that prior notice of any proposed action to be
taken by written consent shall have been given to all members of the Advisory
Committee.
6.2.3 The Advisory Committee shall, unless otherwise specifically
provided herein, act by vote of a majority of the members serving on the
Advisory Committee that are entitled to
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vote on the matter. The matters referred to in paragraph 6.2.1(a)-(f), (h),
(i) and (o) [other than the matters referred to in the definition of Fair
Market Value in Article I and in paragraphs 4.2.2(a), 7.2.1., 7.2.2., 7.2.3
and 15.1] shall require approval of seventy-five percent (75%) of the members
serving on the Advisory Committee that are entitled to vote on the matter.
The matters referred to in paragraph 6.2.1(g) shall require unanimous approval
of the members serving on the Advisory Committee. The representative of the
General Partner on the Advisory Committee shall abstain from the matters
referred to in paragraphs 6.2.1(m) and (n), in the definition of Fair Market
Value in Article I and in paragraphs 7.2.1, 7.2.2 and 7.2.3. Any member of
the Advisory Committee may resign by giving to the General Partner and the
other members of the Advisory Committee thirty (30) days' prior written
notice. Any vacancy in the Advisory Committee, whether created by such
resignation or by the death of any member, shall be filled as provided in
paragraph 6.1 of this Agreement.
6.2.4 Each member of the Advisory Committee shall be reimbursed by
the Partnership for all reasonable out-of-pocket costs and expenses (including
travel expenses) incurred in connection with serving on the Advisory
Committee. No fee shall be paid to members of the Advisory Committee for
their services.
6.2.5 To the fullest extent permitted by law, whenever in this
Agreement the Advisory Committee is permitted or required to consult with or
advise the General Partner or to approve or disapprove any action, each member
of the Advisory Committee shall be entitled to consider only such interests
and factors as such member desires and may consider such member's own
interests or the interests of a Limited Partner that designated, or whose
controlling Person or investment advisor designated, such member, and shall
have no duty or obligation (fiduciary or otherwise) to give any consideration
to any interest of or factors affecting the Partnership, the General Partner
or the Limited Partners. The Partnership and each Partner hereby agrees that
the provisions of the preceding sentence, to the extent they restrict or limit
the duties (including, without limitation, fiduciary duties) or liabilities of
a member of the Advisory Committee that may otherwise exist at law or in
equity, shall replace such other duties and liabilities of a member of the
Advisory Committee.
6.2.6 In the absence of fraud or bad faith, no member of the
Advisory Committee, acting in its capacity as such, shall be liable to any
Partner or the Partnership for any reason, including, without limitation, for
any mistake in judgment or for any action taken or omitted to be taken.
6.2.7 The Partnership shall, to the fullest extent permitted by
law, out of its assets and not out of the assets of the General Partner,
indemnify and hold harmless each member of the Advisory Committee (and each of
their respective heirs and
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legal and personal representatives) who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including any action by or in the right of the Partnership or any of the
Partners), by reason of any actions or omissions or alleged acts or omissions
arising out of such Person's activities in connection with serving on the
Advisory Committee (other than actions taken or omitted to be taken
fraudulently or in bad faith) against losses, damages and expenses (which
shall in each case be advanced as incurred) for which such Person has not
otherwise been reimbursed (including attorney's fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Person in
connection with such action, suit or proceeding; provided, that any Person
entitled to indemnification from the Partnership hereunder shall obtain the
written consent of the General Partner prior to entering into any compromise
or settlement which would result in an obligation of the Partnership to
indemnify such Person.
ARTICLE VII
TRANSFERABILITY OF GENERAL PARTNER'S INTEREST
7.1 Assignment of the General Partner's Interest.
The General Partner shall not (i) until the dissolution of the Partnership
otherwise occurs, take any step to voluntarily dissolve itself, or to
voluntarily resign or withdraw from the Partnership or to voluntarily cause a
dissolution of the Partnership or (ii) directly or indirectly assign, sell,
exchange, transfer, pledge, hypothecate or otherwise dispose of all or any
fraction of its Interest as a General Partner in the Partnership or all or any
part of its Notes, or enter into any agreement as a result of which any other
Person shall have a general partner's interest in the Partnership. Without
limiting the generality of the foregoing, each of the following shall
constitute an indirect Transfer which is prohibited by this paragraph 7.1:
(i) any Transfer by FrontierVision Inc. of all or any part of its interest in
FVP GP, L.P.; (ii) any admission of a new general partner to FVP GP, L.P.;
(iii) any Transfer, issuance of additional interests in the General Partner or
other transaction as a result of which either James C. Vaughn or John S. Koo
shall cease to own, directly or indirectly, substantially all of the economic
and voting interests in FVP GP, L.P. and FrontierVision Inc. which he owns on
the date hereof, other than as a result of the Incapacity of Mr. Vaughn or
Mr. Koo. The General Partner shall be liable in damages to the Limited
Partners for any breach of the provisions of this paragraph 7.1.
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7.2 Removal of the General Partner.
7.2.1 The General Partner may be removed from the Partnership (i)
at any time after the occurrence of a Vaughn Expiration Date; or (ii) at any
time for "cause," in each case by Consent of a majority in Interest of the
Attributable Class A Limited Partners, with the approval of the Advisory
Committee. In addition to, and not in limitation of, the foregoing, in the
event the Partnership shall or would suffer an FCC Regulatory Issue due to the
status or condition of any GP Principal or any of his Affiliates, or due to
any GP Principal or any of his Affiliates having taken or failed to take any
action, then, at the request of the Advisory Committee, the General Partner
shall cause the GP Principal to, and the GP Principal shall, divest all direct
and indirect interests in the Partnership. Any removal of the General Partner
pursuant to this paragraph 7.2.1 shall be subject to the Partnership obtaining
any required approval of the FCC or any other regulatory authority, which the
Partnership and the General Partner agree to diligently and expeditiously
seek. For purposes of this paragraph 7.2.1:
(i) a "Vaughn Expiration Date" shall mean the
earliest of the following dates: (a) the date on which James C.
Vaughn is neither a General Partner nor a GP Principal; (b) the date
on which the Vaughn Employment Agreement is terminated pursuant to
its terms; and (c) the date on which James C. Vaughn ceases to own
beneficially for his own account, directly or indirectly, at least
one of the following: (I) at least two-thirds of the General
Partner's share of distributions pursuant to clause (ii) of
paragraph 4.2.1(c) or (II) at least two-thirds of the interests in
the General Partner that correlate to the General Partner's share of
distributions pursuant to clause (ii) of paragraph 4.2.1(c); and
(ii) "cause" for removal of the General Partner shall
mean (a) any action by the General Partner or any GP Principal which
constitutes dishonesty, a violation of law or a fraud against the
Partnership, (b) the indictment of the General Partner or any GP
Principal for a felony, (c) willful misconduct, drunkenness or abuse
of any controlled substance by the General Partner or any GP
Principal, (d) any material violation by the General Partner or any
GP Principal of its fiduciary obligations to the Partnership or the
Partners, (e) any material breach by the General Partner or any GP
Principal of the terms of this Agreement or any material breach by
FrontierVision Inc. or any GP Principal of the terms of the General
Partner Partnership Agreement or (f) the Partnership would or shall
suffer an FCC Regulatory Issue due to the status or condition of the
General Partner, any GP Principal or any of their Affiliates or due
to the General Partner, any GP Principal or any of their Affiliates
having taken or failed to take any action,
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unless such FCC Regulatory Issue is cured within 15 days after the
General Partner becomes aware thereof.
The foregoing shall not constitute a waiver or exculpation by the Partnership
or any Partner of any liability which the General Partner may have to the
Partnership or any Partner in respect of the cause for its removal.
7.2.2 A majority in Interest of the Attributable Class A Limited
Partners, with the approval of the Advisory Committee, shall have the power to
appoint a new General Partner in place of a General Partner that is removed
pursuant to paragraph 7.2.1. If a majority in Interest of the Attributable
Class A Limited Partners, with the approval of the Advisory Committee, so
elect to appoint a new General Partner, the effective time of removal of the
removed General Partner will not occur until immediately after the successor
General Partner has been admitted to the Partnership, and such successor
General Partner hereby is authorized to continue the business of the
Partnership.
7.2.3 Upon the removal of FVP GP, L.P. as the General Partner, then
either (i) at the election of a majority in Interest of the Attributable Class
A Limited Partners, and with the approval of the Advisory Committee, the
Partnership shall redeem the interest of FVP GP, L.P. in the Partnership, and
repurchase its Notes, for cash at a price equal to the fair market value
thereof, which redemption shall be consummated promptly after the
determination of such fair market value or (ii) in the absence of such
election and approval, the General Partner's interest in the Partnership shall
be converted as of the effective date of such removal to that of a nonvoting,
nonconvertible Limited Partnership Interest in respect of which its Capital
Commitment, Capital Contributions, and rights to allocations and distributions
shall each equal its Capital Commitment, Capital Contributions, and rights to
allocations and distributions as stated herein and made hereunder (subject to
any reduction of such rights pursuant to the terms of this Agreement by reason
of the removal or otherwise). For purposes of this paragraph 7.2.3, the fair
market value of the interest of FVP GP, L.P. in the Partnership and its Notes
shall be agreed upon by FVP GP, L.P. and the Advisory Committee, and if such
agreement is not achieved, then the fair market value of such interest and
Notes shall be determined in accordance with the method of appraisal described
in paragraph 7.2.4 with FVP GP, L.P. and the Advisory Committee each selecting
one appraiser. One-half of the costs of the appraisals shall be borne by the
Partnership and one-half shall be borne by FVP GP, L.P.
7.2.4 Determinations of fair market value under paragraphs 3.7.5,
3.9.4 and 7.2.3 shall be made by two independent appraisers selected as set
forth herein. If the two appraisals set the fair market value at amounts
which do not differ by more than twenty percent (20%) of the lower of the two,
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the mean between them shall constitute fair market value; and if such
differential shall be greater, a third appraiser shall be appointed by mutual
agreement of the two appraisers for the purpose of choosing which of the two
appraisals more nearly reflects fair market value. The appraisal so
designated shall constitute fair market value.
7.3 Liability of Person Ceasing to be General Partner. Any Person
which shall cease to be a General Partner of the Partnership shall remain
liable for obligations and liabilities incurred on account of its activities
as General Partner prior to the time it ceased to be a General Partner, but it
shall be free of any obligation or liability as a General Partner incurred on
account of the activities of the Partnership from and after the time it ceased
to be a General Partner.
ARTICLE VIII
TRANSFERABILITY OF LIMITED PARTNERSHIP INTERESTS
8.1 Restrictions on Transfers of Interests.
8.1.1 No sale, exchange, transfer, assignment, pledge,
hypothecation or other disposition (herein collectively called a "Transfer")
of all or any fraction of a Limited Partnership Interest or Note may be made
except (i) with the prior written consent of the General Partner, which
consent may be withheld in the sole discretion of the General Partner and (ii)
in accordance with and as specifically permitted by the provisions of this
Agreement; provided, however, that (v) a Transfer by operation of law to the
estate or personal representative of a deceased or incompetent individual
Limited Partner (which estate or representative will then be subject to the
same restrictions on Transfer as all other Limited Partners) shall not require
the consent of the General Partner, but shall, to the fullest extent permitted
by law, in all respects be subject to paragraph 8.1.3; (w) subject to
paragraph 8.1.3, any Limited Partner which is a corporation may at any time
Transfer all or a portion of its Interest or Notes to its ultimate parent
corporation (the "Parent") of which it is a direct or indirect wholly owned
subsidiary and a member of the same consolidated group for federal income tax
purposes or to any wholly owned direct or indirect subsidiary of such Parent
which is a member of the same consolidated group for federal income tax
purposes (a "Controlled Subsidiary"), it being understood that (1) unless the
General Partner otherwise consents (which consent shall not unreasonably be
withheld), a Limited Partner making such a Transfer shall thereafter remain
liable (jointly and severally with the transferee) for its Unused Capital
Commitment and Loan Amount and (2) with respect to a Controlled Subsidiary,
the later sale, liquidation or spinoff of such Controlled Subsidiary or other
transaction in which the Parent ceases to control, directly or
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indirectly, 100% of the equity of the Controlled Subsidiary would constitute
an indirect sale of an Interest and/or Note, which sale may only be made in
compliance with the terms and restrictions set forth in this Agreement;
(x) JPMIC may Transfer up to 25% of its Interests as a Special Class A Limited
Partner and a Special Class B Limited Partner and up to 25% of its Notes to a
limited partnership of which an Affiliate of JPMIC is the general partner; and
(y) the General Partner shall not unreasonably withhold its consent to a
Transfer by a Limited Partner (i) that has suffered a Regulatory Disability,
(ii) that is a Nonconforming Partner or (iii) that is a Nondisclosure Partner
subject to an FCC Disclosure Requirement.
8.1.2 In addition to, and not in limitation of, the provisions of
paragraph 8.1.1, except as the General Partner, with the approval of the
Advisory Committee, may otherwise permit, and except for a Transfer pursuant
to paragraph 3.6 or the provisos to paragraph 8.1.1, a Limited Partner may
Transfer all or a portion of its Limited Partnership Interest or Notes only
for a cash purchase price and in accordance with the following procedures:
(i) Such Limited Partner must provide 45 days' written
notice to the General Partner and to all of the Class A and Class B
Limited Partners of such proposed Transfer and the proposed cash purchase
price (the "Asking Price") for the Interest and/or Notes (or portion
thereof) it is seeking to Transfer (the "Offered Securities").
(ii) During the first 30 days of such 45-day period, the
General Partner and each of the Class A and Class B Limited Partners
(other than any Defaulting Partner) will have the right to propose to
acquire the Offered Securities or some portion thereof for the Asking
Price, and if the Partners as a group propose to acquire more than the
Offered Securities, then each such Partner shall have the right to
propose to acquire its pro rata portion of the Offered Securities (based
on the proportion of the Capital Commitment made by such Partner to the
Partnership to the Capital Commitments made to the Partnership by all
Partners proposing to acquire a portion of the Offered Securities);
provided, however, that the Limited Partner that proposes to make the
Transfer shall not be obligated to sell any portion of the Offered
Securities to any Partner unless the Partners have collectively proposed
to purchase all of the Offered Securities.
(iii) If, and only to the extent that, the Offered
Securities are not acquired by the Partners at the end of such 45-day
period, then subject to the last sentence of this paragraph 8.1.2, such
Limited Partner may Transfer the Offered Securities within 90 days, at
not less than the Asking Price, to a Person approved by the General
Partner.
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(iv) If such Limited Partner wishes to Transfer the
Offered Securities at a purchase price of less than the Asking Price, it
must first follow the procedures set forth in clauses (i)-(iii) above
with the new purchase price such Limited Partner is seeking becoming the
Asking Price.
In the case of a proposed Transfer in a single transaction or a series of
related transactions of fifty percent (50%) or more of the outstanding Limited
Partnership Interests or Notes, if the Partners do not exercise their rights
of first refusal pursuant to this paragraph 8.1.2, then, as a further
condition to the Transfer by a Limited Partner of the Offered Securities, such
Limited Partner shall obtain for each other Class A and Class B Limited
Partner the right to sell the same proportion of its Limited Partnership
Interest and/or Notes as that being sold by the selling Limited Partner at the
same purchase price (subject, however, to appropriate adjustments approved by
the General Partner and the Advisory Committee, to reflect any special
distributions to which the Special Limited Partners are entitled pursuant to
clause (iii) of paragraph 4.2.1(c)) and otherwise on the same terms and
conditions.
8.1.3 Notwithstanding any other provisions of this paragraph 8.1,
no Transfer of all or any fraction of a Limited Partnership Interest or Note
may be made unless in the opinion of responsible counsel (who may be counsel
for the Partnership), satisfactory in form and substance to the General
Partner (which opinion may be waived, in whole or in part, at the discretion
of the General Partner, with the approval of the Advisory Committee):
(i) such Transfer, when added to the total of all other
Transfers within the preceding twelve (12) months, would not result in
the Partnership being considered to have terminated within the meaning of
Section 708 of the Code;
(ii) such Transfer would not violate the Securities Act of
1933, as amended, or any state securities or "Blue Sky" laws applicable
to the Partnership or the Interest or Note to be Transferred;
(iii) such Transfer would not cause the Partnership to lose
its status as a partnership for federal income tax purposes or cause the
Partnership to become subject to the Investment Company Act of 1940, as
amended;
(iv) such Transfer would not cause all or any portion of
the assets of the Partnership to constitute "plan assets" under ERISA or
the Code; and
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(v) such Transfer would not result in an FCC Regulatory
Issue.
The General Partner agrees to cooperate with any Limited Partner making a
Transfer by providing such records and other factual information regarding the
Partnership as may be reasonably requested with respect to any proposed
Transfer. Each Limited Partner hereby agrees that it will not Transfer all or
any fraction of its Interest or Notes in the Partnership, except as permitted
by this Agreement.
8.1.4 Each Limited Partner agrees that it will pay all reasonable
expenses, including attorneys' fees, incurred by the Partnership in connection
with a Transfer of a Limited Partnership Interest or Note (or portion thereof)
by that Limited Partner.
8.1.5 Any Person which acquires all or any fraction of the Interest
of a Limited Partner and which is admitted to the Partnership as a Limited
Partner shall assume all or a proportionate fraction of the Capital Account of
such Limited Partner and shall be obligated (i) to pay to the Partnership the
appropriate portion of any amounts thereafter becoming due in respect of the
Capital Commitment made by its predecessor in Interest and (ii) to return to
the Partnership amounts previously wrongfully distributed to its predecessor
in Interest, in accordance with and subject to the limitations of paragraph
3.5.2, as if it had received the distributions made to its predecessor in
Interest. Each Limited Partner agrees that, notwithstanding the Transfer of
all or any fraction of its Limited Partnership Interest, as between it and the
Partnership, it will remain liable for its Unused Capital Commitment and to
return to the Partnership amounts previously wrongfully distributed to it in
accordance with and subject to the limitations of paragraph 3.5.2 as required
to be paid or returned with respect to its Interest prior to the time, if any,
when the purchaser, assignee or transferee of such Interest, or fraction
thereof, is admitted as a Substitute Limited Partner and, subject to clause
(w) of paragraph 8.1.1 and subject to paragraph 8.1.4, to the extent permitted
by law, a transferring Limited Partner will not have any liability for amounts
required to be paid with respect to its Interest after the time, if any, when
the purchaser, assignee or transferee of such Interest, or fraction thereof,
is admitted as a Substituted Limited Partner.
8.2 Assignees.
8.2.1 The Partnership shall not recognize for any purpose any
purported Transfer of all or any fraction of the Interest or Notes of a
Limited Partner unless the provisions of paragraph 8.1 shall have been
complied with and there shall have been filed with the Partnership a dated
notice of such Transfer, in form satisfactory to the General Partner, executed
and
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acknowledged by both the seller, assignor or transferor and the purchaser,
assignee or transferee, and such notice (i) contains the acceptance by the
purchaser, assignee or transferee of all of the terms and provisions of this
Agreement, including the provisions of paragraph 12.1, and the Purchase
Agreement, and its agreement to be bound thereby, (ii) represents that such
Transfer was made in accordance with all applicable laws and regulations and
(iii) contains a power of attorney granted by the purchaser, assignee or
transferee to the General Partner to execute this Agreement and all amendments
hereto on its behalf.
8.2.2 Unless and until an assignee of an Interest becomes a
Substituted Limited Partner, such assignee shall not be entitled to give
Consents with respect to such Interest.
8.2.3 Subject to paragraph 8.1.5, any Limited Partner which shall
Transfer all of its Interest shall cease to be a Limited Partner, except that,
subject to paragraph 8.3.3, unless and until a Substituted Limited Partner is
admitted in its stead, such assigning Limited Partner shall not cease to be a
Limited Partner or cease to have any of the rights or obligations of a Limited
Partner hereunder.
8.2.4 Anything herein to the contrary notwithstanding, both the
Partnership and the General Partner shall be entitled to treat the assignor of
a Limited Partnership Interest as the absolute owner thereof in all respects,
and shall incur no liability for distributions made in good faith to it, until
such time as a written assignment that conforms to the requirements of this
Article VIII has been received by the Partnership and accepted by the General
Partner.
8.2.5 A Person who is the assignee of all or any fraction of the
Interest of a Limited Partner as permitted hereby but does not become a
Substituted Limited Partner and who desires to make a further Transfer of such
Interest, shall be subject to all of the provisions of this Article VIII to
the same extent and in the same manner as any Limited Partner desiring to make
a Transfer of its Interest.
8.3 Substituted Limited Partners.
8.3.1 No Limited Partner shall have the right to substitute a
purchaser, assignee, transferee, heir, legatee, distributee or other recipient
of all or any fraction of such Limited Partner's Interest as a Limited Partner
in its place. Any such purchaser, assignee, transferee, heir, legatee,
distributee or other recipient of an Interest (whether pursuant to a voluntary
or involuntary Transfer) shall be admitted to the Partnership as a Substituted
Limited Partner only (i) with the prior written consent of the General
Partner, which consent may be withheld in the sole discretion of the General
Partner (except that such consent shall not unreasonably be withheld in the
case
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of a Transfer described in clause (w) of paragraph 8.1.1 by a Limited Partner
that is a small business investment corporation if such Limited Partner
determines in good faith that the holding by it of its Limited Partnership
Interest may be inconsistent with applicable provisions of law or regulation,
and no consent shall be required in the case of a Transfer described in
clause (x) of paragraph 8.1.1), (ii) by satisfying the requirements of
paragraphs 8.1 and 8.2 and (iii) upon an amendment to this Agreement, Schedule
A, and the Partnership's certificate of limited partnership, if required,
filed in the proper records of each jurisdiction in which such filing is
necessary to qualify the Partnership to conduct business or to preserve the
limited liability of the Limited Partners.
8.3.2 Each Substituted Limited Partner, as a condition to its
admission as a Limited Partner, shall execute and acknowledge such
instruments, in form and substance satisfactory to the General Partner, as the
General Partner reasonably deems necessary or desirable to effectuate such
admission and to confirm the agreement of the Substituted Limited Partner to
be bound by all the terms and provisions of this Agreement with respect to the
Limited Partnership Interest acquired. All reasonable expenses, including
attorneys' fees not paid by the assignor Partner pursuant to paragraph 8.1.4
that are incurred by the Partnership in this connection shall be borne by such
Substituted Limited Partner.
8.3.3 Until an assignee shall have been admitted to the Partnership
as a Substituted Limited Partner pursuant to paragraph 8.3.1, such assignee
shall only be entitled to the rights of an assignee of a Limited Partnership
Interest under this Agreement.
8.3.4 The Limited Partners hereby Consent to the admission as a
Substituted Limited Partner of any Person so admitted in accordance with this
paragraph 8.3.
8.4 Incapacity of a Limited Partner; Transfer Procedures.
8.4.1 In the event of the Incapacity of a Limited Partner, to the
fullest extent permitted by law, the General Partner may require the Transfer
of the Interest and/or Notes of such Limited Partner. The General Partner
shall provide at least 60 days' notice of such Transfer. Such notice shall
also specify the effective date of such Transfer (the "Required Transfer
Date"). In the event of the Incapacity of a Limited Partner, the Partnership
shall not be dissolved (as long as there is at least one remaining Limited
Partner), and the Limited Partner's trustee in bankruptcy or other legal
representative shall have only the rights of a transferee to receive
Partnership distributions applicable to the Interest of such Incapacitated
Limited Partner as provided herein. Any Transfer from such trustee in
bankruptcy
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or legal representative shall be subject to the provisions of this Agreement.
8.4.2 The General Partner shall designate a purchaser of the
Interest and/or Notes required to be Transferred, and such Interest and/or
Notes shall be acquired by the purchaser in accordance with the provisions of
paragraphs 8.1.3, 8.1.5, 8.2 and 8.3 by the payment to the transferring
Limited Partner within 90 days of the Required Transfer Date of an amount in
cash equal to: (i) in the case of the Interest, any positive balance in the
transferring Limited Partner's Capital Account, after adjustment pursuant to
the following sentence and (ii) in the case of the Notes, the outstanding
principal amount thereof, plus accrued interest thereon. Solely for the
purpose of determining the purchase price for the Interest required to be
Transferred, the Capital Account of the transferring Limited Partner shall be
adjusted as of any Required Transfer Date to reflect income, gains and losses
through the Required Transfer Date and the Fair Market Value of the
Partnership's assets as of the Required Transfer Date. The Partnership will
bear, or will cause the purchaser of the Interest and/or Notes to bear, all
reasonable expenses, including attorneys' fees, incurred by the Partnership in
connection with the Transfer of such Interest and/or Notes. If the General
Partner determines to cause any Transfer by a Limited Partner of all or any
portion of its Limited Partnership Interests and/or Notes in accordance with
the terms of this Agreement, the General Partner and each Class A and Class B
Limited Partner (other than a Defaulting Partner) shall have the right to
purchase a percentage of such Interest and/or Notes equal to the percentage
that such Partner's Capital Commitment bears to the Capital Commitments of all
Partners (other than the Defaulting Partner) on the same terms as those set
forth in this paragraph 8.4.2 within the 30 days' next following the notice of
Transfer given by the General Partner in accordance with paragraph 8.4.1. If
any Partner (other than a Defaulting Partner) does not elect to purchase its
pro rata portion of such Interest and/or Notes, such portion shall be
reoffered to the other Partners (other than a Defaulting Partner) within the
60 days' next following the notice of Transfer given by the General Partner in
accordance with paragraph 8.4.1. Notwithstanding anything in this paragraph
8.4.2 to the contrary, if the Partners (other than Defaulting Partners) elect
to purchase less than the entire Interest and/or Notes sought to be sold by
the General Partner, the General Partner may elect, in its sole discretion, to
(i) permit the Partners (other than any Defaulting Partners) to purchase a
portion of such Interest and/or Notes, (ii) sell such Interest and/or Notes in
its entirety to any Partner or Partners willing to purchase such entire
Interest and/or Notes or (iii) sell such Interest and/or Notes in its entirety
to a Person not a Partner.
8.5 Transfers During a Fiscal Year. In the event of the Transfer
of a Partner's Interest at any time other than the
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end of a Fiscal Year, allocations pursuant to paragraph 4.4 shall be divided
between the transferor and the transferee by taking into account their varying
interests during the Fiscal Year and by using any conventions permitted by law
and selected by the General Partner, in its discretion. Notwithstanding the
foregoing, if during the Fiscal Year in which there is a Transfer of an
Interest, the Partnership shall derive substantial income from activities
outside of the ordinary course of business (as determined by the General
Partner, in its discretion), the allocations pursuant to paragraph 4.4 shall
be divided between the transferor and transferee by taking into account the
date on which such Transfer actually occurred.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND
TERMINATION OF THE PARTNERSHIP
9.1 Dissolution.
The Partnership shall be dissolved and its affairs wound up upon the
happening of any of the following events:
(i) the expiration of its term as set forth in paragraph
2.5;
(ii) the Incapacity, withdrawal, removal or other event of
withdrawal (as defined in the Partnership Act) of a General Partner,
unless (x) at the time thereof there is at least one remaining General
Partner and the remaining General Partner(s) unanimously elect pursuant
to the authority hereby granted to carry on the business of the
Partnership or (y) within 90 days thereafter, Class A Limited Partners
representing not less than a majority in Interest of the remaining
Partners (based on their profits interests and capital interests), or
such greater percentage in Interest of the remaining Partners as may be
required under the Partnership Act, agree in writing to continue the
business of the Partnership and to the appointment, effective as of the
date of such event, of one or more additional general partners;
(iii) on or after the time when all or substantially all of
the Capital Commitments and Loan Amounts have been paid, upon the sale or
other Disposition by the Partnership of all or substantially all of the
Investments it then owns;
(iv) prior to the date of the UVC Closing, the written
Consent of 75 percent in Interest of the Partners, and on and after the
date of the UVC Closing, the written Consent of all Partners; or
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(v) the entry of a decree of judicial dissolution under
Section 17-802 of the Partnership Act.
Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the winding up of the Partnership has been completed, the
assets of the Partnership have been distributed as provided in paragraph 9.2
and the certificate of limited partnership of the Partnership has been
canceled.
9.2 Liquidation.
9.2.1 Upon dissolution of the Partnership, the General Partner or,
if there is none, a Person approved by a majority in Interest of the
Attributable Class A Limited Partners to act as a liquidating trustee (the
"Liquidating Trustee"), shall wind up the affairs of the Partnership and,
subject to the provisions of paragraph 3.10, proceed within a reasonable
period of time to sell or otherwise liquidate the assets of the Partnership
and, after paying or making provision by the setting up of reasonable reserves
for all liabilities to creditors of the Partnership, to distribute the assets
among the Partners in accordance with the provisions for the making of
distributions set forth in this Agreement.
9.2.2 Notwithstanding paragraph 9.2.1 (but subject to paying or
making provision for all liabilities to creditors), in the event that the
General Partner or the Liquidating Trustee shall determine that a sale or
other disposition of part or all of the Investments would cause undue loss to
the Partners or otherwise be impractical or undesirable, the General Partner
or the Liquidating Trustee may either defer liquidation of, and withhold from
distribution for a reasonable time, any such Investments, or, with the
approval of the Advisory Committee, distribute part or all of such
Investments, pro rata to the Partners in kind (subject to the provisions of
paragraph 9.2.5).
9.2.3 The Limited Partners shall not be responsible for restoring
any negative balance in their Capital Accounts, but shall be subject to the
obligations set forth in paragraph 3.5.2.
9.2.4 The assets of the Partnership or the proceeds from
liquidation thereof shall be distributed in the following manner:
(i) First, to pay or make reasonable provision to pay the
liabilities and debts of the Partnership (including the Notes (to the
extent otherwise permitted by law), including all contingent, conditional
or unmatured claims and obligations, and including the expenses of
liquidation), other than liabilities for distributions to Partners; and
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(ii) Thereafter, all remaining assets or proceeds shall be
paid or distributed to all Partners in accordance with the provisions of
paragraph 4.2.1.
9.2.5 In any such liquidation, the General Partner or the
Liquidating Trustee, as applicable, may distribute (after payment of, or the
reasonable provision for, the Partnership's obligations) the assets of the
Partnership in cash or, with the approval of the Advisory Committee, ratably
in kind or any combination thereof. Each distribution in kind of securities,
assets or other property shall be distributed in accordance with paragraph
4.2.1 as if there had been a sale of such property for an amount of cash equal
to the Fair Market Value of such property followed by an immediate
distribution of such cash proceeds. Distributions consisting of cash,
securities, assets and/or other property shall be made, to the extent
practicable, in pro rata portions as to each Partner receiving such
distributions. For purposes of the preceding sentence, securities, assets or
other property having a different tax basis than like securities, assets or
other property shall be considered to be securities, assets or other property
of a different type. Notwithstanding the foregoing, in no event shall any
distribution of securities, assets or other property be made to any Limited
Partner to the extent such Limited Partner would be prohibited by applicable
law or regulation from holding such securities, assets or other property. In
such event, the General Partner or Liquidating Trustee shall vary the method
of distribution in such equitable manner as it may, in its good faith
discretion, determine. In the event of any proposed distribution of voting
securities, to the extent practicable each Limited Partner shall be offered
the opportunity to acquire comparable nonvoting securities or convertible
nonvoting securities, as such Limited Partner may elect. To the extent deemed
desirable by the General Partner or the Liquidating Trustee, distributions may
be made into a liquidating trust or other appropriate entity, and reserves may
be established for contingencies.
9.2.6 When the General Partner or the Liquidating Trustee has
complied with the foregoing liquidation plan, the General Partner or the
Liquidating Trustee, on behalf of all Partners, shall execute, acknowledge and
cause to be filed an instrument evidencing the cancellation of the certificate
of limited partnership of the Partnership.
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ARTICLE X
AMENDMENTS
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 This Agreement is subject to amendment only with the written
Consent of the General Partner and a majority in Interest of the Class A and
Class B Limited Partners; provided, however, that no amendment to this
Agreement may:
(i) add to, detract from or otherwise modify the purposes
of the Partnership;
(ii) increase the Capital Commitment of any Limited
Partner; reduce the Deemed Capital Contribution of any Limited Partner;
convert a Limited Partnership Interest into a General Partner's Interest;
modify the limited liability of a Limited Partner; or increase the
liabilities or responsibilities of any Limited Partner under this
Agreement, in each case, without the Consent of each such adversely
affected Limited Partner;
(iii) alter or change any special rights of the Class A
Limited Partnership Interests, Class B Limited Partnership Interests,
Special Class A Limited Partnership Interests, Special Class B Limited
Partnership Interests or JPMIC so as to affect them adversely, without
the Consent of a majority in Interest of the Class A Limited Partners,
Class B Limited Partners, Special Class A Limited Partners or Special
Class B Limited Partners or JPMIC, as applicable;
(iv) amend any provisions hereof which require the
Consent, action or approval of a specified percentage in Interest of
Limited Partners without the Consent of such specified percentage in
Interest of Limited Partners; or
(v) amend Article VI, without the Consent of 75 percent
in Interest of the Class A Limited Partners.
Notwithstanding anything to the contrary herein: (i) except for an amendment
described in this paragraph 10.1.1, the Class B Limited Partners shall not be
entitled to participate in any vote or Consent of the Limited Partners with
respect to any matter; and (ii) except for an amendment described in paragraph
10.1.1(ii) specifically affecting a Class C Limited Partner (which shall
require the Consent of such Class C Limited Partner), the Consent of the Class
C Limited Partners shall not be required for any amendment to this Agreement
or other matter, and the Class C Limited Partners shall not be entitled to
participate in any vote or Consent of or attend any meeting of
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the Limited Partners with respect to any matter or to receive notices relating
thereto.
10.1.2 Notwithstanding the limitations of paragraph 10.1.1, this
Agreement may be amended from time to time by the General Partner without the
Consent of any of the Limited Partners (i) to add to the representations,
duties or obligations of the General Partner or surrender any right or power
granted to the General Partner herein; (ii) to admit one or more additional
Limited Partners or one or more Substituted Limited Partners, or withdraw one
or more Limited Partners, in accordance with the terms of this Agreement;
(iii) to amend Schedule A hereto to provide any necessary information
regarding any Partner, any additional or successor General Partner or any
additional or Substituted Limited Partner; (iv) to amend paragraph 4.4 under
the circumstances set forth in, and if the approval of the Advisory Committee
has been obtained in accordance with, paragraph 4.4.8; and (v) to reflect any
change in the amount of the Capital Commitments of any Partner in accordance
with the terms of this Agreement; provided, however, that no amendment shall
be adopted pursuant to this paragraph 10.1.2 unless such amendment would not,
in the opinion of counsel for the Partnership (which opinion may be waived, in
whole or in part, by the General Partner, with the approval of the Advisory
Committee), alter, or result in the alteration of, the limited liability of
the Limited Partners or the status of the Partnership as a partnership for
federal income tax purposes.
10.1.3 Upon the adoption of any amendment to this Agreement, the
amendment shall be executed by the General Partner and all of the Limited
Partners and, if required, shall be recorded in the proper records of each
jurisdiction in which recordation is necessary for the Partnership to conduct
business or to preserve the limited liability of the Limited Partners. Any
such adopted amendment may be executed by the General Partner on behalf of the
Limited Partners pursuant to the power of attorney granted in paragraph 12.1.
The General Partner shall send each Limited Partner a copy of any amendment
adopted pursuant to paragraph 10.1.1 or 10.1.2.
10.2 Amendment of Certificate. In the event this Agreement shall
be amended pursuant to this Article X, the General Partner shall amend the
certificate of limited partnership of the Partnership to reflect such change
if such amendment is required or if the General Partner deems such amendment
to be desirable and shall make any other filings or publications required or
desirable to reflect such amendment, including any required filing for
recordation of any certificate of limited partnership or other instrument or
similar document of the type contemplated by paragraph 2.6.
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ARTICLE XI
CONSENTS, VOTING AND MEETINGS
11.1 Method of Giving Consent. Any Consent required by this
Agreement may be given as follows:
(i) by a written Consent given by the approving Partner
at or prior to the doing of the act or thing for which the Consent is
solicited, provided that such Consent shall not have been nullified by
either (a) notice to the General Partner by the approving Partner at or
prior to the time of, or the negative vote by such approving Partner at,
any meeting held to consider the doing of such act or thing, or (b)
notice to the General Partner by the approving Partner prior to the time
the General Partner shall have received sufficient Consents to authorize
the doing of any act or thing, the doing of which is not subject to
approval at such meeting; or
(ii) by the affirmative vote by the approving Partner to
the doing of the act or thing for which the Consent is solicited at any
meeting called and held to consider the doing of such act or thing.
11.2 Meetings. The Partnership shall hold an annual meeting of all
Partners at which information with respect to the business of the Partnership
will be furnished and discussed, such meeting to be held between 90 and 180
days after the end of each Fiscal Year. Any matter requiring the Consent of
all or any of the Limited Partners pursuant to this Agreement may be
considered at a meeting of the Partners held not less than five (5) nor more
than thirty (30) business days after notice thereof shall have been given by
the General Partner to all Partners. Such notice (i) may be given by the
General Partner, in its discretion, at any time, and (ii) shall be given by
the General Partner within thirty (30) days after receipt by the General
Partner of a request for such a meeting made by the Advisory Committee or by
twenty percent (20%) in Interest of the Limited Partners. Any such notice
shall state briefly the purpose, time and place of the meeting. All such
meetings shall be held within or outside the State of Delaware at such
reasonable place as the General Partner shall designate and during normal
business hours.
11.3 Record Dates. The General Partner may set in advance a date
for determining the Limited Partners entitled to notice of and to vote at any
meeting. All record dates shall not be more than sixty (60) days prior to the
date of the meeting to which such record date relates.
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11.4 Submissions to Limited Partners. The General Partner shall
give all of the Class A and Class B Limited Partners notice of any proposal or
other matter required by any provision of this Agreement to be submitted for
the consideration and approval of all or any of the Limited Partners. Such
notice shall include any information required by the relevant provisions of
this Agreement. Neither the General Partner nor the Partnership shall,
directly or indirectly, pay or cause to be paid any remuneration, fee or other
consideration to any Limited Partner for or as an inducement to the entering
into by such Limited Partner of any waiver or amendment of any of the terms
and provisions of this Agreement or the Partnership's certificate of limited
partnership or the giving of any Consent, unless such remuneration is
concurrently paid on the same terms, in proportion to their respective Capital
Commitments, to all the then Class A and Class B Limited Partners.
ARTICLE XII
POWER OF ATTORNEY
12.1 Power of Attorney.
12.1.1 Each Limited Partner, by its execution hereof, hereby
irrevocably makes, constitutes and appoints each of the General Partner (and
when a partnership is a General Partner, each general partner of such General
Partner and when a corporation is a General Partner or a general partner of a
General Partner, the then Chairman, President and each Vice President of such
corporation) and the Liquidating Trustee, if any, in such capacity as
Liquidating Trustee for so long as it acts as such (each is hereinafter
referred to as the "Attorney"), as its true and lawful agent and attorney-in-
fact, with full power of substitution and full power and authority in its
name, place and stead, to make, execute, sign, acknowledge, swear to, record
and file (i) this Agreement and any amendment to this Agreement which has been
adopted as herein provided; (ii) the original certificate of limited
partnership of the Partnership and all amendments thereto required or
permitted by law or the provisions of this Agreement; (iii) all certificates
and other instruments deemed advisable by the General Partner or the
Liquidating Trustee, as the case may be, to carry out the provisions of this
Agreement and applicable law or to permit the Partnership to become or to
continue as a limited partnership or partnership wherein the Limited Partners
have limited liability in each jurisdiction where the Partnership may be doing
business; (iv) all instruments that the General Partner or the Liquidating
Trustee deems appropriate to reflect a change, modification or termination in
or of this Agreement or the Partnership in accordance with this Agreement,
including, without limitation, the admission of additional Limited Partners or
Substituted Limited Partners pursuant to the provisions of this Agreement or
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any reallocation from Junior Subordinated Notes to Capital Commitments
pursuant to Section 1.10 of the Purchase Agreement; (v) all conveyances and
other instruments or papers deemed advisable by the General Partner or the
Liquidating Trustee, including, without limitation, those to effect the
dissolution and termination of the Partnership, including a certificate of
cancellation; (vi) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Partnership; and (vii) all other
instruments or papers which may be required by law to be filed on behalf of
the Partnership.
12.1.2 The foregoing power of attorney:
(a) is coupled with an interest, shall be irrevocable and shall
survive and shall not be affected by the subsequent death, disability or
Incapacity of any Limited Partner;
(b) may be exercised by the Attorney, either by signing
separately as attorney-in-fact for each Limited Partner or by a single
signature of the Attorney, acting as attorney-in-fact for all of them; and
(c) shall survive the delivery of an assignment by a Limited
Partner of the whole or any fraction of its Interest; except that, where the
assignee of the whole of such Limited Partnership Interest has been approved
by the General Partner for admission to the Partnership, as a Substituted
Limited Partner, the power of attorney of the assignor shall survive the
delivery of such assignment for the sole purpose of enabling the Attorney to
execute, swear to, acknowledge and file any instrument necessary or
appropriate to effect such substitution.
ARTICLE XIII
RECORDS AND ACCOUNTING; REPORTS; FISCAL AFFAIRS
13.1 Records and Accounting.
13.1.1 Proper and complete records and books of account of the
business of the Partnership, including a list of the names, addresses and
Interests of all Limited Partners, shall be maintained at the Partnership's
principal place of business. Each Class A or Class B Limited Partner and its
duly authorized representatives shall be permitted for any purpose reasonably
related to such Limited Partner's interest as a limited partner of the
Partnership to inspect the books and records of the Partnership and any
Operating Entity and make copies thereof, at such Limited Partner's expense,
at any reasonable time during normal business hours. The Class C Limited
Partners shall have no right to inspect the books and records of the
Partnership or any Operating Entity, except as may be required by law.
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13.1.2 The books and records of the Partnership shall be kept in
accordance with generally accepted accounting principles. The accrual basis
of accounting shall be followed by the Partnership for federal income tax
purposes. The taxable year of the Partnership shall be its Fiscal Year.
13.1.3 Notwithstanding anything in the Partnership Act (including,
without limitation, Section 17-305(b) thereof) to the contrary, the General
Partner shall have no right to keep confidential from any member of the
Advisory Committee any information concerning the Partnership.
13.2 Annual Reports. Within ninety (90) days after the end of each
Fiscal Year, the General Partner shall cause to be delivered to each Person
who was a Class A or Class B Limited Partner at any time during the Fiscal
Year, an annual report containing the following:
(i) consolidated and consolidating financial statements
of the Partnership, including, without limitation, a consolidated and
consolidating balance sheet as of the end of the Fiscal Year and
statements of income, Partners' equity and cash flow (as required by
generally accepted accounting principles) for such Fiscal Year (and
including as a supplemental schedule thereto a statement showing the
Capital Account of each Partner and the amounts of all allocations and
distributions affecting the Capital Account of each Partner during such
Fiscal Year), which shall be prepared in accordance with generally
accepted accounting principles consistently applied, shall state in
comparative form the figures as of the end of and for the previous Fiscal
Year, and shall be reported on by a firm of independent certified public
accountants selected by the General Partner and approved by the Advisory
Committee;
(ii) a statement, in reasonable detail, showing the
amounts received by the Partnership and the computations made by the
Partnership to determine the distributions to each Partner during such
Fiscal Year; and
(iii) a report containing an overview of the investment
activities of the Partnership during the Fiscal Year covered by the
annual report, and, with respect to the fourth quarter, a description
required by paragraph 13.4(i) or (ii).
13.3 Tax Information. Within ninety (90) days after the end of
each Fiscal Year, the General Partner will cause to be delivered to each
Person who was a Partner at any time during such Fiscal Year a Form K-1 and
such other information, if any, with respect to the Partnership as may be
necessary for the preparation of such Partner's federal income tax returns,
including a statement showing each Partner's share of income,
78
<PAGE> 83
gain or loss, expense and credits for such Fiscal Year for federal income tax
purposes. In addition, at the request of any Class A or Class B Limited
Partner (which request may state that it shall apply to all subsequent Fiscal
Years), the General Partner will cause to be delivered to such Limited
Partner, within ninety (90) days after the end of each Fiscal Year, the
Partnership's Form 1065 (together with schedules and attachments) and such
information regarding the Partnership's state tax returns as such Limited
Partner may reasonably request.
13.4 Interim Reports. Within sixty (60) days after the end of each
of the first three (3) quarters of each Fiscal Year, the General Partner shall
cause to be delivered to each Person who was a Class A or Class B Limited
Partner at any time during such quarter, unaudited financial statements of the
type referred to in paragraph 13.2(i). Within sixty (60) days after the end
of the first six (6) months of each Fiscal Year, the General Partner shall
cause to be delivered to each Person who was a Class A or Class B Limited
Partner at any time during such period, a report containing an overview of the
Partnership's portfolio, including a summary of all companies in which
investments were made by the Partnership during such six-month period. In
addition, within sixty (60) days after the end of each quarter of each Fiscal
Year other than the fourth quarter in which an event described in clause (i)
or (ii) of this sentence shall have occurred, the General Partner shall cause
to be delivered to each Person who was a Class A or Class B Limited Partner at
any time during such quarter a report which shall contain (i) with respect to
any quarter in which the Partnership invests in Investments, a description of
such Investment and the terms thereof; and (ii) a description of any material
event regarding the business of the Partnership (including material
developments in the Investments made by the Partnership) during the quarter
covered by the report.
13.5 Partnership Funds. The funds of the Partnership which are not
invested in Investments or temporary investments pursuant to paragraph
5.1.1(k) may be deposited in the name of the Partnership in one or more bank
accounts in one or more United States banking corporations with an
unrestricted surplus of at least $250,000,000. Withdrawals therefrom shall be
made upon such signature(s) as the General Partner may designate. No funds of
the Partnership shall be kept in any account other than a Partnership account;
and funds shall not be commingled with the funds of any other Person.
13.6 Other Information. With reasonable promptness, the General
Partner will deliver such other information available to the General Partner,
including financial statements and computations, relating to any Person in
which the Partnership then holds Investments as any Class A or Class B Limited
Partner may from time to time reasonably request.
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<PAGE> 84
ARTICLE XIV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERS
14.1 Representations, Warranties and Covenants of the Limited
Partners. Each Limited Partner is fully aware that the Partnership and the
General Partner are relying upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and upon the truth and accuracy of the following representations by each of
the Limited Partners: Each of the Limited Partners hereby severally
represents, warrants and covenants that (i) its Interest in the Partnership is
being acquired for its own account, for investment and not with a view to the
distribution or sale thereof, subject, however, to any requirement of law that
the disposition of its property shall at all times be within its control; (ii)
it will conduct its business and affairs (including its investment activities)
in a manner such that it will be able to honor its obligations under this
Agreement; and (iii) unless an asterisk appears next to its name on the
signature page hereto, it is not an ERISA Partner.
14.2 Representations, Warranties and Covenants of the General
Partner. The General Partner represents and warrants to each Limited Partner
that:
(a) The Partnership (i) has been duly formed and is validly
existing as a limited partnership under the laws of the State of Delaware with
full partnership power and authority to conduct its business as contemplated
in this Agreement, and (ii) is, under currently applicable law and
regulations, a partnership for federal income tax purposes which will not be
treated, for such purposes, as an association.
(b) The General Partner is a duly formed and validly existing
limited partnership under the laws of the State of Delaware, with full
partnership power and authority to perform its obligations herein.
(c) All action required to be taken by the General Partner and
the Partnership as a condition to the issuance and sale of the Limited
Partnership Interests being purchased by the Limited Partners has been taken;
the Interest in the Partnership of each Limited Partner represents a duly and
validly issued Limited Partnership Interest; and each Limited Partner of the
Partnership is entitled to all the benefits of a Limited Partner under this
Agreement and the Partnership Act.
(d) This Agreement has been duly authorized, executed and
delivered by the General Partner and, upon due authorization, execution and
delivery by a Limited Partner, will constitute the valid and legally binding
agreement of the General
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<PAGE> 85
Partner enforceable in accordance with its terms against the General Partner.
(e) Assuming the accuracy of the representations and
warranties made by the Limited Partners in this Agreement and the Purchase
Agreement, the execution and delivery of this Agreement by the General Partner
and the performance of its duties and obligations hereunder do not result in a
breach of any of the terms, conditions or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, credit agreement, note
or other evidence of indebtedness, or any lease or other agreement or
understanding, or any license, permit, franchise or certificate, to which the
General Partner is a party or by which it is bound or to which its properties
are subject, or require any authorization or approval under or pursuant to any
of the foregoing, or violate any statute, regulation, law, order, writ,
injunction, judgment or decree to which the General Partner is subject.
(f) Assuming the accuracy of the representations and
warranties made by the Limited Partners in this Agreement and the Purchase
Agreement, neither the General Partner nor the Partnership is in default (nor
has any event occurred which with notice, lapse of time, or both, would
constitute a default) in the performance of any obligation, agreement or
condition contained in this Agreement, any indenture, mortgage, deed of trust,
credit agreement, note or other evidence of indebtedness or any lease or other
agreement or understanding, or any license, permit, franchise or certificate,
to which either of them is a party or by which either of them is bound or to
which the properties of either of them are subject, nor is either of them in
violation of any statute, regulation, law, order, writ, injunction, judgment
or decree to which either of them is subject, which default or violation would
materially adversely affect the business or financial condition of the General
Partner or the Partnership or impair in any material respect the General
Partner's ability to carry out its obligations under this Agreement.
(g) There is no litigation, investigation or other proceeding
pending or, to the knowledge of the General Partner, threatened against the
General Partner or any of its Affiliates which, if adversely determined, would
materially adversely affect the business or financial condition of the General
Partner.
(h) Assuming the accuracy of the representations and
warranties made by the Limited Partners in this Agreement and the Purchase
Agreement, no consent, approval or authorization of, or filing, registration
or qualification with, any court or governmental authority on the part of the
General Partner or the Partnership is required for the execution and delivery
of this Agreement by the General Partner, the performance of its or the
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<PAGE> 86
Partnership's obligations and duties hereunder, or the issuance of Interests
in the Partnership as contemplated hereby, except any thereof which is not yet
required to be made (but will be made when so required) and any thereof which
may be required of the Partnership solely by virtue of the nature of any
Limited Partner.
(i) At all times one or both of the following statements is or
will, in the reasonable judgment of the General Partner, be true with respect
to the Partnership: (x) the Partnership is an "operating company" or a
"venture capital operating company" as such term is defined in section 2510.3-
101(d) of the Plan Asset Regulations; or (y) the equity participation in the
Partnership by "benefit plan investors" is not "significant" as such terms are
defined in section 2510.3-101(f)(2) and section 2510.3-101(f)(1),
respectively, of the Plan Asset Regulations.
14.3 Representations, Warranties and Covenants of All Partners.
14.3.1 Each Partner severally represents and warrants to the
Partnership that, except as otherwise disclosed in writing to the General
Partner and, in the case of the General Partner, to the Advisory Committee, to
the best knowledge of such Partner, as of the date hereof (or, if later, as of
the date of its admission to the Partnership):
(a) such Partner is not an Alien;
(b) if such Partner is the General Partner or an Attributable
Limited Partner, neither such Partner nor any Person holding an "attributable"
interest (as defined below) in the Partnership through such Partner (an
"Attributable Person") owns or has any "attributable" interest in (i) a
television broadcast station or (ii) a national television network (such as
ABC, CBS, or NBC);
(c) if such Partner is the General Partner or an Attributable
Limited Partner or a Non-Attributable Limited Partner whose Capital Commitment
represents five percent or more of the total Capital Commitments of all
Partners, neither such Partner nor any Attributable Person owns or has (i) any
"attributable" interest or five percent or greater equity interest in any of
the telephone or wireless cable companies listed on Exhibit G to the Purchase
Agreement or (ii) any "attributable" interest or greater than twenty percent
interest in any of the television broadcast companies listed on Exhibit G to
the Purchase Agreement;
(d) neither such Partner nor any Person controlling such
Partner has had any FCC station license, permit or authorization revoked; and
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<PAGE> 87
(e) if such Partner is a General Partner or a Limited Partner
whose Capital Commitment represents five percent (5%) or more of the total
Capital Commitments of all Partners, neither such Partner nor any Attributable
Person (as a result of an interest in such Partner) is subject to a denial of
federal benefits, including specifically FCC benefits, pursuant to
Section 5301 of the Anti-Drug Abuse Act of 1988.
As used in this paragraph 14.3.1, "attributable" interest shall have the
meaning given to such term in Sections 73.3555 and 76.501 of Title 47 of the
Code of Federal Regulations or any successor provision, which provides
generally that any five percent or greater voting stock interest, any
partnership interest, or any position as an officer or director is an
"attributable" interest. If a Limited Partner makes its representations and
warranties in this paragraph 14.3 based on a position regarding attribution
that requires a submission to the FCC, then such Limited Partner shall be
responsible for making such submission to the FCC and shall furnish a copy of
such submission to the General Partner.
14.3.2 The General Partner, with the approval of the Advisory
Committee, from time to time may circulate to the Limited Partners a revised
Exhibit G, modified to specifically identify additional companies or
businesses with media or telecommunications interests relevant to assessing
compliance and reporting obligations of the Partnership. Within fifteen (15)
business days after its receipt of any such revised Exhibit G, each Limited
Partner receiving such revised Exhibit G shall advise the General Partner in
writing whether, to the best knowledge of such Limited Partner, as of the date
thereof, the representations and warranties made by such Limited Partner in
paragraph 14.3.1 continue to be true and correct (taking into account such
revised Exhibit G). Each Partner hereby severally covenants and agrees: (a)
to report in writing to the General Partner (or, in the case of the General
Partner, to the Advisory Committee) promptly after such Partner becomes aware
that, as of any future date, any representation made in paragraph 14.3.1, or
any information provided by such Partner with respect to a revised Exhibit G,
no longer is true and correct, and the reason therefor; and (b) to use
reasonable efforts to obtain and provide information reasonably available to
such Partner (within the time period reasonably requested) in response to
requests from the FCC or reasonable requests from the General Partner in
connection with FCC matters; provided, however, that no Nondisclosure Partner
shall be required to disclose the Nondisclosure Information.
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<PAGE> 88
ARTICLE XV
MISCELLANEOUS
15.1 Notices.
15.1.1 Any notice to any Limited Partner shall be at the address of
such Partner set forth in Schedule A hereto or such other mailing address of
which such Limited Partner shall advise the General Partner in writing. Any
notice to the Partnership or the General Partner shall be at the principal
office of the Partnership as set forth in paragraph 2.3. The General Partner
may, with the approval of the Advisory Committee, at any time change the
location of such office. Prompt notice of any such change shall be given to
the Partners.
15.1.2 Any notice shall be deemed to have been duly given if (i)
sent by United States certified or registered mail, return receipt requested,
when received, (ii) personally delivered or delivered by telecopy, when
received, or (iii) sent by United States Express Mail or overnight courier, on
the second following business day.
15.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS. IT IS THE
INTENTION OF THE PARTIES THAT THE INTERNAL LAWS OF THE STATE OF DELAWARE AND,
IN PARTICULAR, THE PROVISIONS OF THE PARTNERSHIP ACT, SHALL GOVERN THE
VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND THE
INTERPRETATION OF THE RIGHTS AND DUTIES OF THE PARTIES, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. IF ANY PROVISION OF THIS AGREEMENT SHALL BE
HELD TO BE INVALID, THE REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED
THEREBY.
15.3 JUDICIAL PROCEEDINGS. TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY JUDICIAL PROCEEDING INVOLVING ANY DISPUTE, CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR TO THE PARTNERSHIP AFFAIRS OR THE
RIGHTS OR INTERESTS OF THE PARTNERS OR ANY OF THEM OR THE BREACH OR ALLEGED
BREACH OF THIS AGREEMENT, WHETHER ARISING DURING THE PARTNERSHIP TERM OR AT OR
AFTER ITS TERMINATION OR DURING OR AFTER THE LIQUIDATION OF THE PARTNERSHIP
(EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND CLAIMS IS HEREINAFTER
REFERRED TO AS A "PARTNERSHIP DISPUTE"), SHALL BE BROUGHT ONLY IN A COURT
LOCATED IN THE STATE OF DELAWARE, AND EACH OF THE PARTIES HERETO (I)
UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY
RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING A PARTNERSHIP DISPUTE.
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<PAGE> 89
15.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and it supersedes any prior agreement or
understandings among them, oral or written. Except for those contained in the
Purchase Agreement or similar agreement pursuant to which Interests in the
Partnership are purchased, there are no representations, agreements,
arrangements or understandings, oral or written, between or among the Partners
relating only to the subject matter of this Agreement which are not fully
expressed herein. This Agreement may not be modified or amended other than
pursuant to Article X.
15.5 Headings, etc. The headings in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine or the neuter gender shall
include the masculine, the feminine and the neuter.
15.6 Binding Provisions. Subject to Articles VII and VIII, the
covenants and agreements contained herein shall be binding upon and inure to
the benefit of the heirs, executors, administrators, personal or legal
representatives, successors and assigns of the respective parties hereto.
15.7 No Waiver. The failure of any Partner to seek redress for
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted
a violation from having the effect of an original violation.
15.8 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation, Consents, waivers, amendments
and modifications which may hereafter be executed, and certificates and other
information previously or hereafter furnished to any Limited Partner, may be
reproduced by it by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process, and any Limited Partner may
destroy any original document so reproduced. The Partnership, the General
Partner and each Limited Partner agree and stipulate that, to the fullest
extent permitted by law, any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was
made by a Limited Partner in the regular course of business).
15.9 Confidentiality. Each Partner will maintain the
confidentiality of information which is, to the knowledge of such Partner,
non-public information regarding the Partnership, (including any Person in
which the Partnership holds, or contemplates acquiring, any Investments)
received by such Partner pursuant to this Agreement, except as otherwise
required by law.
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<PAGE> 90
Except as may be required by law, the Partnership shall not use the name of,
or make reference to, any of the Limited Partners or any of its Affiliates in
any press release or in any public manner without such Limited Partner's prior
written consent.
15.10 No Right to Partition. To the extent permitted by law, and
except as otherwise expressly provided in this Agreement, the Partners, on
behalf of themselves and their shareholders, partners, heirs, executors,
administrators, personal or legal representatives, successors and assigns, if
any, hereby specifically renounce, waive and forfeit all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the
Partnership or any asset of the Partnership, or any interest which is
considered to be Partnership property, regardless of the manner in which title
to any such property may be held.
15.11 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, provided that each such counterpart
shall be executed by the General Partner.
15.12 Merger. The Partnership may merge with, or consolidate into,
another business entity (as defined in Section 17-211(a) of the Partnership
Act) upon the approval by the General Partner, the Advisory Committee and
eighty percent (80%) in Interest of the Class A Limited Partners. The
Partnership shall not be a party to any merger or consolidation pursuant to
which any Limited Partner would be required to take any voting securities
which would cause such Limited Partner to violate any law, regulation or other
requirement of any governmental body applicable to such Limited Partner.
15.13 Exculpation of Certain Partners. In the case of any Limited
Partner that itself is a limited partnership, the Partnership and the Partners
shall have full recourse to the assets of such Limited Partner for any and all
obligations, liabilities, debts, agreements, covenants, representations and/or
warranties of such Limited Partner to or with the Partnership and/or the
Partners, but the Partnership and the Partners shall not have recourse to any
general or limited partners of such Limited Partner.
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<PAGE> 91
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
GENERAL PARTNER:
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By:/s/ JAMES C. VAUGHN
--------------------------
Name: James C. Vaughn
Title: President
WITHDRAWING LIMITED PARTNER:
/s/ JOHN S. KOO
------------------------------
John S. Koo
ACCEPTED AND AGREED TO AS
TO PARAGRAPHS 5.3.1 AND 7.2.1:
/s/ JAMES C. VAUGHN
- --------------------------------
James C. Vaughn
/s/ JOHN S. KOO
- --------------------------------
John S. Koo
87
<PAGE> 92
SCHEDULE A
AS OF August 11, 1995
<TABLE>
<CAPTION>
CLASS OF INTEREST
[INDICATING WHETHER
SPECIAL AND, IF SO,
NAME AND ADDRESS PERCENTAGE OF
OF PARTNER SPECIAL ALLOCATION] CAPITAL COMMITMENT
- ---------------- ------------------- ------------------
<S> <C> <C>
GENERAL PARTNER:
- ----------------
FVP GP, L.P. General Partnership $ 147,156
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
LIMITED PARTNERS:
- -----------------
J.P. Morgan Investment Special Class A - Attributable $3,400,000
Corporation [2% of Special Allocation]
101 California Street
Suite 3800
San Francisco, CA 94111
1818 II Cable Corp. Special Class A - Attributable $3,351,814
c/o Brown Brothers [2% of Special Allocation]
Harriman & Co.
59 Wall Street
New York, NY 10005
Olympus Cable Corp. Special Class A - Attributable $3,351,814
c/o Olympus Growth [2% of Special Allocation]
Fund II, L.P.
Metro Center
One Station Place
Stamford, CT 06920
First Union Capital Special Class A - Attributable $2,040,000
Partners, Inc. [1.2% of Special Allocation]
One First Union Center
18th Floor
Charlotte, NC 28288
Eos Partners SBIC, L.P. Class A - Non Attributable $ 408,000
520 Madison Avenue
New York, NY 10022
</TABLE>
A-1
<PAGE> 93
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ------------------- ----------------- ------------------
<S> <C> <C>
Tahosa Investors Special Class A - $204,000
c/o Samuel J. Recht Non-Attributable
Quarles & Brady [0.08571% of Special
411 East Wisconsin Avenue Allocation]
Milwaukee, WI 53202-4497(1)
Kensington Investment Special Class A - $136,000
Associates Non-Attributable
575 Madison Avenue [0.05714% of Special
Suite 1006 Allocation]
New York, NY 10022(1)
Pegasus Partners Special Class A - $204,000
c/o Arnold D. Friedman Non-Attributable
27 Hidden Valley Drive [0.08571% of Special
Suffern, NY 10901(1) Allocation]
Prosperity Associates Special Class A - $ 34,000
c/o Philippe L. Sommer Non-Attributable
1165 Park Avenue [0.01429% of Special
Apartment 15C Allocation]
New York, NY 10128(1)
SBF Investments Ltd. Special Class A - $136,000
c/o Dennis Good Non-Attributable
7800 Stemmons Freeway [0.05714% of Special
10th Floor Allocation]
Dallas, TX 75247(1)
L. Philips Runyon III Special Class A - $136,000
Runyon & Howard, P.A. Non-Attributable
69 Main Street [0.05714% of Special
Peterborough, NH 03458(1) Allocation]
Roth Trading Company Special Class A - $ 68,000
101 Park Avenue Non-Attributable
Suite 1800 [0.02857% of Special
New York, NY 10178(1) Allocation]
Washington Partners Special Class A - $ 34,000
39 Plumb Hill Road Non-Attributable
Washington, CN 06793(1) [0.01429% of Special
Allocation]
</TABLE>
- ----------------
(1) With copies to:
R.E. Loewenberg
Capital Management Corporation
450 Park Avenue
New York, New York 10022
A-2
<PAGE> 94
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- -------------------
<S> <C> <C>
Duff Ackerman Goodrich - Special Class A - Attributable $ 58,384
FrontierVision, L.P. [0.4% of Special Allocation]
c/o John M. Duff, Jr.
Two Embarcadero Center
Suite 2930
San Francisco, CA 94111
Richard King Mellon Class A - Non-Attributable $544,000
Foundation
c/o Arthur Miltenberger
Richard K. Mellon & Sons
P.O. Box RKM
Ligonier, PA 15658
Mellon Family Investment Class A - Non-Attributable $136,000
Co., IV
c/o Arthur Miltenberger
Richard K. Mellon & Sons
P.O. Box RKM
Ligonier, PA 15658
J. Cashew Corporation Class A - Non-Attributable $ 54,400
c/o George Dirkes, Esq.
Bancroft & McAlister
601 Montgomery Street
Suite 900
San Francisco, CA 94111
Bertelsen Family Trust Class A - Non-Attributable $ 34,000
Thomas E. Bertelsen, Jr.
201 California Street
2nd Floor
San Francisco, CA 94111
John C. Unkovic, Esq. Class A - Non-Attributable $ 34,000
Reed Smith Shaw & McClay
P.O. Box 2009
Pittsburgh, PA 15230
Roger S. Ahlbrandt Clas A - Non-Attributable $ 13,600
Dean, School of Business
Administration
Portland State University
P.O. Box 751
Portland, OR 97207-0751
</TABLE>
A-3
<PAGE> 95
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Dr. Anne McBride Curtis Class A - Non-Attributable $ 13,600
28 Loyal Lodge
Guilford, CT 06437
Bruce D. Evans, Esq. Class A - Non-Attributable $ 13,600
Reed Smith Shaw & McClay
P.O. Box 2009
Pittsburgh, PA 15219
Frances C. Hardie Class A - Non-Attributable $ 10,200
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
Hardie Brothers Class A - Non-Attributable $ 13,600
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
James H. Hardie Class A - Non-Attributable $ 3,400
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
John D. Margolis Trust Class A - Non-Attributable $ 13,600
(dated 9/16/92)
John D. Margolis
900 Greenwood Street
Evanston, IL 60201
Grover Sams Class A - Non-Attributable $ 13,600
505 Cypress Pt. Drive
#293
Mountain View, CA 94043
Augustus O. Schroeder Class A - Non-Attributable $ 13,600
764 Fairview Road
Pittsburgh, PA 15238
Justin J. Stevenson, Class A - Non-Attributable $ 13,600
III, Esq.
Shearman & Sterling
153 East 53rd Street
New York, NY 10022
John W. Weiser, Esq. Class A - Non-Attributable $ 13,600
Bechtel Group Inc.
50 Beale Street
San Francisco, CA 94105
</TABLE>
A-4
<PAGE> 96
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Mallard Investments Class A Non-Attributable $ 68,000
Limited Partnership
c/o Tim Wulinger
20 Basswood Lane
Moreland Hills, Ohio 44022
</TABLE>
A-5
<PAGE> 97
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
J.P. Morgan Investment Corp.
-------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ John W. Watkins
---------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn John W. Watkins
--------------------------- -------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Vice President
-------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 98
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
1818 II Cable Corp.
------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Lawrence C. Tucker
--------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Lawrence C. Tucker
--------------------------- ------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 President
------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 99
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Olympus Cable Corp. .
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ James A. Conroy
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn James A. Conroy
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 President
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 100
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
First Union Capital Partners, Inc.
-------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ L. Watts Hamrick III
---------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn L. Watts Hamrick III
--------------------------- -------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Senior Vice President
-------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 101
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Eos Partners SBIC, L.P.
------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Marc Michel
--------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Marc Michel
--------------------------- ------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner of General Partner
------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 102
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Tahosa Investors
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Samuel J. Recht
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Samuel J. Recht
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Trustee and Attorney in Fact
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 103
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Kensington Investment Associates
-----------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Charles I. Petschek
-------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Charles I. Petschek
--------------------------- -----------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
-----------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 104
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Pegasus Partners
----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Arnold D. Friedman
------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Arnold D. Friedman
--------------------------- ----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
Secretary of Jupiter
August 11, 1995 Holding Corporation, Partner
----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 105
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Prosperity Associates
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Philippe L. Sommer
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Philippe L. Sommer
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Trustee
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 106
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
SBF Investments, Ltd.
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Sara B. Feldman
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Sara B. Feldman
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 107
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Washington Partners
------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Walter C. Bladstrom
--------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Walter C. Bladstrom
--------------------------- ------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 108
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Roth Trading Company
--------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Daniel A. Picard
----------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Daniel A. Picard
--------------------------- --------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
--------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 109
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
L. Phillips Runyon III
--------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ L. Phillips Runyon III
----------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn L. Phillips Runyon III
--------------------------- --------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Nominee
--------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 110
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Duff Ackerman Goodrich -
FrontierVision, L.P.
-------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION: By: Duff Ackerman Goodrich & Associates, L.P.
Its: General Partner
FVP GP, L.P. By: /s/ R. Thomas Goodrich
---------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn R. Thomas Goodrich
--------------------------- -------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
-------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 111
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Richard King Mellon Foundation
----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Arthur D. Miltenberger
------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Arthur D. Miltenberger
--------------------------- ----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Treasurer
----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 112
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Mellon Family Investment Company, I[nc.]
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Arthur D. Miltenberger
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Arthur D. Miltenberger
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 113
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
J Cashew Corporation
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ George R. Dirkes
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn George R. Dirkes
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Assistant Secretary
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 114
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Bertelsen Family Trust
-------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION: Dated 12-2-[??]
FVP GP, L.P. By: /s/ Thomas E. Bertelsen, Jr.
---------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Thomas E. Bertelsen, Jr.
--------------------------- -------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Trustee
-------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 115
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
John Unkovic
---------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ John Unkovic
-----------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- ---------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
---------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 116
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Roger Ahlbrandt
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Roger Ahlbrandt
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 117
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Anne McB. Curtis
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Anne McB. Curtis
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 118
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Bruce D. Evans
-------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Bruce D. Evans
---------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- -------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 119
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Frances C. Hardie
------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Frances C. Hardie
--------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- ------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 120
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Hardie Brothers Company
---------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ James H. Hardie
-----------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn James H. Hardie
--------------------------- ---------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 General Partner
---------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 121
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
James H. Hardie
------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ James H. Hardie
--------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- ------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 122
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
John D. Margolis Trust
-------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION: Dated 9/16/[9?]
FVP GP, L.P. By: /s/ John D. Margolis
---------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn John D. Margolis
--------------------------- -------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 Trustee
-------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 123
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Grover Sams
---------------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Grover Sams
-----------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- ---------------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
---------------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 124
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Augustus O. Schroeder
--------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Augustus O. Schroeder
----------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn
--------------------------- --------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 125
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Justin J. Stevenson, III, Esq.
----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ Justin J. Stevenson, III, Esq.
------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Justin J. Stevenson, III, Esq.
--------------------------- ----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 126
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
John W. Weiser
-----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION:
FVP GP, L.P. By: /s/ John W. Weiser
-------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By:
---------------------------------- -----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995
-----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 127
FRONTIERVISION PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
SIGNATURE PAGE
WHEREAS, FRONTIERVISION PARTNERS, L.P. (the "Partnership") is a
Delaware limited partnership to be governed by and operated pursuant to the
terms and provisions of a First Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement");
WHEREAS, FVP GP, L.P., a Delaware limited partnership, is the
general partner of the Partnership (the "General Partner");
WHEREAS, the undersigned desires to be admitted as a Limited
Partner of the Partnership effective as of the date specified by the General
Partner in the space below (the "Admission Date");
WHEREAS, the General Partner hereby consents to the admission of
the undersigned as a Limited Partner of the Partnership effective as of the
Admission Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. By execution of this Signature Page, the undersigned has
executed, and shall be and become a party to, the Partnership Agreement,
effective as of the Admission Date.
2. The undersigned is hereby admitted as a Limited Partner of the
Partnership, effective as of the Admission Date.
3. From and after the Admission Date, the undersigned hereby
joins in, and agrees to be bound by each and every term and provision of, the
Partnership Agreement.
IN WITNESS WHEREOF, the undersigned and the General Partner have
executed this Signature Page as of the Admission Date.
<TABLE>
<S> <C>
Mallard Investments Limited Partnership
----------------------------------------------
PRINT NAME OF LIMITED PARTNER
CONSENT TO ADMISSION: By: Mallard Investments, Inc., General Partner
FVP GP, L.P. By: /s/ Timothy F. Wuliger
------------------------------------------
By: FrontierVision, Inc. SIGNATURE OF LIMITED PARTNER
OR AUTHORIZED SIGNATORY
By: /s/ James C. Vaughn Timothy F. Wuliger
--------------------------- ----------------------------------------------
Name: PRINT NAME OF AUTHORIZED
Title: SIGNATORY
ADMISSION DATE:
August 11, 1995 President
----------------------------------------------
TITLE OF AUTHORIZED SIGNATORY
</TABLE>
<PAGE> 128
AMENDMENT NO. 1
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS, L.P.
DATED AS OF AUGUST 11, 1995
----------------------------------------------------
This Amendment No. 1 to the First Amended and Restated
Agreement of Limited Partnership of FrontierVision Partners, L.P., dated as of
August 11, 1995 (the "Agreement"), is dated as of October 31, 1995.
The Agreement is hereby amended as follows:
1. A new paragraph 3.11 is hereby added, to read in its
entirety as set forth on Exhibit A hereto.
2. Schedule A to the Agreement is hereby amended to read
in its entirety as set forth in the Schedule A attached hereto.
Except as expressly amended hereby, the Agreement is, and
shall remain, in full force and effect.
<PAGE> 129
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 1 as of the 31st day of October, 1995.
GENERAL PARTNER:
---------------
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By:/s/ JAMES C. VAUGHN
---------------------------
James C. Vaughn,
President
LIMITED PARTNERS:
----------------
All Limited Partners by the General
Partner pursuant to the Power of
Attorney granted by paragraph 12.1
of the Agreement.
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By:/s/ JAMES C. VAUGHN
---------------------------
James C. Vaughn,
President
<PAGE> 130
Amendment No. 2
to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
dated As of August 11, 1995
This Amendment No. 2 to the First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P. dated as of August 11,
1995, as amended by Amendment No. 1 dated as of October 31, 1995 (the
"Agreement"), is dated as of the date set forth below.
Section 2.5 of the Agreement is hereby amended to read in its entirety
as follows:
"2.5 Term. The term of the Partnership commenced on
April 17, 1995, and shall continue in full force and effect
until December 31, 2005, which period (i) may be extended by
the General Partner to a date not later than June 30, 2007 if
the General Partner determines that such extension is in the
best interest of the Partnership and the Advisory Committee
approves such extension and (ii) shall be extended by the
General Partner to whatever date (but not later than June 30,
2007) the Advisory Committee requests, in each case not later
than thirty (30) days prior to the last day of the term, as
then extended, or until dissolution prior thereto pursuant to
the provisions hereof."
Except as expressly amended hereby, the Agreement is, and shall
remain, in full force and effect.
<PAGE> 131
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
in multiple counterparts as of the _____ day of March, 1996.
GENERAL PARTNER:
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
---------------------------
James C. Vaughn,
President
LIMITED PARTNERS:
All Limited PaRtners (other
than those whose signatures appear on
the signature pages hereof) by the
General Partner pursuant to the Power
of Attorney granted by paragraph 12.1
of the Agreement.
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
---------------------------
James C. Vaughn,
President
<PAGE> 132
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ L. Watts Hamrick III
-----------------------------------
Title: Senior Vice President
<PAGE> 133
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
1818 II CABLE CORP.
By: /s/ [ILLEGIBLE]
---------------------------------
Title:
<PAGE> 134
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
OLYMPUS CABLE CORP.
By: /s/. James A. Conroy
-----------------------------------
Title: President
<PAGE> 135
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
J.P. MORGAN INVESTMENT CORP.
By: /s/ John W. Watkins
-----------------------------------
Title:
<PAGE> 136
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
EOS PARTNERS SBIC, L.P.
By: /s/ Marc Michel
-----------------------------------
General Partner of General Partner
<PAGE> 137
[Signature page to Amendment No. 2 to First Amended and
Restated Agreement of Limited Partnership]
DUFF ACKERMAN GOODRICH -
FRONTIERVISION, L.P.
By Duff Ackerman Goodrich & Associates, L.P.
Its General Partner
By: /s/ R. Thomas Goodrich
-----------------------------------------
Title: General Partner
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF LIMITED PARTNERSHIP
OF
FRONTIERVISION PARTNERS, L.P.
This Certificate of Limited Partnership of FrontierVision
Partners, L.P. (the "Partnership") is being duly executed and filed by the
undersigned, as President of FrontierVision Inc., the general partner of FVP
GP, L.P., to form a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (6 Del. C. sections 17-101 et seq.).
1. The name of the limited partnership formed hereby is
FrontierVision Partners, L.P.
2. The address of the registered office of the Partnership in the
State of Delaware is at c/o The Prentice Hall Corporation System, Inc.,
32 Loockerman Square, Suite L-100, Kent County, Dover Delaware 19904, and the
name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Prentice-Hall Corporation System,
Inc., 32 Loockerman Square, Suite L-100, Kent County, Dover Delaware, 19904.
3. The name and mailing address of the general partner
of the Partnership are:
FVP GP, L.P.
2337 South Cook Street
Denver, Colorado 80210
GENERAL PARTNER:
FVP GP, L.P.
By: FrontierVision Inc., Its sole general
partner
By: /s/ James C. Vaughn
--------------------------------------
Name: James C. Vaughn
Title: President
<PAGE> 1
EXHIBIT 3.5
FVP GP, L.P.
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
THE LIMITED PARTNERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR UNDER THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. SUCH
LIMITED PARTNERSHIP INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT AND THE APPLICABLE STATE OR FOREIGN SECURITIES LAWS, PURSUANT TO
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM. IN ADDITION, TRANSFER OR OTHER
DISPOSITION OF SUCH LIMITED PARTNERSHIP INTERESTS IS FURTHER RESTRICTED AS
PROVIDED IN THIS AGREEMENT. PURCHASERS OF LIMITED PARTNERSHIP INTERESTS SHOULD
BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THEIR
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Formation and Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Place of Business and Office; Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Qualification in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III Partners and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Partnership Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Liability of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Default in Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Nonconforming Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8 Conversion of Certain Limited Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.10 Fund Investors; Special Purpose Corporations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.11 Deferral of Capital Commitment Payments; Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV Distributions; Allocation of Profits and
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1 Distributions -- General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Division of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4 Capital Accounts and Adjusted Capital Accounts; Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5 Tax Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V Rights and Duties of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.2 Duties and Obligations of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3 Other Businesses of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.4 Authority of Partners to Deal with Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.5 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.6 Exculpation and Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
[Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VII Transferability of General Partner's Interest . . . . . . . . . . . . . . . . . . . . . . .. . . 42
7.1 Assignment of the General Partner's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 42
7.2 Removal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 42
7.3 Liability of Person Ceasing to be General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 44
ARTICLE VIII Transferability of Limited Partnership Interests . . . . . . . . . . . . . . . . . . . . . .. . . 45
8.1 Restrictions on Transfers of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 45
8.2 Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 48
8.3 Substituted Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 49
8.4 Incapacity of a Limited Partner; Transfer Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 50
8.5 Transfers During a Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 51
ARTICLE IX Dissolution, Liquidation and Termination of the Partnership . . . . . . . . . . . . . . . .. . . 51
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 51
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 52
ARTICLE X Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 54
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 54
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 55
ARTICLE XI Consents, Voting and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 56
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 56
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 56
11.3 Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 56
11.4 Submissions to Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 56
ARTICLE XII Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 57
12.1 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 57
ARTICLE XIII Records and Accounting; Reports; Fiscal Affairs . . . . . . . . . . . . . . . . . . . . . .. . . 58
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 58
13.2 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 59
13.3 Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 59
13.4 Interim Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 59
13.5 Partnership Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 59
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE XIV Representations, Warranties and Covenants of
the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.1 Representations, Warranties and Covenants of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.2 Representations, Warranties and Covenants of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.3 Representations, Warranties and Covenants of All
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.3 JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.6 Binding Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.8 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.10 No Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
15.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
15.12 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
15.13 Exculpation of Certain Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
iii
<PAGE> 5
FVP GP, L.P.
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF FVP GP, L.P., dated as of August __, 1995, among FrontierVision
Inc., a Delaware corporation, as General Partner, and John S. Koo and each
additional party that shall be admitted as a limited partner, as Limited
Partners.
W I T N E S S E T H:
FrontierVision Inc., as general partner of the
Partnership, and Allan H. Cohen, as a limited partner, entered into an
agreement of limited partnership dated as of April 14, 1995 and formed a
limited partnership under the laws of the State of Delaware under the name FVP
GP, L.P. John S. Koo was subsequently admitted as a limited partner of the
Partnership and, immediately thereafter, Allan H. Cohen withdrew as a limited
partner of the Partnership.
The parties now wish (i) to amend and restate as
hereinafter set forth the original agreement of limited partnership; (ii) to
admit additional Limited Partners to the Partnership; and (iii) to continue the
business of the Partnership.
In consideration of the mutual covenants and
agreements herein made and intending to be legally bound, the parties hereby
agree as follows:
ARTICLE I
Defined Terms
The following defined terms used in this Agreement
shall, unless the context otherwise requires, have the meanings specified in
this Article I.
"Adjusted Capital Account" shall mean, with respect
to any Partner, the balance in such Partner's Capital Account as of the end of
the relevant Fiscal Year or period, adjusted as follows:
(i) Credit to such Capital Account the sum of (x)
any amount which such Partner is obligated or has agreed to
contribute (but has not yet contributed) to the Partnership
and (y) the amount which such Partner is deemed to be
obligated to restore pursuant to the penultimate sentence of
<PAGE> 6
Treas. Reg. Section 1.704-2(g)(1) and the penultimate sentence
of Treas. Reg. Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in subclauses (4), (5) and (6) of Treas. Reg.
Section 1.704- 1(b)(2)(ii)(d).
"Affiliate" of, or a Person "Affiliated" with, a
specified Person, shall mean a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
"Agreement" shall mean this First Amended and
Restated Agreement of Limited Partnership, as originally executed and as
amended, modified, supplemented or restated from time to time, as the context
requires.
"Alien" shall mean a foreign government or its
representative.
"Attributable Limited Partner" shall mean any Limited
Partner that is not a Non-Attributable Limited Partner.
"Attributable Person" shall have the meaning
specified in paragraph 14.3.1.
"Bankruptcy" shall mean, with respect to a Person,
(i) that such Person has (A) made an assignment for the benefit of creditors;
(B) filed a voluntary petition in bankruptcy; (C) been adjudged bankrupt or
insolvent, or had entered against such Person an order of relief in any
bankruptcy or insolvency proceeding; (D) filed a petition or an answer seeking
for such Person any reorganization, arrangement, composition, readjust ment,
liquidation, dissolution or similar relief under any statute, law or regulation
or filed an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against such Person in any proceeding
of such nature; or (E) sought, consented to, or acquiesced in the appointment
of a trustee, receiver or liquidator of such Person or of all or any
substantial part of such Person's properties; (ii) 90 days have elapsed after
the commencement of any proceed ing against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation and such proceeding has not been
dismissed; or (iii) 60 days have elapsed since the appointment without such
Person's consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any substantial part of such Person's properties and such
appointment has not been vacated or stayed or the appointment is not vacated
within 60 days after the expiration of such stay.
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"Capital Account" shall mean the capital account of
each Partner as determined and maintained by the Partnership in accordance with
paragraph 4.4 hereof.
"Capital Call Expiration Date" shall have the meaning
specified in paragraph 3.3.1(b).
"Capital Commitment" of a Partner shall mean the
amount set forth under the caption "Capital Commitment" opposite the name of
such Partner on Schedule A, as it may be amended from time to time pursuant to
paragraph 10.1.2, but shall be reduced by the amount, if any, of such Partner's
Unused Capital Commitment after the Capital Call Expiration Date.
"Capital Contributions" of a Partner shall mean the
total amount of contributions such Partner has made to the Partnership pursuant
to paragraph 3.3.1 as of the date in question.
"Class X Limited Partner" shall mean any Partner
holding a Class X Limited Partnership Interest.
"Class X Limited Partnership Interest" shall mean,
with respect to any Partner, the Interest of a Limited Partner designated as a
Class X Limited Partnership Interest on Schedule A hereto.
"Class Y Limited Partner" shall mean any Partner
holding a Class Y Limited Partnership Interest.
"Class Y Limited Partnership Interest" shall mean,
with respect to any Partner, the Interest of a Limited Partner designated as a
Class Y Limited Partnership Interest on Schedule A hereto.
"Class Z Limited Partner" shall mean any Partner
holding a Class Z Limited Partnership Interest.
"Class Z Limited Partnership Interest" shall mean,
with respect to any Partner, the Interest of a Limited Partner designated as a
Class Z Limited Partnership Interest on Schedule A hereto.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor federal income tax code.
"Communications Act" means the Communications Act of
1934, as amended from time to time.
"Consent" shall mean the approval of a Person, given
as provided in paragraph 11.1, to do the act or thing for which the approval is
solicited, or the act of granting such approval, as the context may require.
Reference to the Consent of a majority
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or specified percentage in Interest of the Limited Partners or of a class or
classes of Limited Partners shall mean, except as set forth in paragraphs 3.2.4
and 3.6, the Consent of Limited Partners entitled to approve the act or thing
for which approval is solicited in accordance with the terms of this Agreement
whose aggregate Capital Contributions represent more than fifty percent (50%)
or not less than the specified percentage, as the case may be, of the aggregate
Capital Contributions of all such Limited Partners.
"Defaulting Partner" shall have the meaning specified
in paragraph 3.6.1.
"Disposition" of an Investment shall mean the sale,
exchange, or other disposition by FrontierVision of all or any portion of that
Investment, and shall include the receipt by FrontierVision of a liquidating
dividend or other like distribution (including such a distribution resulting
from a refinancing).
"Disposition Proceeds" shall mean the proceeds
realized from any Disposition less all expenses related thereto as determined
in accordance with generally accepted accounting principles consistently
applied.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Partner" shall mean any Limited Partner that
is an employee benefit plan subject to ERISA, a "benefit plan investor" within
the meaning of the Plan Asset Regulations or a Governmental Plan.
"Excess Capital Account" shall mean, with respect to
a Partner, the excess, if any, of (i) the positive balance of such Partner's
Adjusted Capital Account over (ii) such Partner's Unrecouped Capital
Contributions.
"FCC" means the Federal Communications Commission (or
any successor thereto).
"FCC Regulatory Issue" shall mean any event,
occurrence or circumstance that would cause the Partnership, FrontierVision
and/or any Operating Entity to be in violation of the Communications Act or the
rules or regulations promulgated thereunder (with or without an actual finding
thereof by the FCC).
"Fiscal Year" shall mean the calendar year or, in the
case of the first and the last fiscal years, the fraction thereof commencing on
the date on which the Partnership is formed under the Partnership Act or ending
on the date on which the winding up of the Partnership is completed, as the
case may be.
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"FrontierVision" shall mean FrontierVision Partners,
L.P., a Delaware limited partnership.
"FrontierVision Advisory Committee" shall mean that
committee selected, and performing the functions, as provided in Article VI of
the FrontierVision Partnership Agreement.
"FrontierVision Inc." shall mean FrontierVision Inc.,
a Delaware corporation.
"FrontierVision Partnership Agreement" shall mean the
First Amended and Restated Agreement of Limited Partner of FrontierVision, as
originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
"FrontierVision Purchase Agreement" shall mean the
Limited Partnership Interest and Notes Purchase Agreement dated as of July 28,
1995 by and between FrontierVision, the Partnership and the Class A and Class B
Limited Partners of FrontierVision.
"Fund Investor" shall have the meaning specified in
paragraph 3.10.
"General Partner" shall mean FrontierVision Inc.,
and/or any other Person which becomes a successor or additional general partner
of the Partnership as provided herein, in such Person's capacity as a general
partner of the Partnership.
"Governmental Plan" shall mean a "governmental plan"
within the meaning of Section 3(32) of ERISA.
"GP Principal" shall mean any general partner of the
Partnership, and any shareholder of a corporation that is a general partner of
the Partnership, and shall include James C. Vaughn and John S. Koo.
"GP Special Allocation Percentage" shall have the
meaning specified in paragraph 4.2.2(a) of the FrontierVision Partnership
Agreement.
"Incapacity" shall mean, as to any Person, (i) the
adjudication of incompetence or insanity of such Person, or the Bankruptcy of
such Person, or (ii) the death, dissolution or termination (other than by
merger or consolidation), as the case may be, of such Person.
"Indemnitee" shall have the meaning specified in
paragraph 5.6.1.
"Interest" shall mean the entire interest(s) of a
Partner in the Partnership at any particular time, including the
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right of such Partner to any and all benefits to which a Partner may be
entitled as provided in this Agreement, together with the obligations of such
Partner to comply with all the terms and provisions of this Agreement.
"Investment" shall have the meaning specified in
paragraph 2.4 of the FrontierVision Partnership Agreement.
"JPMIC" shall mean J.P. Morgan Investment
Corporation, a Delaware corporation.
"Junior Subordinated Notes" shall have the meaning
specified in the FrontierVision Purchase Agreement.
"Koo Employment Agreement" shall mean the employment
agreement, dated as of April 17, 1995, by and between the Partnership and John
S. Koo, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
"Koo Termination Event" shall have the meaning
specified in paragraph 4.2.2(d) of the FrontierVision Partnership Agreement.
"Limited Partner" shall mean any Person that is a
limited partner of the Partnership at the time of reference thereto, in such
Person's capacity as a limited partner of the Partnership.
"Limited Partnership Interests" shall mean,
collectively, the Class X Limited Partnership Interests, the Class Y Limited
Partnership Interests and the Class Z Limited Partnership Interests.
"Liquidating Trustee" shall mean the General Partner
or, if there is none, a Person selected by a majority in Interest of the
Attributable Class X Limited Partners, to act as a liquidating trustee as
provided in paragraph 9.2.1.
"Net Profits" and "Net Losses" for any Fiscal Year or
other period shall mean, respectively, an amount equal to the Partnership's
income or loss for such Fiscal Year or period, as computed for federal income
tax purposes with the following adjustments:
(i) Any income of the Partnership which is exempt
from federal income tax shall increase such taxable income or
shall reduce such loss;
(ii) Any expenditures of the Partnership which are
described in Code Section 705(a)(2)(B), or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Treas. Reg.
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Section 1.704-1(b)(2)(iv)(h)(i)(1), shall reduce such taxable
income or shall increase such loss;
(iii) Any item which is specially allocated
pursuant to paragraphs 4.4.4 or 4.4.5 hereof shall not be
taken into account in computing such income or loss;
(iv) For purposes of computing gain or loss
(whether realized by reason of a sale or distribution) and
depreciation and amortization, the basis of any property shall
be equal to the amount shown on the Partnership's books; and
(v) Any deemed gain or deemed loss for book
purposes resulting from the distribution of appreciated or
depreciated property, or the adjustment of the value of such
property on the Partnership's books, shall be taken into
account in computing such income or loss.
"Non-Attributable Limited Partner" shall have the
meaning specified in paragraph 3.2.4.
"Nonconforming Partner" shall have the meaning
specified in paragraph 3.7.
"Nonrecourse Deductions" shall have the meaning set
forth in Treas. Reg. Section 1.704-2(b).
"Operating Entity" shall mean any partnership,
limited liability company, corporation or other entity formed or controlled,
directly or indirectly, by FrontierVision to carry out the purposes of the
FrontierVision as set forth in paragraph 2.4. of the FrontierVision Partnership
Agreement.
"Partner" shall mean the General Partner or any of
the Limited Partners and "Partners" shall mean the General Partner and all of
the Limited Partners.
"Partner Nonrecourse Deduction" shall have the
meaning set forth in Treas. Reg. Section 1.704-2(i).
"Partner Nonrecourse Loan" shall mean a loan made to,
or credit arrangement for the benefit of, the Partnership by a Partner or by a
person related to a Partner (as defined in Treas. Reg. Section 1.752-4(b))
which by its terms exculpates the Partners from personal liability on the debt,
but under which such Partner or related person bears the ultimate economic risk
of loss within the meaning of Treas. Reg. Section 1.752-2.
"Partnership" shall mean the limited partnership
governed hereby, as such limited partnership may from time to time be
constituted.
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"Partnership Act" shall mean the Delaware Revised
Uniform Limited Partnership Act, 6 Del. C. Section 17-101, et seq., as amended
from time to time, and any successor to said Act.
"Partnership Minimum Gain" shall have the meaning set
forth in Treas. Reg. Section 1.704-2(d).
"Person" shall mean any individual, partnership
(general or limited), corporation, unincorporated organization or association,
limited liability company, trust or other entity.
"Regulation Y Limited Partner" shall have the meaning
specified in paragraph 3.8.6.
"Regulatory Disability" shall have the meaning
specified in paragraph 3.6.6.
"Repurchase Amount" shall have the meaning specified
in paragraph 3.9.4.
"Repurchase Payments" shall have the meaning
specified in paragraph 3.9.3(e).
"Required Transfer Date" shall have the meaning
specified in paragraph 8.4.1.
"Senior Subordinated Notes" shall have the meaning
specified in the FrontierVision Purchase Agreement.
"SPC" shall have the meaning specified in paragraph
3.10.
"Special Distribution" shall have the meaning
specified in paragraph 4.2.2(a).
"Substituted Limited Partner" shall mean any Person
admitted to the Partnership as a Limited Partner pursuant to the provisions of
paragraph 8.3.
"Tax Advances" shall have the meaning specified in
paragraph 4.5.
"Transfer" shall have the meaning specified in
paragraph 8.1.1.
"Treas. Reg." and "Regulations" shall mean the Income
Tax Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"Unrecouped Capital Contributions" shall mean, with
respect to a Partner, the amount of such Partner's Capital Commitment less the
cumulative amount of distributions made
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pursuant to paragraphs 4.2.1 and 9.2.4(ii) (but only to the extent in
accordance with paragraph 4.2.1) to such Partner.
"Unused Capital Commitments" shall have the meaning
specified in paragraph 3.3.2.
"UVC Closing" shall mean the closing of the
acquisition by FrontierVision of the cable television systems owned and
operated by United Video Cablevision, Inc. in the states of Maine and Ohio.
"Vaughn Employment Agreement" shall mean the
employment agreement, dated as of April 17, 1995, by and between the
Partnership and James C. Vaughn, as originally executed and as amended,
modified, supplemented or restated from time to time, as the context requires.
"Vaughn Expiration Date" shall have the meaning
specified in paragraph 7.2.1 of the FrontierVision Partnership Agreement.
"Vaughn Termination Event" shall have the meaning
specified in paragraph 4.2.2(c) of the FrontierVision Partnership Agreement.
ARTICLE II
Organization
2.1 Formation and Continuation. The parties have
formed and hereby continue the Partnership as a limited partnership pursuant to
the provisions of the Partnership Act. The rights and liabilities of the
Partners shall be as provided in the Partnership Act, except as herein
otherwise expressly provided.
2.2 Name. The name of the Partnership heretofore
formed and hereby continued is FVP GP, L.P. However, the business of the
Partnership may be conducted, upon compliance with all applicable laws, under
any other name designated in writing by the General Partner to the Limited
Partners, provided such name contains the words "limited partnership" or the
abbreviation "L.P."
2.3 Place of Business and Office; Registered Agent.
The Partnership shall maintain a registered office in the State of Delaware at
c/o The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite
L-100, Dover, Kent County, Delaware 19904. The Partnership shall maintain its
principal office at 1777 South Harrison Street, Suite P200, Denver, Colorado
80210. The General Partner may at any time change the location of the
Partnership's offices and may establish additional offices.
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Notice of any such change shall be given to the Limited Partners. The name and
address of the Partnership's registered agent for service of process on the
Partnership in the State of Delaware is The Prentice-Hall Corporation System,
Inc., 32 Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19904 or
such other agent as the General Partner may from time to time designate.
2.4 Purpose. The sole purpose of the Partnership is
to serve as general partner of FrontierVision, a Delaware limited partnership.
The Partnership may engage in any and all activities, and shall have the power
to do any and all acts, necessary, desirable or incidental to the
accomplishment of the foregoing. Without limiting the generality of the
foregoing, (i) the Partnership shall have any and all of the powers that may be
exercised by the General Partner on behalf of the Partnership pursuant to
Article V and (ii) the Partnership, and the General Partner on behalf of the
Partnership, may enter into and perform the FrontierVision Partnership
Agreement without any further act, vote or approval of any Partner.
2.5 Term. The term of the Partnership commenced on
April 17, 1995, and shall continue in full force and effect until June 30,
2002, which period shall be extended by the General Partner for up to two
additional one-year periods from such date to the extent required so that the
term of the Partnership ends no earlier than the term of FrontierVision, or
until dissolution prior thereto pursuant to the provisions hereof.
2.6 Qualification in Other Jurisdictions. The
General Partner shall cause the Partnership to be qualified or registered under
assumed or fictitious names or foreign limited partnership statutes or similar
laws in any jurisdiction in which the Partnership or FrontierVision owns
property or transacts business to the extent, in the reasonable judgment of the
General Partner, such qualification or registration is necessary or advisable
in order to protect the limited liability of the Limited Partners or to permit
the Partnership or FrontierVision lawfully to own property or transact
business. The General Partner shall have the power and authority to execute,
file and publish all such certificates, notices, statements or other
instruments, and any and all amendments thereto, necessary to permit the
Partnership to conduct business as a limited partnership in all jurisdictions
where the Partnership elects to do business.
ARTICLE III
Partners and Capital
3.1 General Partner.
3.1.1 The General Partner shall be FrontierVision
Inc. and/or any other Person which becomes a successor or additional
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General Partner as provided herein. The name(s), address(es) and Capital
Commitment(s) of the General Partner(s) are set forth in Schedule A hereto, as
amended from time to time. The Capital Commitment(s) of the General Partner(s)
shall at all times be an amount equal to not less than one percent (1%) of the
total Capital Commitments of all Partners, including the General Partner(s),
and shall be payable on the same terms as provided herein with respect to the
Class X and Class Z Limited Partners.
3.1.2 No General Partner, as such, shall be required
to lend any funds to the Partnership or to make any payment to the Partnership
with respect to its Capital Commitment that exceeds its Unused Capital
Commitment as of the date of the payment.
3.2 Limited Partners.
3.2.1 The names, addresses, class of Interests owned
and Capital Commitments of the Limited Partners are set forth in Schedule A
hereto, as the same may be amended from time to time in accordance with this
Agreement. On the date hereof, John S. Koo's Interest as a limited partner of
the Partnership is being redesignated as a Class Y Limited Partnership
Interest. On the date hereof, each other Person listed as a Limited Partner on
the Schedule A hereto which is dated as of the date hereof shall, upon the
execution and delivery by such Limited Partner of a counterpart of this
Agreement, be admitted to the Partnership as a Limited Partner.
3.2.2 Any Partner may lend money to, borrow money
from, act as surety, guarantor or endorser for, guarantee or assume one or more
specific obligations of, provide collateral for, and transact other business
with, the Partnership, and shall have the same rights and obligations with
respect thereto as a Person who is not a Partner. However, no Limited Partner
shall be required to lend any funds to the Partnership, except as provided in
paragraph 3.11, or to make any payment to the Partnership with respect to its
Capital Commitment that exceeds its Unused Capital Commitment as of the date of
the payment.
3.2.3 No Limited Partner shall participate in the
control of the business of the Partnership, and no Limited Partner shall have
any right or authority to act for or bind the Partnership.
3.2.4 Any Limited Partner may, upon notice to the
General Partner, elect to be, any Limited Partner may, pursuant to paragraph
3.7.3(a), be deemed to be, and any Limited Partner that is an Alien
automatically shall be, a "Non-Attributable Limited Partner", in which case,
such Limited Partner shall be subject to the restrictions set forth in this
paragraph 3.2.4. In addition to, and not in limitation of, the restrictions set
forth in paragraph 3.2.3, and notwithstanding anything in this
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Agreement or any other agreement between the Partnership and any of the
Partners to the contrary, no Non-Attributable Limited Partner shall have any
involvement in any material respect in the management or operation of any of
the Partnership's or FrontierVision's cable television enterprises. In
particular, but without limitation, no Non-Attributable Limited Partner shall:
(i) serve as a General Partner;
(ii) act as an employee, agent or independent
contractor of the Partnership or FrontierVision in any function or
capacity which directly or indirectly relates to the Partnership's or
FrontierVision's FCC regulated activities, or perform any service
materially related to such activities, other than as a lender or
surety;
(iii) communicate with the General Partner, the
Partnership or any FCC regulated entity in which the Partnership or
FrontierVision holds an interest on matters pertaining to the
day-to-day operations of any FCC regulated entity or be entitled to
vote on such matters;
(iv) vote on the admission of a new general
partner unless such vote is subject to veto by the existing General
Partner, if any (and in furtherance, and not in limitation, of the
foregoing, each Non-Attributable Limited Partner hereby agrees that it
shall not be a Limited Partner for purposes of a vote to select a new
general partner of the Partnership pursuant to Section 17-801(3) of
the Partnership Act); or
(v) vote to remove the General Partner unless the
General Partner is (A) subject to bankruptcy proceedings as described
in Section 17-402(a)(4)-(5) of the Partnership Act; (B) adjudicated
incompetent by a court of competent jurisdiction; or (C) found by a
neutral arbiter to have engaged in malfeasance, criminal conduct or
wanton or willful neglect.
The foregoing restrictions apply to the constituent Persons (e.g., directors,
officers, partners) of any Non-Attributable Limited Partner that is not a
natural person. The foregoing provisions of this paragraph 3.2.4 are intended
to assure adequate insulation for purposes of the attribution rules of the FCC
as described in the FCC's Attribution Reconsideration Order, 58 R.R.2d 604
(1985), and Further Attribution Reconsideration Order, 1 FCC Rcd 802 (1986),
and shall be interpreted and applied in a manner consistent with this purpose.
Except as set forth in this paragraph 3.2.4, or otherwise expressly provided in
this Agreement, an Interest held by a Non-Attributable Limited Partner shall be
identical in all respects to other Limited Partnership Interests of the same
class. Any election made by a Limited
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Partner to be treated as a Non-Attributable Limited Partner shall be revocable
only with the Consent of the General Partner.
3.2.5 Unless admitted to the Partnership as a General Partner
or a Limited Partner, as provided in this Agreement, no Person shall be
considered a Partner. The Partnership and the General Partner need deal only
with Persons so admitted as Partners. Any distribution by the Partnership to
the Person shown on the Partnership records as a Partner or to its legal
representatives, or to the assignee of the right to receive Partnership
distributions as provided herein, shall relieve the Partnership and the General
Partner of all liability to any other Person who may be interested in such
distribution by reason of any other assignment by the Partner or by reason of
the Partner's Incapacity, or for any other reason.
3.2.6 The General Partner or any Affiliate of the General
Partner may also be a Limited Partner, upon acquiring the Interest of a Limited
Partner or otherwise.
3.3 Partnership Capital.
3.3.1 (a) Subject to paragraph 3.11 in the case of Class Y
Limited Partners, each Partner shall make payments from time to time with
respect to its Capital Commitment, on the date specified in a written notice
given by the General Partner, which date shall be not less than twenty (20)
days after such notice has been given. If such notice relates to a required
capital contribution or loan by the Partnership to FrontierVision, then such
notice shall be given to the Partners at the same time notice is given by the
Partnership to the limited partners of FrontierVision. Each such notice shall
state the amount being requested from the Partner to whom such notice is given
and the total amount being requested from all Partners. The Partnership may
use up to two percent (2%) of the aggregate Capital Commitments to pay
partnership expenses in accordance with paragraph 5.5.1, provided that at least
ninety-eight percent (98%) of the aggregate Capital Commitments have been used
or are available for use by the Partnership to make its required capital
contributions and loans to FrontierVision. No Partner, as such, shall be
required to make any payment with respect to its Capital Commitment that (i)
exceeds such Partner's Unused Capital Commitment at the time of payment or (ii)
relates to a capital call made subsequent to the Capital Call Expiration Date.
The aggregate payments required to be made by the Partners pursuant to this
paragraph 3.3.1(a) shall be called by the General Partner and, subject to
paragraph 3.11, shall be paid by the Partners in proportion to their respective
Unused Capital Commitments.
(b) No such notice of a capital call pursuant to
paragraph (a) above may be given after June 30, 1997; provided, however, that
such date shall be extended if and to the extent the corresponding provision in
paragraph 3.3.1(b) of the
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FrontierVision Partnership Agreement, or Section 1.7(b) of the FrontierVision
Purchase Agreement, is extended. (Such expiration date, as extended, is herein
referred to as the "Capital Call Expiration Date".)
3.3.2 The "Unused Capital Commitment" of a Partner as of a
date means the amount of such Partner's Capital Commitment reduced by the
amount of all Capital Contributions made by that Partner pursuant to paragraph
3.3.1 as of that date.
3.3.3 No Partner shall be paid interest on any Capital
Contribution to the Partnership or on such Partner's Capital Account.
3.3.4 No Partner shall have any right to demand the return of
its Capital Contributions, other than upon dissolution of the Partnership
pursuant to Article IX.
3.3.5 No Partner shall have the right to demand or receive
property other than cash in return for its Capital Contributions.
3.4 [Intentionally Omitted].
3.5 Liability of Partners.
3.5.1 In no event shall any Limited Partner (or former
Limited Partner) have any liability for the repayment or discharge of the debts
and obligations of the Partnership (although its share of any undistributed
assets and profits of the Partnership shall be available for such repayment or
discharge and the Class Y Limited Partners shall have the obligations as
guarantors set forth in paragraph 3.11) or, subject to paragraph 3.5.2, be
obligated to make any contribution to the Partnership in addition to its Unused
Capital Commitment; provided, however, that such Limited Partner shall be
liable to the Partnership for its Unused Capital Commitment to the extent a
call for a payment is made in accordance with paragraph 3.3.1.
3.5.2 In accordance with the Partnership Act, a limited
partner of a partnership may, under certain circum stances, be required to
return to such partnership, for the benefit of partnership creditors, amounts
previously wrongfully distributed to such partner. It is the intent of the
Partners that no distribution to any Limited Partner pursuant to paragraph 4.2
shall be deemed to be a return of money or other property paid or distributed
in violation of the Partnership Act. The payment or distribution of any such
money or other property to a Limited Partner shall be deemed to be a compromise
within the meaning of Section 17-502(b) of the Partnership Act and, except as
otherwise provided by applicable law, the Limited Partner receiving any such
money or property shall not be required to return any such money or property to
the Partnership or any
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<PAGE> 19
creditor of the Partnership. However, if any court of competent jurisdiction
holds that, notwithstanding the provisions of this Agreement, any Limited
Partner is obligated to make any such payment, such obligation shall be the
obligation of such Limited Partner and not of the General Partner.
3.5.3 Neither the General Partner nor any of its Affiliates
shall have any liability to any Limited Partner in respect of any amounts
outstanding in the Capital Account of a Limited Partner, including, but not
limited to, Capital Contributions.
3.6 Default in Payment.
3.6.1 Except as otherwise provided in paragraph 3.11, in the
event any Partner shall default in any payment with respect to its Capital
Commitment when required to be made other than as a result of a Regulatory
Disability (as such term is defined in paragraph 3.6.6), and shall fail to make
such payment within ten (10) days after notice of default shall be given it by
the General Partner (a "Default Notice"), then such Partner shall be a
defaulting Partner (a "Defaulting Partner") and the General Partner (in the
case of a default by a Class X or Class Z Limited Partner) or a majority in
Interest of the Class X Limited Partners (in the case of a default by a Class Y
Limited Partner) may elect to have any or all of the following provisions of
this paragraph 3.6.1 apply:
(A) In the case of a default by a Class Y Limited
Partner, his Interest in the Partnership shall be deemed to be
divided into two Interests: (i) a Class Y-1 Limited
Partnership Interest having all of the rights and obligations
of a Class Y Limited Partnership Interest, other than the
right to receive the portion of the Special Distribution to
which the Class Y Limited Partner originally was entitled (and
corresponding allocations of Net Profits) and (ii) a
non-voting Class Y-2 Limited Partnership Interest having none
of the rights of a Class Y Limited Partnership Interest, other
than the right to receive the portion of the Special
Distribution to which the Class Y Limited Partner originally
was entitled, and having no obligation to make payments in
respect of a Capital Commitment. The provisions of this
paragraph 3.6 shall apply only to the Class Y-1 Limited
Partnership Interest. The Class Y-2 Limited Partnership
Interest shall be subject to reduction under the circumstances
and to the extent described in paragraph 4.2.2(b) and (c).
(B) A Defaulting Partner: (i) in addition to, and
not in limitation of, the restrictions on Transfer set forth
in this Agreement, shall not be
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entitled to Transfer such Defaulting Partner's Interest
without the written consent of the General Partner and, in the
case of a default by a Class Y Limited Partner, the Consent of
a majority in Interest of the Class X Limited Partners, such
consent to be given or withheld by the General Partner and the
Class X Limited Partners in their sole discretion; (ii) shall
not be entitled (but may be required) to make further payments
with respect to its Capital Commitment pursuant to paragraph
3.3.1(a) and as a result shall suffer a permanent reduction in
the Defaulting Partner's proportionate Interest (to the extent
provided by law, the liability of such Defaulting Partner to
the creditors of the Partnership shall remain unchanged as if
such default had not occurred); and (iii) shall lose its
right, if any, to participate in any Consent of the Limited
Partners (and the Capital Commitment of such Partner shall not
be counted in determining the existence of a quorum, the
giving or withholding of any Consent or the aggregate Capital
Commitments).
3.6.2 After the date which is the tenth (10th) day after the
date of any Default Notice, the General Partner (in the case of a default by a
Class X or Class Z Limited Partner) or a majority in Interest of the Class X
Limited Partners (in the case of a default by a Class Y Limited Partner) may
elect to have the following provisions apply:
(A) After such time as any Special Loans made for
the benefit of the Defaulting Partner have been repaid in
full, the Defaulting Partner shall pay over to the other
Partners (except any other Defaulting Partner), as partial
recompense for damages suffered, and the Partnership shall
withhold (for the account of such other Partners) from any
distribution which would otherwise be made to such Partner on
or after such date an amount equal to the following
percentages (the "Default Percentage") of such distribution:
(i) 50%, if on the date of default such Defaulting Partner has
contributed to the Partnership, in the aggregate, less than
25% of its Capital Commitment; (ii) 33%, if on the date of
default such Defaulting Partner has contributed to the
Partnership 25% or more and less than 50% of its Capital
Commitment; and (iii) 25%, if on the date of default such
Defaulting Partner has contributed to the Partnership 50% or
more of its Capital Commitment.
(B) The amounts withheld from the Defaulting Partner
by the Partnership pursuant to subparagraph (A) above shall be
distributed among the other Partners (other than any other
Defaulting Partner) in proportion to their respective Capital
Commitments.
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3.6.3 The General Partner (in the case of a default by a
Class X or a Class Z Limited Partner) or a majority in Interest of the Class X
Limited Partners (in the case of a default by a Class Y Limited Partner) shall
have the right to cause any Defaulting Partner to Transfer its Limited
Partnership Interest effective immediately upon written notice, in which case
(i) the procedure set forth in paragraph 8.4.2 for Transfer shall apply, with
the date of the Defaulting Partner's receipt of such notice being treated as
the "Required Transfer Date" and (ii) the provisions of paragraph 3.6.1 and
3.6.2 shall not apply to the Transferred Interest; provided, however, that (x)
the amount paid by the transferee for such Interest shall first be applied to
repay any Special Loans made for the benefit of the Defaulting Partner and (y)
the Defaulting Partner shall pay over to the other Partners (other than any
other Defaulting Partner), in proportion to their respective Capital
Commitments, as partial recompense for damages suffered, the Default Percentage
of any amount paid by the transferee for such Interest in excess of the amount
required to repay such Special Loans.
3.6.4 The General Partner may offer to all Limited Partners
the opportunity to increase their Capital Commitments, and to make additional
Capital Contributions, to the extent necessary to make up any shortfall
resulting from the Defaulting Partner's default. All Limited Partners shall
have the right to participate on a pro rata basis, based on their respective
Capital Commitments. If the Limited Partners do not elect to make additional
Capital Contributions in an amount sufficient to make up the shortfall, then
the General Partner may deliver a new notice to each Limited Partner requiring
an additional payment with respect to its Capital Commitment, and each such
Partner shall make such additional payment within twenty (20) days after having
been given such new notice; provided that no Limited Partner shall be obligated
to contribute an additional amount to the extent that (i) such additional
amount would exceed such Limited Partner's Unused Capital Commitment or (ii)
any "24.9% Partner" shall have elected pursuant to the following sentence to be
excused from making an additional payment. No Limited Partner (a "24.9%
Partner") shall be obligated to contribute an additional amount to the extent
that such 24.9% Partner's aggregate Capital Contributions to the Partnership
would as a result of such additional payment exceed 24.9% of the aggregate
Capital Contributions of all Partners to the Partnership.
3.6.5 Nothing contained in this paragraph 3.6 shall reduce
(except, in the case of a non-Defaulting Partner, to the extent of additional
payments made pursuant to paragraph 3.6.4) or increase the Unused Capital
Commitment of any Limited Partner or increase the obligations of any
non-Defaulting Partner. Each of the Partners hereby acknowledges and accepts
the application to it of the remedies provided in this paragraph 3.6 in
recognition of the risk and speculative damages its default would cause the
other Partners, and further agrees that the
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availability of such remedies shall not preclude any other remedies which may
be available at law, in equity, by statute or otherwise. No Limited Partner
shall, however, in any event be liable to the Partnership or the other Partners
for an aggregate amount in excess of its Capital Commitment.
3.6.6 If any default described in paragraph 3.6.1 is by
reason of the Regulatory Disability of a Limited Partner, then such Limited
Partner shall deliver to the Partnership a certificate describing in reasonable
detail such Regulatory Disability. The Partnership and such Limited Partner
shall consult with one another to consider the options available to the
Partnership and such Limited Partner, and shall have a period of 60 days from
receipt of such certificate to take such commercially reasonable action as may
be necessary to cure such Regulatory Disability. If such Regulatory Disability
is cured to the reasonable satisfaction of the Limited Partner, then the
Limited Partner shall make the required payment with respect to its Capital
Commitment. If such cure cannot be effected after application of the best
commercially reasonable efforts of both such Limited Partner and the
Partnership, then such Limited Partner shall be released from its obligation to
make further payments with respect to its Capital Commitment, and, as a result,
such Limited Partner's Capital Commitment shall then be permanently reduced to
an amount equal to its Capital Contributions theretofore made. The provisions
of this paragraph 3.6.6 shall be the sole and exclusive remedy of the
Partnership, the General Partner and all other Persons against any Limited
Partner for any default in any payment with respect to its Capital Commitment
by reason of a Regulatory Disability. A Limited Partner will suffer a
"Regulatory Disability", as that term is used in this paragraph 3.6.6, if by
reason of the regulatory status of such Limited Partner or of the Partnership,
there is a reasonable likelihood that the continuation of such Limited Partner
as a limited partner of the Partnership, or the making by such Limited Partner
of an additional Capital Contribution to the Partnership, will result in a
violation of applicable law or governmental rules, regulations or policies.
3.7 Nonconforming Partners. If the Partnership shall suffer
an FCC Regulatory Issue due to the status or condition of a Limited Partner or
an Attributable Person through such Limited Partner or due to such Limited
Partner or any such Attributable Person having taken or failed to take any
action, then, unless the FCC Regulatory Issue is attributable to an action
voluntarily taken by the Partnership or the General Partner with knowledge of
facts and circumstances actually disclosed to the Partnership by such Limited
Partner (or without such knowledge if the General Partner failed to make
reasonable inquiry of the Limited Partner before taking such action), such
Limited Partner shall be considered to be a "Nonconforming Partner" and the
following shall apply.
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3.7.1 The Partnership and the Nonconforming Partner each
shall advise the other promptly after it becomes aware of such FCC Regulatory
Issue.
3.7.2 The Nonconforming Partner, the Partnership and the
General Partner shall cooperate with each other and use all commercially
reasonable efforts to cure such FCC Regulatory Issue, which shall include but
not be limited to: (i) the Partnership, the General Partner and the
Nonconforming Partner seeking such waivers, consents, approvals and rulings
("Approvals") as are necessary to cure such FCC Regulatory Issue; and (ii) such
Nonconforming Partner having the right to elect to be deemed to be a
Non-Attributable Limited Partner under this Agreement. Subject to paragraph
3.7.4, the Partnership and the Nonconforming Partner shall each bear their own
costs in such efforts.
3.7.3 If the General Partner and the Nonconforming Partner
cannot agree on a satisfactory resolution of, or otherwise successfully cure,
such FCC Regulatory Issue, then
(a) the Nonconforming Partner shall be deemed to be
a Non-Attributable Limited Partner under this Agreement, if and to the extent
such status will cure such FCC Regulatory Issue;
(b) if the application of clause (a) will not
cure such FCC Regulatory Issue, then (i) the Nonconforming Partner shall use
all commercially reasonable efforts to sell such portion of its Limited
Partnership Interests as may be necessary to cure such FCC Regulatory Issue;
(ii) the Partnership and the General Partner shall not unreasonably withhold
their consent to such sale; (iii) to the extent requested by such Nonconforming
Partner, the General Partner and the Partnership shall assist the Nonconforming
Partner in selling such Interest in a prompt and orderly manner (provided that
neither the Partnership nor the General Partner shall be obligated to incur any
costs or financial obligations to third parties in the course of such
assistance); and (iv) to the extent requested by such Nonconforming Partner,
the General Partner and the Partnership shall provide such financial and other
information concerning the Partnership as may reasonably be requested by any
prospective purchaser of such Interest; and
(c) if the Nonconforming Partner is unable so to
sell its Limited Partnership Interest (or appropriate portion thereof) within
180 days of the date the General Partner requests that such Interest be sold
(or, if applicable, the period of time established by the FCC to cure the FCC
Regulatory Issue, provided that the Partnership shall seek such extensions
thereof as shall be commercially reasonable), then, at the election of the
General Partner,
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(i) if the Partnership does not elect to make the "Buyout
Payment Election" (as hereinafter defined), the Nonconforming Partner
shall immediately cease to be a Limited Partner, and the Partnership
shall treat the Nonconforming Partner as if it were an unadmitted
assignee of the Limited Partnership Interest of such Nonconforming
Partner but shall make distributions to such Nonconforming Partner of
those amounts otherwise payable with respect to such Limited
Partnership Interest hereunder; and the Nonconforming Partner shall
not be required to make any further payments in respect of its Unused
Capital Commitment; provided, however, that the General Partner shall
have the right at any time to restore the Nonconforming Partner to the
status of a Limited Partner, in which case the provisions of this
paragraph 3.7 shall cease to apply; and
(ii) for a period of 90 days following the expiration of
the period pursuant to the prefatory paragraph of this paragraph
3.7.3(c) in which the Nonconforming Partner may sell its Interest (or
portion thereof) pursuant to paragraph 3.7.3(b), the General Partner
(with the Consent of a majority in Interest of the Class X Limited
Partners if the Nonconforming Partner is a Class Y Limited Partner)
may elect on behalf of the Partnership by notice to the Nonconforming
Partner (the "Buyout Payment Election"), to make "Buyout Payments"
pursuant to paragraph 3.7.5 to the Nonconforming Partner in complete
satisfaction of the Nonconforming Partner's Interest, whereupon the
economic interest of the Nonconforming Partner shall be deemed to have
been converted from a Limited Partnership Interest to debt and the
Nonconforming Partner shall immediately cease to be a Partner; the
Nonconforming Partner shall not be required to make any further
payments in respect of its Unused Capital Commitment; and the
Partnership shall have no obligation to make any payments to the
Nonconforming Partner in respect of its Capital Contributions or
Capital Account, or to make other distributions hereunder.
3.7.4 In the event (and only in the event) such FCC
Regulatory Issue shall be attributable to the bad faith of the Nonconforming
Partner or its Affiliates, the Nonconforming Partner shall be liable in damages
to the Partnership for all reasonable costs and liabilities that the
Partnership may incur as a result of such FCC Regulatory Issue. The remedies
set forth in this paragraph 3.7 shall be the sole and exclusive remedies of the
Partnership against a Nonconforming Partner for damages arising from an FCC
Regulatory Issue.
3.7.5 For purposes of this paragraph 3.7, Buyout Payments
shall be made in four installments, each equal to one-fourth of the Buyout
Amount (as hereinafter defined), payable on the next four consecutive
anniversaries following the Buyout
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Payment Election, plus interest accrued from the date of the Buyout Payment
Election through the date of each such installment on the unpaid balance of
such Buyout Amount at the lowest rate permitted under Code Section 1274 so as
to avoid the imputation of interest income, but in no event less than the
"applicable federal rate." As used in this paragraph 3.7, the "Buyout Amount"
shall be an amount equal to the fair market value of such Nonconforming
Partner's Limited Partnership Interest. The Partnership may, at its sole
election, prepay all or any portion of the Buyout Payments and interest accrued
thereon at any time without penalty. The Partnership shall prepay all of the
outstanding Buyout Amount, together with interest thereon, upon the earlier of
the sale of all or substantially all of the Limited Partnership Interests or
the liquidation of the Partnership. For purposes of this paragraph 3.7.5, the
fair market value of a Nonconforming Partner's Limited Partnership Interest
shall be agreed upon by the General Partner (with the Consent of a majority in
Interest of the Class X Limited Partners if the Nonconforming Partner is a
Class Y Limited Partner) and the Nonconforming Partner, and if such agreement
is not achieved, then the fair market value of such Interest shall be
determined in accordance with the method of appraisal described in paragraph
7.2.4, with the General Partner (with the Consent of a majority in Interest of
the Class X Limited Partners if the Nonconforming Partner is a Class Y Limited
Partner) and the Nonconforming Partner each selecting one appraiser. One-half
of the costs of the appraisal shall be borne by the Partnership and one-half
shall be borne by the Nonconforming Partner.
3.8 Conversion of Certain Limited Partnership
Interests.
3.8.1 Subject to and upon compliance with the
provisions of this paragraph 3.8, any Limited Partner shall be entitled to
convert, at any time and from time to time, any or all of the Class X Limited
Partnership Interests held by such Limited Partner into the same amount of
Class Z Limited Partnership Interests.
3.8.2 Subject to and upon compliance with the
provisions of this paragraph 3.8, any Limited Partner shall be entitled to
convert, at any time and from time to time, any or all of the Class Z Limited
Partnership Interests held by such Limited Partner into the same amount of
Class X Limited Partnership Interests; provided, however, that no such Limited
Partner shall be entitled to convert any such Class Z Limited Partnership
Interests into Class X Limited Partnership Interests to the extent that, as a
result of such conversion, such Limited Partner and its Affiliates, directly or
indirectly, would own, control or have the power to vote a greater number of
Class X Limited Partnership Interests than such Limited Partner and its
Affiliates shall be permitted to own, control or have power to vote under any
law, regulation, rule or other requirement of any
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governmental authority at the time applicable to such Limited Partner or its
Affiliates. A certificate of a Limited Partner stating that it is entitled to
convert Class Z Limited Partnership Interests into Class X Limited Partnership
Interests under this paragraph 3.8.2 shall be conclusive and may be relied upon
by the Partnership.
3.8.3 Each conversion of Class X Limited Partnership
Interests into Class Z Limited Partnership Interests or Class Z Limited
Partnership Interests into Class X Limited Partnership Interests, respectively,
shall be effected by the Limited Partner that holds the Limited Partnership
Interests to be converted (the "Converting Interests") giving written notice to
the Partnership, stating that such Limited Partner desires to convert the
Converting Interests into an equal amount of Limited Partnership Interests of
the class into which such Interests may be converted (the "Converted
Interests"). The Partnership shall promptly notify each Regulation Y Limited
Partner of its receipt of such notice. Promptly after the receipt of such
written notice, the Partnership will amend Schedule A hereto to reflect the
conversion, and will deliver a certificate to the Limited Partner which
requested such conversion certifying that such conversion has been effected,
together with an amended copy of Schedule A hereto; provided, however, that if
such conversion is subject to paragraph 3.8.4 hereof, the Partnership shall not
effect such conversion until the expiration of the Deferral Period referred to
therein. Such conversion, to the extent permitted by law, shall be deemed to
have been effected as of the close of business on the date on which such notice
shall have been received by the Partnership, and at such time the rights of the
Limited Partner that holds the Converting Interests, as a holder of such
Interests, shall cease (except that, in the case of a conversion subject to
paragraph 3.8.4 below, the conversion shall be deemed effective upon the
expiration of the Deferral Period referred to therein), and such Limited
Partner upon such conversion shall be deemed to have become the Limited Partner
of record of the Converted Interests. Upon the conversion of Limited
Partnership Interests in accordance with this paragraph 3.8.3, such Converted
Interests shall be deemed to be duly authorized, validly issued and, except for
any unfunded or Unused Capital Commitment of such Limited Partner, fully paid
and nonassessable.
3.8.4 The Partnership shall not convert or directly or
indirectly redeem, purchase or otherwise acquire any Limited Partnership
Interests or take any other action affecting the voting rights of any Limited
Partnership Interests, if such action will increase the percentage of any class
of outstanding voting securities owned or controlled by any Regulation Y
Limited Partner (other than any such Regulation Y Limited Partner which
requested that the Partnership take such action, or which otherwise waives in
writing its rights under this 3.8.4) unless the Partnership gives written
notice (the "Deferral Notice") of such action to each Regulation Y Limited
Partner. The
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Partnership will defer making any such conversion, redemption, purchase or
other acquisition, or taking any such other action for a period of 30 days (the
"Deferral Period") after giving the Deferral Notice in order to allow each
Regulation Y Limited Partner to determine whether it wishes to convert or take
any other action with respect to the Limited Partnership Interests it owns,
controls or has the power to vote, and if any such Regulation Y Limited Partner
then elects to convert any Class X Limited Partnership Interests owned by such
Regulation Y Limited Partner, it shall notify the Partnership in writing within
20 days of the giving of the Deferral Notice, in which case the Partnership
shall (i) defer taking the pending action until the end of the Deferral Period,
(ii) promptly notify from time to time each other Regulation Y Limited Partner
of each proposed conversion and the proposed transactions and (iii) effect the
conversions requested by all Regulation Y Limited Partners in response to the
notices issued pursuant to this 3.8.4 at the end of the Deferral Period.
3.8.5 The conversion of Limited Partnership Interests shall
be made without charge to the Limited Partner converting Limited Partnership
Interests; provided, however, that such Limited Partner shall be responsible
for its own legal and accounting fees and expenses and any issuance, transfer
or other taxes incurred as a result of such conversion.
3.8.6 As used in this paragraph 3.8, "Regulation Y Limited
Partner" shall mean (i) any Limited Partner that is subject to the provisions
of Regulation Y of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 225) or any successor to such regulation ("Regulation Y"), (ii) any
Affiliate of any such Regulation Y Limited Partner that is a transferee of any
Limited Partnership Interest and (iii) any Person to which such Regulation Y
Limited Partner or any of its Affiliates has transferred such Limited
Partnership Interest if such Person (or any Affiliate of such Person) is
subject to the provisions of Regulation Y.
3.9 [Intentionally Omitted]
3.10 Fund Investors; Special Purpose Corporations.
Two of the Class X Limited Partners are special purpose corporations (each a
"SPC"), each of whose obligations have been guaranteed by its principal
shareholder (each such principal shareholder a "Fund Investor"). Each SPC is a
single-purpose corporation, whose sole purpose and business is to make an
investment in the Partnership. Each Fund Investor has guaranteed to the
Partnership the liabilities and obligations of its SPC to the Partnership.
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3.11 Deferral of Capital Commitment Payments; Loans.
(a) Each Partner shall have an absolute and
unconditional obligation to make payments with respect to such Partner's
Capital Commitment as provided in paragraph 3.3.1. However, Mr. Vaughn has
advised the Partnership that he may be unable to make payments with respect to
his Capital Commitment until the fifth anniversary of the date hereof with
respect to the first $350,000 of his Capital Commitment obligation, and the
tenth anniversary of the date hereof with respect to the remaining $150,000 of
his Capital Commitment obligation. Mr. Vaughn shall have an absolute
obligation to pay the first $350,000 of his Capital Commitment obligation on
the fifth anniversary of the date hereof and the remaining $150,000 of his
Capital Commitment obligation on the tenth anniversary of the date hereof (in
each case, to the extent such payments have been called by the Partnership and
have not previously been made by Mr. Vaughn). Any failure by Mr. Vaughn to
make such payments at such time shall constitute a material breach of, and
default under, this Agreement. In addition, in the event that at any time or
from time to time Mr. Vaughn receives payments in respect of his interests as a
limited partner of, or as a participant in certain bonus pools relating to,
various partnerships affiliated with Triax Communications Corporation (each
such event a "Vaughn Funding Event"), he shall be required to make payments
with respect to his Capital Commitment (to the extent such payments have been
called by the Partnership and have not previously been made by Mr. Vaughn) to
the extent of the net after tax proceeds of such payments (each such payment a
"Vaughn Funding Payment"). Any failure by Mr. Vaughn to make such payments at
such time shall constitute a material breach of, and default under, this
Agreement. If Mr. Vaughn shall fail to make any payment with respect to the
first $350,000 of his Capital Commitment obligation prior to the fifth
anniversary of the date hereof, or with respect to the remaining $150,000 of
his Capital Commitment obligation prior to the tenth anniversary of the date
hereof (in either of which cases, he shall be a "Non-Paying Partner"), he shall
not be deemed to have breached, or to be in default under, this Agreement
provided that at the time of such nonpayment (i) he otherwise is in compliance
with the terms and provisions of this Agreement and (ii) he has made (and
thereafter shall continue to make) the Vaughn Funding Payments upon the
occurrence of the Vaughn Funding Events. Similarly, Mr. Koo has advised the
Partnership that he may be unable to make payments with respect to his Capital
Commitment until the earlier of (the "Koo Final Payment Date") (x) the fifth
anniversary of the date hereof and (y) such time as he sells his house in
Connecticut. Mr. Koo shall have an absolute obligation to make all payments
with respect to his Capital Commitment (to the extent such payments have been
called by the Partnership and have not previously been made by Mr. Koo) no
later than the Koo Final Payment Date. Any failure by Mr. Koo to make such
payments at such time shall constitute a material breach of, and default under,
this
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Agreement. If Mr. Koo shall fail to make any payment with respect to his
Capital Commitment prior to the Koo Final Payment Date (in which case he shall
be a "Non-Paying Partner"), he shall not be deemed to have breached, or to be
in default under, this Agreement provided that on such date he otherwise is in
compliance with the terms and provisions of this Agreement. Upon any failure
of a Non-Paying Partner to make a required payment as aforesaid, the Class X
and Class Z Limited Partners shall, in proportion to their Capital Commitments,
loan an aggregate amount equal to such payment to the Partnership (that portion
of such aggregate amount loaned by each such Class X or Class Z Limited
Partner, a "Special Loan", and each such Class X and Class Z Limited Partner, a
"Special Lending Partner").
(b) Each Special Loan shall mature on June 30, 2004
(or, if earlier, the last day of the term of FrontierVision) and shall be
evidenced by a promissory note (a "Special Note") of the Partnership payable to
the Lending Partner in the amount of the Special Loan. Interest on the
original principal amount of each Special Loan, at the rate of 12% per annum,
compounded annually (or, if less, the maximum rate permitted by applicable
provisions of law) shall be payable on the date such Special Loan is paid. Any
capital contributions made by, and any distributions that otherwise would have
been made to, the Non-Paying Partner for whose benefit the Special Loan was
made (except, in the case of distributions, for amounts necessary to enable the
Non-Paying Partner to pay taxes on his allocable share of the related income,
which will continue to be distributed) will be applied to reduce the Special
Loans (including accrued interest) made with respect to such Non-Paying Partner
and, in the case of distributions, will be treated as if they had been
distributed to such Non-Paying Partner and then were contributed by such
Non-Paying Partner to the Partnership in respect of his Capital Commitment. To
the extent (if any) of the amount of the principal of, and accrued interest on,
a Special Loan that is repaid by the Partnership other than out of capital
contributions made by, or distributions that otherwise would have been made to,
the Non-Paying Partner for whose benefit the Special Loan was made (e.g., out
of amounts that otherwise would have been available to pay distributions to the
Partners other than the Non-Paying Partner) (the "Repayment Amount"), whether
by reason of the maturity of the Special Loan prior to sufficient available
capital contributions by and distributions to the Non-Paying Partner, its
acceleration or otherwise, any capital contributions thereafter made by, and
any distributions that thereafter would have been made to, the Non-Paying
Partner for whose benefit the Special Loan was made (except, in the case of
distributions, for amounts necessary to enable the Non-Paying Partner to pay
taxes on his allocable share of the related income, which will continue to be
distributed) will be distributed to the other Partners in proportion to their
Capital Commitments, until the other Partners have so received an amount equal
to the Repayment Amount and, in the case of distributions, will be treated as
if such amounts had
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been distributed to the Non-Paying Partner and then were contributed by such
Non-Paying Partner to the Partnership in respect of his Capital Commitment.
(c) When and as a Non-Paying Partner makes the
payments in respect of his Capital Commitment that he previously was unable to
make, he shall make such payments as a Capital Contribution to the Partnership
and the proceeds thereof shall be applied to the reduction of the Special
Loan(s) made with respect to such Non-Paying Partner.
(d) If any of the following events shall occur and
be continuing for any reason whatsoever (and whether it shall be voluntary or
involuntary or occur or be effected by operation of law or otherwise):
(i) the Partnership defaults in the payment when
due of any principal of or interest on any Special Loan or Special
Note,
(ii) any event of default occurs (and is not
waived) under the Senior Subordinated Notes or Junior Subordinated
Notes, or any other indebtedness of the Partnership, FrontierVision or
any Operating Entity for borrowed money in an aggregate amount in
excess of $5,000,000, and, as a result of such event of default, such
indebtedness becomes or is declared due and payable prior to its
stated maturity,
(iii) the Partnership, FrontierVision or any
Operating Entity shall (A) be generally not paying its debts as they
become due, (B) file, or consent by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, (C)
make an assignment for the benefit of its creditors, (D) consent to
the appointment of a custodian, receiver, trustee or other officer
with similar powers of itself or of any substantial part of its
property, (E) be adjudicated insolvent or be liquidated or (F) take
partnership action for the purpose of any of the foregoing, or
(iv) a court or governmental authority of
competent jurisdiction shall enter an order appointing, without
consent by the Partnership, FrontierVision or the Operating Entity, as
applicable, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise
to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or
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liquidation of the Partnership, FrontierVision or any Operating
Entity, or if any petition for any such relief shall be filed against
the Partnership, FrontierVision or any Operating Entity and such
petition shall not be dismissed within 60 days,
then (x) upon the occurrence of any event of default described in clause (iii)
or (iv), the unpaid principal amount of and the accrued interest on the Special
Notes shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by the Partnership or (y) upon the occurrence of
any other event of default, the holder or holders of at least 51% of the unpaid
principal amount of the Special Notes at the time outstanding may, by written
notice to the Partnership, declare all of the Special Notes to be, and the same
shall forthwith become, due and payable, together with accrued interest thereon
which shall be deemed matured. Nevertheless, if at any time after acceleration
of the maturity of any Special Note or Notes, the Partnership shall pay all
arrears of interest and all payments on account of principal which shall have
become due otherwise than by acceleration (with interest on principal at the
rate specified in the Special Notes) and all events of default (other than
non-payment of principal of and accrued interest on Special Notes due and
payable solely by virtue of acceleration) shall be remedied or waived by the
holder or holders of at least 51% of the unpaid principal amount of the Special
Notes at the time outstanding by written notice to the Partnership, then the
acceleration and its consequences shall be rescinded and annulled; but such
action shall not affect any subsequent event of default or impair any right
consequent thereon.
(e) During such time as any Special Loan is
outstanding with respect to Mr. Vaughn or Mr. Koo, he shall provide to
each of the Special Lending Partners, within 120 days after the end of
each calendar year, his personal financial statement as of the end of
such calendar year.
ARTICLE IV
Distributions; Allocation of Profits and Losses
4.1 Distributions -- General Principles.
4.1.1 Each distribution made by the Partnership, whether
derived from FrontierVision's operating cash flow, from the Disposition of all
or any portion of an Investment, from the financing or refinancing of an
Investment or otherwise shall be made in accordance with this Article IV.
4.1.2 Except as otherwise provided below, the General Partner
shall have discretion to determine the amounts available
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for distribution. The General Partner shall periodically review any reserves
created and may in its discretion increase such reserves or release any excess
amounts in such reserves for distribution in accordance with this Article IV.
Notwithstanding anything to the contrary contained in this Agreement,
distributions to Partners shall be subject to the restrictions contained in
Section 17-607 of the Partnership Act.
4.1.3 The Partnership shall use commercially reason able
efforts to make distributions to Partners with respect to each Fiscal Year in
an aggregate amount that equals not less than one-third of the Partnership's
net taxable income for federal income tax purposes for such Fiscal Year.
Disposition Proceeds from an Investment (less reasonable reserves established
by the General Partner) shall be distributed within 60 days after the date such
Disposition Proceeds are received by the Partnership. All other distributions
shall be made at such times and intervals as the General Partner shall
determine.
4.1.4 The General Partner may elect, with the Consent of a
majority in Interest of the Class X Limited Partners, to distribute to the
Partners securities, assets or other property in kind. Each distribution in
kind of securities, assets or other property shall be distributed in accordance
with paragraph 4.2 as if there had been a sale of such property for an amount
of cash equal to the fair market value of such property followed by an
immediate distribution of such cash proceeds. Distributions consisting of
cash, securities, assets and/or other property shall be made, to the extent
practicable, in pro rata portions as to each Partner receiving such
distributions. For purposes of the preceding sentence, securities, assets or
other property having a different tax basis than like securities, assets or
other property shall be considered to be securities, assets or other property
of a different type. Notwithstanding the foregoing, in no event shall any
distribution of securities, assets or other property be made to any Limited
Partner to the extent such Limited Partner would be prohibited by applicable
law or regulation from holding such securities, assets or other property. In
such event, the General Partner, with the Consent of a majority in Interest of
the Class X Limited Partners, shall vary the method of distribution in such
equitable manner as it may, in its good faith discretion, determine. In the
event of any proposed distribution of voting securities, to the extent
practicable, each Limited Partner shall be offered the opportunity to acquire
comparable nonvoting securities or convertible nonvoting securities, as such
Limited Partner may elect.
4.2 Division of Distributions.
4.2.1 Subject to paragraphs 3.11 and 4.2.2, each
distribution shall be divided among the Limited Partners and the General
Partner as follows: 99% to the Limited Partners in
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<PAGE> 33
proportion to their respective Capital Commitments, and 1% to the General
Partner.
4.2.2(a) (i) Subject to paragraph 3.11 and to
paragraphs 4.2.2(b) and 4.2.2(c), if and to the extent the Partnership receives
any distributions from FrontierVision pursuant to the GP Special Allocation
Percentage set forth in paragraph 4.2.1(c)(ii) of the FrontierVision
Partnership Agreement (the "Special Distribution"), such Special Distribution
shall be distributed by the Partnership among the General Partner and the Class
Y Limited Partners identified below in the following percentages:
<TABLE>
<CAPTION>
Partner Percentages
------- -----------
<S> <C>
General Partner 1%
James C. Vaughn 66%
John S. Koo 33%
-------------------
Total 100%
</TABLE>
(b) (i) If the amount of the Special Distribution
is reduced because of a Vaughn Termination Event (as provided in paragraph
4.2.2(a) of the FrontierVision Partnership Agreement), the distributions to be
made by the Partnership pursuant to paragraph 4.2.2(a) above shall be adjusted
so that Mr. Vaughn bears the entire amount of such reduction, and that Mr. Koo
receives the same amount of such distributions as if no Vaughn Termination
Event had occurred.
(ii) Under the illustration set forth in
paragraph 4.2.2(a)(ii) in the FrontierVision Partnership Agreement, if no Class
C Limited Partnership Interests have been issued by FrontierVision, and if a
Vaughn Type A Termination Event occurs on December 31, 1997, then, pursuant to
the formulas set forth in the FrontierVision Partnership Agreement, the GP
Special Allocation Percentage would be reduced by 1.46 percentage points, so
that the resulting GP Special Allocation would be reduced from 7% to 5.54%. If
the aggregate distribution being made pursuant to paragraph 4.2.1(c) of the
FrontierVision Partnership Agreement is $200,000, the Special Distribution to
be received by the Partnership from FrontierVision would be $11,080 ($200,000 x
5.54%), rather than the $14,000 ($200,000 x 7%) it otherwise would have been
under this illustration if there had been no Vaughn Type A Termination Event.
The amounts to be distributed by the Partnership under each scenario would be
as follows:
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<PAGE> 34
<TABLE>
<CAPTION>
Assuming No Vaughn Assuming a Vaughn
Type A Type A
Partner Termination Event Termination Event
------- ----------------- -----------------
<S> <C> <C>
General Partner $ 140 ( 1%) $ 140
Vaughn 9,240 (66%) 6,320
Koo 4,620 (33%) 4,620
------- ----- -------
Total $14,000 (100%) $11,080
======= ====== =======
</TABLE>
(c) (i) If the amount of the Special Distribution
is reduced because of a Koo Termination Event (as provided in paragraph
4.2.2(a) of the FrontierVision Partnership Agreement), the distributions to be
made by the Partnership pursuant to paragraph 4.2.2(a) above shall be adjusted
so that Mr. Koo bears the entire amount of such reduction, and that Mr. Vaughn
receives the same amount of such distributions as if no Koo Termination Event
had occurred.
(ii) Modifying the illustration set forth in
paragraph 4.2.2(b)(ii) above, if no Class C Limited Partnership Interests have
been issued by FrontierVision, and if a Koo Type A Termination Event occurs on
December 31, 1997, then, pursuant to the formulas set forth in the
FrontierVision Partnership Agreement, the GP Special Allocation Percentage
would be reduced by 0.73 percentage points, so that the resulting GP Special
Allocation would be reduced from 7% to 6.27%. If the aggregate distribution
being made pursuant to paragraph 4.2.1(c) of the FrontierVision Partnership
Agreement is $200,000, the Special Distribution to be received by the
Partnership from FrontierVision would be $12,540 ($200,000 x 6.27%), rather
than the $14,000 ($200,000 x 7%) it otherwise would have been under this
illustration if there had been no Koo Type A Termination Event. The amounts to
be distributed by the Partnership under each scenario would be as follows:
<TABLE>
<CAPTION>
Assuming No Koo Assuming a Koo
Type A Type A
Partner Termination Event Termination Event
------- ----------------- -----------------
<S> <C> <C>
General Partner $ 140 ( 1%) $ 140
Vaughn 9,240 (66%) 9,240
Koo 4,620 (33%) 3,160
------- ----- -------
Total $14,000 (100%) $12,540
======= ====== =======
</TABLE>
4.3 [Intentionally Omitted]
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<PAGE> 35
4.4 Capital Accounts and Adjusted Capital Accounts;
Allocations.
4.4.1 (a) There shall be established for each Partner on
the books of the Partnership a Capital Account initially reflecting an amount
equal to its Capital Contribution. The Capital Accounts shall be adjusted from
time to time to reflect the Partners' allocable shares of Net Profits or Net
Losses, special allocations pursuant to paragraph 4.4.4, distributions pursuant
to paragraphs 4.2 and 9.2.4(ii) and as otherwise required by the Code and
Regulations, including but not limited to the rules of Treas. Reg. Section
1.704-1(b)(2)(iv).
(b) If allocations are required pursuant to
paragraph 4.4.5(b) or (c) hereof, then the adjustments to the Capital Accounts
of the Partners in respect of the property described therein shall be made in
accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(g) for allocations to
them of depreciation, depletion, amortization and gain or loss as computed for
book purposes, and no further adjustments shall be made to the Capital Accounts
to reflect the Partners' shares of the corresponding tax items. For purposes
of computing such adjustments to the Capital Accounts, the General Partner will
utilize the method of computing depreciation, depletion or amortization with
respect to such property as is utilized for federal income tax purposes except
that the property's value for book purposes will be used rather than its
adjusted tax basis.
(c) The General Partner shall at all times during
the existence of the Partnership maintain a minimum Capital Account balance
equal to 1% of the total positive Capital Account balances of all Partners
having positive balances in their Capital Accounts.
(d) The Partnership shall establish and maintain
an Adjusted Capital Account for each Partner in its workpapers (and not on its
books).
4.4.2 Net Profits for any Fiscal Year or period shall be
allocated as follows:
(a) first, to those Partners, if any, having
negative balances in their respective Adjusted Capital Accounts, an amount
equal, and in proportion, to such negative balances;
(b) second, to the Partners in an amount equal,
and in proportion, to the excess, if any, of each respective Partner's
Unrecouped Capital Contributions over such Partner's Adjusted Capital Account
until the positive balance in each Partner's Adjusted Capital Account equals
the amount of such Partner's Unrecouped Capital Contributions; and
31
<PAGE> 36
(c) thereafter, to the Partners in such amount and
manner as may be required so that, to the maximum extent possible, the amount
of each Partner's Adjusted Capital Account (prior to the applicable
distribution, if any) is such that if a distribution were to be made to each
Partner in an amount equal to such Partner's Excess Capital Account, such
distribution would be equal to the amount distributed and/or distributable to
such Partner under paragraph 4.2.1 (other than amounts representing the return
of Capital Contributions) and paragraph 4.2.2.
4.4.3 Net Losses for any Fiscal Year or period shall be
allocated as follows:
(a) first, to the Partners in such amount and manner
as may be required so that, to the maximum extent possible, the amount of each
Partner's Adjusted Capital Account (prior to the applicable distribution, if
any) is such that if a distribution were to be made to each Partner in an
amount equal to such Partner's Excess Capital Account, such distribution would
be equal to the amount distributed and/or distributable to such Partner under
paragraph 4.2.1 (other than amounts representing the return of Capital
Contributions) and paragraph 4.2.2;
(b) second, to the Partners in an amount equal, and
in proportion, to the amounts of their respective Excess Capital Accounts until
no Partner has an Excess Capital Account;
(c) third, to the Partners in an amount equal, and
in proportion, to the positive balances of their respective Adjusted Capital
Accounts, until the balance of each Partner's Adjusted Capital Account is
reduced to zero; and
(d) thereafter, 100 percent to the General Partner.
4.4.4 Notwithstanding any other provision of this Agreement,
the following allocations shall be made prior to any other allocations under
this Agreement and in the following order of priority:
(a) (i) If there is a net decrease in
Partnership Minimum Gain during any Fiscal Year or period so that an
allocation is required by Treas. Reg. Section 1.704-2(f), items of
income and gain shall be allocated to the Partners in the manner and
to the extent required by such Regulation. This provision is intended
to be a minimum gain chargeback within the meaning of Treas. Reg.
Section 1.704-2(f)(1) and shall be interpreted and applied
consistently therewith.
(ii) If there is a net decrease in the
minimum gain attributable to a Partner Nonrecourse Loan during any
Fiscal Year or period so that an allocation is required by Treas.
Reg. Section 1.704-2(i)(4) (minimum gain
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<PAGE> 37
chargeback attributable to a partner nonrecourse debt), items of
income and gain shall be allocated in the manner and to the extent
required by such Regulation.
(b) If, at the close of any Fiscal Year, allocations
of Net Profits or Net Losses pursuant to the other provisions of this paragraph
4.4 or distributions made or to be made pursuant to paragraph 4.2.1 or
paragraph 9.2.4(ii) would not prevent or would cause any Limited Partner to
have a negative Adjusted Capital Account balance, then gross income of the
Partnership for such year and each subsequent year (if necessary) shall be
allocated to such Partner to the extent required to eliminate, as quickly as
possible, such negative Adjusted Capital Account balance. This paragraph
4.4.4(b) is intended to comply with the qualified income offset requirement of
Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(c) Nonrecourse Deductions, if any, for any Fiscal
Year or period shall be allocated in the following order of priority:
(i) first, to the Partners up to an amount equal, and
in proportion, to the allocation of Net Profits for such Fiscal Year
or period pursuant to paragraph 4.4.2 hereof; and
(ii) thereafter, to the Partners in proportion to their
respective Capital Contributions.
(d) Any Partner Nonrecourse Deduction shall be
allocated to the Partner who bears the economic risk of loss with
respect to the loan giving rise to such deduction within the meaning
of Treas. Reg. Section 1.752-2.
4.4.5 (a) For federal, state and local income tax purposes,
all items of taxable income, gain, loss, and deduction for each Fiscal Year or
period shall be allocated among the Partners in accordance with the manner in
which the corresponding items were allocated under paragraphs 4.4.2, 4.4.3 and
4.4.4, except as provided in paragraph 4.4.5(b) and (c) hereof.
(b) If property is contributed to the Partnership
by a Partner and there is a difference between the basis of such property to
the Partnership for federal income tax purposes and the fair market value at
the time of its contribution, then items of income, gain, deduction and loss
with respect to such property, as computed for federal income tax purposes (but
not for book purposes), shall be allocated among the Partners so as to take
account of such book/tax difference as required by Code Section 704(c).
(c) If property (other than property described in
paragraph 4.4.5(b) hereof) of the Partnership is reflected in the
33
<PAGE> 38
Capital Accounts of the Partners and on the books of the Partnership at a book
value that differs from the adjusted basis of such property for federal income
tax purposes by reason of a revaluation of such property, then items of income,
gain, deduction and loss with respect to such property, as computed for federal
income tax purposes (but not for book purposes), shall be allocated among the
Partners in a manner that takes account of the difference between the adjusted
basis of such property for federal income tax purposes and its book value in
the same manner as differences between adjusted basis and fair market value are
taken into account in determining the Partners' shares of tax items under Code
Section 704(c).
4.4.6 Without altering the overall amount of Net Profits or
gross income allocable to any Partner, Net Profits or gross income taxable as
ordinary income under Sections 1245 and 1250 of the Code, or similar provisions
of the Code (the "Depreciation Recapture"), shall, to the extent possible, be
allocated to those Partners to whom allowances for depreciation or amortization
giving rise to Depreciation Recapture were allocated.
4.4.7 If, at any time, the allocation provisions of
paragraphs 4.4.2, 4.4.3 and 4.4.4 do not result in the General Partner
receiving in the aggregate an allocation of at least 1% of all the Partnership
items of income, gain, loss or deduction for the Fiscal Year, then the General
Partner shall be allocated pro rata so much of each of those items as will
cause it in the aggregate to be allocated at all times 1% of those items.
4.4.8 The foregoing provisions are intended to comply with
Treas. Reg. Section 1.704-1(b), and shall be interpreted and applied as
provided in such Treasury Regulations. If the General Partner shall reasonably
determine that the manner in which the Capital Accounts or Adjusted Capital
Accounts, or any increases or decreases thereto, are computed, or the manner in
which any allocations are made under paragraph 4.4.5, should be adjusted in
order to comply with Section 704(b) and Section 704(c) of the Code and the
Regulations thereunder, the General Partner shall, subject to the Consent of a
majority in Interest of the Class X Limited Partners, make such modifications,
provided that the General Partner shall not modify the manner of making
distributions pursuant to this Agreement. Without limiting the generality of
the foregoing, the General Partner shall apply paragraphs 4.4.2 and 4.4.3, in
conjunction with paragraph 4.4.4, in a manner that does not result in the
duplication of the allocation of items of income, gain, deduction or loss. All
elections, decisions and other matters concerning the allocations hereunder
among the Partners, and accounting procedures, not specifically and expressly
provided for by the terms of this Agreement, including, but not limited to, the
election pursuant to section 754 of the Code (or corresponding provisions of
subsequent law) to adjust the basis of the Partnership's assets
34
<PAGE> 39
as provided by sections 734 and 743 of the Code, shall be determined by the
General Partner, but shall be subject in the case of any material election,
decision or other matter, to the Consent of a majority in Interest of the Class
X Limited Partners.
4.5 Tax Advances. To the extent the Partnership is
required by law to withhold or to make tax payments on behalf of or with
respect to any Partner (e.g., backup withholding or withholding with respect to
Partners that are neither citizens nor residents of the United States) ("Tax
Advances"), the General Partner may withhold such amounts and make such tax
payments as so required. All Tax Advances (other than Tax Advances withheld
from distributions) made on behalf of a Partner, together with interest thereon
at the "applicable federal rate," shall, at the option of the General Partner,
(i) be promptly paid to the Partnership by the Partner on whose behalf such Tax
Advances were made or (ii) be repaid by reducing the amount of the current or
next succeeding distribution or distributions which would other wise have been
made to such Partner or, if such distributions are not sufficient for that
purpose, by so reducing the liquidation proceeds otherwise payable to such
Partner. Whenever the General Partner selects option (ii) pursuant to the
preceding sentence for repayment of a Tax Advance by a Partner, for all other
purposes of this Agreement such Partner shall be treated as having received all
distributions (whether before or upon liquidation) unreduced by the amount of
such Tax Advance. Each Partner hereby agrees to indemnify and hold harmless
the Partnership from and against any liability with respect to Tax Advances
required on behalf of or with respect to such Partner.
ARTICLE V
Rights and Duties of the General Partner
5.1 Management.
5.1.1 Except as otherwise expressly provided herein,
the General Partner is hereby vested with the full, exclusive and complete
right, power and discretion to operate, manage and control the affairs and
business of the Partnership and to make all decisions affecting Partnership
affairs and business, as deemed proper, convenient or advisable by the General
Partner to carry on the business of the Partnership as described in paragraph
2.4, and the General Partner shall have all of the rights and powers of a
general partner of a limited partnership under the Partnership Act and
otherwise as provided by law. Without limiting the generality of the foregoing,
all of the Partners hereby specifically agree and Consent that the General
Partner may, on behalf of the Partnership or in its capacity as the general
partner of FrontierVision (as the case may be), at any time, and without
further notice to or Consent from any
35
<PAGE> 40
Limited Partner (but subject to such approvals of the FrontierVision Advisory
Committee as may be required pursuant to paragraph 6.2 of the FrontierVision
Partnership Agreement), do the following:
(a) cause FrontierVision to make Investments
consistent with the purposes of FrontierVision and the Partnership;
(b) cause FrontierVision to sell, exchange or
otherwise dispose of all or any part of any Investment, whether for cash,
securities, property or on such terms as the General Partner shall determine to
be appropriate;
(c) cause the Partnership or FrontierVision to borrow
money or guarantee loans, to the extent permitted by paragraph 5.1.2 of each of
this Agreement and the FrontierVision Partnership Agreement;
(d) perform, or arrange for the performance of, the
management and administrative services necessary for the operations of the
Partnership and FrontierVision and, subject to paragraph 5.1.1(k) of each of
this Agreement and the FrontierVision Partnership Agreement, manage the
investment of the Partnership's and FrontierVision's funds prior to their
investment in Investments;
(e) manage Investments, including, but not limited to,
administering Investments and the ultimate realization of those Investments and
providing managerial assistance to the Persons in which FrontierVision holds
Investments;
(f) incur all expenditures permitted by this
Agreement and, to the extent that funds of the Partnership are available, pay
all expenses, debts and obligations of the Partnership;
(g) employ and dismiss from employment any and all
employees, consultants, agents, attorneys, accountants and professional
advisors;
(h) enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements or other instruments
as the General Partner shall determine to be appropriate in furtherance of the
purposes of the Partnership;
(i) pay, collect, compromise, arbitrate, resort to
legal action for or otherwise adjust claims or demands of or against the
Partnership;
(j) engage in any kind of activity and perform and
carry out contracts of any kind necessary to, or in
36
<PAGE> 41
connection with, or incidental to, the purposes of the Partnership (as set
forth in paragraph 2.4), to the extent the same may be lawfully carried on or
performed by a partnership under the laws of each state in which the
Partnership is then formed or qualified;
(k) pending investment in Investments, payment of
Partnership expenses in accordance with paragraph 5.5.1 or cash distributions
to the Partners, make temporary investments of Partnership capital in (i)
United States government and agency obligations, (ii) commercial paper rated
not lower than P-2 with maturities of not more than six (6) months and one (1)
day, (iii) interest-bearing deposits in United States banks with an
unrestricted surplus of at least $250,000,000, maturing within one (1) year, or
(iv) money market mutual funds with assets of not less than $750,000,000,
substantially all of which assets consist of items described in one or more of
the foregoing clauses (i), (ii) and (iii);
(l) admit an assignee of all or any fraction of a
Limited Partner's Interest to be a Substituted Limited Partner in
the Partnership pursuant to and subject to the terms of paragraph 8.3; and
(m) act as the "tax matters partner" of the
Partnership, as such term is defined in Section 6231(a)(7) of the Code, and
exercise any authority permitted the tax matters partner under the Code.
5.1.2 Subject to the Consent of a majority in Interest of the
Class X Limited Partners, the General Partner shall have the right, at its
option, to cause the Partnership to borrow money from any Person (including a
Partner) for any Partnership purpose. The Partnership will not, however,
secure such borrowings with Partnership assets, nor will it assign its right to
receive the Unused Capital Commitments from time to time of any of the
Partners.
5.1.3 Third parties dealing with the Partnership may rely
conclusively upon any certificate of the General Partner to the effect that it
is acting on behalf of the Partnership. The signature of the General Partner
shall be sufficient to bind the Partnership in every manner to any agreement or
on any document, including, but not limited to, documents drawn or agreements
made in connection with the acquisition or disposition of any Investments or
other properties in furtherance of the purposes of the Partnership.
5.1.4 Notwithstanding the provisions of paragraph 5.1.1, the
General Partner shall not do any of the following:
(a) conduct the operations of the Partnership or
FrontierVision or do any act in a manner inconsistent with the
37
<PAGE> 42
provisions of this Agreement or the FrontierVision Partnership Agreement;
(b) take any action which would make it
impossible to carry on the ordinary operations of the Partnership or
FrontierVision, except as otherwise provided in this Agreement or the
FrontierVision Partnership Agreement;
(c) possess Partnership property, or assign any
rights in Partnership property, for other than a Partnership purpose;
(d) take any action which requires approval of the
Limited Partners, or any class of Limited Partners, unless such action shall
first have been so approved;
(e) permit the Partnership to take any action or
operate in any manner as (i) would cause the Partnership to be classified as an
"investment company" for purposes of the Investment Company Act of 1940 (as
amended from time to time) or (ii) would cause all or any portion of the assets
of the Partnership to constitute "plan assets" under ERISA or the Code;
(f) admit a Person as a Partner, except as
otherwise provided in this Agreement;
(g) transfer its Interest as General Partner of the
Partnership; or
(h) amend this Agreement, except as otherwise
provided in Article X.
5.2 Duties and Obligations of the General Partner.
5.2.1 The General Partner shall take all actions and
perform all duties and obligations which may be necessary or appropriate in
connection with the management, conduct and operation of the business and
affairs of the Partnership or FrontierVision in accordance with the terms and
provisions of this Agreement, the FrontierVision Partnership Agreement and
applicable laws and regulations.
5.2.2 The General Partner will use its reasonable best
efforts to find opportunities for investment in Investments.
5.2.3 The General Partner shall take all action which may be
necessary or appropriate for the continuation of the Partnership's and
FrontierVision's valid existence and authority to do business as a limited
partnership under the laws of the State of Delaware and of each other
jurisdiction in which such authority to do business is, in the judgment of the
General Partner, necessary or advisable to protect the limited liability of the
Limited Partners and the limited partners of
38
<PAGE> 43
FrontierVision, or to enable the Partnership or FrontierVision to conduct the
business in which it is engaged.
5.2.4 The General Partner shall at all times conduct
its affairs and the affairs of all of its Affiliates and of the Partnership and
FrontierVision in such a manner that, except as otherwise provided herein or in
the FrontierVision Partnership Agreement, no Limited Partner, no limited
partner of FrontierVision, no member of the FrontierVision Advisory Committee
and no Affiliate of any of the foregoing will have any personal liability to
third parties with respect to any liability or obligation of the Partnership or
FrontierVision.
5.2.5 The General Partner shall prepare or cause to
be prepared and shall file on or before the due date (or any extension thereof)
any federal, state or local tax returns required to be filed by the
Partnership. The General Partner shall cause the Partnership to pay any taxes
payable by the Partnership (it being understood that the expenses of
preparation and filing of such tax returns, and the amounts of such taxes, are
expenses of the Partnership and not of the General Partner); provided, however,
that the General Partner shall not be required to cause the Partnership to pay
any tax so long as the General Partner or the Partnership is in good faith and
by appropriate legal proceedings contesting the validity, applicability or
amount thereof and such contest does not materially endanger any right or
interest of the Partnership.
5.2.6 The General Partner shall be under a fiduciary
duty to conduct the affairs of the Partnership and its dealings with the
Limited Partners in the best interests of the Partnership and the Limited
Partners, including the safekeeping and use of all Partnership funds and assets
for the exclusive benefit of the Partnership.
5.3 Other Businesses of Partners.
5.3.1 The General Partner shall be a single-purpose
entity, whose sole purpose and activity shall be to act as general partner of
the Partnership. The General Partner shall not acquire or hold any investment,
other than its Interest in the Partnership. The General Partner shall, and
shall cause each GP Principal to, devote to the Partnership, FrontierVision and
to Persons in which FrontierVision acquires or holds Investments such time as
shall be necessary to conduct the business and affairs of the Partnership and
FrontierVision in an appropriate manner which, in the case of James C. Vaughn
and John S. Koo, shall be his full business time except, in the case of Mr.
Vaughn, for his responsibilities in assisting in the sale of the partnership
interests of Triax Associates V, L.P. Until the earlier of (i) the expiration
of the term of the Partnership (including any extension thereof) and (ii) the
dissolution of the Partnership, the General Partner shall cause each GP
Principal
39
<PAGE> 44
not to, directly or indirectly, acquire, for its or his own account, an
investment which is of a character and in an amount consistent with the
purposes of the Partnership or FrontierVision or be a general partner or
principal of any other entity having purposes substantially similar to the
principal purpose of the Partnership or FrontierVision. Any Class X or Class Z
Limited Partner may engage in or possess any interest in other business
ventures of any kind, nature or description, independently or with others,
whether such ventures are competitive with the Partnership, FrontierVision or
otherwise. Neither the Partnership nor any Partner shall have any rights or
obligations by virtue of this Agreement or the partnership relationship created
hereby in or to such independent ventures or the income or profits or losses
derived therefrom. The Limited Partners Consent that the General Partner may
offer to any Limited Partner, outside the Partnership and in its individual
capacity, the opportunity to make loans to any Person in which the Partnership
acquires or holds investments, and no other Partner shall have any right to
participate, or any interest, therein by virtue of this Agreement or the
partnership relationship created hereby.
5.4 Authority of Partners to Deal with
Partnership.
5.4.1 Without limiting the other powers set forth
herein, the General Partner is expressly authorized, in the name and on behalf
of FrontierVision, to enter into the Vaughn Employment Agreement and the Koo
Employment Agreement, and to perform and observe each and every one of the
covenants, promises, obligations, duties and liabilities applicable to the
Partnership or FrontierVision as set forth in such agreements.
5.4.2 Except as expressly provided in Article IV and
in the Vaughn Employment Agreement and the Koo Employment Agreement, neither
the General Partner nor any GP Principal nor any of its Affiliates shall
receive, directly or indirectly, any salary, fees, profits, distributions or
compensation from the Partnership or FrontierVision, other than salaries,
bonuses and other benefits that are approved by the FrontierVision Advisory
Committee.
5.5 Partnership Expenses.
5.5.1 The Partnership shall pay all expenses of
operating and maintaining the Partnership and its assets and business (which
expenses shall include, without limitation, legal and accounting fees of the
Partnership).
5.6 Exculpation and Indemnification.
5.6.1 In the absence of fraud, breach of fiduciary
duty, willful misconduct (which shall include, but not be limited to, any
willful breach of this Agreement) or gross negligence,
40
<PAGE> 45
neither the General Partner nor its officers, directors, employees, agents or
stockholders (including when any of the foregoing is serving at the request of
the General Partner on behalf of the Partnership or FrontierVision as a
partner, officer, director, employee or agent of any other Person) (in each
case, an "Indemnitee") shall be liable to any other Partner or the Partnership
(i) for any mistake in judgment, (ii) for any action taken or omitted to be
taken in good faith and in a manner reasonably believed by such Person to be in
the best interests of the Partnership and to be within the scope of its
authority conferred by this Agreement, or (iii) for any loss due to the
mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any
broker or other agent, provided that such broker or other agent shall have been
selected and supervised by the General Partner or other Indemnitee with
reasonable care.
5.6.2 The Partnership shall, to the fullest extent
permitted by law, out of its assets and not out of the assets of the General
Partner, indemnify and hold harmless each of the Indemnitees and the
Liquidating Trustee (and each of their respective heirs and legal and personal
representatives) who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than any action by or in the
name of the Partnership), by reason of any action taken or omitted to be taken
in connection with or arising out of such Person's activities on behalf of the
Partnership or in furtherance of the interests of the Partnership, if such
actions were taken or omitted to be taken in good faith and in a manner
reasonably believed by such Person to be in the best interests of the
Partnership and to be within the scope of the authority conferred by this
Agreement, against losses, damages and expenses for which such Person has not
otherwise been reimbursed (including reasonable attorneys' fees, judgments,
fines and amounts paid in settlement) actually and reasonably incurred by such
Person in connection with such action, suit or proceeding; provided, that any
Person entitled to indemnification from the Partnership hereunder shall obtain
the written consent of the General Partner (which consent shall not be given
without the Consent of a majority in Interest of the Class X Limited Partners)
prior to entering into any compromise or settlement which would result in an
obligation of the Partnership to indemnify such Person. The Partnership, in
the discretion of the General Partner (but subject to the Consent of a majority
in Interest of the Class X Limited Partners), may advance monies of the
Partnership to any Indemnitee who is or may be subject to a claim for which
indemnification may be required under this paragraph 5.6.2 to cover attorneys'
and accountants' fees and disbursements and other similar defense costs or
expenses. Such advances shall be conditioned on receipt by the Partnership of
an undertaking by the Indemnitee to return monies so advanced if it ultimately
is determined that indemnification is not required under this paragraph 5.6.2.
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ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
Transferability of General Partner's Interest
7.1 Assignment of the General Partner's Interest. The
General Partner shall not (i) until the dissolution of the Partnership
otherwise occurs, take any step to voluntarily dissolve itself, or to
voluntarily resign or withdraw from the Partnership or to voluntarily cause a
dissolution of the Partnership or (ii) directly or indirectly assign, sell,
exchange, transfer, pledge, hypothecate or otherwise dispose of all or any
fraction of its Interest as a General Partner in the Partnership, or enter into
any agreement as a result of which any other Person shall have a general
partner's interest in the Partnership. Without limiting the generality of the
foregoing, each of the following shall constitute an indirect Transfer which is
prohibited by this paragraph 7.1: any Transfer, issuance of additional
interests in the General Partner or other transaction as a result of which
either James C. Vaughn or John S. Koo shall cease to own, directly or
indirectly, substantially all of the economic and voting interests in
FrontierVision Inc. which he owns on the date hereof, other than as a result of
the Incapacity of Mr. Vaughn or Mr. Koo. The General Partner shall be liable
in damages to the Limited Partners for any breach of the provisions of this
paragraph 7.1.
7.2 Removal of the General Partner.
7.2.1 The General Partner may be removed from the
Partnership (i) at any time after the occurrence of a Vaughn Expiration Date,
by Consent of a majority in Interest of the Attributable Class X and Class Y
Limited Partners; or (ii) at any time for "cause," by Consent of a majority in
Interest of the Attributable Class X Limited Partners. In addition to, and not
in limitation of, the foregoing, in the event the Partnership shall or would
suffer an FCC Regulatory Issue due to the status or condition of any GP
Principal or any of his Affiliates, or due to any GP Principal or any of his
Affiliates having taken or failed to take any action, then the General Partner
shall cause the GP Principal to, and the GP Principal shall, divest all direct
and indirect interests in the Partnership. Any removal of the General Partner
pursuant to this paragraph 7.2.1 shall be subject to the Partnership obtaining
any required approval of the FCC or any other regulatory authority, which the
Partnership and the General Partner agree to diligently and expeditiously seek.
For purposes of this paragraph 7.2.1:
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(i) a "Vaughn Expiration Date"
shall mean the earliest of the following dates: (a) the date
on which James C. Vaughn is neither a General Partner nor a GP
Principal; (b) the date on which the Vaughn Employment
Agreement is terminated pursuant to its terms; and (c) the
date on which James C. Vaughn ceases to own beneficially for
his own account, directly or indirectly, at least one of the
following: (I) at least two thirds of the Special
Distribution or (II) at least two thirds of the interests in
the Partnership that correlate to the Special Distribution;
and
(ii) "cause" for removal of the
General Partner shall mean (a) any action by the General
Partner or any GP Principal which constitutes dishonesty, a
violation of law or a fraud against the Partnership, (b) the
indictment of the General Partner or any GP Principal for a
felony, (c) willful misconduct, drunkenness or abuse of any
controlled substance by the General Partner or any GP
Principal, (d) any material violation by the General Partner
or any GP Principal of its fiduciary obligations to the
Partnership or the Partners, (e) any material breach by the
General Partner or any GP Principal of the terms of this
Agreement, including, without limitation, any failure by Mr.
Vaughn or Mr. Koo to make payments in respect of his Capital
Commitment as provided in paragraphs 3.1.1 and 3.11, or (f)
the Partnership would or shall suffer an FCC Regulatory Issue
due to the status or condition of the General Partner, any GP
Principal or any of their Affiliates or due to the General
Partner, any GP Principal or any of their Affiliates having
taken or failed to take any action, unless such FCC Regulatory
Issue is cured within 15 days after the General Partner
becomes aware thereof.
The foregoing shall not constitute a waiver or exculpation by the Partnership
or any Partner of any liability which the General Partner may have to the
Partnership or any Partner in respect of the cause for its removal.
7.2.2 A majority in Interest of the Attributable Class X
Limited Partners shall have the power to appoint a new General Partner in place
of a General Partner that is removed pursuant to
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paragraph 7.2.1. If a majority in Interest of the Attributable Class X Limited
Partners so elect to appoint a new General Partner, the effective time of
removal of the removed General Partner will not occur until immediately after
the successor General Partner has been admitted to the Partnership, and such
successor General Partner hereby is authorized to continue the business of the
Partnership.
7.2.3 Upon the removal of FrontierVision Inc. as the General
Partner then either (i) at the election of a majority in Interest of the
Attributable Class X Limited Partners the Partnership shall redeem the interest
of FrontierVision Inc. in the Partnership for cash at a price equal to the fair
market value thereof, which redemption shall be consummated promptly after the
determination of such fair market value or (ii) in the absence of such
election, the General Partner's interest in the Partnership shall be converted
as of the effective date of such removal to that of a nonvoting, nonconvertible
Limited Partnership Interest in respect of which its Capital Commitment,
Capital Contributions, and rights to allocations and distributions shall each
equal its Capital Commitment, Capital Contributions, and rights to allocations
and distributions as stated herein and made hereunder (subject to any reduction
of such rights pursuant to the terms of this Agreement and the FrontierVision
Partnership Agreement by reason of the removal or otherwise). For purposes of
this paragraph 7.2.3, the fair market value of the interest of FrontierVision
Inc. in the Partnership shall be agreed upon by FrontierVision Inc. and a
majority in Interest of the Attributable Class X Limited Partners, and if such
agreement is not achieved, then the fair market value of such interest shall be
determined in accordance with the method of appraisal described in paragraph
7.2.4, with FrontierVision Inc. and a majority in Interest of the Attributable
Class X Limited Partners each selecting one appraiser. One-half of the costs
of the appraisals shall be borne by the Partnership and one-half shall be borne
by FrontierVision Inc.
7.2.4 Determinations of fair market value under paragraphs
3.7.5 and 7.2.3 shall be made by two independent appraisers selected as set
forth herein. If the two appraisals set the fair market value at amounts which
do not differ by more than twenty percent (20%) of the lower of the two, the
mean between them shall constitute fair market value; and if such differential
shall be greater, a third appraiser shall be appointed by mutual agreement of
the two appraisers for the purpose of choosing which of the two appraisals more
nearly reflects fair market value. The appraisal so designated shall
constitute fair market value.
7.3 Liability of Person Ceasing to be General Partner. Any
Person which shall cease to be a General Partner of the Partnership shall
remain liable for obligations and liabilities
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incurred on account of its activities as General Partner prior to the time it
ceased to be a General Partner, but it shall be free of any obligation or
liability as a General Partner incurred on account of the activities of the
Partnership from and after the time it ceased to be a General Partner.
ARTICLE VIII
Transferability of Limited Partnership Interests
8.1 Restrictions on Transfers of Interests.
8.1.1 No sale, exchange, transfer, assignment, pledge,
hypothecation or other disposition (herein collectively called a "Transfer") of
all or any fraction of a Limited Partnership Interest may be made except (i)
with the prior written consent of the General Partner, which consent may be
withheld in the sole discretion of the General Partner, (ii) in the case of a
Transfer by a Class Y Limited Partner, with the prior Consent of a majority in
Interest of the Class X Limited Partners, which Consent may be withheld in the
sole discretion of the Class X Limited Partners, and (iii) in accordance with
and as specifically permitted by the provisions of this Agreement; provided,
however, that (v) a Transfer by operation of law to the estate or personal
representative of a deceased or incompetent individual Limited Partner (which
estate or representative will then be subject to the same restrictions on
Transfer as all other Limited Partners) shall not require the consent of the
General Partner, but shall, to the fullest extent permitted by law, in all
respects be subject to paragraph 8.1.3; (w) subject to paragraph 8.1.3, any
Limited Partner which is a corporation may at any time Transfer all or a
portion of its Interest to its ultimate parent corporation (a "Parent") of
which it is a direct or indirect wholly owned subsidiary and a member of the
same consolidated group for federal income tax purposes or to any wholly owned
direct or indirect subsidiary of such Parent which is a member of the same
consolidated group for federal income tax purposes (a "Controlled Subsidiary"),
it being understood that (1) unless the General Partner otherwise consents
(which consent shall not unreasonably be withheld), a Limited Partner making
such a Transfer shall thereafter remain liable (jointly and severally with the
transferee) for its Unused Capital Commitment and (2) with respect to a
Controlled Subsidiary, the later sale, liquidation or spinoff of such
Controlled Subsidiary or other transaction in which the Parent ceases to
control, directly or indirectly, 100% of the equity of the Controlled
Subsidiary would constitute an indirect sale of an Interest, which sale may
only be made in compliance with the terms and restrictions set forth in this
Agreement; (x) JPMIC may Transfer up to 25% of its Interests as a Class X
Limited Partner and a Class Z Limited Partner to a limited partnership of which
an Affiliate of JPMIC is the general partner; and (y) the General Partner shall
not
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unreasonably withhold its consent to a Transfer by a Limited Partner (i) that
has suffered a Regulatory Disability or (ii) that is a Nonconforming Partner.
8.1.2 In addition to, and not in limitation of, the
provisions of paragraph 8.1.1, except as the General Partner, with the Consent
of a majority in Interest of the Class X Limited Partners, may otherwise
permit, and except for a Transfer pursuant to paragraph 3.6 or the provisos to
paragraph 8.1.1, a Limited Partner may Transfer all or a portion of its Limited
Partnership Interest only for a cash purchase price and in accordance with the
following procedures:
(i) Such Limited Partner must provide 45
days' written notice to the General Partner and to all of the Limited
Partners of such proposed Transfer and the proposed cash purchase
price (the "Asking Price") for the Interest (or portion thereof) it is
seeking to Transfer (the "Offered Securities").
(ii) During the first 30 days of such 45-day
period, the General Partner and each of the Limited Partners (other
than any Defaulting Partner) will have the right to propose to acquire
the Offered Securities or some portion thereof for the Asking Price,
and if the Partners as a group propose to acquire more than the
Offered Securities, then each such Partner shall have the right to
propose to acquire its pro rata portion of the Offered Securities
(based on the proportion of the Capital Commitment made by such
Partner to the Partnership to the Capital Commitments made to the
Partnership by all Partners proposing to acquire a portion of the
Offered Securities); provided, however, that the Limited Partner that
proposes to make the Transfer shall not be obligated to sell any
portion of the Offered Securities to any Partner unless the Partners
have collectively proposed to purchase all of the Offered Securities.
(iii) If, and only to the extent that, the
Offered Securities are not acquired by the Partners at the end of such
45-day period, then such Limited Partner may Transfer the Offered
Securities within 90 days, at not less than the Asking Price, to a
Person approved by the General Partner.
(iv) If such Limited Partner wishes to
Transfer the Offered Securities at a purchase price of less than the
Asking Price, it must first follow the procedures set forth in clauses
(i)-(iii) above with the new purchase price such Limited Partner is
seeking becoming the Asking Price.
8.1.3 Notwithstanding any other provisions of this paragraph
8.1, no Transfer of all or any fraction of a Limited
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Partnership Interest may be made unless in the opinion of responsible counsel
(who may be counsel for the Partnership), satisfactory in form and substance to
the General Partner (which opinion may be waived, in whole or in part, at the
discretion of the General Partner):
(i) such Transfer, when added to the total of all
other Transfers within the preceding twelve (12) months, would not
result in the Partnership being considered to have terminated within
the meaning of Section 708 of the Code;
(ii) such Transfer would not violate the Securities
Act of 1933, as amended, or any state securities or "Blue Sky" laws
applicable to the Partnership or the Interest to be Transferred;
(iii) such Transfer would not cause the Partnership
to lose its status as a partnership for federal income tax purposes or
cause the Partnership to become subject to the Investment Company Act
of 1940, as amended;
(iv) such Transfer would not cause all or any
portion of the assets of the Partnership to constitute "plan assets"
under ERISA or the Code; and
(v) such Transfer would not result in an FCC
Regulatory Issue.
The General Partner agrees to cooperate with any Limited Partner making a
Transfer by providing such records and other factual information regarding the
Partnership as may be reasonably requested with respect to any proposed
Transfer. Each Limited Partner hereby agrees that it will not Transfer all or
any fraction of its Interest in the Partnership, except as permitted by this
Agreement.
8.1.4 Each Limited Partner agrees that it will pay all
reasonable expenses, including attorneys' fees, incurred by the Partnership in
connection with a Transfer of a Limited Partnership Interest (or portion
thereof) by that Limited Partner.
8.1.5 Any Person which acquires all or any fraction of the
Interest of a Limited Partner and which is admitted to the Partnership as a
Limited Partner shall assume all or a proportionate fraction of the Capital
Account of such Limited Partner and shall be obligated (i) to pay to the
Partnership the appropriate portion of any amounts thereafter becoming due in
respect of the Capital Commitment made by its predecessor in Interest and (ii)
to return to the Partnership amounts previously wrongfully distributed to its
predecessor in Interest, in accordance with and subject to the limitations of
paragraph
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3.5.2, as if it had received the distributions made to its predecessor in
Interest. Each Limited Partner agrees that, notwithstanding the Transfer of
all or any fraction of its Limited Partnership Interest, as between it and the
Partnership, it will remain liable for its Unused Capital Commitment and to
return to the Partnership amounts previously wrongfully distributed to it in
accordance with and subject to the limitations of paragraph 3.5.2 as required
to be paid or returned with respect to its Interest prior to the time, if any,
when the purchaser, assignee or transferee of such Interest, or fraction
thereof, is admitted as a Substitute Limited Partner and, subject to clause (w)
of paragraph 8.1.1 and subject to paragraph 8.1.4, to the extent permitted by
law, a transferring Limited Partner will not have any liability for amounts
required to be paid with respect to its Interest after the time, if any, when
the purchaser, assignee or transferee of such Interest, or fraction thereof, is
admitted as a Substituted Limited Partner.
8.2 Assignees.
8.2.1 The Partnership shall not recognize for any purpose any
purported Transfer of all or any fraction of the Interest of a Limited Partner
unless the provisions of paragraph 8.1 shall have been complied with and there
shall have been filed with the Partnership a dated notice of such Transfer, in
form satisfactory to the General Partner, executed and acknowledged by both the
seller, assignor or transferor and the purchaser, assignee or transferee, and
such notice (i) contains the acceptance by the purchaser, assignee or
transferee of all of the terms and provisions of this Agreement, including the
provisions of paragraph 12.1 and its agreement to be bound thereby, (ii)
represents that such Transfer was made in accordance with all applicable laws
and regulations and (iii) contains a power of attorney granted by the
purchaser, assignee or transferee to the General Partner to execute this
Agreement and all amendments hereto on its behalf.
8.2.2 Unless and until an assignee of an Interest becomes a
Substituted Limited Partner, such assignee shall not be entitled to give
Consents with respect to such Interest.
8.2.3 Subject to paragraph 8.1.5, any Limited Partner which
shall Transfer all of its Interest shall cease to be a Limited Partner, except
that, subject to paragraph 8.3.3, unless and until a Substituted Limited
Partner is admitted in its stead, such assigning Limited Partner shall not
cease to be a Limited Partner or cease to have any of the rights or obligations
of a Limited Partner hereunder.
8.2.4 Anything herein to the contrary notwithstanding, both
the Partnership and the General Partner shall be entitled to treat the assignor
of a Limited Partnership Interest as the absolute owner thereof in all
respects, and shall incur no
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liability for distributions made in good faith to it, until such time as a
written assignment that conforms to the requirements of this Article VIII has
been received by the Partnership and accepted by the General Partner.
8.2.5 A Person who is the assignee of all or any fraction of
the Interest of a Limited Partner as permitted hereby but does not become a
Substituted Limited Partner and who desires to make a further Transfer of such
Interest, shall be subject to all of the provisions of this Article VIII to the
same extent and in the same manner as any Limited Partner desiring to make a
Transfer of its Interest.
8.3 Substituted Limited Partners.
8.3.1 No Limited Partner shall have the right to substitute a
purchaser, assignee, transferee, heir, legatee, distributee or other recipient
of all or any fraction of such Limited Partner's Interest as a Limited Partner
in its place. Any such purchaser, assignee, transferee, heir, legatee,
distributee or other recipient of an Interest (whether pursuant to a voluntary
or involuntary Transfer) shall be admitted to the Partnership as a Substituted
Limited Partner only (i) with the prior written consent of the General Partner,
which consent may be withheld in the sole discretion of the General Partner
(except that such consent shall not unreasonably be withheld in the case of a
Transfer described in clause (w) of paragraph 8.1.1 by a Limited Partner that
is a small business investment corporation if such Limited Partner determines
in good faith that the holding by it of its Limited Partnership Interest may be
inconsistent with applicable provisions of law or regulation, and no consent
shall be required in the case of a Transfer described in clause (x) of
paragraph 8.1.1), (ii) in the case of a Class Y Limited Partner, with the prior
Consent of a majority in Interest of the Class X Limited Partners, which
Consent may be withheld in the sole discretion of the Class X Limited Partners,
(iii) by satisfying the requirements of paragraphs 8.1 and 8.2 and (iv) upon an
amendment to this Agreement, Schedule A, and the Partnership's certificate of
limited partnership, if required, filed in the proper records of each
jurisdiction in which such filing is necessary to qualify the Partnership to
conduct business or to preserve the limited liability of the Limited Partners.
8.3.2 Each Substituted Limited Partner, as a condition to its
admission as a Limited Partner, shall execute and acknowledge such instruments,
in form and substance satisfactory to the General Partner, as the General
Partner reasonably deems necessary or desirable to effectuate such admission
and to confirm the agreement of the Substituted Limited Partner to be bound by
all the terms and provisions of this Agreement with respect to the Limited
Partnership Interest acquired. All reasonable expenses, including attorneys'
fees not paid by the
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assignor Partner pursuant to paragraph 8.1.4 that are incurred by the
Partnership in this connection shall be borne by such Substituted Limited
Partner.
8.3.3 Until an assignee shall have been admitted to the
Partnership as a Substituted Limited Partner pursuant to paragraph 8.3.1, such
assignee shall only be entitled to the rights of an assignee of a Limited
Partnership Interest under this Agreement.
8.3.4 The Limited Partners hereby Consent to the admission as
a Substituted Limited Partner of any Person so admitted in accordance with this
paragraph 8.3.
8.4 Incapacity of a Limited Partner; Transfer Procedures.
8.4.1 In the event of the Incapacity of a Limited Partner, to
the fullest extent permitted by law, the General Partner may require the
Transfer of the Interest of such Limited Partner. The General Partner shall
provide at least 60 days' notice of such Transfer. Such notice shall also
specify the effective date of such Transfer (the "Required Transfer Date"). In
the event of the Incapacity of a Limited Partner, the Partnership shall not be
dissolved (as long as there is at least one remaining Limited Partner), and the
Limited Partner's trustee in bankruptcy or other legal representative shall
have only the rights of a transferee to receive Partnership distributions
applicable to the Interest of such Incapacitated Limited Partner as provided
herein. Any Transfer from such trustee in bankruptcy or legal representative
shall be subject to the provisions of this Agreement.
8.4.2 The General Partner shall designate a purchaser of the
Interest required to be Transferred, and such Interest shall be acquired by the
purchaser in accordance with the provisions of paragraphs 8.1.3, 8.1.5, 8.2 and
8.3 by the payment to the transferring Limited Partner within 90 days of the
Required Transfer Date of an amount in cash equal to any positive balance in
the transferring Limited Partner's Capital Account, after adjustment pursuant
to the following sentence. Solely for the purpose of determining the purchase
price for the Interest required to be Transferred, the Capital Account of the
transferring Limited Partner shall be adjusted as of any Required Transfer Date
to reflect income, gains and losses through the Required Transfer Date and the
fair market value of the Partnership's assets as of the Required Transfer Date.
The Partnership will bear, or will cause the purchaser of the Interest to bear,
all reasonable expenses, including attorneys' fees, incurred by the Partnership
in connection with the Transfer of such Interest. If the General Partner
determines to cause any Transfer by a Limited Partner of all or any portion of
its Limited Partnership Interests in accordance with the terms of
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this Agreement, each other Partner (other than a Defaulting Partner) shall have
the right to purchase a percentage of such Interest equal to the percentage
that such Partner's Capital Commitment bears to the Capital Commitments of all
Partners (other than the Defaulting Partner) on the same terms as those set
forth in this paragraph 8.4.2 within the 30 days' next following the notice of
Transfer given by the General Partner in accordance with paragraph 8.4.1. If
any Partner (other than a Defaulting Partner) does not elect to purchase its
pro rata portion of such Interest, such portion shall be reoffered to the other
Partners (other than a Defaulting Partner) within the 60 days' next following
the notice of Transfer given by the General Partner in accordance with
paragraph 8.4.1. Notwithstanding anything in this paragraph 8.4.2 to the
contrary, if the Partners (other than Defaulting Partners) elect to purchase
less than the entire Interest sought to be sold by the General Partner, the
General Partner may elect, in its sole discretion, to (i) permit the Partners
(other than any Defaulting Partners) to purchase a portion of such Interest,
(ii) sell such Interest in its entirety to any Partner or Partners willing to
purchase such entire Interest or (iii) sell such Interest in its entirety to a
Person not a Partner.
8.5 Transfers During a Fiscal Year. In the event of the
Transfer of a Partner's Interest at any time other than the end of a Fiscal
Year, allocations pursuant to paragraph 4.4 shall be divided between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year and by using any conventions permitted by law and
selected by the General Partner, in its discretion. Notwithstanding the
foregoing, if during the Fiscal Year in which there is a Transfer of an
Interest, the Partnership shall derive substantial income from activities
outside of the ordinary course of business (as determined by the General
Partner, in its discretion), the allocations pursuant to paragraph 4.4 shall be
divided between the transferor and transferee by taking into account the date
on which such Transfer actually occurred.
ARTICLE IX
Dissolution, Liquidation and Termination of the Partnership
9.1 Dissolution.
The Partnership shall be dissolved and its affairs wound up
upon the happening of any of the following events:
(i) the expiration of its term as set
forth in paragraph 2.5;
(ii) the Incapacity, withdrawal, removal
or other event of withdrawal (as defined in the Partnership
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Act) of a General Partner, unless (x) at the time thereof there is at
least one remaining General Partner and the remaining General
Partner(s) unanimously elect pursuant to the authority hereby granted
to carry on the business of the Partnership or (y) within 90 days
thereafter, Class X and Class Y Limited Partners representing not less
than a majority in Interest of the remaining Partners (based on their
profits interests and capital interests), or such greater percentage
in Interest of the remaining Partners as may be required under the
Partnership Act, agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of such
event, of one or more additional general partners;
(iii) prior to the date of the UVC
Closing, the written Consent of 75 percent in Interest of the Class X
Limited Partners, and on and after the date of the UVC Closing, the
written Consent of all Partners; or
(iv) the entry of a decree of judicial
dissolution under Section 17-802 of the Partnership Act.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Partnership shall not terminate
until the winding up of the Partnership has been completed, the assets of the
Partnership have been distributed as provided in paragraph 9.2 and the
certificate of limited partnership of the Partnership has been canceled.
9.2 Liquidation.
9.2.1 Upon dissolution of the Partnership, the General
Partner or, if there is none, a Person approved by a majority in Interest of
the Attributable Class X Limited Partners to act as a liquidating trustee (the
"Liquidating Trustee"), shall wind up the affairs of the Partnership and
proceed within a reasonable period of time to sell or otherwise liquidate the
assets of the Partnership and, after paying or making provision by the setting
up of reasonable reserves for all liabilities to creditors of the Partnership,
to distribute the assets among the Partners in accordance with the provisions
for the making of distributions set forth in this Agreement.
9.2.2 Notwithstanding paragraph 9.2.1 (but subject to paying
or making provision for all liabilities to creditors), in the event that the
General Partner or the Liquidating Trustee shall determine that a sale or other
disposition of part or all of the assets of the Partnership would cause undue
loss to the Partners or otherwise be impractical or undesirable, the General
Partner or the Liquidating Trustee may either defer liquidation of, and
withhold from distribution for a reasonable time, any such assets, or
distribute part or all of such assets, pro rata
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to the Partners in kind (subject to the provisions of paragraph 9.2.5).
9.2.3 The Limited Partners shall not be responsible for
restoring any negative balance in their Capital Accounts, but shall be subject
to the obligations set forth in paragraph 3.5.2.
9.2.4 The assets of the Partnership or the proceeds from
liquidation thereof shall be distributed in the following manner:
(i) First, to pay or make reasonable
provision to pay the liabilities and debts of the Partnership
(including the Special Notes (to the extent otherwise permitted by
law), including all contingent, conditional or unmatured claims and
obligations, and including the expenses of liquidation), other than
liabilities for distributions to Partners; and
(ii) Thereafter, all remaining assets or
proceeds shall be paid or distributed to all Partners in accordance
with the provisions of paragraph 4.2.
9.2.5 In any such liquidation, the General Partner or the
Liquidating Trustee, as applicable, may distribute (after payment of, or the
reasonable provision for, the Partnership's obligations) the assets of the
Partnership in cash or ratably in kind or any combination thereof. Each
distribution in kind of securities, assets or other property shall be
distributed in accordance with paragraph 4.2 as if there had been a sale of
such property for an amount of cash equal to the fair market value of such
property followed by an immediate distribution of such cash proceeds.
Distributions consisting of cash, securities, assets and/or other property
shall be made, to the extent practicable, in pro rata portions as to each
Partner receiving such distributions. For purposes of the preceding sentence,
securities, assets or other property having a different tax basis than like
securities, assets or other property shall be considered to be securities,
assets or other property of a different type. Notwithstanding the foregoing,
in no event shall any distribution of securities, assets or other property be
made to any Limited Partner to the extent such Limited Partner would be
prohibited by applicable law or regulation from holding such securities, assets
or other property. In such event, the General Partner or Liquidating Trustee
shall vary the method of distribution in such equitable manner as it may, in
its good faith discretion, determine. In the event of any proposed
distribution of voting securities, to the extent practicable each Limited
Partner shall be offered the opportunity to acquire comparable nonvoting
securities or convertible nonvoting securities, as such Limited Partner may
elect. To the extent deemed desirable by the General Partner or the
Liquidating Trustee, distributions may be made into a liquidating trust or
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other appropriate entity, and reserves may be established for contingencies.
9.2.6 When the General Partner or the Liquidating Trustee has
complied with the foregoing liquidation plan, the General Partner or the
Liquidating Trustee, on behalf of all Partners, shall execute, acknowledge and
cause to be filed an instrument evidencing the cancellation of the certificate
of limited partnership of the Partnership.
ARTICLE X
Amendments
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 This Agreement is subject to amendment only with the
written Consent of the General Partner, a majority in Interest of the Class X
and Class Z Limited Partners, and a majority in Interest of the Class Y Limited
Partners; provided, however, that no amendment to this Agreement may:
(i) add to, detract from or otherwise modify the
purposes of the Partnership;
(ii) increase the Capital Commitment of any Limited
Partner; convert a Limited Partnership Interest into a General
Partner's Interest; modify the limited liability of a Limited
Partner; or increase the liabilities or responsibilities of any
Limited Partner under this Agreement, in each case, without the
Consent of each such adversely affected Limited Partner;
(iii) alter or change any special rights of the Class X
Limited Partnership Interests, Class Y Limited Partnership
Interests or Class Z Limited Partnership Interests so as to affect
them adversely, without the Consent of a majority in Interest of
the Class X Limited Partners, Class Y Limited Partners or Class Z
Limited Partners, as applicable; or
(iv) amend any provisions hereof which require the
Consent, action or approval of a specified percentage in
Interest of Limited Partners without the Consent of such
specified percentage in Interest of Limited Partners.
Notwithstanding anything to the contrary herein, except for an amendment
described in this paragraph 10.1.1, the Class Z Limited Partners shall not be
entitled to participate in any vote or Consent of the Limited Partners with
respect to any matter.
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<PAGE> 59
10.1.2 Notwithstanding the limitations of paragraph 10.1.1,
this Agreement may be amended from time to time by the General Partner without
the Consent of any of the Limited Partners (i) to add to the representations,
duties or obligations of the General Partner or surrender any right or power
granted to the General Partner herein; (ii) to admit one or more additional
Limited Partners or one or more Substituted Limited Partners, or withdraw one
or more Limited Partners, in accordance with the terms of this Agreement; (iii)
to amend Schedule A hereto to provide any necessary information regarding any
Partner, any additional or successor General Partner or any additional or
Substituted Limited Partner; (iv) to amend paragraph 4.4 under the
circumstances set forth in, and if the Consent of a majority in Interest of the
Class X Limited Partners has been obtained in accordance with, paragraph 4.4.8;
and (v) to reflect any change in the amount of the Capital Commitments of any
Partner in accordance with the terms of this Agreement; provided, however, that
no amendment shall be adopted pursuant to this paragraph 10.1.2 unless such
amendment would not, in the opinion of counsel for the Partnership (which
opinion may be waived, in whole or in part, by the General Partner) alter, or
result in the alteration of, the limited liability of the Limited Partners or
the status of the Partnership as a partnership for federal income tax purposes.
10.1.3 Upon the adoption of any amendment to this Agreement,
the amendment shall be executed by the General Partner and all of the Limited
Partners and, if required, shall be recorded in the proper records of each
jurisdiction in which recordation is necessary for the Partnership to conduct
business or to preserve the limited liability of the Limited Partners. Any such
adopted amendment may be executed by the General Partner on behalf of the
Limited Partners pursuant to the power of attorney granted in paragraph 12.1.
The General Partner shall send each Limited Partner a copy of any amendment
adopted pursuant to paragraph 10.1.1 or 10.1.2.
10.2 Amendment of Certificate. In the event this Agreement
shall be amended pursuant to this Article X, the General Partner shall amend
the certificate of limited partnership of the Partnership to reflect such
change if such amendment is required or if the General Partner deems such
amendment to be desirable and shall make any other filings or publications
required or desirable to reflect such amendment, including any required filing
for recordation of any certificate of limited partnership or other instrument
or similar document of the type contemplated by paragraph 2.6.
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<PAGE> 60
ARTICLE XI
Consents, Voting and Meetings
11.1 Method of Giving Consent. Any Consent required
by this Agreement may be given as follows:
(i) by a written Consent given by the
approving Partner at or prior to the doing of the act or thing for which
the Consent is solicited, provided that such Consent shall not have been
nullified by either (a) notice to the General Partner by the approving
Partner at or prior to the time of, or the negative vote by such approving
Partner at, any meeting held to consider the doing of such act or thing, or
(b) notice to the General Partner by the approving Partner prior to the
time the General Partner shall have received sufficient Consents to
authorize the doing of any act or thing, the doing of which is not subject
to approval at such meeting; or
(ii) by the affirmative vote by the
approving Partner to the doing of the act or thing for which the Consent is
solicited at any meeting called and held to consider the doing of such act
or thing.
11.2 Meetings. Any matter requiring the Consent of
all or any of the Limited Partners pursuant to this Agreement may be considered
at a meeting of the Partners held not less than five (5) nor more than thirty
(30) business days after notice thereof shall have been given by the General
Partner to all Partners. Such notice (i) may be given by the General Partner,
in its discretion, at any time, and (ii) shall be given by the General Partner
within thirty (30) days after receipt by the General Partner of a request for
such a meeting made by twenty percent (20%) in Interest of the Limited
Partners. Any such notice shall state briefly the purpose, time and place of
the meeting. All such meetings shall be held within or outside the State of
Delaware at such reasonable place as the General Partner shall designate and
during normal business hours.
11.3 Record Dates. The General Partner may set in
advance a date for determining the Limited Partners entitled to notice of and
to vote at any meeting. All record dates shall not be more than sixty (60)
days prior to the date of the meeting to which such record date relates.
11.4 Submissions to Limited Partners. The General
Partner shall give all of the Limited Partners notice of any proposal or other
matter required by any provision of this Agreement to be submitted for the
consideration and approval of all or any of the Limited Partners. Such notice
shall include any information required by the relevant provisions of this
Agreement. Neither the General Partner nor the Partnership
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<PAGE> 61
shall, directly or indirectly, pay or cause to be paid any remuneration, fee or
other consideration to any Limited Partner for or as an inducement to the
entering into by such Limited Partner of any waiver or amendment of any of the
terms and provisions of this Agreement or the Partnership's certificate of
limited partnership or the giving of any Consent, unless such remuneration is
concurrently paid on the same terms, in proportion to their respective Capital
Commitments, to all the then Limited Partners.
ARTICLE XII
Power of Attorney
12.1 Power of Attorney.
12.1.1 Each Limited Partner, by its execution hereof, hereby
irrevocably makes, constitutes and appoints each of the General Partner (and
when a partnership is a General Partner, each general partner of such General
Partner and when a corporation is a General Partner or a general partner of a
General Partner, the then Chairman, President and each Vice President of such
corporation) and the Liquidating Trustee, if any, in such capacity as
Liquidating Trustee for so long as it acts as such (each is hereinafter
referred to as the "Attorney"), as its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
record and file (i) this Agreement and any amendment to this Agreement which
has been adopted as herein provided; (ii) the original certificate of limited
partnership of the Partnership and all amendments thereto required or permitted
by law or the provisions of this Agreement; (iii) all certificates and other
instruments deemed advisable by the General Partner or the Liquidating Trustee,
as the case may be, to carry out the provisions of this Agreement and
applicable law or to permit the Partnership to become or to continue as a
limited partnership or partnership wherein the Limited Partners have limited
liability in each jurisdiction where the Partnership may be doing business;
(iv) all instruments that the General Partner or the Liquidating Trustee deems
appropriate to reflect a change, modification or termination in or of this
Agreement or the Partnership in accordance with this Agreement, including,
without limitation, the admission of additional Limited Partners or Substituted
Limited Partners pursuant to the provisions of this Agreement; (v) all
conveyances and other instruments or papers deemed advisable by the General
Partner or the Liquidating Trustee, including, without limitation, those to
effect the dissolution and termination of the Partnership, including a
certificate of cancellation; (vi) all fictitious or assumed name certificates
required or permitted to be filed on behalf of the Partnership;
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<PAGE> 62
and (vii) all other instruments or papers which may be required by law to be
filed on behalf of the Partnership.
12.1.2 The foregoing power of attorney:
(a) is coupled with an interest, shall be irrevocable and
shall survive and shall not be affected by the subsequent death, disability or
Incapacity of any Limited Partner;
(b) may be exercised by the Attorney, either by signing
separately as attorney-in-fact for each Limited Partner or by a single
signature of the Attorney, acting as attorney-in- fact for all of them; and
(c) shall survive the delivery of an assignment by a Limited
Partner of the whole or any fraction of its Interest; except that, where the
assignee of the whole of such Limited Partnership Interest has been approved by
the General Partner for admission to the Partnership, as a Substituted Limited
Partner, the power of attorney of the assignor shall survive the delivery of
such assignment for the sole purpose of enabling the Attorney to execute, swear
to, acknowledge and file any instrument necessary or appropriate to effect such
substitution.
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs
13.1 Records and Accounting.
13.1.1 Proper and complete records and books of account of
the business of the Partnership, including a list of the names, addresses and
Interests of all Limited Partners, shall be maintained at the Partnership's
principal place of business. Each Limited Partner and its duly authorized
representatives shall be permitted for any purpose reasonably related to such
Limited Partner's interest as a limited partner of the Partnership to inspect
the books and records of the Partnership and make copies thereof, at such
Limited Partner's expense, at any reasonable time during normal business hours.
13.1.2 The books and records of the Partnership shall be kept
in accordance with generally accepted accounting principles. The accrual basis
of accounting shall be followed by the Partnership for federal income tax
purposes. The taxable year of the Partnership shall be its Fiscal Year.
13.1.3 Notwithstanding anything in the Partnership Act
(including, without limitation, Section 17-305(b) thereof) to the contrary, the
General Partner shall have no right to keep confidential from any Class X or
Class Z Limited Partner any information concerning the Partnership.
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13.2 Annual Reports. Within ninety (90) days after the end
of each Fiscal Year, the General Partner shall cause to be delivered to each
Person who was a Limited Partner at any time during the Fiscal Year, an annual
report containing the following:
(i) financial statements of the Partnership,
including, without limitation, a balance sheet as of the end of the
Fiscal Year and statements of income, Partners' equity and cash flow
(as required by generally accepted accounting principles) for such
Fiscal Year (and including as a supplemental schedule thereto a
statement showing the Capital Account of each Partner and the amounts
of all allocations and distributions affecting the Capital Account of
each Partner during such Fiscal Year), which shall be prepared in
accordance with generally accepted accounting principles consistently
applied, and shall be reported on by a firm of independent certified
public accountants; and
(ii) a statement, in reasonable detail,
showing the amounts received by the Partnership and the computations
made by the Partnership to determine the distributions to each Partner
during such Fiscal Year.
13.3 Tax Information. Within ninety (90) days after the end
of each Fiscal Year, the General Partner will cause to be delivered to each
Person who was a Partner at any time during such Fiscal Year a Form K-1 and
such other information, if any, with respect to the Partnership as may be
necessary for the preparation of such Partner's federal income tax returns,
including a statement showing each Partner's share of income, gain or loss,
expense and credits for such Fiscal Year for federal income tax purposes. In
addition, at the request of any Limited Partner (which request may state that
it shall apply to all subsequent Fiscal Years), the General Partner will cause
to be delivered to such Limited Partner, within ninety (90) days after the end
of each Fiscal Year, the Partnership's Form 1065 (together with schedules and
attachments) and such information regarding the Partnership's state tax returns
as such Limited Partner may reasonably request.
13.4 Interim Reports. Within sixty (60) days after the end
of each of the first three (3) quarters of each Fiscal Year, the General
Partner shall cause to be delivered to each Person who was a Class X or Class Z
Limited Partner at any time during such quarter, unaudited financial statements
of the type referred to in paragraph 13.2(i).
13.5 Partnership Funds. The funds of the Partnership which
are not invested in Investments or temporary investments pursuant to paragraph
5.1.1(k) may be deposited in the name of the Partnership in one or more bank
accounts in one or more United States banking corporations with an unrestricted
surplus
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of at least $250,000,000. Withdrawals therefrom shall be made upon such
signature(s) as the General Partner may designate. No funds of the Partnership
shall be kept in any account other than a Partnership account; and funds shall
not be commingled with the funds of any other Person.
ARTICLE XIV
Representations, Warranties and Covenants of the Partners
14.1 Representations, Warranties and Covenants of
the Limited Partners. Each Limited Partner hereby severally represents,
warrants and covenants that:
(a) Such Limited Partner is
acquiring its Interest for investment for its own account and not with a view
to the resale or distribution thereof in violation of applicable securities
laws.
(b) Such Limited Partner is not
acting as a nominee or agent for any Person, and does not have any contracts,
understandings, agreements or arrangements with any Person to sell, transfer or
grant participation in its Limited Partnership Interest to any Person, other
than as disclosed in writing to the Partnership.
(c) Such Limited Partner is an
"accredited investor" (as defined in Rule 501 promulgated under the Securities
Act), can bear the economic risk of its investment for an indefinite period of
time and has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the
Partnership.
(d) Such Limited Partner has had
an opportunity to ask questions of the General Partner and its Affiliates
regarding the terms of the offering of Interests in the Partnership and other
matters pertaining to its investment in the Partnership, and all such questions
have been answered to the satisfaction of such Limited Partner.
(e) Such Limited Partner has
been afforded an opportunity to examine the books, records, financial
statements, contracts, documents and other information concerning the
Partnership, the General Partner and their respective Affiliates, and has been
given all information as has been requested by such Limited Partner in order to
evaluate the merits and risks of an investment in the Partnership.
(f) Such Limited Partner
acknowledges that: (i) an investment in the Partnership is highly speculative;
(ii) the Partnership has only recently been organized and has no
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financial or operating history; (iii) an investment in the Partnership involves
substantial risks; and (iv) no Person has attempted to minimize the risks of an
investment in the Partnership.
(g) Such Limited Partner has
performed its own due diligence with respect to its investment in the
Partnership and is relying on that due diligence in making its investment. Such
Limited Partner is not relying on the General Partner or its Affiliates with
respect to tax, suitability or other economic considerations of its investment
in the Partnership.
(h) Such Limited Partner
understands and acknowledges that its Limited Partnership Interest will not be
registered for sale under the Securities Act, in reliance upon an exemption
from the registration requirements thereof, and that its Limited Partnership
Interest will not be registered or qualified for sale under the securities or
Blue Sky laws of any other jurisdiction. Such Limited Partner understands and
acknowledges that the availability of such exemption is based, in part, upon
its representations in this Agreement. Such Limited Partner also understands
and acknowledges that no federal or state agency has made any recommendation or
endorsement of an investment in the Partnership.
(i) Such Limited Partner
understands that (i) its Limited Partnership Interest is a "restricted
security" (as defined in Rule 144 promulgated under the Securities Act) and
that it may not be resold or otherwise transferred without registration under
the Securities Act and applicable state securities laws unless an exemption
from registration is available; (ii) transfer of its Limited Partnership
Interest is further restricted by this Agreement; and (iii) legends may be
placed on any certificate or other document evidencing the Limited Partnership
Interests, setting forth the foregoing transfer restrictions and such other
matters as the Partnership may consider necessary or desirable to comply with
federal and state securities laws.
(j) Such Limited Partner has not
and will not enter into any agreement pursuant to which the Partnership or any
other Limited Partner will be liable, as a result of the transactions
contemplated by this Agreement, for any claim of any person for any
commission, fee or other compensation as finder or broker.
(k) Unless an asterisk appears
next to its name on the signature page hereto, such Limited Partner is not an
ERISA Partner.
14.2 Representations, Warranties and Covenants of
the General Partner. The General Partner represents and warrants to each
Limited Partner that:
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(a) The Partnership (i) has been duly formed and is
validly existing as a limited partnership under the laws of the State of
Delaware with full partnership power and authority to conduct its business as
contemplated in this Agreement, and (ii) is, under currently applicable law and
regulations, a partnership for federal income tax purposes which will not be
treated, for such purposes, as an association.
(b) The General Partner is a duly formed and validly
existing corporation under the laws of the State of Delaware, with full
corporate power and authority to perform its obligations herein.
(c) All action required to be taken by the General
Partner and the Partnership as a condition to the issuance and sale of the
Limited Partnership Interests being purchased by the Limited Partners has been
taken; the Interest in the Partnership of each Limited Partner represents a
duly and validly issued Limited Partnership Interest; and each Limited Partner
of the Partnership is entitled to all the benefits of a Limited Partner under
this Agreement and the Partnership Act.
(d) This Agreement has been duly authorized,
executed and delivered by the General Partner and, upon due authorization,
execution and delivery by a Limited Partner, will constitute the valid and
legally binding agreement of the General Partner enforceable in accordance with
its terms against the General Partner.
14.3 Representations, Warranties and Covenants of All
Partners.
14.3.1 Each Partner severally represents and warrants to the
Partnership that, except as otherwise disclosed in writing to the General
Partner, to the best knowledge of such Partner, as of the date hereof (or, if
later, as of the date of its admission to the Partnership):
(a) such Partner is not an Alien;
(b) if such Partner is the General Partner or an
Attributable Limited Partner, neither such Partner nor any Person holding an
"attributable" interest (as defined below) in the Partnership through such
Partner (an "Attributable Person") owns or has any "attributable" interest in
(i) a television broadcast station or (ii) a national television network (such
as ABC, CBS, or NBC);
(c) if such Partner is the General Partner or an
Attributable Limited Partner or a Non-Attributable Limited Partner whose
Capital Commitment represents five percent or more of the total Capital
Commitments of all Partners, neither such Partner nor any Attributable Person
owns or has (i) any
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"attributable" interest or five percent or greater equity interest in any of
the telephone or wireless cable companies listed on Exhibit G to the
FrontierVision Purchase Agreement or (ii) any "attributable" interest or
greater than twenty percent interest in any of the television broadcast
companies listed on Exhibit G to the FrontierVision Purchase Agreement;
(d) neither such Partner nor any Person
controlling such Partner has had any FCC station license, permit or
authorization revoked; and
(e) if such Partner is a General Partner or a
Limited Partner whose Capital Commitment represents five percent or more of the
total Capital Commitments of all Partners, neither such Partner nor any
Attributable Person (as a result of an interest in such Partner) is subject to
a denial of federal benefits, including specifically FCC benefits, pursuant to
Section 5301 of the Anti-Drug Abuse Act of 1988.
As used in this paragraph 14.3.1, "attributable" interest shall have the
meaning given to such term in Sections 73.3555 and 76.501 of Title 47 of the
Code of Federal Regulations or any successor provision, which provides
generally that any five percent or greater voting stock interest, any
partnership interest, or any position as an officer or director is an
"attributable" interest. If a Limited Partner makes its representations and
warranties in this paragraph 14.3 based on a position regarding attribution
that requires a submission to the FCC, then such Limited Partner shall be
responsible for making such submission to the FCC and shall furnish a copy of
such submission to the General Partner.
14.3.2 The General Partner, with the approval of a majority
in Interest of the Class X Limited Partners, from time to time may circulate to
the Limited Partners a revised Exhibit G, modified to specifically identify
additional companies or businesses with media or telecommunications interests
relevant to assessing compliance and reporting obligations of the Partnership.
Within fifteen (15) business days after its receipt of any such revised Exhibit
G, each Limited Partner receiving such revised Exhibit G shall advise the
General Partner in writing whether, to the best knowledge of such Limited
Partner, as of the date thereof, the representations and warranties made by
such Limited Partner in paragraph 14.3.1 continue to be true and correct
(taking into account such revised Exhibit G). Each Partner hereby severally
covenants and agrees: (a) to report in writing to the General Partner promptly
after such Partner becomes aware that, as of any future date, any
representation made in paragraph 14.3.1, or any information provided by such
Partner with respect to a revised Exhibit G, no longer is true and correct, and
the reason therefor; and (b) to use reasonable efforts to obtain and provide
information reasonably available to such Partner (within the time period
reasonably requested) in
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response to requests from the FCC or reasonable requests from the General
Partner in connection with FCC matters.
ARTICLE XV
Miscellaneous
15.1 Notices.
15.1.1 Any notice to any Limited Partner shall be at the
address of such Partner set forth in Schedule A hereto or such other mailing
address of which such Limited Partner shall advise the General Partner in
writing. Any notice to the Partnership or the General Partner shall be at the
principal office of the Partnership as set forth in paragraph 2.3. The General
Partner may at any time change the location of such office. Prompt notice of
any such change shall be given to the Partners.
15.1.2 Any notice shall be deemed to have been duly given if
(i) sent by United States certified or registered mail, return receipt
requested, when received, (ii) personally delivered or delivered by telecopy,
when received, or (iii) sent by United States Express Mail or overnight
courier, on the second following business day.
15.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS. IT IS THE
INTENTION OF THE PARTIES THAT THE INTERNAL LAWS OF THE STATE OF DELAWARE AND,
IN PARTICULAR, THE PROVISIONS OF THE PARTNERSHIP ACT, SHALL GOVERN THE VALIDITY
OF THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND THE INTERPRETATION OF THE
RIGHTS AND DUTIES OF THE PARTIES, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO BE INVALID, THE
REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED THEREBY.
15.3 JUDICIAL PROCEEDINGS. TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY JUDICIAL PROCEEDING INVOLVING ANY DISPUTE, CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR TO THE PARTNERSHIP AFFAIRS OR
THE RIGHTS OR INTERESTS OF THE PARTNERS OR ANY OF THEM OR THE BREACH OR ALLEGED
BREACH OF THIS AGREEMENT, WHETHER ARISING DURING THE PARTNERSHIP TERM OR AT OR
AFTER ITS TERMINATION OR DURING OR AFTER THE LIQUIDATION OF THE PARTNERSHIP
(EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND CLAIMS IS HEREINAFTER
REFERRED TO AS A "PARTNERSHIP DISPUTE"), SHALL BE BROUGHT ONLY IN A COURT
LOCATED IN THE STATE OF DELAWARE, AND EACH OF THE PARTIES HERETO (I)
UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY
RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO
HEREBY WAIVES
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TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING A
PARTNERSHIP DISPUTE.
15.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and it supersedes any prior agreement or
understandings among them, oral or written. Except for those contained in the
FrontierVision Partnership Agreement and the FrontierVision Purchase Agreement,
there are no representations, agreements, arrangements or under-standings, oral
or written, between or among the Partners relating only to the subject matter
of this Agreement which are not fully expressed herein. This Agreement may not
be modified or amended other than pursuant to Article X.
15.5 Headings, etc. The headings in this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation of this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine or the neuter gender shall include the masculine, the feminine and
the neuter.
15.6 Binding Provisions. Subject to Articles VII and VIII,
the covenants and agreements contained herein shall be binding upon and inure
to the benefit of the heirs, executors, administrators, personal or legal
representatives, successors and assigns of the respective parties hereto.
15.7 No Waiver. The failure of any Partner to seek redress
for violation, or to insist on strict performance, of any covenant or condition
of this Agreement shall not prevent a subsequent act which would have
constituted a violation from having the effect of an original violation.
15.8 Reproduction of Documents. This Agreement and all
documents relating hereto, including, without limitation, Consents, waivers,
amendments and modifications which may hereafter be executed, and certificates
and other information previously or hereafter furnished to any Limited Partner,
may be reproduced by it by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process, and any Limited
Partner may destroy any original document so reproduced. The Partnership, the
General Partner and each Limited Partner agree and stipulate that, to the
fullest extent permitted by law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by a Limited Partner in the regular course of business).
15.9 Confidentiality. Each Partner will maintain the
confidentiality of information which is, to the knowledge of such Partner,
non-public information regarding the Partnership,
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received by such Partner pursuant to this Agreement, except as otherwise
required by law. Except as may be required by law, the Partnership shall not
use the name of, or make reference to, any of the Limited Partners or any of
its Affiliates in any press release or in any public manner without such
Limited Partner's prior written consent.
15.10 No Right to Partition. To the extent permitted by law,
and except as otherwise expressly provided in this Agreement, the Partners, on
behalf of themselves and their shareholders, partners, heirs, executors,
administrators, personal or legal representatives, successors and assigns, if
any, hereby specifically renounce, waive and forfeit all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the
Partnership or any asset of the Partnership, or any interest which is
considered to be Partnership property, regardless of the manner in which title
to any such property may be held.
15.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument, provided that each such
counterpart shall be executed by the General Partner.
15.12 [Intentionally Omitted].
15.13 Exculpation of Certain Partners. In the case of any
Limited Partner that itself is a limited partnership, the Partnership and the
Partners shall have full recourse to the assets of such Limited Partner for any
and all obligations, liabilities, debts, agreements, covenants, representations
and/or warranties of such Limited Partner to or with the Partnership and/or the
Partners, but the Partnership and the Partners shall not have recourse to any
general or limited partners of such Limited Partner.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
GENERAL PARTNER:
---------------
FRONTIERVISION INC.
By: /s/ James C. Vaughn
---------------------------------------------
Name: James C. Vaughn
Title: President
LIMITED PARTNERS:
------------------------------
/s/ John W. Watkins
------------------------------
/s/ Lawrence C. Tucker
------------------------------
/s/ James A. Conroy
------------------------------
/s/ L. Watts Hamrick III
------------------------------
Accepted and agreed to as
to paragraph 3.11(e)
/s/ James C. Vaughn
- -------------------------
James C. Vaughn
/s/ John S. Koo
- -------------------------
John S. Koo
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SCHEDULE A
AS OF AUGUST , 1995
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
GENERAL PARTNER:
- ---------------
FrontierVision Inc. General Partnership $ 12,885
1777 South Harrison Street
Suite P 200
Denver, Colorado 80210
LIMITED PARTNERS:
- ----------------
CLASS X LIMITED PARTNERS:
- ------------------------
J.P. Morgan Investment Class X 173,753
Corporation
101 California Street
Suite 3800
San Francisco, CA 94111
1818 II Cable Corp. Class X 173,753
c/o Brown Brothers
Harriman & Co.
59 Wall Street
New York, New York 10005
Olympus Cable Corp. Class X 173,753
c/o Olympus Growth Fund II, L.P.
Metro Center
One Station Place
Stamford, Connecticut 06902
First Union Capital Class X 104,251
Partners, Inc. -------
One First Union Center
18th Floor
Charlotte, NC 28288
All Class X Limited Partners $ 625,510
CLASS Y LIMITED PARTNERS:
- ------------------------
James C. Vaughn Class Y $ 500,000
2337 South Cook Street
Denver, Colorado 80210
John S. Koo Class Y $ 150,000
5531 South Lisbon Lane -------
Aurora, Colorado 80015
</TABLE>
<PAGE> 73
SCHEDULE A (CONT'D)
<TABLE>
<S> <C>
All Class Y Limited Partners $ 650,000
All Limited Partners $ 1,275,510
---------
All Partners $ 1,288,395
=========
</TABLE>
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF LIMITED PARTNERSHIP
OF
FVP GP, L.P.
This Certificate of Limited Partnership of FVP GP, L.P. (the
"Partnership") is being duly executed and filed by the undersigned, as
President of FrontierVision Inc., to form a limited partnership under the
Delaware Revised Uniform Limited Partnership Act (6 Del. C. Sections 17-101
et seq.).
1. The name of the limited partnerhsip formed hereby is
FVP GP, L.P.
2. The address of the registered office of the Partnership in the
State of Delaware is at c/o The Prentice Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Kent County, Dover Delaware 19904, and the name
and address of the registered agent for service of process on the Partnership
in the State of Delaware is The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Kent County, Dover Delaware, 19904.
3. The name and mailing address of the general partner of the
Partnership are:
FrontierVision Inc.
2337 South Cook Street
Denver, Colorado 80210
GENERAL PARTNER:
FrontierVision Inc.
By /s/ James C. Vaughn
----------------------------
Name: James C. Vaughn
Title: President
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
FRONTIERVISION INC.
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is:
FrontierVision Inc.
SECOND: The registered office of the Corporation in the State of
Delaware is to be located at 32 Loockerman Square, Suite L-100, in the City of
Dover, County of Kent, State of Delaware 19904. The name of its registered
agent at that address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is Two Thousand (2,000) shares of Common Stock,
and the par value of each share is One Cent ($0.01).
FIFTH: The name and the mailing address of the sole incorporator is:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Allan H. Cohen 1585 Broadway
New York, NY 10036
</TABLE>
SIXTH: The number of directors of the Corporation shall be the number
from time to time fixed by, or in the manner provided in, the by-laws of the
Corporation. Elections of directors need not be by ballot unless the by-laws
of the Corporation shall so provide.
SEVENTH: In furtherance and not in limitation of the powers conferred
upon the Board of Directors by law, the Board of Directors shall have power to
make, adopt, alter, amend and repeal from time to time by-laws of the
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to alter and repeal by-laws made by the Board of Directors.
<PAGE> 2
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this certificate, and to add or insert other
provisions authorized by the laws of the State of Delaware at the time in
force, in the manner now or hereafter prescribed by law, and all rights and
powers conferred herein on shareholders, directors and officers are granted
subject to this reservation.
TENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
March, 1995.
/s/ ALLAN H. COHEN
------------------------------------
Allan H. Cohen
2
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
OF
FRONTIERVISION INC.
1. MEETINGS OF STOCKHOLDERS.
1.1 Annual Meeting. The annual meeting of stock-holders
shall be held at a place and time determined by the board of directors (the
"Board").
1.2 Special Meetings. Special meetings of the
stockholders may be called by resolution of the Board or the president, and
shall be called by the president or the secretary upon the written request
(stating the purpose or purposes of the meeting) of a majority of the directors
then in office or of the holders of a majority of the outstanding shares
entitled to vote. Only business related to the purposes set forth in the
notice of the meeting may be transacted at a special meeting.
1.3 Place and Time of Meetings. Meetings of the
stockholders may be held in or outside Delaware at the place and time specified
by the Board or the officers or stockholders requesting the meeting.
1.4 Notice of Meetings: Waiver of Notice. Written notice
of each meeting of stockholders shall be given to each stockholder entitled to
vote at the meeting, except that (a) it shall not be necessary to give notice
to any stockholder who submits a signed waiver of notice before or after the
meeting and (b) no notice of an adjourned meeting need be given, except when
required under section 1.5 below or by law. Each notice of a meeting shall be
given, personally or by mail, not fewer than 10 nor more than 60 days before
the meeting and shall state the time and place of the meeting, and, unless it
is the annual meeting, shall state at whose direction or request the meeting is
called and the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a stockholder at his or her address on the
corporation's records. The attendance of any stockholder at a meeting, without
protesting at the beginning of the meeting that the meeting is not lawfully
called or convened, shall constitute a waiver of notice by him or her.
1.5 Ouorum. At any meeting of stockholders, the presence
in person or by proxy of the holders of a majority of the shares entitled to
vote shall constitute a quorum for the transaction of any business. In the
absence of a quorum, a majority in voting interest of those present or, if no
stockholders are present, any officer entitled to preside at or to act as
secretary of the meeting, may adjourn the meeting until
<PAGE> 2
a quorum is present. At any adjourned meeting at which a quorum is present, any
action may be taken that might have been taken at the meeting as originally
called. No notice of an adjourned meeting need be given, if the time and place
are announced at the meeting at which the adjournment is taken, except that, if
adjournment is for more than 30 days or if, after the adjournment, a new record
date is fixed for the meeting, notice of the adjourned meeting shall be given
pursuant to section 1.4.
1.6 Voting; Proxies. Each stockholder of record shall be
entitled to one vote for each share registered in his or her name. Corporate
action to be taken by stockholder vote, other than the election of directors,
shall be authorized by a majority of the votes cast at a meeting of
stockholders, except as otherwise provided by law or by section 1.8. Directors
shall be elected in the manner provided in section 2.1. Voting need not be by
ballot, unless requested by a majority of the stockholders entitled to vote at
the meeting or ordered by the chairman of the meeting. Each stockholder
entitled to vote at any meeting of stockholders or to express consent to or
dissent from corporate action in writing without a meeting may authorize
another person to act for him or her by proxy. No proxy shall be valid after
three years from its date, unless it provides otherwise.
1.7 List of Stockholders. Not fewer than 10 days prior to
the date of any meeting of stockholders, the secretary of the corporation shall
prepare a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in his or her name. For a period of not fewer
than 10 days prior to the meeting, the list shall be available during ordinary
business hours for inspection by any stockholder for any purpose germane to the
meeting. During this period, the list shall be kept either.(a) at a place
within the city where the meeting is to be held, if that place shall have been
specified in the notice of the meeting or (b) if not so specified, at the place
where the meeting is to be held. The list shall also be available for
inspection by stockholders at the time and place of the meeting.
1.8 Action by Consent Without a Meeting. Any action
required or permitted to be taken at any meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not fewer than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voting. Prompt notice of the taking
of any such action shall be given to those stockholders who did not consent in
writing.
<PAGE> 3
2. BOARD OF DIRECTORS.
2.1 Number, Qualification, Election and Term of
Directors. The business of the corporation shall be managed by the entire
Board, which initially shall consist of one director. The number of directors
may be changed by resolution of a majority of the Board or by the stockholders,
but no decrease may shorten the term of any incumbent director. Directors shall
be elected at each annual meeting of stockholders by a plurality of the votes
cast and shall hold office until the next annual meeting of stockholders and
until the election and qualification of their respective successors, subject to
the provisions of section 2.9. As used in these by-laws, the term "entire
Board" means the total number of directors the corporation would have, if there
were no vacancies on the Board.
2.2 Ouorum and Manner of Acting. A majority of the entire
Board shall constitute a quorum for the transaction of business at any meeting,
except as provided in section 2.10. Action of the Board shall be authorized by
the vote of the majority of the directors present at the time of the vote, if
there is a quorum, unless otherwise provided by law or these by-laws. In the
absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held
in or outside Delaware.
2.4 Annual and Regular Meetings. Annual meetings of the
Board, for the election of officers and consideration of other matters, shall
be held either (a) without notice immediately after the annual meeting of
stockholders and at the same place or (b) as soon as practicable after the
annual meeting of stockholders, on notice as provided in section 2.6. Regular
meetings of the Board may be held without notice at such times and places as
the Board determines. If the day fixed for a regular meeting is a legal
holiday, the meeting shall be held on the next business day.
2.5 Special Meetings. special meetings of the Board may
be called by the president or by a majority of the directors.
2.6 Notice of Meetings: Waiver of Notice. Notice of the
time and place of each special meeting of the Board, and of each annual meeting
not held immediately after the annual meeting of stockholders and at the same
place, shall be given to each director by mailing it to him or her at his or
her residence or usual place of business at least three days before the
meeting, or by delivering or telephoning or telegraphing it to him or her at
least two days before the meeting. Notice of a special meeting also shall state
the purpose or purposes for which the
<PAGE> 4
meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the transaction of any
business because the meeting was not lawfully called or convened. Notice of any
adjourned meeting need not be given, other than by announcement at the meeting
at which the adjournment is taken.
2.7 Board or Committee Action Without a Meeting. Any
action required or permitted to be taken by the Board or by any committee of
the Board may be taken without a meeting, if all the members of the Board or
the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consents by the members of the Board
or the committee shall be filed with the minutes of the proceedings of the
Board or the committee.
2.8 Participation in Board or Committee Meetings by Conference
Telephone. Any or all members of the Board or any committee of the Board may
participate in a meeting of the Board or the committee by means of a conference
telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
2.9 Designation and Removal of Directors. Any director may resign
at any time by delivering his or her resignation in writing to the president or
the secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, by vote of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one created by
an increase in the number of directors, may be filled for the unexpired term by
a majority vote of the remaining directors, though less than a quorum.
2.11 Compensation. Directors shall receive such
compensation as the Board determines, together with reimbursement of their
reasonable expenses in connection with the performance of their duties. A
director also may be paid for serving the corporation or its affiliates or
subsidiaries in other capacities.
3. COMMITTEES.
3.1 Executive Committee. The Board, by resolution adopted by a
majority of the entire Board, may designate an executive committee of one or
more directors, which shall have all the powers and authority of the Board,
except as otherwise provided in the resolution, section 141(c) of the General
Corporation Law of Delaware or any other applicable law. The
<PAGE> 5
members of the executive committee shall serve at the pleasure of the Board.
All action of the executive committee shall be reported to the Board at its
next meeting.
3.2 Other Committees. The Board, by resolution adopted by a
majority of the entire Board, may designate other committees of one or more
directors, which shall serve at the Board's pleasure and have such powers and
duties as the Board determines.
3.3 Rules Applicable to Committees. The Board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In case of the
absence or disqualification of any member of a committee, the member or members
present at a meeting of the committee and not disqualified, whether or not a
quorum, may unanimously appoint another director to act at the meeting in place
of the absent or disqualified member. All action of a committee shall be
reported to the Board at its next meeting. Each committee shall adopt rules of
procedure and shall meet as provided by those rules or by resolutions of the
Board.
4. OFFICERS.
4.1 Number: Security. The executive officers of the corporation
shall be the president, one or more vice presidents (including one or more
executive or senior vice presidents, if the Board so determines), a secretary
and, if the Board so determines, a treasurer. Any two or more offices may be
held by the same person. The Board may require any officer, agent or employee
to give security for the faithful performance of his or her duties.
4.2 Election: Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election
of his or her successor, subject to the provisions of section 4.4.
4.3 Subordinate Officers. The Board may appoint subordinate
officer. (including assistant secretaries and assistant treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or committee the power to appoint and define the powers and duties of
any subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may resign at
any time by delivering his or her resignation in
<PAGE> 6
writing to the president or secretary of the corporation, to take effect at the
time specified in the resignation; the acceptance of a resignation, unless
required by its terms, shall not be necessary to make it effective. Any officer
elected or appointed by the Board or appointed by an executive officer or by a
committee may be removed by the Board either with or without cause, and in the
case of an officer appointed by an executive officer or by a committee, by the
officer or committee that appointed him or her or by the president.
4.5 Vacancies. A vacancy in any office may be filled for
the unexpired term in the manner prescribed in sections 4.2 and 4.3 for
election or appointment to the office.
4.6 The President. The president shall be the chief
executive officer of the corporation. Subject to the control of the Board, he
or she shall have general supervision over the business of the corporation and
shall have such other powers and duties as presidents of corporations usually
have or as the Board assigns to him or her.
4.8 Vice President. Each vice president shall have such
powers and duties as the Board or the president assigns to him or her.
4.9 The Treasurer. The treasurer, if any, shall be in
charge of the corporation's books and accounts. Subject to the control of the
Board, he or she shall have such other powers and duties as the Board or the
president assigns to him or her.
4.10 The Secretary. The secretary shall be the secretary
of, and keep the minutes of, all meetings of the Board and the stockholders,
shall be responsible for giving notice of all meetings of stockholders and the
Board, and shall keep the seal and, when authorized by the Board, apply it to
any instrument requiring it. Subject to the control of the Board, he or she
shall have such powers and duties as the Board or the president assigns to him
or her. In the absence of the secretary from any meeting, the minutes shall be
kept by the person appointed for that purpose by the presiding officer.
4.11 Salaries. The Board may fix the officers' salaries,
if any, or it may authorize the president to fix the salary of any other
officer.
5. SHARES.
5.1 Certificates. The corporation's shares shall be
represented by certificates in the form approved by the Board. Each certificate
shall be signed by the president or a vice president, and by the secretary or
an assistant secretary or the
<PAGE> 7
treasurer or an assistant treasurer, and shall be sealed with the corporation's
seal or a facsimile of the seal. Any or all of the signatures on the
certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
5.3 Determination of Stockholders of Record. The Board
may fix, in advance, a date as the record date for the determination of
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or to express consent to or dissent from any proposal without a
meeting, or to receive payment of any dividend or the allotment of any rights,
or for the purpose of any other action. The record date may not be more than 60
or fewer than 10 days before the date of the meeting or more than 60 days
before any other action.
6. MISCELLANEOUS.
6.1 Seal. The Board shall adopt a corporate seal, which
shall be in the form of a circle and shall bear the corporation's name and the
year and state in which it was incorporated.
6.2 Fiscal Year. The Board may determine the
corporation's fiscal year. Until changed by the Board, the last day of the
corporation's fiscal year shall be December 31.
6.3 Voting of Shares in Other Corporations. Shares in
other corporations held by the corporation may be represented and voted by an
officer of this corporation or by a proxy or proxies appointed by one of them.
The Board may, however, appoint some other person to vote the shares.
6.4 Amendments. By-laws may be amended, repealed or
adopted by the stockholders.
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
OF
FRONTIERVISION CAPITAL CORPORATION
FIRST. The name of the Corporation is FrontierVision Capital
Corporation.
SECOND. The registered office of the Corporation in the State of
Delaware is located at 1013 Centre Road, in the City of Wilmington, County of
New Castle. The registered agent in charge thereof is The Prentice-Hall
Corporation System, Inc.
THIRD. The nature of the business to be conducted and promoted by the
Corporation and the purpose of the Corporation shall be to borrow money and
issue evidences of indebtedness as co-obligor with FrontierVision Operating
Partners, L.P., a limited partnership organized and operating under the laws of
the State of Delaware, and to take any and all other action necessary or
appropriate in connection therewith or incidental thereto and for no other
purposes.
FOURTH. The amount of the total authorized capital stock of this
Corporation shall be One Thousand (1,000) shares of voting common stock, with a
par value of one cent ($.01) per share.
FIFTH. The name and mailing address of the sole incorporator is as
follows:
Seth E. Bravin
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
SIXTH. The Corporation is to have perpetual existence.
SEVENTH. The by-laws of the Corporation may be made, altered,
amended, changed, added to or repealed by the board of directors without the
assent or vote of the stockholders.
EIGHTH. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
NINTH. Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to
time by the board of directors or in the by-laws of the Corporation.
<PAGE> 2
- 2 -
TENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provision of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as such court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
ELEVENTH. A director shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duties as a director, provided that the liability of a director (i) for any
breach of the director's loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of Title 8 of the
Delaware Code or (iv) for any transaction from which the director derived an
improper personal benefit shall not be eliminated or limited hereby. All
references in this paragraph to a director shall also be deemed to refer to
such other person or persons, if any, who, pursuant to any provision of this
certificate of incorporation in accordance with subsection (a) of Section 141
of Title 8 of the Delaware Code, exercise or perform any of the powers or
duties otherwise conferred or imposed upon the board of directors by Title 8 of
the Delaware Code.
TWELFTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
<PAGE> 3
- 3 -
The undersigned, Seth E. Bravin, for the purpose of forming a
corporation pursuant to the General Corporation Law of the State of Delaware,
does hereby make, file and record this Certificate of Incorporation and does
hereby certify that the facts herein stated are true, and has accordingly
hereunto set his hand and seal.
/s/ SETH E. BRAVIN
-----------------------------------
Seth E. Bravin, Incorporator
Dated: July 25, 1996
<PAGE> 1
EXHIBIT 3.10
BY-LAWS
OF
FRONTIERVISION CAPITAL CORPORATION
ARTICLE I
OFFICES
Section l. The registered office of FrontierVision Capital Corporation
(the "Corporation") shall be located in the City of Wilmington, County of New
Castle, State of Delaware.
Section 2. The principal office of the Corporation shall be in the
City of Denver, County of Denver, State of Colorado. The Corporation may also
have offices at such other places both within and without the State of Delaware
and the United States as the Board of Directors may from time to time determine
or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders for the election of
directors shall be held at the principal office of the Corporation, at such
place and time as may be fixed from time to time by the Board of Directors, or
at such other place either within or without the State of Delaware or the
United States, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting or in a duly executed waiver
of the notice thereof. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware or the
United States, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders shall be held on such
date not more than one hundred and eighty days (180) following the end of the
fiscal year, and at a time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. At the annual
meeting, the stockholders shall elect by a plurality vote a Board of Directors
and shall transact such other business as may properly be brought before the
meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. Special meetings of the stockholders for any purpose or
purposes, unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, shall be
<PAGE> 2
- 2 -
called by the President or Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
owning a majority of the capital stock of the Corporation issued and
outstanding and entitled to vote. Such requests shall state the purpose or
purposes of the proposed meeting.
Section 5. Written notice of a special meeting shall state the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called and shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at
such meeting.
Section 6. The holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 7. Unless otherwise required by law or the Certificate of
Incorporation, any question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stockholders
represented and entitled to vote thereat. Each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such
votes may be cast in person or by proxy, but no proxy shall be voted on or
after three years from this date, unless such proxy provides for a longer
period.
Section 8. Unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
stock of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Such consent shall be
filed with the Secretary of the Corporation. Prompt notice of the taking of
the corporate action without a meeting by less than
<PAGE> 3
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unanimous written consent shall be given to those stockholders who have
not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors that constitutes the Board of
Directors shall be at least one (1) and not more than five (5), the exact
number of which shall initially be fixed by the Incorporator and thereafter
from time to time by the Board of Directors. Except as provided in Section 2
of this Article, directors shall be elected by a plurality of the votes cast
at annual meetings of stockholders, and each director so elected shall hold
office until the next annual meeting and until his successor is duly elected
and qualified,or until his earlier resignation or removal. Any director may
resign at any time upon notice to the Corporation. Directors need not be
shareholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director. The directors so chosen shall hold office until the next
annual election and until their successors are duly elected and qualified. If
at the time of filling any vacancy or any newly created directors the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), stockholders holding at
least a majority of the outstanding shares entitled to vote for directors shall
have the right to order to vote to fill any such vacancies or newly created
directorships, or to replace any directors chosen by the directors.
Section 3. The business of the Corporation shall be managed by its
Board of Directors, which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute, the Certificate of
Incorporation or these By-laws directed or required to be exercised or done by
the stockholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware or the United States. Regular meetings of the Board of Directors may
be held without notice at such place as may from time to time be determined by
the Board. Special meetings of the Board of Directors may be called by the
President or by any two directors. Notice thereafter shall be given by the
Secretary to each director either by mail on four day's notice or by telegram
or telephone on one day's notice.
<PAGE> 4
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Section 2. At all meetings of the Board, a majority of the entire
Board of Directors shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, unless otherwise
specifically provided by statute or the Certificate of Incorporation. If a
quorum is not present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum shall be present.
Section 3. Unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors.
Section 4. Unless otherwise provided by the Certificate of
Incorporation or these by-laws, members of the Board of Directors, or of any
committee designated by the Board, may participate in a meeting of the Board or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
ARTICLE V
COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each consisting of two or more
directors of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
ARTICLE VI
COMPENSATION OF DIRECTORS
Section l. The directors may be paid their expenses, if any, of
attending meetings of the Board of Directors. Such payments may take the form
of a fixed sum for attendance at each
<PAGE> 5
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meeting or a stated salary as a director. Members of committees may be allowed
like compensation for attending committee meetings.
Section 2. No payment permitted under this Article VI shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 3. No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose if (i) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE VII
OFFICERS
Section l. The officers of the Corporation shall be designated by the
Board of Directors by election and, unless otherwise required by the General
Corporation Law of the State of Delaware, may include a President, one or more
Vice Presidents, a Chief Financial Officer, a Secretary, a Treasurer, and one
or more Assistant Secretaries. The Board of Directors may also elect such
other officers and agents as it deems necessary, including Vice-Presidents and
one or more Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person, unless otherwise provided by statute,
the Certificate of Incorporation or these By-laws. In its discretion, the
Board of Directors may choose not to fill any office for any period as it may
deem advisable, except that of
<PAGE> 6
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any vacancy in the offices of the President and Secretary shall be
filled as expeditiously as possible.
Section 2. The officers of the Corporation shall be elected by the
Board of Directors at the Board's first meeting after each annual meeting of
stockholders.
Section 3. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors whenever in its judgment the best interests
of the Corporation will be served thereby. Any vacancy occurring in any office
of the Corporation shall be filled by the Board of Directors.
Section 4. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 5. The President shall be the chief executive officer of the
Corporation. The President shall preside at all meetings of the stockholders,
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute under the seal of the
Corporation bonds, mortgages, contracts and other contracts requiring a seal,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof is expressly delegated by
the Board of Directors to some other officer or agent of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these by-laws or by the
Board of Directors.
Section 6. In the absence of the President or in the event of his
inability or refusal to act, the Vice-President (or in the event there are more
than one, the Vice-Presidents in the order designated, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice-President shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 7. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all of the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for any
committees when required. The Secretary shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors or the President, under
<PAGE> 7
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whose supervision he shall be. The Secretary shall have custody of the
seal of the Corporation, and he, or an Assistant Secretary, shall have the
authority to affix the same to any instrument requiring it, and (when so
affixed) it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing
by his signature.
Section 8. The Treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors.
Section 9. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President, and the Board of Directors at
the Board's regular meetings or when the Board so requires, an account of all
his transactions as Treasurer and of the financial condition of the
Corporation.
Section 10. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
ARTICLE VIII
NOTICE
Section 1. Whenever, under the provisions of law or of the Certificate
of Incorporation or of these by-laws, notice is required to be given to any
director or stockholder in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram or by telephone and shall be deemed to
be given at the time when such telegram is sent or such telephone notice is
actually given and received.
Section 2. Whenever any notice is required to be given under the
provisions of law or of the Certificate of Incorporation or by these by-laws, a
waiver thereof in writing,
<PAGE> 8
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signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE IX
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman or Vice-Chairman of the Board of
Directors, or the President or a Vice-President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the
number of shares owned by the stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile if the certificate is manually signed on behalf of a transfer agent
or a registrar (other than the Corporation itself or an employee of the
Corporation). In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, the certificate may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
Section 3. The Board of Directors may direct that a new certificate or
certificates be issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates or his legal
representative to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by the proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders or any adjournment thereof, or entitled to
<PAGE> 9
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express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date that shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new date for the
adjourned meeting.
Section 6. The Corporation shall be entitled to recognize the
exclusive rights of a person registered on its books as the owner of shares to
receive dividends and to vote as such owner. The Corporation shall be entitled
to hold liable for calls and assessments a person registered on its books as
the owner of shares. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, regardless of whether the Corporation shall have express or
other notice thereof, unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be paid in
cash, property, or in shares of stock, unless otherwise provided by statute,
the Certificate of Incorporation or these By-laws. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
their absolute discretion, may think proper as a reserve or reserves for
contingencies, equalizing dividends, repairing or maintaining any property of
the Corporation, or for such other purpose or purposes as the Board of
Directors shall think conducive to the interests of the Corporation, and the
Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
persons as the Board of Directors may from time to time designate.
<PAGE> 10
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Section 3. Fiscal Year. The fiscal year of the Corporation shall be
designated by resolution of the Board of Directors.
Section 4. Corporate Seal. The Corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 5. Indemnification. The Corporation shall have the power to
indemnify its officers, directors, employees and agents of the Corporation, and
such other persons as designated by the Board of Directors, to the full extent
as permitted under Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time. To assure indemnification under this
provision of all such persons who are or were "fiduciaries" of an employee
benefit plan governed by the Act of Congress entitled "Employee Retirement
Income Security Act of 1974," as amended from time to time, said Section 145
shall, for the purposes hereof, be interpreted as follows: "other enterprise"
shall be deemed to include an employee benefit plan; the Corporation shall be
deemed to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Corporation also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan; excise taxes assessed on a person with respect to
an employee benefit plan pursuant to said Act of Congress shall be deemed
"fines"; and action taken or omitted by a person with respect to an employee
benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
Section 6. Amendments. Unless such power is reserved to the
stockholders by statute, the Certificate of Incorporation or these By-laws,
these By-laws may be altered, amended or repealed, in whole or in part, or new
By-laws adopted either by the stockholders or the Board of Directors (when such
power is conferred upon the Board of Directors by the Certificate of
Incorporation, and subject to repeal or change by action of the stockholders)
provided, however, that notice of such alteration, repeal, or adoption of new
by-laws be contained in the notice of such meeting of stockholders or Board of
Directors as the case may be. All such amendments must be approved by either
the holders of a majority of the capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
<PAGE> 1
EXHIBIT 10.1
[EXECUTION COUNTERPART]
************************************************************
FRONTIERVISION OPERATING PARTNERS, L.P.
-----------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 9, 1996
$265,000,000
------------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent,
J.P. MORGAN SECURITIES INC.,
as Syndication Agent
and
CIBC INC.,
as Managing Agent
************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience of reference only.
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Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . 36
1.03 Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
1.04 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2. Commitments, Loans, Notes and Prepayments . . . . . . . . . . . . . . . . . . . . . 37
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.03 Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.04 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.06 Several Obligations; Remedies Independent . . . . . . . . . . . . . . . . . . . 43
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.08 Optional Prepayments and Conversions or Continuations of Loans . . . . . . . . . 45
2.09 Mandatory Prepayments and Reductions of Commitments . . . . . . . . . . . . . . 46
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . . . . . . . . . . . . . 55
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.06 Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . 59
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.06 U.S. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.01 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.02 Initial and Subsequent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.03 Determinations Under Section 6.01. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.05 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.10 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.11 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.12 Material Agreements and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.15 Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.16 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.17 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.18 Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.19 The CATV Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.20 Rate Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.21 Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.01 Financial Statements Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
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8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.05 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.09 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.10 Certain Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.11 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.12 Interest Rate Protection Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 103
8.13 Subordinated Indebtedness; Other Equity Interests . . . . . . . . . . . . . . . . . . 103
8.14 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
8.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
8.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.17 Certain Obligations Respecting Subsidiaries . . . . . . . . . . . . . . . . . . . . . 107
8.18 Modifications of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 108
8.19 Certain Obligations Respecting the Collateral . . . . . . . . . . . . . . . . . . . . 109
Section 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 10. The Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.01 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.02 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.06 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . . . . 118
10.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
10.08 Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . . . . . 119
10.09 Consents under Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 119
10.10 The Syndication Agent and the Managing Agent . . . . . . . . . . . . . . . . . . . . 120
10.11 Control Affiliates of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
11.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 123
11.06 Assignments and Participations . . . . . . . . . . . . . . . . . . . . 124
11.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.10 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . 127
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . 128
11.12 Treatment of Certain Information; Confidentiality . . . . . . . . . . . 128
11.13 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . 129
</TABLE>
(iv)
<PAGE> 6
Schedules and Exhibits
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Subsidiaries and Investments
SCHEDULE III - Franchises
SCHEDULE IV - Real Property
SCHEDULE V - Litigation
SCHEDULE VI - Certain Matters Related to CATV Systems
SCHEDULE VII - Certain Matters Related to Financial Statements
SCHEDULE VIII - Certain Environmental Matters
SCHEDULE IX - Certain Equity Rights
SCHEDULE X - Calculation of C4 and Americable EBITDA
Adjustments
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Facility A Term Loan Note
EXHIBIT A-3 - Form of Facility B Term Loan Note
EXHIBIT B - Form of Quarterly Officer's Report
EXHIBIT C-1 - Copy of Security Agreement
EXHIBIT C-2 - Form of Amendment No. 1 to Security Agreement
EXHIBIT D-1 - Copy of Partner Pledge Agreement
EXHIBIT D-2 - Form of Amendment No. 1 to Partner Pledge
Agreement
EXHIBIT E-1 - Copy of Stock Pledge Agreement
EXHIBIT E-2 - Form of Amendment No. 1 to Stock Pledge
Agreement
EXHIBIT F - Form of Subsidiary Guarantee Agreement
EXHIBIT G - Form of Opinion of Counsel to
the Obligors
EXHIBIT H - Form of Opinion of Special New York
Counsel to Chase
EXHIBIT I - Form of Confidentiality Agreement
EXHIBIT J - Form of Notice of Assignment
(v)
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 9,
1996, between: FRONTIERVISION OPERATING PARTNERS, L.P., a limited partnership
duly organized and validly existing under the laws of the State of Delaware
(the "Company"); each of the lenders that is a signatory hereto identified
under the caption "Lenders" on the signature pages hereto and each lender that
becomes a "Lender" after the date hereof pursuant to Section 11.06(b) hereof
(individually, a "Lender" and, collectively, the "Lenders"); THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), as administrative agent for the Lenders
(in such capacity, together with its successors in such capacity, the
"Administrative Agent"); J.P. MORGAN SECURITIES INC., as syndication agent (in
such capacity, the "Syndication Agent"); and CIBC INC., as Managing Agent (in
such capacity, the "Managing Agent" and, together with the Administrative Agent
and the Syndication Agent, the "Agents").
The Company, the Existing Lenders (as hereinafter defined),
the Administrative Agent, the Syndication Agent and CIBC Inc., as Co-Agent, are
parties to a Credit Agreement dated as of November 9, 1995 (as heretofore
modified and supplemented and in effect on the date of this Agreement, the
"Existing Credit Agreement") providing, subject to the terms and conditions
thereof, for the making of revolving credit and term loans to the Company. The
parties hereto now wish to amend the Existing Credit Agreement by, among other
things, increasing the amount of credit available thereunder to $265,000,000
(to finance, inter alia, the Cox Acquisition and the Subsequent Acquisitions
(as hereinafter defined) of various cable television systems and the payment of
fees, commissions, and expenses payable in connection therewith and for the
ongoing working capital requirements of the Company and its Subsidiaries), by
adding the New Lenders (as hereinafter defined) as parties thereto and by
amending certain of the other provisions thereof and, in that connection, wish
to amend and restate the Existing Credit Agreement in its entirety, it being
the intention of the parties hereto that the loans outstanding under the
Existing Credit Agreement on the Effective Date (as hereinafter defined) shall
continue and remain outstanding and not be repaid on the Effective Date, but
shall be
Credit Agreement
<PAGE> 8
- 2 -
assigned and reallocated among the Lenders as provided in Section 2.01 hereof.
Accordingly, the parties hereto hereby agree that the Existing
Credit Agreement shall, as of the date hereof (but subject to the satisfaction
of the conditions precedent specified in Section 6 hereof), be amended and
restated in its entirety as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Acquired System" shall have the meaning assigned to such
term in Section 8.05(b) hereof.
"Acquisition Agreements" shall mean, collectively, the Initial
Acquisition Agreements, the Cox Acquisition Agreement and each Subsequent
Acquisition Agreement.
"Acquisitions" shall mean, collectively, the Initial
Acquisitions, the Cox Acquisition and the Subsequent Acquisitions.
"Acquisition Environmental Surveys" shall mean, with respect
to any Acquisition, environmental surveys and assessments prepared by a firm of
licensed engineers (familiar with the identification of toxic and hazardous
substances), based upon physical on-site inspections by such firm of each of
the sites and facilities to be owned by the Company and its Subsidiaries (after
giving effect to such Acquisition), as well as an historical review of the uses
of such sites and facilities.
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is
Credit Agreement
<PAGE> 9
- 3 -
controlled by, the Company and, if such Person is an individual, any member of
the immediate family (including parents, spouse, children and siblings) of such
individual and any trust whose principal beneficiary is such individual or one
or more members of such immediate family and any Person who is controlled by
any such member or trust. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), provided
that, in any event, any Person that owns directly or indirectly securities
having 5% or more of the voting power for the election of directors or other
governing body of a corporation or 5% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of
such other Person) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely
by reason of his or her being a director, officer or employee of the Company or
any of its Subsidiaries and (b) none of the Wholly Owned Subsidiaries of the
Company shall be Affiliates.
"Americable" shall mean Americable International Maine, Inc.
"Americable Acquisition" shall mean the acquisition by the
Company of CATV Systems in Maine from Americable pursuant to the Americable
Acquisition Agreement.
"Americable Acquisition Agreement" shall mean the Asset
Purchase Agreement dated as of February 27, 1996 by and between Americable and
the Company, as the same shall, subject to Section 8.18 hereof, be modified and
supplemented and in effect from time to time.
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate
of such Lender) designated for such Type of
Credit Agreement
<PAGE> 10
- 4 -
Loan on the signature pages hereof or such other office of such Lender (or of
an affiliate of such Lender) as such Lender may from time to time specify to
the Administrative Agent and the Company as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" shall mean: (a) with respect to Facility
B Term Loans, 2.00% (in the case of Base Rate Loans) and 3.25% (in the case of
Eurodollar Loans) and (b) with respect to Revolving Credit Loans and Facility A
Term Loans of any Type during any Payment Period (as defined below), the
respective rates indicated below for Loans of such Type opposite the applicable
Debt Ratio indicated below for such Payment Period:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
Range --------------------------
of
Debt Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
<S> <C> <C>
Greater than or equal
to 5.50 to 1 1.50% 2.75%
Greater than or equal to
5.00 to 1 but less than
5.50 to 1 1.25% 2.50%
Greater than or equal to
4.50 to 1 but less than
5.00 to 1 1.00% 2.25%
Greater than or equal to
4.00 to 1 but less than
4.50 to 1 0.75% 2.00%
</TABLE>
Credit Agreement
<PAGE> 11
- 5 -
<TABLE>
<S> <C> <C>
Greater than or equal to
3.50 to 1 but less than
4.00 to 1 0.50% 1.75%
Less than 3.50 0.25% 1.50%
</TABLE>
In addition, in the event that the Senior Debt Ratio for any Payment Period
shall be less than 4.00 to 1 and the aggregate outstanding principal amount of
all Subordinated Indebtedness (other than Indebtedness in respect of the UVC
Notes) as at the first day of such Payment Period shall be greater than or
equal to $100,000,000, the respective rates set forth above for Revolving
Credit and Facility A Term Loans of any Type shall be adjusted by subtracting
0.25% therefrom.
For purposes hereof, a "Payment Period" shall mean (i)
initially, the period commencing on the Effective Date to but not including the
Quarterly Date falling on or nearest to June 30, 1996 and (ii) thereafter, the
period commencing on a Quarterly Date to but not including the immediately
following Quarterly Date.
The Debt Ratio for the initial Payment Period shall be
determined on the basis of the certificate of a Senior Officer delivered
pursuant to Section 6.01(n) hereof unless the certificate of a Senior Officer
delivered with the financial statements for the fiscal quarter ending March 31,
1996 delivered pursuant to Section 8.01(a) hereof does not demonstrate that the
Debt Ratio as at March 31, 1996 was less than or equal to the Debt Ratio
indicated in such certificate delivered pursuant to said Section 6.01(n), in
which event the Applicable Margin for Revolving Credit and Facility A Term
Loans shall be retroactively increased to the rate set forth in the schedule
above for the corresponding Debt Ratio as at March 31, 1996 (and the Company
shall be obligated to make any additional payments of interest required
pursuant to the penultimate paragraph of Section 3.02 hereof).
Credit Agreement
<PAGE> 12
- 6 -
The Debt Ratio and the Senior Debt Ratio for any Payment
Period after the initial Payment Period shall be determined on the basis of a
certificate of a Senior Officer setting forth a calculation of each such Ratio
as at the last day of the fiscal quarter immediately preceding such Payment
Period (i.e. such Ratios for the Payment Period commencing June 30, 1996 shall
be determined on the basis of the Debt Ratio and the Senior Debt Ratio,
respectively, as at March 31, 1996, such Ratios for the Payment Period
commencing September 30, 1996 shall be determined on the basis of the Debt
Ratio and Senior Debt Ratio, respectively, as at June 30, 1996, and so forth),
each of which certificates shall be delivered together with the financial
statements for the fiscal quarter on which such calculation is based.
Anything in this Agreement to the contrary notwithstanding,
the Applicable Margin for Revolving Credit and Facility A Term Loans shall be
the highest rates provided for above (i.e., 1.50% with respect to Base Rate
Loans and 2.75% with respect to Eurodollar Loans, and without reduction based
upon the Senior Debt Ratio), (i) during any period when a Specified Event of
Default shall have occurred and be continuing, or (ii) if the certificate of a
Senior Officer shall not be delivered as provided above prior to the beginning
of any Payment Period (but only, in the case of this clause (ii), with respect
to the portion of such Payment Period prior to the delivery of such
certificate).
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of
1978, as amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
Credit Agreement
<PAGE> 13
- 7 -
"Base Rate Loans" shall mean Loans that bear interest at rates
based upon the Base Rate.
"Basic Documents" shall mean, collectively, the Loan Documents
and the Cox Acquisition Agreement.
"Basle Accord" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended,
modified and supplemented and in effect from time to time or any replacement
thereof.
"Business Day" shall mean any day (a) on which commercial
banks are not authorized or required to close in New York City and (b) if such
day relates to a borrowing of, a payment or prepayment of principal of or
interest on, a Conversion of or into, or an Interest Period for, a Eurodollar
Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, that is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"C4 Acquisition" shall mean the acquisition by the Company of
CATV Systems in Georgia, Tennessee and Virginia from C4 Media.
"C4 Acquisition Agreement" shall mean the respective agreement
pursuant to which the C4 Acquisition was consummated, as the same shall,
subject to Section 8.18 hereof, be modified and supplemented and in effect from
time to time.
"C4 Media" shall mean, collectively, C4 Media Cable Southeast,
L.P. and County Cable Company, L.P.
"Capital Expenditures" shall mean, for any period,
expenditures (including, without limitation, the aggregate amount of Capital
Lease Obligations incurred during such period) made by the Company or any of
its Subsidiaries to acquire or construct
Credit Agreement
<PAGE> 14
- 8 -
fixed assets, plant and equipment (including renewals, improvements and
replacements, but excluding repairs and excluding also any Acquisition) during
such period computed in accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Casualty Event" shall mean, with respect to any Property of
any Person, any loss of or damage to, or any condemnation or other taking of,
such Property for which such Person or any of its Subsidiaries receives
insurance proceeds, or proceeds of a condemnation award or other compensation.
"CATV System" shall mean any cable distribution system that
receives broadcast signals by antennae, microwave transmission, satellite
transmission or any other form of transmission and that amplifies such signals
and distributes them to Persons who pay to receive such signals.
"Chase" shall mean The Chase Manhattan Bank (National
Association) and its successors.
"Class" shall have the meaning assigned to such term in
Section 1.03 hereof.
"Closing Date" shall mean November 9, 1995, the "Closing Date"
under, and as defined in, the Existing Credit Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Credit Agreement
<PAGE> 15
- 9 -
"Collateral" shall have the meaning assigned to such term in
the Security Agreement.
"Collateral Account" shall have the meaning assigned to such
term in Section 4.01 of the Security Agreement.
"Commitments" shall mean, collectively, the Revolving Credit
Commitments, the Facility A Term Loan Commitments and the Facility B Term Loan
Commitments.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.08 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Control Affiliate" shall mean, with respect to any Person
(the "Relevant Person"), (a) any Subsidiary of the Relevant Person, (b) any
other Person of which the Relevant Person is a Subsidiary and (c) any other
Person that is a Subsidiary of the Person referred to in the immediately
preceding clause (b).
"Convert", "Conversion" and "Converted" shall refer to a
conversion pursuant to Section 2.08 hereof of one Type of Loans into another
Type of Loans, which may be accompanied by the transfer by a Lender (at its
sole discretion) of a Loan from one Applicable Lending Office to another.
"Cox" shall mean, collectively, Cox Communications Ohio, Inc.,
an Ohio corporation, Times Mirror Cable Television of Defiance, Inc., an Ohio
corporation, Chillicothe Cablevision, Inc., an Ohio corporation, and Cox
Communications Eastern Kentucky, inc., a Kentucky corporation.
"Cox Acquisition" shall mean the proposed acquisition by the
Company of CATV Systems in Kentucky and Ohio from Cox pursuant to the Cox
Acquisition Agreement.
Credit Agreement
<PAGE> 16
- 10 -
"Cox Acquisition Agreement" shall mean the Asset Purchase
Agreement dated November 17, 1995 by and among the Company, as "Buyer" and Cox,
as "Sellers", as the same shall, subject to Section 8.18 hereof, be modified
and supplemented and in effect from time to time.
"Debt Issuance" shall mean any issuance of Permitted
Subordinated Indebtedness.
"Debt Ratio" shall mean, as at any date, the ratio of:
(a) the sum of the aggregate amount of all Indebtedness of
the Company and its Subsidiaries (including, without limitation, all
Subordinated Indebtedness (other than Indebtedness in respect of the
UVC Notes) and all letters of credit contemplated by Section 8.07(f)
hereof, but excluding all performance bonds contemplated by said
Section) as at such date to
(b) the product of EBITDA for the fiscal quarter ending on,
or most recently ended prior to such date times four (or, for purposes
of Section 6.01(n) hereof and for purposes of determining the Debt
Ratio as at any date prior to March 31, 1996, the product of EBITDA
for the three months ended February 29, 1996 times four).
"Debt Service" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) in the case of
Loans under this Agreement, the aggregate amount of payments of principal of
such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.03 hereof, were
required to be made pursuant to Section 3.01 hereof during such period plus (b)
in the case of all other Indebtedness, all regularly scheduled payments or
prepayments of principal of such Indebtedness (including, without limitation,
the principal component of any payments in respect of Capital Lease
Obligations, but excluding (1) any payments or prepayments of
Credit Agreement
<PAGE> 17
- 11 -
principal made in respect of the UVC Notes in accordance with Section 8.09
hereof and (2) any conversion of UVC Notes to Other Equity Interests in
accordance with Section 8.13 hereof) made or payable during such period plus
(c) all Interest Expense for such period (excluding, however, non-cash
amortization of loan facility fees and other deferred debt costs, in each case
to the extent included in determining Interest Expense for such period).
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or
other disposition of any Property (whether now owned or hereafter acquired) by
the Company or any of its Subsidiaries to any other Person, excluding (1) any
sale, assignment, transfer or other disposition of Property described in clause
(i) of Section 8.05(c) hereof to the extent the aggregate fair market value of
all such Property so disposed of by the Company and its Subsidiaries during the
term of this Agreement does not exceed $20,000,000, and (2) any sale,
assignment, transfer or other disposition of Property described in clause (ii)
or (iii) of Section 8.05(c) hereof.
"Disposition Investments" shall have the meaning assigned to
such term in Section 8.08(i) hereof.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"EBITDA" shall mean, for any period, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following:
(a) gross operating revenue for such period derived in the
ordinary course of business in respect of the CATV Systems of the
Company and its Subsidiaries (including revenues arising from second
outlets and remotes and advertising revenues, and including
pay-per-view revenues
Credit Agreement
<PAGE> 18
- 12 -
and installation fees, but excluding interest income and unusual
items) minus
(b) all operating expenses for such period, including,
without limitation, technical, programming, selling and general
administration expenses incurred by the Company and its Subsidiaries
during such period, but excluding (to the extent included in operating
expenses) depreciation, amortization, Interest Expense, any non-cash
charges (including, without limitation, non-cash pension expenses and
any interest under the UVC Notes to the extent either not paid in cash
or paid in cash from the proceeds of Special Debt or Special Equity
Issuances) and any Tax Payment Amount for the relevant period plus
(c) transaction costs (including, without limitation, legal
expenses, brokerage commissions, investment banking fees and the like)
incurred in connection with (x) the formation of the Company and
FrontierVision LP, the initial issuance of equity interests by
FrontierVision LP, the Initial Acquisitions, the Cox Acquisition and
this Agreement and the other transactions that are contemplated hereby
to occur on or before the Effective Date, (y) any Subsequent
Acquisition or (z) the incurrence of any Permitted Subordinated
Indebtedness, in the case of each of the foregoing clauses (x), (y)
and (z), to the extent the same are (A) paid within twelve months of
the date the respective event giving rise to such transaction costs
shall occur, and (B) expensed and not capitalized.
For purposes hereof, "gross operating revenue" and "operating expenses" shall
both be determined exclusive of extraordinary and non-recurring gains or
losses, and any gains or losses from the sale of assets. For purposes of
determining EBITDA:
(A) for any period ended on or before September 30, 1995, the
certain expenses of UVC relating to health insurance accruals, pole
rentals and sales and use taxes aggregating $104,344 which have been
excluded from the pro
Credit Agreement
<PAGE> 19
- 13 -
forma financial statements referred to in Section 6.01(m) of the
Existing Credit Agreement, and noted accordingly in such statements,
shall not be treated as "operating expenses";
(B) for the fiscal quarter ending on December 31, 1995,
EBITDA for such fiscal quarter shall be deemed to be equal to the
product of (x) EBITDA for the month of December, 1995 times (y) three;
(C) for periods prior to the date of the C4 Acquisition,
EBITDA for each day during such period attributable to the CATV
Systems acquired pursuant to the C4 Acquisition shall be deemed to be
equal to $15,018 (determined by the Company as provided in Schedule X
hereto);
(D) for periods prior to the date of the Americable
Acquisition, EBITDA for each day during such period attributable to
the CATV Systems acquired pursuant to the Americable Acquisition shall
be deemed to be equal to $1,904 (determined by the Company as provided
in Schedule X hereto); and
(E) for periods prior to the date of the Cox Acquisition,
EBITDA for each day during such period attributable to the CATV
Systems acquired pursuant to the Cox Acquisition shall be deemed to be
equal to $37,353 (determined by the Company as provided in Schedule X
hereto).
For all purposes of this Agreement (other than for purposes of EBITDA as used
in the definition of Excess Cash Flow), if during any period for which EBITDA
is being determined the Company or any of its Subsidiaries shall have made any
acquisition or disposition of any CATV System (but excluding the CATV Systems
acquired pursuant to the Initial Acquisitions and the Cox Acquisition), then
EBITDA shall be determined on the basis of the actual results of operations of
the Company and its Subsidiaries for such period, adjusted by:
Credit Agreement
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(I) in the case of a Subsequent Acquisition the aggregate
Purchase Price of which is less than or equal to $10,000,000, such
amount as the Company shall determine, reasonably and in good faith,
to be appropriate to reflect the effect of the relevant acquisitions
and dispositions during such period (and the Company shall, promptly
following the consummation of such Acquisition, notify the
Administrative Agent (which shall notify the Lenders thereof promptly)
of such amount); and
(II) in the case of a Subsequent Acquisition the aggregate
Purchase Price of which exceeds $10,000,000, such amounts as the
Company and the Majority Lenders shall agree to be appropriate to
reflect the effect of the relevant acquisitions and dispositions
during such period (provided that, in the absence of such an agreement
between the Company and the Majority Lenders, EBITDA shall be
determined on a pro forma basis for such period as if the relevant
acquisition or disposition had been made or consummated on the first
day of such period, whether or not such first day shall occur prior to
the Closing Date).
"Effective Date" shall mean the date on which the conditions
to effectiveness set forth in Section 6.01 hereof shall have been satisfied or
waived.
"Environmental Claim" shall mean, with respect to any Person,
any written or oral notice, claim, demand or other communication (collectively,
a "claim") by any other Person alleging or asserting such Person's liability
for investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (ii) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal,
Credit Agreement
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response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Issuance" shall mean (a) any issuance or sale by the
Company or any of its Subsidiaries, or by FrontierVision LP, after the Closing
Date of (i) any of its partnership interests (whether as a general or a limited
partner) or of its capital stock (other than any such partnership interests or
capital stock issued to directors, officers or employees of the Company or any
of its Subsidiaries or FrontierVision LP), (ii) any warrants or options
exercisable in respect of its capital stock or its partnership interests (other
than any warrants or options issued to directors, officers or employees of the
Company or any of its Subsidiaries, or FrontierVision LP, and any partnership
interests of the Company, or FrontierVision LP, issued upon the exercise of
such warrants or options) or (iii) any other security or instrument
representing an equity interest (or the right to obtain any equity interest) in
the Company or any of its Subsidiaries, or FrontierVision LP, or (b) the
receipt by the Company or any of its Subsidiaries, or FrontierVision LP, after
the Closing Date of any capital
Credit Agreement
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contribution (whether or not evidenced by any equity security issued by the
recipient of such contribution); provided that Equity Issuance shall not
include (x) any such issuance or sale by any Subsidiary of the Company to the
Company or any Wholly Owned Subsidiary of the Company or (y) any capital
contribution by the Company or any Wholly Owned Subsidiary of the Company to
any Subsidiary of the Company. In the case of FrontierVision LP, the term
"Equity Issuance" shall include the issuance of Notes by FrontierVision LP, and
the making of Loans to FrontierVision LP, pursuant to the Limited Partnership
Interest and Note Purchase Agreement dated as of July 28, 1995 between
FrontierVision LP, FVP GP, L.P. and the Investors named therein (including,
without limitation, the Initial Equityholders).
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"Equivalent Basic Subscribers" shall mean, as at any date, the
sum of (a) the number of Subscribers who subscribe to a CATV System at the
regular basic monthly subscription rate for such CATV System to a single
household Subscriber (exclusive of "secondary outlets", as such term is
commonly understood in the cable television industry), plus (b) the number of
Subscribers determined by dividing the aggregate dollar monthly amount billed
to bulk Subscribers (hotels, motels, apartment buildings, hospitals and the
like), by the regular basic monthly subscription rate for basic service charged
by the CATV System in which such bulk Subscriber is located.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
Credit Agreement
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"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in
Section 414(b) or (c) of the Code of which the Company is a member and (ii)
solely for purposes of potential liability under Section 302(c)(11) of ERISA
and Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which the Company is a member.
"Eurodollar Base Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%), quoted by Chase at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such Interest Period for
the offering by Chase to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Eurodollar Loan to be made by the
Chase for such Interest Period. If Chase is not participating in any
Eurodollar Loans during any Interest Period therefor, the Eurodollar Base Rate
for such Loans for such Interest Period shall be determined by reference to the
amount of such Loans that Chase would have made or had outstanding had it been
participating in such Loan during such Interest Period.
"Eurodollar Loans" shall mean Loans that bear interest at
rates based on rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement (if any) for such Loan for such Interest Period.
Credit Agreement
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"Event of Default" shall have the meaning assigned to such
term in Section 9 hereof.
"Excess Cash Flow" shall mean, for any period, the sum for the
Company and its Subsidiaries (determined without duplication) of (a) EBITDA for
such period (provided that, in the case of the fiscal year ending December 31,
1995, such period shall not include periods prior to the Closing Date) minus
(b) Fixed Charges for such period plus (c) interest paid during such period in
respect of the UVC Notes in accordance with Section 8.09 hereof (other than any
such payments made from the proceeds of Special Debt or Special Equity
Issuances) plus (d) cash receipts during such period in respect of any
extraordinary or non-recurring gains to the extent not constituting Net
Available Proceeds minus (e) cash payments during such period in respect of any
extraordinary or non-recurring losses.
"Excluded Franchise" shall mean any Franchise for any CATV
System owned by the Company or any of its Subsidiaries that either (a) has a
remaining term of three years or less (determined as at the date of acquisition
thereof) or (b) is not material to the operations of the Company and its
Subsidiaries taken as a whole (as determined by the Majority Lenders in their
sole discretion).
"Excluded Leasehold Interest" shall mean any leasehold
interest held by the Company or any of its Subsidiaries that either (a) has a
remaining term of three years or less (determined as at the date of acquisition
thereof) or (b) is not material to the operations of the Company and its
Subsidiaries taken as a whole (as determined by the Majority Lenders in their
sole discretion).
"Existing Credit Agreement" shall have the meaning assigned to
such term in the recitals to this Agreement.
"Existing Lenders" shall mean Chase, Morgan Guaranty Trust
Company of New York and CIBC Inc.
Credit Agreement
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"Existing Loans" shall mean the "Loans" under, and as defined
in, the Existing Credit Agreement.
"Facility A Term Loan Commitment" shall mean, as to each
Facility A Term Loan Lender, the obligation of such Lender to make Facility A
Term Loans in an aggregate principal amount up to but not exceeding the amount
set opposite the name of such Lender on the signature pages hereof under the
caption "Facility A Term Loan Commitment" or, in the case of a Person that
becomes a Facility A Term Loan Lender pursuant to an assignment permitted under
Section 11.06(b) hereof, as specified in the respective instrument of
assignment pursuant to which such assignment is effected (as the same may be
reduced from time to time pursuant to Section 2.03 or 2.09 hereof or increased
or reduced from time to time pursuant to assignments permitted under Section
11.06(b) hereof). The original aggregate principal amount of the Facility A
Term Loan Commitments is $100,000,000.
"Facility A Term Loan Commitment Termination Date" shall
mean April 9, 1996.
"Facility A Term Loan Lenders" shall mean, (a) on the date
hereof, the Lenders having Facility A Term Loan Commitments on the signature
pages hereof and (b) thereafter, the Lenders from time to time holding Facility
A Term Loans and Facility A Term Loan Commitments after giving effect to any
assignments thereof permitted by Section 11.06(b) hereof.
"Facility A Term Loan Notes" shall mean the promissory notes
provided for by Section 2.07(b) hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time. The "Facility A Term Loan
Notes" shall include any Registered Notes evidencing Facility A Term Loans
executed and delivered pursuant to Section 2.07(f) hereof.
"Facility A Term Loans" shall mean the loans provided for by
Section 2.01(b) hereof.
Credit Agreement
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"Facility B Term Loan Commitment" shall mean, as to each
Facility B Term Loan Lender, the obligation of such Lender to make Facility B
Term Loans in an aggregate principal amount up to but not exceeding the amount
set opposite the name of such Lender on the signature pages hereof under the
caption "Facility B Term Loan Commitment" or, in the case of a Person that
becomes a Facility B Term Loan Lender pursuant to an assignment permitted under
Section 11.06(b) hereof, as specified in the respective instrument of
assignment pursuant to which such assignment is effected (as the same may be
reduced from time to time pursuant to Section 2.03 or 2.09 hereof or increased
or reduced from time to time pursuant to assignments permitted under Section
11.06(b) hereof). The original aggregate principal amount of the Facility B
Term Loan Commitments is $90,000,000.
"Facility B Term Loan Commitment Termination Date" shall mean
April 9, 1996.
"Facility B Term Loan Lenders" shall mean, (a) on the date
hereof, the Lenders having Facility B Term Loan Commitments on the signature
pages hereof and (b) thereafter, the Lenders from time to time holding Facility
B Term Loans and Facility B Term Loan Commitments after giving effect to any
assignments thereof permitted by Section 11.06(b) hereof.
"Facility B Term Loan Notes" shall mean the promissory notes
provided for by Section 2.07(c) hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time. The "Facility B Term Loan
Notes" shall include any Registered Notes evidencing Facility B Term Loans
executed and delivered pursuant to Section 2.07(f) hereof.
"Facility B Term Loans" shall mean the loans provided for by
Section 2.01(c) hereof.
"FCC" shall mean the Federal Communications Commission or any
governmental authority substituted therefor.
Credit Agreement
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"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Fixed Charges" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) the aggregate
amount of Debt Service for such period plus (b) the aggregate amount of taxes
paid or payable in respect of the income or profit of the Company and its
Subsidiaries for such period plus (c) Capital Expenditures made by the Company
and its Subsidiaries during such period (other than Capital Expenditures made
with the proceeds of Indebtedness permitted under Section 8.07(g) hereof) plus
(d) the Tax Payment Amount for such period.
"Fixed Charges Ratio" shall mean, as at any date, the ratio of
(a) product of (x) the sum of EBITDA for the fiscal quarter ending on or most
recently ended prior to such date and (but only for periods ending on or before
June 30, 1998) all interest income of the Company and its Subsidiaries for such
fiscal quarter times (y) four to (b) Fixed Charges for the period of four
fiscal quarters ending on or most recently ended prior to such date.
"Franchise" shall mean a franchise, license, authorization or
right by contract or otherwise to construct,
Credit Agreement
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own, operate, promote, extend and/or otherwise exploit any CATV System operated
or to be operated by the Company or any of its Subsidiaries granted by any
state, county, city, town, village or other local or state government authority
or by the FCC. The term "Franchise" shall include each of the Franchises set
forth on Schedule III hereto.
"FrontierVision" shall mean FrontierVision Operating Partners,
Inc., a Delaware corporation.
"FrontierVision LP" shall mean FrontierVision Partners, L.P.,
a Delaware limited partnership.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those that, in accordance with the last
sentence of Section 1.02(a) hereof, are to be used in making the calculations
for purposes of determining compliance with this Agreement.
"General Partner" shall mean FrontierVision LP and such other
Person or Persons as may be a general partner of the Company from time to time.
"Guarantee" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become contingently liable under or with
respect to, the Indebtedness, other obligations, net worth, working capital or
earnings of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an agreement
to purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor's obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank or other
financial institution to issue a letter of credit or other similar instrument
for the benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary
Credit Agreement
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course of business. The terms "Guarantee" and "Guaranteed" used as a verb
shall have a correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any
petroleum or petroleum products, flammable materials, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, and transformers or
other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any
chemicals or other materials or substances that are now or hereafter become
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", "contaminants",
"pollutants" or words of similar import under any Environmental Law and (c) any
other chemical or other material or substance, exposure to which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money or capitalized
leases) arising, and accrued expenses incurred, in the ordinary course of
business so long as such trade accounts payable are payable within 90 days of
the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person.
Credit Agreement
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"Information Memorandum" shall mean the confidential Senior
Financing Memorandum dated February 1996 prepared by the Company with respect
to the CATV Systems to be acquired in the Cox Acquisition.
"Initial Acquisition Agreements" shall mean, collectively, the
C4 Acquisition Agreement, the Longfellow Acquisition Agreement, the UVC
Acquisition Agreement and the Americable Acquisition Agreement.
"Initial Acquisitions" shall mean, collectively, the C4
Acquisition, the Longfellow Acquisition, the UVC Acquisition and the Americable
Acquisition.
"Initial Equityholders" shall mean, collectively, (i) J.P.
Morgan Investment Corp., (ii) 1818 II Cable Corp., (iii) Olympus Cable Corp.,
(iv) First Union Capital Partners, Inc., (v) any Control Affiliate of any of
the foregoing entities and (vi) any limited partnership of which any Control
Affiliate of any of the foregoing entities is the sole general partner (so long
as the aggregate equity interests of FrontierVision LP that shall have been
transferred to all such limited partnerships by any such entity shall not
exceed 25% of the aggregate equity interests held by such entity in
FrontierVision LP).
"Interest Coverage Ratio" shall mean, as at any date, the
ratio of:
(a) the product of (x) the sum of EBITDA for the fiscal
quarter ending on, or most recently ended prior to such date and (but
only for periods ending on or before June 30, 1998) all interest
income for the Company and its Subsidiaries for such fiscal quarter
times (y) four (or, for purposes of determining the Interest Coverage
Ratio as at any date prior to March 31, 1996, the product of (I) the
sum of EBITDA for the three months ended February 29, 1996 and all
interest income for the Company and its Subsidiaries for such period
times (II) four) to
Credit Agreement
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(b) Interest Expense for the period of four fiscal quarters
ending on or most recently ended prior to such date (excluding,
however, non-cash amortization of loan facility fees and other
deferred debt costs, in each case to the extent included in
determining Interest Expense for such period).
"Interest Expense" shall mean, for any period, the sum, for
the Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations, but excluding interest
in respect of the UVC Notes) accrued or capitalized during such period (whether
or not actually paid during such period) plus (b) all interest in respect of
the UVC Notes paid in cash during such period (other than any such payments
made from the proceeds of Special Debt or Special Equity Issuances) plus (c)
the net amount payable (or minus the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period).
Notwithstanding the foregoing, (i) if during any period for
which Interest Expense is being determined the Company shall have made or
consummated any Acquisition (including, without limitation, the Initial
Acquisitions or the Cox Acquisition), then "Interest Expense" shall be
determined on a pro forma basis as if such Acquisition (and any Indebtedness
incurred by the Company or any of its Subsidiaries in connection with such
Acquisition) had been made or consummated on the first day of such period
(whether or not such first day shall occur prior to the Closing Date) and (ii)
if, as at any date (a "calculation date"), fewer than four complete consecutive
fiscal quarters have elapsed subsequent to the Closing Date, Interest Expense
shall be annualized by multiplying the amount of such Interest Expense (after
giving effect to the adjustment contemplated in the foregoing clause (i)) by a
fraction, the numerator of which is 365 and the denominator of which is the
number of days during the
Credit Agreement
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period commencing on the date immediately following the Closing Date through
and including the calculation date.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar Loan is made or
Converted from a Base Rate Loan or (in the event of a Continuation) the last
day of the next preceding Interest Period for such Loan and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter (or, to the extent determined to be available by each Lender
in its sole discretion, nine or twelve months thereafter), as the Company may
select as provided in Section 4.05 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing:
(i) if any Interest Period for any Revolving Credit
Loan would otherwise end after the Revolving Credit Commitment
Termination Date, such Interest Period shall end on the Revolving
Credit Commitment Termination Date;
(ii) no Interest Period for any Revolving Credit Loan
may commence before the Revolving Credit Commitment Adjustment Date
and end after the first Revolving Credit Commitment Reduction Date;
(iii) no Interest Period for any Revolving Credit Loan
may commence before and end after any Revolving Credit Commitment
Reduction Date unless, after giving effect thereto, the aggregate
principal amount of Revolving Credit Loans having Interest Periods
that end after such Revolving Credit Commitment Reduction Date shall
be equal to or less than the aggregate principal amount of Revolving
Credit Loans scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Revolving Credit
Commitment Reduction Date;
Credit Agreement
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(iv) no Interest Period for any Facility A Term Loan
may commence before and end after any Principal Payment Date, unless,
after giving effect thereto, the aggregate principal amount of the
Facility A Term Loans having Interest Periods that end after such
Principal Payment Date shall be equal to or less than the aggregate
principal amount of the Facility A Term Loans scheduled to be
outstanding after giving effect to the payments of principal required
to be made on such Principal Payment Date;
(v) no Interest Period for any Facility B Term Loan
may commence before and end after any Principal Payment Date, unless,
after giving effect thereto, the aggregate principal amount of the
Facility B Term Loans having Interest Periods that end after such
Principal Payment Date shall be equal to or less than the aggregate
principal amount of the Facility B Term Loans scheduled to be
outstanding after giving effect to the payments of principal required
to be made on such Principal Payment Date;
(vi) each Interest Period that would otherwise end on a
day that is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day);
and
(vii) notwithstanding clauses (i), (ii), (iii), (iv) and
(v) above, no Interest Period shall have a duration of less than one
month and, if the Interest Period for any Eurodollar Loan would
otherwise be a shorter period, such Loan shall not be available
hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specific
contingencies.
Credit Agreement
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"Investment" shall mean, for any Person: (a) the
acquisition (whether for cash, Property, services or securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of any other Person or any agreement to make any
such acquisition (including, without limitation, any "short sale" or any sale
of any securities at a time when such securities are not owned by the Person
entering into such sale); (b) the making of any deposit with, or advance, loan
or other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person), but excluding
any such advance, loan or extension of credit having a term not exceeding 90
days arising in connection with the sale of programming or advertising time by
such Person in the ordinary course of business; (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person; or (d) the entering
into of any Interest Rate Protection Agreement.
"Lien" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such Property. For purposes of this Agreement and the other Loan Documents,
a Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"Limited Partner" shall mean FrontierVision and such other
Person or Persons as may be a limited partner of the Company from time to time.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes and the Security Documents.
Credit Agreement
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"Loans" shall mean, collectively, the Revolving Credit Loans,
the Facility A Term Loans and the Facility B Term Loans.
"Longfellow Acquisition" shall mean the acquisition by the
Company of the assets of Longfellow Cable Company, Inc., Carrabassett
Electronics and Carrabassett Cable Company, Inc. pursuant to the Longfellow
Acquisition Agreement.
"Longfellow Acquisition Agreement" shall mean the Asset
Acquisition Agreement (July 27, 1995 Auction Sale) dated as of July 27, 1995
between Stephen S. Gray in his capacity as Receiver of Longfellow Cable
Company, Inc., Carrabassett Electronics and Carrabassett Cable Company, Inc.
and FrontierVision LP, as the same shall, subject to Section 8.18 hereof, be
modified and supplemented and in effect from time to time.
"Majority Facility A Term Loan Lenders" shall mean Lenders
having at least 66-2/3% of the aggregate outstanding principal amount of the
Facility A Term Loans, at such time (or, if the Facility A Term Loans shall not
have been made, the aggregate outstanding principal amount of the Facility A
Term Loan Commitments at such time).
"Majority Facility B Term Loan Lenders" shall mean Lenders
having at least 66-2/3% of the aggregate outstanding principal amount of the
Facility B Term Loans, at such time (or, if the Facility B Term Loans shall not
have been made, the aggregate outstanding principal amount of the Facility B
Term Loan Commitments at such time).
"Majority Lenders" shall mean Lenders having at least 66-2/3%
of the sum of (i) the aggregate amount of the Revolving Credit Commitments at
such time (or, if the Revolving Credit Commitments shall have terminated, the
aggregate amount of the Revolving Credit Loans at such time) plus (ii) the
aggregate outstanding principal amount of the Facility A Term Loans, at such
time (or, if the Facility A Term Loans shall not have been made, the aggregate
outstanding principal amount of the Facility A Term Loan Commitments at such
time) plus (iii) the
Credit Agreement
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aggregate outstanding principal amount of the Facility B Term Loans, at such
time (or, if the Facility B Term Loans shall not have been made, the aggregate
outstanding principal amount of the Facility B Term Loan Commitments at such
time).
"Majority Revolving Credit Lenders" shall mean Lenders having
at least 66-2/3% of the aggregate amount of the Revolving Credit Commitments at
such time (or, if the Revolving Credit Commitments shall have terminated, the
aggregate amount of the Revolving Credit Loans at such time).
"Margin Stock" shall mean "margin stock" within the meaning
of Regulations G, T, U and X.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company to perform its obligations under any of
the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lenders and
the Administrative Agent under any of the Loan Documents or (e) the timely
payment of the principal of or interest on the Loans or other amounts payable
in connection therewith.
"Mortgages" shall mean, collectively, one or more mortgages,
deeds of trust or collateral assignments of leasehold interest, in form and
substance satisfactory to the Majority Lenders, to effect a Lien on real
property or leasehold interests in the State where the respective Property to
be covered by such instrument is located, executed by the respective Obligor
that is the owner or lessee of such Property in favor of the Administrative
Agent (or, in the case of a deed of trust, in favor of a trustee for the
benefit of the Administrative Agent and the Lenders) pursuant to Section
6.01(j) of the Existing Credit Agreement, Section 6.01(i) hereof or Section
8.19 hereof, as the case may be, covering the respective fee or leasehold
interests owned by such Obligor, as said mortgages, deeds of
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trust and collateral assignments of leasehold interests shall be modified and
supplemented and in effect from time to time.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made by the
Company or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
(i) in the case of any Disposition, the amount of Net
Cash Payments received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate
amount of proceeds of insurance, condemnation awards and other
compensation received by the Company and its Subsidiaries in respect
of such Casualty Event net of (A) reasonable expenses incurred by the
Company and its Subsidiaries in connection therewith and (B)
contractually required repayments of Indebtedness to the extent
secured by a Lien on such Property and any income and transfer taxes
payable by the Company or any of its Subsidiaries in respect of such
Casualty Event;
(iii) in the case of any Debt Issuance, the aggregate
amount of all cash received by the Company and its Subsidiaries in
respect of such Debt Issuance, net of reasonable expenses incurred by
the Company and its Subsidiaries in connection therewith; and
(iv) in the case of any Equity Issuance, the aggregate
amount of all cash received by the Company and its Subsidiaries or by
FrontierVision L.P., as the case may be, in respect of such Equity
Issuance, net of reasonable expenses incurred by the Company and its
Subsidiaries and by FrontierVision L.P. in connection therewith.
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"Net Cash Payments" shall mean, with respect to any
Disposition, the aggregate amount of all cash payments received by the Company
and its Subsidiaries directly or indirectly in connection with such
Disposition, whether at the time of such Disposition or after such Disposition
under deferred payment arrangements or Investments entered into or received in
connection with such Disposition (but excluding, in the event such Disposition
consisted in whole or in part of an exchange of CATV Systems, any cash and cash
equivalents derived from the operation of the CATV Systems acquired as part of
such exchange); provided that:
(a) Net Cash Payments shall be net of (i) the amount of any
legal, accounting, regulatory, title and recording tax expenses,
commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Tax
Payment Amount estimated to be payable by the Company and its
Subsidiaries as a result of such Disposition, and
(b) Net Cash Payments shall be net of any repayments by the
Company or any of its Subsidiaries of Indebtedness to the extent that
(i) such Indebtedness is secured by a Lien on the Property that is the
subject of such Disposition and (ii) such Indebtedness is repaid in
connection with such Disposition.
"Net Company Portion of Excess Cash Flow" shall mean (a) for
any fiscal year through and including the fiscal year ending December 31, 1997,
100% of Excess Cash Flow for such fiscal year and (b) for any fiscal year
thereafter, 50% of Excess Cash Flow for such fiscal year.
"New Lenders" shall mean each of the Lenders hereto identified
under the caption "NEW LENDERS" on the signature pages hereto.
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"Notes" shall mean, collectively, the Revolving Credit Notes,
the Facility A Term Loan Notes and the Facility B Term Loan Notes.
"Obligors" shall mean, collectively, the Company, each Partner
Pledgor under and as defined in the Partner Pledge Agreement, each Stock
Pledgor under and as defined in the Stock Pledge Agreement and, effective upon
the execution and delivery of any Subsidiary Guarantee Agreement, each
Subsidiary of the Company so executing and delivering such Subsidiary Guarantee
Agreement.
"Other Equity Interests" shall mean limited partnership
interests issued by the Company in accordance with Section 8.13 hereof.
"Other Equity Issuance" shall mean any issuance by the
Company of Other Equity Interests.
"Other Pledge Agreement" shall mean a pledge agreement
executed and delivered by a holder of Other Equity Interests in favor of the
Administrative Agent in accordance with Section 8.13(b)(iii) hereof.
"Pari Passu Obligations" shall mean, collectively, (a) the
obligations of the Company in respect of Interest Rate Protection Agreements
between the Company and a Lender (or a Control Affiliate of a Lender) permitted
under Section 8.08(g) hereof and (b) any Indebtedness of the Company or any of
its Subsidiaries to any Lender permitted under Section 8.07(f) hereof.
"Partner Pledge Agreement" shall mean the Partner Pledge
Agreement dated as of November 9, 1995 between the Partner Pledgors referred to
therein and the Administrative Agent, a copy of which is attached as Exhibit
D-1 hereto, as the same shall be amended by Amendment No. 1 thereto in
substantially the form attached as Exhibit D-2 hereto and as the same shall be
further modified and supplemented and in effect from time to time.
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"Partners" shall mean, collectively, the General Partners and
the Limited Partners of the Company from time to time.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership of FrontierVision Operating Partners, L.P. dated as of July 14,
1995 by and between the Partners (as amended by Amendment No. 1 thereto dated
as of July 15, 1995, by Amendment No. 2 thereto dated as of November 9, 1995
and by Amendment No. 3 thereto dated as of April 9, 1996) as the same shall,
subject to Section 8.18 hereof, be further modified and supplemented and in
effect from time to time.
"Partnership Distribution" shall mean, with respect to (i) any
portion of any partnership interest (whether general or limited) in the
Company, (ii) any warrants, options or other rights to acquire any such
partnership interest or (iii) any payments to any Person (such as "phantom
stock" payments) where the amount thereof is calculated with reference to fair
market or equity value of the Company or any Subsidiary, all partnership
distributions of the Company (in cash, Property or obligations) thereon, or
other payments or distributions on account thereof, or the setting apart of
money for a sinking or other analogous fund therefor, or the purchase,
redemption, retirement or other acquisition thereof. The term "Partnership
Distribution" shall include any distributions or payments made by the Company
to the Partners for the purpose of enabling the Partners (or their direct or
indirect owners) to pay federal, state or local income taxes in respect of
taxable income of the Company attributable to the Partners (or such owners).
"Pay TV Units" shall mean the aggregate number of premium or
pay television services to which Subscribers subscribe.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
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"Permitted Investments" shall mean: (a) direct obligations of
the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or of
any agency thereof, in either case maturing not more than 90 days from the date
of acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; (c) commercial paper rated A-1 or better or P-1 by Standard & Poor's
Ratings Services, a Division of McGraw Hill, Inc., or Moody's Investors
Service, Inc., respectively, maturing not more than 90 days from the date of
acquisition thereof; in each case so long as the same (x) provide for the
payment of principal and interest (and not principal alone or interest alone)
and (y) are not subject to any contingency regarding the payment of principal
or interest; and (d) Investments in money market funds whose assets consist
primarily of Investments of the types described in the foregoing clauses (a),
(b) and (c) rated as investment grade or better.
"Permitted Subordinated Indebtedness" shall mean Indebtedness
of the Company incurred in accordance with Section 8.13 hereof.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, limited liability company, joint venture,
trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Company or any ERISA Affiliate and that is
covered by Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to 2%
plus the Base Rate as in effect from time to time plus the
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Applicable Margin for Base Rate Loans, provided that, with respect to principal
of a Eurodollar Loan that shall become due (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise) on a day other
than the last day of the Interest Period therefor, the "Post-Default Rate"
shall be, for the period from and including such due date to but excluding the
last day of such Interest Period, 2% plus the interest rate for such Loan as
provided in Section 3.02(b) hereof and, thereafter, the rate provided for above
in this definition.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending
rate.
"Principal Office" shall mean the principal office of Chase,
located on the date hereof at 1 Chase Manhattan Plaza, New York, New York
10081.
"Principal Payment Date" shall mean each Quarterly Date
commencing with September 30, 1998 through and including June 30, 2005.
"Pro Forma Financial Statements" shall have the meaning
assigned to such term in Section 6.01(m) hereof.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Price" shall mean with respect to any Subsequent
Acquisition, an amount equal to the sum of (i) the aggregate consideration,
whether cash, Property or securities (including, without limitation, any
Indebtedness incurred pursuant to Section 8.07(g) hereof and the fair market
value of any CATV Systems being transferred by the Company or any of its
Subsidiaries in exchange for the CATV Systems being acquired in such Subsequent
Acquisition), paid or delivered by the Company and its Subsidiaries in
connection with such Subsequent Acquisition plus (ii) the aggregate amount of
liabilities of the
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acquired business (net of current assets of the acquired business) that would
be reflected on a balance sheet (if such were to be prepared) of the Company
and its Subsidiaries after giving effect to such Subsequent Acquisition.
"Qualified Public Offering" shall mean an offer or offerings
of equity interests of FrontierVision Partners LP under one or more effective
registration statements under the Securities Act of 1933, as amended, such
that, after giving effect thereto, (i) at least 20% of the aggregate equity
interests in FrontierVision LP on a fully diluted basis (i.e., giving effect to
the exercise of any warrants, options and conversion and other rights) has been
sold pursuant to such offerings, and (ii) such offerings result in aggregate
cash proceeds being received by FrontierVision LP (and contributed by
FrontierVision LP to the Company) of at least $50,000,000 exclusive of
underwriter's discounts and other expenses.
"Quarterly Dates" shall mean the last Business Day of March,
June, September and December in each year, the first of which shall be the
first such day after the date hereof.
"Quarterly Officer's Report" shall mean a quarterly report of
a Senior Officer with respect to Equivalent Basic Subscribers, homes passed,
revenues per Subscriber and Pay TV Units, substantially in the form of Exhibit
B hereto.
"Registered Holder" shall have the meaning assigned to such
term in Section 5.06(a)(ii) hereof.
"Registered Loan" shall have the meaning assigned to such
term in Section 2.07(f) hereof.
"Registered Note" shall have the meaning assigned to such
term in Section 2.07(f) hereof.
"Regulations A, D, G, T, U and X" shall mean, respectively,
Regulations A, D, G, T, U and X of the Board of Governors of the Federal
Reserve System (or any successor), as
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the same may be modified and supplemented and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Lender,
any change after the date hereof in Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to
a class of banks including such Lender of or under any Federal, state or
foreign law or regulations (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for any Interest Period for
any Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall include any other reserves required to be maintained
by such member banks by reason of any Regulatory Change with respect to (i) any
category of liabilities that includes deposits by reference to which the
Eurodollar Base Rate is to be determined as provided in the definition of
"Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions
of credit or other assets that includes Eurodollar Loans.
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"Reserved Commitment Amount" shall have the meaning assigned
to such term in Section 2.01(a) hereof.
"Reserved Proceeds" shall mean, with respect to any Debt
Issuance, the Net Available Proceeds thereof which are not simultaneously with,
or within five Business Days of, the occurrence thereof used to make a
Subsequent Acquisition, to refinance outstanding Subordinated Indebtedness or
to make payments in respect of the UVC Notes as contemplated by the last
sentence of the first paragraph of Section 8.09 hereof.
"Restricted Payment" shall mean, collectively, Partnership
Distributions and, to the extent made in cash, payments of principal, interest
or premiums in respect of the UVC Notes.
"Revolving Credit Commitment" shall mean, as to each Revolving
Credit Lender, the obligation of such Lender to make Loans in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set opposite the name of such Lender on the signature pages hereof under the
caption "Revolving Credit Commitment" or, in the case of a Person that becomes
a Revolving Credit Lender pursuant to an assignment permitted under Section
11.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced at
any time or from time to time pursuant to Section 2.03 or 2.09 hereof or
increased or reduced from time to time pursuant to assignments permitted under
Section 11.06(b) hereof). The aggregate original principal amount of the
Revolving Credit Commitments is $75,000,000.
"Revolving Credit Commitment Adjustment Date" shall mean the
Quarterly Date falling on or nearest to June 30, 1998.
"Revolving Credit Commitment Reduction Dates" shall mean each
Quarterly Date commencing with September 30, 1998, through and including June
30, 2004.
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"Revolving Credit Commitment Termination Date" shall mean the
Quarterly Date falling on or nearest to June 30, 2004.
"Revolving Credit Lenders" shall mean (a) on the date hereof,
the Lenders having Revolving Credit Commitments on the signature pages hereof
and (b) thereafter, the Lenders from time to time holding Revolving Credit
Loans and Revolving Credit Commitments after giving effect to any assignments
thereof permitted by Section 11.06(b).
"Revolving Credit Loans" shall mean the loans provided for in
Section 2.01(a) hereof.
"Revolving Credit Notes" shall mean the promissory notes
provided for by Section 2.07(a) hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time. The "Revolving Credit Notes"
shall include any Registered Notes evidencing Revolving Credit Loans executed
and delivered pursuant to Section 2.07(f) hereof.
"Security Agreement" shall mean the Security Agreement dated
as of November 9, 1995 between the Company, the other Securing Parties from
time to time party thereto and the Administrative Agent, a copy of which is
attached as Exhibit C-1 hereto, as the same shall be amended by Amendment No. 1
thereto in substantially the form attached as Exhibit C-2 hereto and as the
same shall be further modified and supplemented and in effect from time to
time.
"Security Documents" shall mean, collectively, the Security
Agreement, the Partner Pledge Agreement, the Stock Pledge Agreement, the
Subsidiary Guarantee Agreements, the Mortgages and the Other Pledge Agreements,
and all Uniform Commercial Code financing statements required by the Security
Agreement, the Partner Pledge Agreement, the Stock Pledge Agreement, the
Subsidiary Guarantee Agreements, the Mortgages and the Other Pledge Agreements
to be filed with respect to the security interests in personal Property and
fixtures created
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pursuant to the Security Agreement, the Partner Pledge Agreement, the Stock
Pledge Agreement, the Subsidiary Guarantee Agreements, the Mortgages and the
Other Pledge Agreements.
"Sellers" shall mean, collectively, (a) with respect to the
Longfellow Acquisition, Stephen S. Gray in his capacity as Receiver of
Longfellow Cable Company, Inc., Carrabassett Electronics and Carrabassett Cable
Company, Inc., (b) with respect to the UVC Acquisition, UVC, (c) with respect
to the Americable Acquisition, Americable, (d) with respect to the C4
Acquisition, C4 Media, (e) with respect to the Cox Acquisition, Cox and (f)
with respect to any Subsequent Acquisition, the owner of, the stock (or other
ownership interests) of the entity that owns, or the assets of, the CATV System
to be acquired by the Company or any of its Subsidiaries pursuant to such
Subsequent Acquisition, as the case may be.
"Senior Debt Ratio" shall mean, as at any date, the ratio of:
(a) the sum of the aggregate amount of all Indebtedness of
the Company and its Subsidiaries (excluding all Subordinated
Indebtedness and performance bonds contemplated by Section 8.07(f)
hereof but including all letters of credit contemplated by said
Section) as at such date to
(b) the product of EBITDA for the fiscal quarter ending on,
or most recently ended prior to such date times four (or, for purposes
of determining the Senior Debt Ratio as at any date prior to March 31,
1996, the product of EBITDA for the three months ended February 29,
1996 times four).
"Senior Officer" shall mean the president or chief financial
officer of FrontierVision Inc., acting in its capacity as the general partner
of the general partner of the General Partner, acting for and on behalf of the
Company.
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"Special Debt Issuance" shall mean any Debt Issuance to the
extent the proceeds thereof are applied to refinance, or to make payments in
cash in respect of, the UVC Notes as contemplated by the last sentence of the
first paragraph of Section 8.09 hereof.
"Special Equity Issuance" shall mean any Equity Issuance to
the extent the proceeds thereof are applied to refinance, or to make payments
in cash in respect of, the UVC Notes as contemplated by the last sentence of
the first paragraph of Section 8.09 hereof.
"Specified Default" shall mean, collectively, any Event of
Default under Section 9(a), 9(b), 9(d)(i), 9(e), 9(f), 9(g), 9(h), 9(l), 9(m)
or 9(n) hereof.
"Stock Pledge Agreement" shall mean the Stock Pledge Agreement
dated as of November 9, 1995 between the Stock Pledgors referred to therein and
the Administrative Agent, a copy of which is attached as Exhibit E-1 hereto, as
the same shall be amended by Amendment No. 1 thereto in substantially the form
attached as Exhibit E-2 hereto and as the same shall be further modified and
supplemented and in effect from time to time.
"Subordinated Indebtedness" shall mean, collectively, (a) the
UVC Notes and (b) Permitted Subordinated Indebtedness.
"Subscriber" shall mean a Person who subscribes to one or more
of the cable television services of the Company and its Subsidiaries and
includes both Equivalent Basic Subscribers and Persons who subscribe to Pay TV
Units, but excluding each such Person whose account is more than 90 days past
due.
"Subsequent Acquisition" shall mean any acquisition permitted
under Section 8.05(b)(iv) hereof.
"Subsequent Acquisition Agreement" shall mean each agreement
pursuant to which a Subsequent Acquisition shall be
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consummated, as the same shall, subject to Section 8.18 hereof, be modified and
supplemented and in effect from time to time.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries of such Person.
"Subsidiary Guarantee Agreement" shall mean a Subsidiary
Guarantee Agreement substantially in the form of Exhibit F hereto by a
Subsidiary of the Company in favor of the Administrative Agent, as the same
shall be modified and supplemented and in effect from time to time.
"Subsidiary Guarantor" shall mean any Subsidiary of the
Company that executes and delivers the Subsidiary Guarantee Agreement.
"Tax Payment Amount" shall mean, for any period, an amount
equal to the aggregate amount of Federal, state and local income taxes the
Company and its Subsidiaries would have paid in respect of such period in the
event they were corporations (other than an "S corporation" within the meaning
of Section 1361 of the Code) for such period and all prior periods filing
consolidated income tax returns with the Company as the "common parent" (within
the meaning of Section 1504 of the Code).
"Term Loan Commitments" shall mean, collectively, the Facility
A Term Loan Commitments and the Facility B Term Loan Commitments.
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"Term Loans" shall mean, collectively, the Facility A Term
Loans and the Facility B Term Loans.
"Type" shall have the meaning assigned to such term in
Section 1.03 hereof.
"Unused Proceeds" shall mean, with respect to any Debt
Issuance, the Net Available Proceeds thereof other than the Reserved Proceeds
thereof.
"U.S. Person" shall mean a citizen or resident of the United
States of America, a corporation, partnership or other entity created or
organized in or under any laws of the United States of America or any State
thereof, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income.
"U.S. Taxes" shall mean any present or future tax, assessment
or other charge or levy imposed by or on behalf of the United States of America
or any taxing authority thereof.
"UVC" shall mean United Video Cablevision, Inc.
"UVC Acquisition" shall mean the acquisition by the Company of
assets of UVC pursuant to the UVC Acquisition Agreement.
"UVC Acquisition Agreement" shall mean the Asset Purchase
Agreement dated July 20, 1995 between the Company and UVC, as the same shall,
subject to Section 8.18 hereof, be modified and supplemented and in effect from
time to time.
"UVC Notes" shall mean, collectively, (a) the promissory note
of the Company in favor of UVC executed and delivered by the Company in
connection with the UVC Acquisition in an aggregate principal amount of
$7,200,000 and (b) any PIK Notes (under and as defined in such promissory note)
executed and delivered thereunder as provided therein, as the same shall,
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subject to Section 8.18 hereof, be modified and supplemented and in effect from
time to time.
"Wholly Owned Subsidiary" shall mean, with respect to any
Person, any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned or
controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements
and certificates and reports as to financial matters required to be delivered
to the Administrative Agent and the Lenders hereunder shall (unless otherwise
disclosed to the Lenders in writing at the time of delivery thereof in the
manner described in subsection (b) below) be prepared, in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the latest financial statements furnished to
the Administrative Agent and the Lenders hereunder (which, prior to the
delivery of the first financial statements under Section 8.01 hereof, shall
mean the Pro Forma Financial Statements). All calculations made for the
purposes of determining compliance with this Agreement shall (except as
otherwise expressly provided herein) be made by application of generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the latest annual or quarterly financial statements
furnished to the Lenders pursuant to Section 8.01 hereof (or, prior to the
delivery of the first financial statements under Section 8.01 hereof, used in
the preparation of the Pro Forma Financial Statements) unless:
(i) the Company shall have objected to determining
such compliance on such basis at the time of delivery of such
financial statements or
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(ii) the Majority Lenders shall so object in writing
within 30 days after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the Pro Forma Financial Statements).
(b) The Company shall deliver to the Administrative Agent (in
sufficient copies for each Lender) and the Agents at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as
to which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 8 hereof, the Company will
not change the last day of its fiscal year from December 31 of each year, or
the last days of the first three fiscal quarters in each of its fiscal years
from March 31, June 30 and September 30 of each year, respectively.
(d) Whenever making determinations under this Agreement of
the amount of income taxes payable during any period by the Company and its
Subsidiaries, the amount of such taxes shall be deemed to include the Tax
Payment Amount for such period.
1.03 Types of Loans. Loans hereunder are distinguished by
"Class" and by "Type". The "Class" of a Loan refers to whether such Loan is a
Revolving Credit Loan, a
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Facility A Term Loan or a Facility B Term Loan, each of which constitutes a
Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or
a Eurodollar Loan, each of which constitutes a Type. Loans may be identified
by both Class and Type.
1.04 Subsidiaries. The Company has no Subsidiaries on the
date hereof; reference in this Agreement to Subsidiaries of the Company shall
be deemed inapplicable until such time as the Majority Lenders shall consent to
the creation of such Subsidiaries or such Subsidiaries shall in fact come into
existence in accordance with the terms hereof.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Revolving Credit Loans. Each Revolving Credit Lender
severally agrees, on the terms and conditions of this Agreement, to make
revolving credit loans to the Company in Dollars during the period from and
including the Effective Date to but not including the Revolving Credit
Commitment Termination Date in an aggregate principal amount (as to all
Revolving Credit Loans held by such Lender) at any one time outstanding up to
but not exceeding the amount of the Revolving Credit Commitment of such Lender
as in effect from time to time. Subject to the terms and conditions of this
Agreement, during such period the Company may borrow, repay and reborrow the
amount of the Revolving Credit Commitments by means of Base Rate Loans and
Eurodollar Loans and may Convert Loans of one Type into Loans of another Type
(as provided in Section 2.08 hereof) or Continue Eurodollar Loans from one
Interest Period to the next Interest Period (as provided in Section 2.08
hereof). Anything herein to the contrary notwithstanding, no Revolving Credit
Loans may be made hereunder on the Effective Date unless the Company shall be
simultaneously borrowing Facility A and Facility B Term Loans hereunder in an
aggregate amount equal to the original Facility A and Facility B Term Loan
Commitments hereunder (after giving effect to the
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designation of Existing Loans as Facility A and Facility B Term Loans as
provided in Sections 2.01(a) and (b) hereof).
Proceeds of Revolving Credit Loans shall be available for any
use permitted under Section 8.16 hereof, provided that, in the event that as
contemplated by Section 2.09(d) hereof, the Company shall prepay Revolving
Credit Loans from the proceeds of a Disposition hereunder, then an amount of
Revolving Credit Commitments equal to the amount of such prepayment (herein the
"Reserved Commitment Amount") shall be reserved and shall not be available for
borrowings hereunder except and to the extent that the proceeds of such
borrowings are to be applied to make Subsequent Acquisitions permitted under
Section 8.05(b) hereof or to make prepayments of Loans under Section
2.09(d)(y)(B) hereof. The Company agrees, upon the occasion of any borrowing
of Revolving Credit Loans hereunder that is to constitute a utilization of any
Reserved Commitment Amount, to advise the Administrative Agent in writing of
such fact at the time of such borrowing, identifying the amount of such
borrowing that is to constitute such utilization, the Subsequent Acquisition in
respect of which the proceeds of such borrowing are to be applied and the
reduced Reserved Commitment Amount to be in effect after giving effect to such
borrowing.
(b) Facility A Term Loans. On the Effective Date, all
outstanding Existing Loans held by the Existing Lenders shall, to the extent of
the aggregate Facility A Term Loan Commitments, automatically, and without any
action on the part of any Person, be designated as Facility A Term Loans
hereunder, and each of the New Lenders that is a Facility A Term Loan Lender
(and each Existing Lender, if any, whose relative proportion of Facility A Term
Loan Commitments hereunder is increasing over the proportion of Existing Loans
held by it under the Existing Credit Agreement) shall, by assignments from the
Existing Lenders (which shall be deemed to occur automatically on the Effective
Date), acquire a portion of the Facility A Term Loans of the Existing Lenders
so designated in such amounts (and the Facility A Term Loan Lenders shall,
through the Administrative Agent, make such additional adjustments among
themselves as shall be necessary) so that after
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giving effect to such assignments and adjustments, the Facility A Term Loan
Lenders shall hold the Facility A Term Loans hereunder ratably in accordance
with their respective Facility A Term Loan Commitments. In addition to the
foregoing, each Facility A Term Loan Lender severally agrees, on the terms and
conditions of this Agreement, to make additional term loans to the Company in
Dollars on the Effective Date in an aggregate principal amount up to but not
exceeding the then unused amount of the Facility A Term Loan Commitment of such
Lender. Subject to the terms and conditions of this Agreement (including,
without limitation, paragraph (d) below), the Company may Convert Facility A
Term Loans of one Type into Facility A Term Loans of another Type (as provided
in Section 2.08 hereof) or Continue Eurodollar Loans from one Interest Period
to the next Interest Period (as provided in Section 2.08 hereof).
Proceeds of Facility A Term Loans hereunder shall be available
for any use permitted under Section 8.16 hereof.
(c) Facility B Term Loans. On the Effective Date, all
outstanding Existing Loans shall, to the extent the same are not designated as
Facility A Term Loans pursuant to Section 2.01(b) hereof, automatically, and
without any action on the part of any Person, be designated as Facility B Term
Loans hereunder and each of the New Lenders that is a Facility B Term Loan
Lender (and each Existing Lender, if any, whose relative proportion of Facility
B Term Loan Commitments hereunder is increasing over the proportion of Existing
Loans held by it under the Existing Credit Agreement) shall, by assignments
from the Existing Lenders (which shall be deemed to occur automatically on the
Effective Date), acquire a portion of the Facility B Term Loans of the Existing
Lenders so designated in such amounts (and the Facility B Term Loan Lenders
shall, through the Administrative Agent, make such additional adjustments among
themselves as shall be necessary) so that after giving effect to such
assignments and adjustments, the Facility B Term Loan Lenders shall hold the
Facility B Term Loans hereunder ratably in accordance with their respective
Facility B Term Loan Commitments. In addition to the foregoing, each Facility
B Term Loan Lender severally agrees, on the terms and
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conditions of this Agreement, to make additional term loans to the Company in
Dollars on the Effective Date in an aggregate principal amount up to but not
exceeding the then unused amount of the Facility B Term Loan Commitment of such
Lender. Subject to the terms and conditions of this Agreement (including,
without limitation, paragraph (d) below), the Company may Convert Facility B
Term Loans of one Type into Facility B Term Loans of another Type (as provided
in Section 2.08 hereof) or Continue Eurodollar Loans from one Interest Period
to the next Interest Period (as provided in Section 2.08 hereof).
Proceeds of Facility B Term Loans hereunder shall be available
for any use permitted under Section 8.16 hereof.
(d) Limit on Eurodollar Loans.
(i) On the Effective Date all "Interest Periods" under
the Existing Credit Agreement in respect of the Existing Loans shall
automatically be terminated, and, subject to the provisions of
paragraph (ii) below, the Company shall be permitted to Continue such
Existing Loans as Eurodollar Loans of the appropriate Class hereunder,
or to Convert such Existing Loans into Base Rate Loans of the
appropriate Class hereunder.
(ii) No more than seven separate Interest Periods in
respect of Eurodollar Loans of all Classes may be outstanding at any
one time.
2.02 Borrowings. The Company shall give the Administrative
Agent notice of each borrowing hereunder as provided in Section 4.05 hereof.
Not later than 1:00 p.m. New York time on the date specified for each borrowing
hereunder, each Lender shall make available the amount of the Loan or Loans to
be made by it on such date to the Administrative Agent, at account number
NYAO-DI-900-9-000002 maintained by the Administrative Agent with Chase at the
Principal Office, in immediately available funds, for account of the Company
(or, at such other account as the Administrative Agent may designate).
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The amount so received by the Administrative Agent shall, subject to the terms
and conditions of this Agreement, be made available to the Company by
depositing the same, in immediately available funds, in an account of the
Company designated by the Company and maintained with Chase at the Principal
Office (or, in such other manner as the Company may reasonably specify to the
Administrative Agent).
2.03 Changes of Commitments.
(a) The aggregate amount of the Revolving Credit Commitments
shall be automatically reduced to zero on the Revolving Credit Commitment
Termination Date. In addition, (i) if on the Revolving Credit Commitment
Adjustment Date, the Revolving Credit Commitments shall exceed the aggregate
principal amount of the Revolving Credit Loans, the aggregate amount of the
Revolving Credit Commitments shall be automatically reduced on such date to an
amount equal to such aggregate principal amount of Revolving Credit Loans (the
aggregate amount of the Revolving Credit Commitments as at the Revolving Credit
Commitment Adjustment Date, after giving effect to such reduction, being
hereinafter referred to as the "Adjusted Commitment Amount") and (ii) the
aggregate amount of the Revolving Credit Commitments shall be automatically
reduced on each Revolving Credit Commitment Reduction Date set forth in column
(A) below, (x) by an amount (subject to reduction pursuant to paragraph (c)
below) equal to the percentage of the Adjusted Commitment Amount set forth in
column (B) below opposite such Revolving Credit Commitment Reduction Date, (y)
to an amount (subject to reduction pursuant to paragraph (c) below) equal to
the percentage of the Adjusted Commitment Amount set forth in column (C) below
opposite such Revolving Credit Commitment Reduction Date:
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<TABLE>
<CAPTION>
(A) (B) (C)
Revolving Credit Revolving Credit Revolving Credit
Commitment Reduction Commitments Reduced Commitments Reduced
Date Falling on or by the Following to the Following
Nearest to: Percentages Percentages
---------- ------------------- -------------------
<S> <C> <C>
September 30, 1998 1.5 98.5
December 31, 1998 1.5 97.0
March 31, 1999 2.0 95.0
June 30, 1999 2.0 93.0
September 30, 1999 2.0 91.0
December 31, 1999 2.0 89.0
March 31, 2000 3.0 86.0
June 30, 2000 3.0 83.0
September 30, 2000 3.0 80.0
December 31, 2000 3.0 77.0
March 31, 2001 4.0 73.0
June 30, 2001 4.0 69.0
September 30, 2001 4.0 65.0
December 31, 2001 4.0 61.0
March 31, 2002 5.0 56.0
June 30, 2002 5.0 51.0
September 30, 2002 5.0 46.0
December 31, 2002 5.0 41.0
March 31, 2003 6.5 34.5
June 30, 2003 6.5 28.0
September 30, 2003 6.5 21.5
December 31, 2003 6.5 15.0
March 31, 2004 7.5 7.5
June 30, 2004 7.5 0.0
</TABLE>
(b) The Company shall have the right at any time or from time
to time (i) so long as no Revolving Credit Loans are
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outstanding to terminate the Revolving Credit Commitments or (ii) to reduce the
aggregate unused amount of the Revolving Credit Commitments; provided that (x)
the Company shall give notice of each such termination or reduction as provided
in Section 4.05 hereof and (y) each partial reduction shall be in an aggregate
amount at least equal to $5,000,000 (or a larger multiple of $1,000,000). In
addition, the Revolving Credit Commitments shall be automatically reduced to
the extent required pursuant to Section 2.09(f) hereof.
(c) Each partial reduction in the aggregate amount of the
Revolving Credit Commitments pursuant to paragraph (b)(ii) above, or Section
2.09(f) hereof, on any date after the Revolving Credit Commitment Adjustment
Date, shall be applied to scheduled reductions in the Revolving Credit
Commitments ratably as follows: each such reduction shall result in a
reduction of the respective percentages set forth in column (B) at the end of
paragraph (a) above (ratably in accordance with the respective remaining
amounts thereof, after giving effect to any prior reductions pursuant to this
paragraph (c)), with appropriate reductions (but not below zero) being made to
the respective percentages set forth in column (C) of said paragraph (a) after
giving effect to such reduction of the percentages in said column (B).
(d) Any portion of the Facility A and Facility B Term Loan
Commitments not used on the Effective Date shall be automatically terminated on
the Effective Date.
(e) The Commitments once terminated or reduced may not be
reinstated.
2.04 Commitment Fee. The Company shall pay to the
Administrative Agent for account of each Lender:
(a) a commitment fee on the daily average unused amount of
such Lender's Revolving Credit Commitment (including, without
limitation, the Reserved Commitment Amount), for the period from and
including the date hereof
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to but not including the earlier of the date such Commitment is
terminated and the Revolving Credit Commitment Termination Date, at a
rate per annum equal to 1/2 of 1%;
(b) a commitment fee on the daily average unused amount of
such Lender's Facility A Term Loan Commitment, for the period from and
including the date hereof to but not including the earlier of the date
such Commitment is terminated and the Facility A Term Loan Commitment
Termination Date, at a rate per annum equal to 1/2 of 1%; and
(c) a commitment fee on the daily average unused amount of
such Lender's Facility B Term Loan Commitment, for the period from and
including the date hereof to but not including the earlier of the date
such Commitment is terminated and the Facility B Term Loan Commitment
Termination Date, at a rate per annum equal to 1/2 of 1%.
Accrued commitment fees shall be payable on the Effective Date, on each
Quarterly Date and on the earlier of the date the Commitments are terminated
and the Revolving Credit Commitment Termination Date, the Facility A Term Loan
Commitment Termination Date or the Facility B Term Loan Commitment Termination
Date, as the case may be.
Notwithstanding anything to the contrary contained herein or
in the Existing Credit Agreement, the accrued commitment fee payable under
Section 2.04 of the Existing Credit Agreement shall be payable on the Effective
Date.
2.05 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
2.06 Several Obligations; Remedies Independent. The failure
of any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender
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nor the Administrative Agent shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender, and (except as otherwise
provided in Section 4.06 hereof) no Lender shall have any obligation to the
Administrative Agent or any other Lender for the failure by such Lender to make
any Loan required to be made by such Lender. The amounts payable by the
Company at any time hereunder and under the Notes to each Lender shall be a
separate and independent debt and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall
not be necessary for any other Lender or the Administrative Agent to consent
to, or be joined as an additional party in, any proceedings for such purposes.
2.07 Notes.
(a) The Revolving Credit Loans (other than Registered Loans)
made by each Revolving Credit Lender shall be evidenced by a single promissory
note of the Company substantially in the form of Exhibit A-1 hereto, dated the
date hereof, payable to such Lender in a principal amount equal to the amount
of its Revolving Credit Commitment as originally in effect and otherwise duly
completed.
(b) The Facility A Term Loans (other than Registered Loans)
made by each Facility A Term Loan Lender shall be evidenced by a single
promissory note of the Company substantially in the form of Exhibit A-2 hereto,
dated the date hereof, payable to such Lender in a principal amount equal to
the amount of its Facility A Term Loan Commitment as originally in effect and
otherwise duly completed.
(c) The Facility B Term Loans (other than Registered Loans)
made by each Facility B Term Loan Lender shall be evidenced by a single
promissory note of the Company substantially in the form of Exhibit A-3 hereto,
dated the date hereof, payable to such Lender in a principal amount equal to
the amount of its Facility B Term Loan Commitment as originally in effect and
otherwise duly completed.
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(d) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by each Lender
to the Company, and each payment made on account of the principal thereof,
shall be recorded by such Lender on its books and, prior to the transfer of any
Note evidencing the Loans of such Class held by it, endorsed by such Lender on
the schedule attached to such Note or any continuation thereof; provided that
the failure of such Lender to make any such recordation or endorsement shall
not affect the obligations of the Company to make a payment when due of any
amount owing hereunder or under such Note in respect of such Loans.
(e) No Lender shall be entitled to have its Notes substituted
or exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitment, Loans and Notes pursuant to
Section 11.06 hereof and except as provided in clause (f) below (and, if
requested by any Lender, the Company agrees to so exchange any Note).
(f) Notwithstanding the foregoing, any Lender that is not a
U.S. Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code may request the Company (through the Administrative Agent), and the
Company agrees thereupon, to record on the Register referred to in Section
11.06(g) hereof any Loans of any Class held by such Lender under this
Agreement. Loans recorded on the Register ("Registered Loans") may not be
evidenced by promissory notes other than Registered Notes as defined below and,
upon the registration of any Loan, any promissory note (other than a Registered
Note) evidencing the same shall be null and void and shall be returned to the
Company. The Company agrees, at the request of any Lender that is the holder
of Registered Loans, to execute and deliver to such Lender a promissory note in
registered form to evidence such Registered Loans (i.e. containing the optional
registered note language as indicated in Exhibits A-1, A-2 or A-3 hereto, as
the case may be) and registered as provided in Section 11.06(g) hereof (herein,
a "Registered Note"), dated the date hereof, payable to such Lender
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and otherwise duly completed. A Loan once recorded on the Register may not be
removed from the Register so long as it remains outstanding and a Registered
Note may not be exchanged for a promissory note that is not a Registered Note.
2.08 Optional Prepayments and Conversions or Continuations of
Loans. Subject to Section 4.04 hereof, the Company shall have the right to
prepay Loans, to Convert Loans of one Type into Loans of another Type or to
Continue Eurodollar Loans from one Interest Period to the next Interest Period,
at any time or from time to time, provided that: (a) the Company shall give
the Administrative Agent notice of each such prepayment, Conversion or
Continuation as provided in Section 4.05 hereof (and, upon the date specified
in any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder); (b) Eurodollar Loans may be prepaid or Converted only on
the last day of an Interest Period for such Loans; (c) any Conversion or
Continuation of Eurodollar Loans shall be subject to the provisions of Section
2.01(d) hereof; and (d) prepayments of Term Loans shall be applied to the
Facility A and Facility B Term Loans ratably in accordance with the respective
aggregate outstanding principal amounts thereof, and to the installments of
principal thereof ratably in accordance with the respective amounts of such
installments. Notwithstanding the foregoing, and without limiting the rights
and remedies of the Lenders under Section 9 hereof, in the event that any Event
of Default shall have occurred and be continuing, the Administrative Agent may
(and at the request of the Majority Lenders shall) suspend the right of the
Company to Convert any Loan into a Eurodollar Loan, or to Continue any
Eurodollar Loan, in which event all Loans shall be Converted (on the last
day(s) of the respective Interest Periods therefor) into Base Rate Loans.
2.09 Mandatory Prepayments and Reductions of Commitments.
(a) Casualty Events. Upon the date 365 days following the
receipt by the Company of the proceeds of insurance,
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condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Company or any of its Subsidiaries (or upon such
earlier date as the Company or such Subsidiary, as the case may be, shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Company shall prepay the Loans, and the Commitments shall be
subject to automatic reduction, in an aggregate amount, if any, equal to 100%
of the Net Available Proceeds of such Casualty Event not theretofore applied
(or committed to be applied pursuant to executed construction contracts or
equipment orders) to the repair or replacement of such Property, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in paragraph (f) of this Section 2.09.
Nothing in this paragraph (a) shall be deemed to limit any
obligation of the Company and its Subsidiaries pursuant to the Security
Agreement to remit to the Collateral Account the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event, and the Administrative Agent shall release such proceeds to the Company
in the manner and to the extent provided in Section 4.01(d) of the Security
Agreement.
(b) Equity Issuance. Upon any Equity Issuance (other than a
Special Equity Issuance or an Other Equity Issuance), the Company shall prepay
the Loans, and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 100% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in paragraph (f) of this Section 2.09; provided that,
notwithstanding the foregoing, the Company shall not be required to make a
prepayment pursuant to this Section 2.09(b) with respect to:
(i) the first $125,000,000 of Net Available Proceeds
received by the Company or FrontierVision LP in respect of Equity
Issuances (including any such Net Available Proceeds received prior to
the date hereof, but
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excluding any Net Available Proceeds received from any Special Equity
Issuance and any Other Equity Issuance);
(ii) additional Net Available Proceeds received by
FrontierVision LP in respect of Equity Issuances in an aggregate
amount not exceeding $5,000,000 (or such greater amount as the
Majority Lenders may otherwise agree) to the extent that such proceeds
are not contributed by FrontierVision LP to the Company but instead
are used to fund administrative and overhead costs and other costs
associated with the start-up of FrontierVision LP or such other costs
of FrontierVision LP as the Majority Lenders may otherwise agree;
(iii) additional Net Available Proceeds of one or more
Equity Issuances in an aggregate amount not exceeding $50,000,000 to
the extent that all of such Net Available Proceeds are to be applied
within 180 days of such Equity Issuances to Subsequent Acquisitions
each having (unless the Majority Lenders otherwise agree) an aggregate
Purchase Price not exceeding $10,000,000; and
(iv) additional Net Available Proceeds of one or more
Equity Issuances in an aggregate amount not exceeding $75,000,000 to
the extent that all of such Net Available Proceeds are to be applied
within 180 days of the relevant Equity Issuance to one or more
Subsequent Acquisitions to which the Majority Lenders have consented,
so long as, in the case of clauses (iii) and (iv) of this proviso:
(w) the Company advises the Administrative Agent at the time
of the relevant Equity Issuance that it intends to use such Net
Available Proceeds to finance such Subsequent Acquisitions,
(x) such Net Available Proceeds are held by the
Administrative Agent in the Collateral Account pending such
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Acquisition(s), in which event the Administrative Agent need not
release such Net Available Proceeds except upon presentation of
evidence satisfactory to it that such Net Available Proceeds are to be
so applied in compliance with the provisions of this Agreement, and
(y) such Net Available Proceeds are in fact so applied to
such Acquisition(s) within 180 days of such Equity Issuance (it being
understood that, in the event Net Available Proceeds from more than
one Equity Issuance are paid into the Collateral Account, such Net
Available Proceeds shall be deemed to be released in the same order in
which such Equity Issuances occurred and, accordingly, any such Net
Available Proceeds so held for more than 180 days shall be forthwith
applied to the prepayment of Loans and reductions of Commitments as
provided above).
As contemplated by Section 4.01 of the Security Agreement, nothing in this
paragraph (b) shall be deemed to obligate the Administrative Agent to release
any of such proceeds from the Collateral Account to the Company for use in
financing a Subsequent Acquisition as aforesaid upon the occurrence and during
the continuance of any Event of Default.
(c) Excess Cash Flow. Not later than the date 90 days after
the end of each fiscal year of the Company, commencing with Excess Cash Flow
for the fiscal year ending December 31, 1998, the Company shall prepay the
Loans, and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to the excess of (A) 50% of Excess Cash Flow for such
fiscal year over (B) the aggregate amount of voluntary prepayments of Term
Loans made during such fiscal year pursuant to Section 2.08 hereof (other than
that portion, if any, of such prepayments applied to installments of the Term
Loans falling due in such fiscal year) and, after the payment in full of the
Term Loans, the aggregate amount of voluntary reductions of Revolving Credit
Commitments made during such fiscal year pursuant to Section 2.03(b) hereof
(other than that portion, if any, of such reductions applied to reduce the
reductions of Revolving Credit
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Commitments occurring in such fiscal year pursuant to Section 2.03(a) hereof).
(d) Sale of Assets. Without limiting the obligation of the
Company to obtain the consent of the Majority Lenders pursuant to Section 8.05
hereof to any Disposition not otherwise permitted hereunder, the Company
agrees, two Business Days prior to the occurrence of any Disposition in which
the fair market value of the Property that is the subject of such Disposition
is greater than or equal to $1,000,000, to deliver to the Administrative Agent
(in sufficient copies for each Lender) and the other Agents a statement,
certified by a Senior Officer, in reasonable detail of the estimated amount of
the Net Available Proceeds of such Disposition, in which event the Company will
prepay the Loans, and the Commitments shall be subject to automatic reduction,
as follows:
(i) on the date of such Disposition, in an aggregate
amount equal to 100% of the actual Net Available Proceeds of such
Disposition received by the Company and its Subsidiaries on the date
of such Disposition; and
(ii) thereafter, quarterly, on the date of the delivery
by the Company to the Administrative Agent pursuant to Section 8.01
hereof of the financial statements for each quarterly fiscal period or
(if earlier) the date 45 days after the end of such quarterly fiscal
period, to the extent the Company or any of its Subsidiaries shall
receive Net Available Proceeds during such quarterly fiscal period in
cash under deferred payment arrangements or Investments entered into
or received in connection with any Disposition, an amount equal to (A)
100% of the aggregate amount of such Net Available Proceeds minus (B)
any transaction expenses associated with such Disposition and not
previously deducted in the determination of Net Available Proceeds
plus (or minus, as the case may be) (C) any other adjustment received
or paid by the Company or such Subsidiary pursuant to the respective
agreements giving rise to such Disposition and not previously taken
into account in the determination of
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the Net Available Proceeds of such Disposition, provided that, if
prior to the date upon which the Company would otherwise be required
to make a prepayment under this clause (ii) with respect to any
quarterly fiscal period the aggregate amount of such Net Available
Proceeds received in cash shall aggregate an amount that will require
a prepayment of $1,000,000 or more under this clause (ii) with respect
to such quarterly fiscal period, then the Company shall immediately
make a prepayment under this clause (ii) in an amount equal to such
required prepayment.
Prepayments of Loans and reductions of Commitments shall be effected in each
case in the manner and to the extent specified in paragraph (f) of this Section
2.09.
Notwithstanding the foregoing, the Company shall not be
required to make a prepayment pursuant to this paragraph (d) with respect to
the Net Available Proceeds from any Disposition (including, without limitation,
the Dispositions permitted under Section 8.05(c)(vi) hereof) in the event that
the Company advises the Administrative Agent at the time the Net Available
Proceeds from such Disposition are received that it intends to reinvest such
Net Available Proceeds into replacement assets pursuant to a transaction
permitted under Section 8.05(b) hereof, so long as:
(x) such Net Available Proceeds are either (i) held by the
Administrative Agent in the Collateral Account pending such
reinvestment, in which event the Administrative Agent need not release
such Net Available Proceeds except upon presentation of evidence
satisfactory to it that such Net Available Proceeds are to be so
reinvested in compliance with the provisions of this Agreement or (ii)
applied by the Company to the prepayment of Revolving Credit Loans
hereunder (in which event the Company agrees to advise the
Administrative Agent in writing at the time of such prepayment of
Revolving Credit Loans that such prepayment is being made from the
proceeds of a Disposition and that, as contemplated by Section 2.01(a)
hereof, a portion of the Revolving Credit Commitments hereunder equal
to the amount
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of such prepayment gives rise to a Reserved Commitment Amount that
shall be available hereunder only for purposes of making Subsequent
Acquisitions under Section 8.05(b) hereof),
(y) the Net Available Proceeds from any Disposition are in
fact so reinvested within twelve months of such Disposition (it being
understood that, in the event Net Available Proceeds from more than
one Disposition are paid into the Collateral Account or applied to the
prepayment of Revolving Credit Loans as provided in clause (x) above,
such Net Available Proceeds shall be deemed to be released (or, as the
case may be, Revolving Credit Loans utilizing the Reserved Commitment
Amount shall be deemed to be made) in the same order in which such
Dispositions occurred and, accordingly, (A) any such Net Available
Proceeds so held for more than twelve months shall be forthwith
applied to the prepayment of Loans and reductions of Commitments as
provided above and (B) any Reserved Commitment Amount that remains so
unutilized for more than twelve months shall, subject to the
satisfaction of the conditions precedent to such borrowing in Section
6.02 hereof, be utilized through the borrowing by the Company of
Revolving Credit Loans the proceeds of which shall be applied to the
prepayment of Loans and reductions of Commitments as provided in
paragraph (f) of this Section 2.09) and
(z) the aggregate amount of Net Available Proceeds (together
with investment earnings thereon) so held at any time by the
Administrative Agent pending reinvestment as contemplated by this
sentence, together with the aggregate amount of the Reserved
Commitment Amount, shall not at any time exceed $10,000,000 or such
greater amount as the Majority Lenders may otherwise agree.
As contemplated by Section 4.01 of the Security Agreement, nothing in this
paragraph (d) shall be deemed to obligate the Administrative Agent to release
any of such proceeds from the Collateral Account to the Company for purposes of
reinvestment as
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<PAGE> 70
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aforesaid upon the occurrence and during the continuance of any Event of
Default.
(e) Subordinated Indebtedness. Without limiting the
obligation of the Company to obtain the approval of the Majority Lenders to the
terms of Permitted Subordinated Indebtedness to the extent required by Section
8.13 hereof, upon any Debt Issuance:
(i) the Company shall prepay the Loans and the
Commitments shall be subject to automatic reduction on the date of
such issuance in an amount equal to the Unused Proceeds thereof, such
prepayment and reduction to be effected in the manner and to the
extent specified in paragraph (f) of this Section 2.09; and
(ii) the Company shall deposit the Reserved Proceeds
thereof into an escrow account (which shall be established on such
terms and conditions, and with an escrow agent, as shall be acceptable
to the Administrative Agent and the Majority Lenders), to be held by
said escrow agent in said escrow account pending application thereof
to make one or more Subsequent Acquisitions, to refinance outstanding
Subordinated Indebtedness or to make payments in respect of the UVC
Notes as contemplated by the last sentence of the first paragraph of
Section 8.09 hereof (and such escrow agent need not release such
Reserved Proceeds except upon presentation of evidence satisfactory to
it that such Reserved Proceeds are to be so applied in compliance with
the provisions of this Agreement), provided that if such Reserved
Proceeds are not in fact so applied within 180 days of such Debt
Issuance, such Reserved Proceeds shall forthwith be applied to the
prepayment of Loans and reductions of Commitments as provided above
(it being understood that, in the event Reserved Proceeds from more
than one Debt Issuance are paid into said escrow account, such
Reserved Proceeds shall be deemed to be released in the same order in
which such Debt Issuances occurred).
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Nothing in this paragraph (e) shall be deemed to obligate the Administrative
Agent or the Majority Lenders to agree to the release from said escrow account
of any of such proceeds to or for the benefit of the Company for purposes as
aforesaid upon the occurrence and during the continuance of any Event of
Default.
(f) Application. Upon the occurrence of any of the events
described in the above paragraphs of this Section 2.09, the amount of the
required prepayment shall be applied to the reduction of the Revolving Credit
Commitments and the prepayment of the Facility A and Facility B Term Loans
ratably in accordance with the respective then-outstanding aggregate amounts of
such Commitments and Loans (and to the simultaneous prepayment of the Revolving
Credit Loans in an amount equal to such required reduction of Revolving Credit
Commitments), provided that to the extent any such required reduction of
Revolving Credit Commitments shall exceed the then-outstanding aggregate
principal amount of Revolving Credit Loans, such excess shall be applied to the
prepayment of Facility A and Facility B Term Loans. Each such prepayment of
Term Loans shall be applied to the Facility A and Facility B Term Loans ratably
in accordance with the respective aggregate outstanding principal amounts
thereof, and to the installments of principal thereof ratably in accordance
with the respective amounts of such installments.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative
Agent for account of each Revolving Credit Lender the entire outstanding
principal amount of such Lender's Revolving Credit Loans, and each Revolving
Credit Loan shall mature, on the Revolving Credit Commitment Termination Date.
In addition, if following any Revolving Credit Commitment Reduction Date the
aggregate principal amount of the Revolving Credit Loans shall exceed the
Revolving Credit Commitments, the Company shall
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pay principal of the Revolving Credit Loans in an aggregate amount equal to
such excess.
(b) The Company hereby promises to pay to the Administrative
Agent for account of the Facility A Term Loan Lenders the principal of the
Facility A Term Loans in twenty-four installments payable on the Principal
Payment Dates set forth below as follows:
<TABLE>
<CAPTION>
Principal Payment Date
Falling on or Nearest to: Amount ($)
------------------------- ----------
<S> <C>
September 30, 1998 1,500,000
December 31, 1998 1,500,000
March 31, 1999 2,000,000
June 30, 1999 2,000,000
September 30, 1999 2,000,000
December 31, 1999 2,000,000
March 31, 2000 3,000,000
June 30, 2000 3,000,000
September 30, 2000 3,000,000
December 31, 2000 3,000,000
March 31, 2001 4,000,000
June 30, 2001 4,000,000
September 30, 2001 4,000,000
December 31, 2001 4,000,000
March 31, 2002 5,000,000
June 30, 2002 5,000,000
September 30, 2002 5,000,000
December 31, 2002 5,000,000
</TABLE>
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<PAGE> 73
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<TABLE>
<S> <C>
March 31, 2003 6,500,000
June 30, 2003 6,500,000
September 30, 2003 6,500,000
December 31, 2003 6,500,000
March 31, 2004 7,500,000
June 30, 2004 7,500,000
</TABLE>
If the Company does not borrow the full amount of the
aggregate Facility A Term Loan Commitments on the Effective Date the shortfall
shall be applied to reduce the foregoing installments ratably.
(c) The Company hereby promises to pay to the Administrative
Agent for account of the Facility B Term Loan Lenders the principal of the
Facility B Term Loans in twenty-eight installments payable on the Principal
Payment Dates set forth below as follows:
<TABLE>
<S> <C>
Principal Payment Date
Falling on or Nearest to: Amount ($)
------------------------- ----------
September 30, 1998 337,500
December 31, 1998 337,500
March 31, 1999 337,500
June 30, 1999 337,500
September 30, 1999 337,500
December 31, 1999 337,500
March 31, 2000 337,500
June 30, 2000 337,500
September 30, 2000 337,500
December 31, 2000 337,500
</TABLE>
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<PAGE> 74
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<TABLE>
<S> <C>
March 31, 2001 337,500
June 30, 2001 337,500
September 30, 2001 337,500
December 31, 2001 337,500
March 31, 2002 337,500
June 30, 2002 337,500
September 30, 2002 337,500
December 31, 2002 337,500
March 31, 2003 337,500
June 30, 2003 337,500
September 30, 2003 337,500
December 31, 2003 337,500
March 31, 2004 337,500
June 30, 2004 337,500
September 30, 2004 18,450,000
December 31, 2004 18,450,000
March 31, 2005 22,500,000
June 30, 2005 22,500,000
</TABLE>
If the Company does not borrow the full amount of the
aggregate Facility B Term Loan Commitments on the Effective Date the shortfall
shall be applied to reduce the foregoing installments ratably.
3.02 Interest. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) plus the Applicable Margin
and
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<PAGE> 75
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(b) during such periods as such Loan is a Eurodollar Loan,
for each Interest Period relating thereto, the Eurodollar Rate for
such Loan for such Interest Period plus the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender and on any
other amount payable by the Company hereunder or under the Notes held by such
Lender to or for account of such Lender, that shall not be paid in full when
due (whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan
shall be payable (i) in the case of a Base Rate Loan, quarterly on the
Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the last day of each
Interest Period therefor and, if such Interest Period is longer than three
months, at three-month intervals following the first day of such Interest
Period, and (iii) in the case of any Loan, upon the payment or prepayment
thereof or the Conversion of such Loan to a Loan of another Type (but only on
the principal amount so paid, prepaid or Converted), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or
any change therein, the Administrative Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Company.
In the event that, as contemplated by the definition of
"Applicable Margin" set forth in Section 1.01 hereof, the Applicable Margin for
the first Payment Period (as defined therein) shall be retroactively increased,
then, to the extent the Company has previously paid interest with respect to
any period ending prior to such date, the Company shall on the Quarterly Date
immediately following such date pay such additional amounts as shall be
necessary to give effect to such retroactive increase.
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<PAGE> 76
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Notwithstanding anything to the contrary contained herein or
in the Existing Credit Agreement, accrued interest payable under Section 3.02
of the Existing Credit Agreement with respect to any of the "Loans" outstanding
thereunder shall be paid on the Effective Date.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
under this Agreement and the Notes, and, except to the extent otherwise
provided therein, all payments to be made by the Company under any other Loan
Document, shall be made in Dollars, in immediately available funds, without
deduction, set-off or counterclaim, to the Administrative Agent at account
number NYAO-DI-900-9-000002 maintained by the Administrative Agent with Chase
at the Principal Office (or, at such other account as the Administrative Agent
may designate), not later than 2:00 p.m. New York time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
(b) Any Lender for whose account any such payment is to be
made may (but shall not be obligated to) debit the amount of any such payment
that is not made by such time to any ordinary deposit account of the Company
with such Lender (with notice to the Company and the Administrative Agent),
provided that such Lender's failure to give such notice shall not affect the
validity of such debit.
(c) The Company shall, at the time of making each payment
under this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans or other amounts payable by the Company hereunder to which such
payment is
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to be applied (and in the event that the Company fails to so specify, or if an
Event of Default has occurred and is continuing, the Administrative Agent may
distribute such payment to the Lenders for application in such manner as it or
the Majority Lenders, subject to Section 4.02 hereof, may determine to be
appropriate).
(d) Each payment received by the Administrative Agent under
this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or
any Note would otherwise fall on a day that is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be
payable for any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing of Loans of a particular Class from the
Lenders under Section 2.01 hereof shall be made from the relevant Lenders, each
payment of commitment fee under Section 2.04 hereof in respect of Commitments
of a particular Class shall be made for account of the relevant Lenders, and
each termination or reduction of the amount of the Commitments of a particular
Class under Section 2.03 hereof shall be applied to the respective Commitments
of such Class of the relevant Lenders, pro rata according to the amounts of
their respective Commitments of such Class; (b) except as otherwise provided in
Section 5.04 hereof, Eurodollar Loans of any Class having the same Interest
Period shall be allocated pro rata among the relevant Lenders according to the
amounts of their respective Revolving Credit, Facility A Term Loan Commitments
and Facility B Term Loan Commitments (in the case of the making of Loans) or
their respective Revolving Credit Loans, Facility A Term Loans and Facility B
Term Loans (in the case of Conversions and Continuations of Loans); (c) each
payment or prepayment of
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principal of Revolving Credit Loans, Facility A Term Loans or Facility B Term
Loans by the Company shall be made for account of the relevant Lenders pro rata
in accordance with the respective unpaid principal amounts of the Loans of such
Class held by them; and (d) each payment of interest on Revolving Credit Loans,
Facility A Term Loans and Facility B Term Loans by the Company shall be made
for account of the relevant Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Loans and commitment fee
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which payable.
4.04 Minimum Amounts. Except for mandatory prepayments made
pursuant to Section 2.09 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, each borrowing, Conversion and partial prepayment of
principal of Base Rate Loans shall be in an aggregate amount at least equal to
$500,000 or a larger multiple of $100,000 and each borrowing, Conversion and
partial prepayment of Eurodollar Loans shall be in an aggregate amount at least
equal to $2,000,000 or a larger multiple of $1,000,000 (borrowings, Conversions
or prepayments of or into Loans of different Types or, in the case of
Eurodollar Loans, having different Interest Periods at the same time hereunder
to be deemed separate borrowings, Conversions and prepayments for purposes of
the foregoing, one for each Type or Interest Period). If any Eurodollar Loans
would otherwise be in a lesser principal amount for any period, such Loans
shall be Base Rate Loans during such period.
4.05 Certain Notices. Notices by the Company to the
Administrative Agent of terminations or reductions of the Commitments and of
borrowings, Conversions, Continuations and optional prepayments of Loans and
Classes of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 11:00 a.m. New York time on
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the number of Business Days prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day
of such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate.
The Administrative Agent shall promptly notify the Lenders of
the contents of each such notice. In the event that the Company fails to
select the Type of Loan, or the duration of any Interest Period for any
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically
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Converted into a Base Rate Loan on the last day of the then current Interest
Period for such Loan or (if outstanding as a Base Rate Loan) will remain as, or
(if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Lender or the
Company (the "Payor") prior to the date on which the Payor is to make payment
to the Administrative Agent of (in the case of a Lender) the proceeds of a Loan
to be made by such Lender hereunder or (in the case of the Company) a payment
to the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the "Advance Date") such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such day and, if such recipient(s) shall fail promptly to make such payment,
the Administrative Agent shall be entitled to recover such amount, on demand,
from the Payor, together with interest as aforesaid, provided that if neither
the recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to
be made by the Company to the Lenders, the
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Company and the recipient(s) shall each be obligated retroactively to
the Advance Date to pay interest in respect of the Required Payment at
the Post-Default Rate (without duplication of the obligation of the
Company under Section 3.02 hereof to pay interest on the Required
Payment at the Post-Default Rate), it being understood that the return
by the recipient(s) of the Required Payment to the Administrative
Agent shall not limit such obligation of the Company under said
Section 3.02 to pay interest at the Post-Default Rate in respect of
the Required Payment and
(ii) if the Required Payment shall represent proceeds
of a Loan to be made by the Lenders to the Company, the Payor and the
Company shall each be obligated retroactively to the Advance Date to
pay interest in respect of the Required Payment pursuant to whichever
of the rates specified in Section 3.02 hereof is applicable to the
Type of such Loan, it being understood that the return by the Company
of the Required Payment to the Administrative Agent shall not limit
any claim the Company may have against the Payor in respect of such
Required Payment.
4.07 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for
the credit or account of the Company at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such
Lender's Loans or any other amount payable to such Lender hereunder, that is
not paid when due (regardless of whether such deposit or other indebtedness are
then due to the Company), in which case it shall promptly notify the Company
and the Administrative Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
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(b) If any Lender shall obtain from the Company payment of
any principal of or interest on any Loan of any Class owing to it or payment of
any other amount under this Agreement or any other Loan Document through the
exercise of any right of set-off, banker's lien or counterclaim or similar
right or otherwise (other than from the Administrative Agent as provided
herein), and, as a result of such payment, such Lender shall have received a
greater percentage of the principal of or interest on the Loans of such Class
or such other amounts then due hereunder or thereunder by the Company to such
Lender than the percentage received by any other Lender, it shall promptly
purchase from such other Lenders participations in (or, if and to the extent
specified by such Lender, direct interests in) the Loans of such Class or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal of and/or interest on the Loans of
such Class or such other amounts, respectively, owing to each of the Lenders.
To such end all the Lenders shall make appropriate adjustments among themselves
(by the resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may, to the fullest extent permitted by law,
exercise all rights of set-off, banker's lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans or other amounts (as the case may be) owing to such Lender in
the amount of such participation.
(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable
bankruptcy, insolvency
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or other similar law, any Lender receives a secured claim in lieu of a set-off
to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Lender from time
to time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation, resulting
from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable
Lending Office for any of such Loans) to any tax, duty or other charge
in respect of such Loans or its Notes or changes the basis of taxation
of any amounts payable to such Lender under this Agreement or its
Notes in respect of any of such Loans (excluding changes in the rate
of tax on the overall net income of such Lender or of such Applicable
Lending Office by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit
or similar requirements (other than the Reserve Requirement utilized
in the determination of the Eurodollar Rate for such Loan) relating to
any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Lender (including, without limitation, any
of such Loans or any deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof), or any
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commitment of such Lender (including, without limitation, the
Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this
Agreement or its Notes (or any of such extensions of credit or
liabilities) or its Commitments.
If any Lender requests compensation from the Company under this Section
5.01(a), the Company may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions
of this Section 5.01 (but without duplication), the Company shall pay directly
to each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or
other requirement (whether or not having the force of law and whether or not
the failure to comply therewith would be unlawful) hereafter issued by any
government or governmental or supervisory authority implementing at the
national level the Basle Accord, of capital in respect of its Commitments or
Loans (such compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of such Lender (or any
Applicable
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Lending Office or such bank holding company) to a level below that which such
Lender (or any Applicable Lending Office or such bank holding company) could
have achieved but for such law, regulation, interpretation, directive or
request).
(c) Each Lender shall notify the Company of any event
occurring after the date hereof entitling such Lender to compensation under
paragraph (a) or (b) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after such Lender obtains actual knowledge thereof;
provided that (i) if any Lender fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Lender shall, with respect
to compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no
obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender will furnish to the Company a certificate
setting forth the basis and amount of each request by such Lender for
compensation under paragraph (a) or (b) of this Section 5.01. Determinations
and allocations by any Lender for purposes of this Section 5.01 of the effect
of any Regulatory Change pursuant to paragraph (a) of this Section 5.01, or of
the effect of capital maintained pursuant to paragraph (b) of this Section
5.01, on its costs or rate of return of maintaining Loans or its obligation to
make Loans, or on amounts receivable by it in respect of Loans, and of the
amounts required to compensate such Lender under this Section 5.01, shall be
conclusive, provided that such determinations and allocations are made on a
reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the
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<PAGE> 86
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determination of any Eurodollar Base Rate for any Interest Period:
(a) the Administrative Agent determines, which determination
shall be conclusive, that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof are not being provided in the relevant
amounts or for the relevant maturities for purposes of determining
rates of interest for Eurodollar Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the
Majority Revolving Credit Lenders, if the related Loans are Facility A
Term Loans, the Majority Facility A Term Loan Lenders or, if the
related Loans are Facility B Term Loans, the Majority Facility B Term
Loan Lenders, determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Base Rate" in Section
1.01 hereof upon the basis of which the rate of interest for
Eurodollar Loans for such Interest Period is to be determined are not
likely adequately to cover the cost to such Lenders of making or
maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such
Loans into Base Rate Loans in accordance with Section 2.08 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder (and, in the sole
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opinion of such Lender, the designation of a different Applicable Lending
Office would either not avoid such unlawfulness or would be disadvantageous to
such Lender), then such Lender shall promptly notify the Company thereof (with
a copy to the Administrative Agent) and such Lender's obligation to make or
Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 hereof shall be
applicable).
5.04 Treatment of Affected Loans. If the obligation of any
Lender to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03
hereof, such Lender's Eurodollar Loans shall be automatically Converted into
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
Eurodollar Loans (or, in the case of a Conversion resulting from a circumstance
described in Section 5.03 hereof, on such earlier date as such Lender may
specify to the Company with a copy to the Administrative Agent) and, unless and
until such Lender gives notice as provided below that the circumstances
specified in Section 5.01 or 5.03 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that such Lender's Eurodollar Loans have
been so Converted, all payments and prepayments of principal that
would otherwise be applied to such Lender's Eurodollar Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Converted into Base
Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of
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such Lender's Eurodollar Loans pursuant to this Section 5.04 no longer exist
(which such Lender agrees to do promptly upon such circumstances ceasing to
exist) at a time when Eurodollar Loans of the same Class made by other Lenders
are outstanding, such Lender's Base Rate Loans of the same Class shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Base Rate and Eurodollar Loans of such
Class are allocated among the Lenders ratably (as to principal amounts, Types
and Interest Periods) in accordance with their respective Commitments of such
Class.
5.05 Compensation. The Company shall pay to the
Administrative Agent for account of each Lender, upon the request of such
Lender through the Administrative Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender) to compensate it for any
loss, cost or expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or
Conversion of a Eurodollar Loan made by such Lender for any reason
(including, without limitation, the acceleration of the Loans pursuant
to Section 9 hereof) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 6 hereof to be satisfied) to borrow a Eurodollar
Loan from such Lender on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case
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of a failure to borrow, the Interest Period for such Loan that would have
commenced on the date specified for such borrowing) at the applicable rate of
interest for such Loan provided for herein over (ii) the amount of interest
that otherwise would have accrued on such principal amount at a rate per annum
equal to the interest component of the amount such Lender would have bid in the
London interbank market for Dollar deposits of leading banks in amounts
comparable to such principal amount and with maturities comparable to such
period (as reasonably determined by such Lender).
Without limiting the generality of the foregoing, on the
Effective Date, the Company shall pay to the Administrative Agent for account
of the Existing Lenders under the Existing Credit Agreement any amounts that
would be payable under Section 5.05 of the Existing Credit Agreement assuming
any "Eurodollar Loans" outstanding thereunder had been paid in full on the
Effective Date.
5.06 U.S. Taxes.
(a) The Company agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such
payment (or in lieu thereof, payment of such U.S. Taxes by such non-U.S.
Person), will not be less than the amount stated herein to be then due and
payable, provided that the foregoing obligation to pay such additional amounts
shall not apply:
(i) to any payment to any Lender hereunder (other than
in respect of any Registered Loan) unless such Lender is, on the date
hereof (or on the date it becomes a Lender hereunder as provided in
Section 11.06(b) hereof) and on the date of any change in the
Applicable Lending Office of such Lender, entitled to either submit a
Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it
hereunder
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in respect of the Loans) or Form 4224 (relating to all interest to be
received by such Lender hereunder in respect of the Loans),
(ii) any payment to any Lender hereunder in respect of a
Registered Loan (a "Registered Holder"), unless such Registered Holder
(or, if such Registered Holder is not the beneficial owner of such
Registered Loan, the beneficial owner thereof) is, on the date hereof
(or on the date such Registered Holder becomes a Lender as provided in
Section 11.06(b) hereof) and on the date of any change in the
Applicable Lending Office of such Lender, entitled to submit a Form
W-8, together with an annual certificate stating that (x) such
Registered Holder (or beneficial owner, as the case may be) is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, and (y)
such Registered Holder (or beneficial owner, as the case may be) shall
promptly notify the Company if at any time, such Registered Holder (or
beneficial owner, as the case may be) determines that it is no longer
in a position to provide such certificate to the Company (or any other
form of certification adopted by the relevant taxing authorities of
the United States of America for such purposes), or
(iii) to any U.S. Taxes imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or
connections with the United States of America of such non-U.S. Person
if such compliance is required by statute or regulation of the United
States of America as a precondition to relief or exemption from such
U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (B) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
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Connected with the Conduct of a Trade or Business in the United States) of the
Department of the Treasury of the United States of America (or in relation to
either such Form such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates) and (C) "Form W-8" shall mean Form
W-8 (Certificate of Foreign Status of the Department of Treasury of the United
States of America). Each of the Forms referred to in the foregoing clauses
(A), (B) and (C) shall include such successor and related forms as may from
time to time be adopted by the relevant taxing authorities of the United States
of America to document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the
Administrative Agent or any Lender from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or other authority,
the Company shall deliver to the Administrative Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).
(c) Each Lender that is not a U.S. Person agrees, to the
extent it is entitled to an exemption from (or reduction of) the amount of
withholding of U.S. Taxes from interest payments hereunder, to furnish to the
Company on or prior to the date hereof (or the date on which it becomes a
Lender as provided in Section 11.06(b) hereof) two copies of Form 1001, Form
4224 or Form W-8 (as applicable), and any other form reasonably requested by
the Company which such Lender may lawfully deliver that is necessary or
required to establish such exemption (or reduction).
Section 6. Conditions Precedent.
6.01 Effectiveness. The effectiveness of this Agreement (and
the amendment and restatement of the Existing Credit Agreement to be effected
hereby), and the obligation of any Lender to make its initial Loan hereunder
are subject to
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(i) the condition precedent that such effectiveness shall occur on or before
April 9, 1996 and (ii) the receipt by the Administrative Agent of the following
documents, each of which shall be satisfactory to the Administrative Agent (and
to the extent specified below, to each Lender or the Majority Lenders) in form
and substance:
(a) Corporate and Partnership Documents. Certified copies of
the Partnership Agreement and of the charter and by-laws (or
equivalent documents) of each Obligor and of all partnership and
corporate authority for the Obligors (including, without limitation,
board of director resolutions and evidence of the incumbency,
including specimen signatures, of officers for each Obligor) with
respect to the execution, delivery and performance of such of the
Basic Documents to which such Obligor is intended to be a party and
each other document to be delivered by such Obligor from time to time
in connection herewith and the Loans hereunder (and the Administrative
Agent and each Lender may conclusively rely on such certificate until
it receives notice in writing from such Obligor, as the case may be,
to the contrary).
(b) Officer's Certificate. A certificate of a Senior
Officer, dated the Effective Date, to the effect set forth in the
first sentence of Section 6.02 hereof.
(c) Opinion of Counsel to the Company. An opinion, dated the
Effective Date, of Edwards & Angell, counsel to the Obligors,
substantially in the form of Exhibit G hereto and covering such other
matters as the Administrative Agent or any Lender may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinion to the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An
opinion, dated the Effective Date, of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase, substantially
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in the form of Exhibit H hereto (and Chase hereby instructs such
counsel to deliver such opinion to the Lenders).
(e) Notes. The Notes, duly completed and executed for each
Lender (except that, in the case of a Registered Holder, Notes shall
be required only to the extent that such Registered Holder shall have
requested the execution and delivery of Notes pursuant to Section
2.07(f) hereof).
(f) Amendment No. 1 to Security Agreement. Amendment No. 1
to the Security Agreement, in substantially the form of Exhibit C-2
hereto, duly executed and delivered by the Company and the
Administrative Agent. In addition, the Company shall have taken such
other action as the Administrative Agent shall have requested in order
to perfect the security interests created pursuant to the Security
Agreement (other than perfection of security interests in Motor
Vehicles under and as defined therein) to the extent such filings have
not already been effected pursuant to the Existing Credit Agreement,
including, without limitation, (i) delivering to the Administrative
Agent, for filing, appropriately completed and duly executed copies of
Uniform Commercial Code financing statements and (ii) obtaining any
consents from municipal franchising authorities necessary to create
and perfect a valid and enforceable first priority Lien on the
respective Franchises issued by such authorities for the CATV Systems
to be owned by the Company (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date), it
being understood that not all of such consents need be obtained by the
Effective Date so long as consents covering Franchises for at least
93% of the Subscribers (after giving effect to the transactions
contemplated to occur on or before the Effective Date) have been
obtained.
(g) Amendment No. 1 to Partner Pledge Agreement. Amendment
No. 1 to the Partner Pledge Agreement, in substantially the form of
Exhibit D-2 hereto, duly executed and delivered by FrontierVision and
FrontierVision LP and
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the Administrative Agent. In addition, FrontierVision and
FrontierVision LP shall have taken such other action as the
Administrative Agent shall have requested in order to perfect the
security interests created pursuant to the Partner Pledge Agreement
(to the extent such action has not already been taken pursuant to the
Existing Credit Agreement), including, without limitation, delivering
to the Administrative Agent, for filing, appropriately completed and
duly executed copies of Uniform Commercial Code financing statements.
(h) Amendment No. 1 to Stock Pledge Agreement. Amendment No.
1 to the Stock Pledge Agreement, in substantially the form of Exhibit
E-2 hereto, duly executed and delivered by FrontierVision LP and the
Administrative Agent. In addition, FrontierVision LP shall have taken
such other action as the Administrative Agent shall have requested in
order to perfect the security interests created pursuant to the Stock
Pledge Agreement (to the extent such action has not already been taken
pursuant to the Existing Credit Agreement), including, without
limitation, delivering to the Administrative Agent, for filing,
appropriately completed and duly executed copies of Uniform Commercial
Code financing statements.
(i) Mortgages. The following documents each of which shall
be executed (and, where appropriate, acknowledged) by Persons
satisfactory to each Lender:
(i) one or more Mortgages covering the fee
interest of the Company in the Properties listed in Part A of
Schedule IV hereto as "Cox Properties", and the leasehold
interest of the Company in the Properties listed in Part B of
Schedule IV hereto (other than any such leasehold interest
that is identified in said Part B as an Excluded Leasehold
Interest), in each case, duly executed and delivered by the
Company and (in the case of any Mortgage covering a fee
interest of the
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Company) in recordable form (in such number of copies as the
Administrative Agent shall have requested); and
(ii) to the extent necessary under applicable
law, for filing in the appropriate county land office(s),
Uniform Commercial Code financing statements covering fixtures
relating to the Property covered by the Mortgages referred to
in clause (i) above, in each case appropriately completed and
duly executed.
In addition, the Company shall have paid an amount equal to any
recording and stamp taxes payable in connection with recording the
Mortgages with respect to any fee interest of the Company in the
appropriate county land offices.
(j) Acquisition Environmental Surveys. To the extent
obtained by the Company in connection with the Cox Acquisition, copies
of Acquisition Environmental Surveys in form and substance
satisfactory to each Lender reflecting that the CATV Systems being
acquired pursuant to the Cox Acquisition will not be subject to any
material environmental liabilities.
(k) Deferred Compensation Plans. A copy, certified as being
true, correct and complete by a Senior Officer, of each deferred
compensation plan (if any) of the Company and of each of its
Subsidiaries as in effect on the date hereof.
(l) Solvency Certificate. A certificate from a Senior
Officer, to the effect that, as of the Effective Date and immediately
after giving effect to the Cox Acquisition and to the initial Loans
hereunder and to the other transactions contemplated hereunder to
occur on or before the Effective Date, (i) the aggregate value of all
Properties of the Company and its Subsidiaries at their present fair
saleable value (i.e., the amount that may be realized within a
reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount that could be
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obtained for the Property in question within such period by a capable
and diligent businessman from an interested buyer who is willing to
purchase under ordinary selling conditions), exceeds the amount of all
the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of the Company and its
Subsidiaries, (ii) the Company and its Subsidiaries will not, on a
consolidated basis, have an unreasonably small capital with which to
conduct their business operations as heretofore conducted and (iii)
the Company and its Subsidiaries will have, on a consolidated basis,
sufficient cash flow to enable them to pay their debts as they mature.
Such certificate shall also state that the financial projections and
underlying assumptions contained in such analyses were at the time
made, and on the Effective Date are, fair and reasonable and
accurately computed.
(m) Pro Forma Balance Sheet. A pro forma balance sheet of
the Company and its Subsidiaries as at February 29, 1996, and the
related pro forma statement of income and retained earnings (deficit)
and cash flow for the immediately preceding three-month period, giving
effect to the Cox Acquisition and the Loans hereunder to be
outstanding on the Effective Date, in form and providing such details
as are reasonably satisfactory to each Lender (collectively, the "Pro
Forma Financial Statements"), together with (x) a reconciliation of
the information provided in such pro forma financial statements to the
Debt Ratio determined for purposes of Section 6.01(n) hereof and (y) a
certificate of a Senior Officer stating that (i) said financial
statements fairly present the pro forma financial condition of the
Company as at such date and for such period in accordance with GAAP,
after giving effect to the Cox Acquisition and the Loans hereunder to
be outstanding on the Effective Date and (ii) the Company and its
Subsidiaries shall have sufficient cash after giving effect to the Cox
Acquisition and such Loans and to the cash contributions in respect of
the partnership interests of the Company contemplated by Section
6.01(p) hereof, to meet its
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anticipated working capital operating needs for a period of three
months.
(n) Certain Financial Matters. Evidence that, as of the
Effective Date and after giving effect to the Cox Acquisition and the
Loans hereunder to be outstanding on the Effective Date, the Debt
Ratio shall not exceed 6.25 to 1, and the Administrative Agent shall
have received a certificate of a Senior Officer to such effect.
(o) Insurance. Certificates of insurance evidencing the
existence of all insurance required to be maintained by the Company
and its Subsidiaries pursuant to Section 8.04 hereof and the
designation of the Administrative Agent as the loss payee or
additional named insured, as the case may be, thereunder to the extent
required by said Section 8.04, such certificates to be in such form
and contain such information as is specified in said Section 8.04. In
addition, the Company shall have delivered to the Administrative Agent
a certificate of a Senior Officer setting forth the insurance obtained
by it in accordance with the requirements of Section 8.04 and stating
that such insurance is in full force and effect and that all premiums
then due and payable thereon have been paid.
(p) Equity Capital. Evidence that on or prior to the
Effective Date (i) FrontierVision LP shall have received net cash
proceeds (after the payment of any related transaction or other
expenses) of at least $102,000,000 from the issuance by it of either
partnership interests or Indebtedness (or both), in each case, on
terms, and pursuant to documents, in form and substance satisfactory
to each Lender, and the Administrative Agent shall have received
copies of such documents and of all instruments and documents executed
and delivered in connection therewith, certified by a Senior Officer,
and (ii) net cash proceeds from such issuance in an amount at least
equal to $102,000,000 shall have been contributed by FrontierVision LP
(either directly, or indirectly through FrontierVision)
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pursuant to the Partnership Agreement as additional equity in respect
of the General and Limited Partnership interests held by
FrontierVision LP and FrontierVision, as the case may be; and the
Administrative Agent shall have received a certificate to the effect
of the foregoing clauses (i) and (ii) from a Senior Officer.
(q) Cox Acquisition. Evidence that the Cox Acquisition shall
have been (or shall be simultaneously) consummated in accordance with
the terms of the Cox Acquisition Agreement (except for any
modifications, supplements or waivers thereof, or written consents or
determinations made by the parties thereto, that shall be satisfactory
to each Lender), and the Administrative Agent shall have received a
certificate of a Senior Officer to such effect and to the effect that
attached thereto are true and complete copies of the documents
delivered in connection with the closing of the Cox Acquisition
pursuant to the Cox Acquisition Agreement. In addition, the
Administrative Agent shall have received copies of the legal opinions
delivered to the Company pursuant to the Cox Acquisition Agreement in
connection with the Cox Acquisition, together with a letter from each
Person delivering such opinion (or authorization within such opinion)
authorizing reliance thereon by the Administrative Agent and the
Lenders.
(r) Repayment of Existing Indebtedness. Evidence that the
principal of and interest on, and all other amounts owing in respect
of, the Indebtedness indicated on Schedule I hereto that is to be
repaid on the Effective Date shall have been (or shall be
simultaneously) paid in full, that any commitments to extend credit
under the agreements or instruments relating to such Indebtedness
shall have been canceled or terminated and that all Guarantees in
respect of, and all Liens securing, any such Indebtedness shall have
been released (or arrangements for such release satisfactory to each
Lender shall have been made); in addition, the Administrative Agent
shall have received from any Person holding any Lien securing any such
Indebtedness, such
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Uniform Commercial Code termination statements, mortgage releases and
other instruments, in each case in proper form for recording, as the
Administrative Agent shall have requested to release and terminate of
record the Liens securing such Indebtedness (or arrangements for such
release and termination satisfactory to each Lender shall have been
made).
(s) Approvals. Evidence of receipt of all licenses, permits,
approvals and consents, if any, required with respect to the Cox
Acquisition (including, without limitation, the consents of the
respective municipal franchising authorities to the acquisition of the
respective CATV Systems being acquired by the Company pursuant to the
Cox Acquisition, it being understood that not all of such consents
need be obtained by the Effective Date so long as consents covering
Franchises for at least 93% of the Subscribers (after giving effect to
the transactions contemplated to occur on or before the Effective Date
have been obtained), or the termination of the waiting periods
applicable thereto.
(t) Other Documents. Such other documents as the
Administrative Agent or any Lender or special New York counsel to
Chase may reasonably request.
The effectiveness of this Agreement (and the amendment and restatement of the
Existing Credit Agreement contemplated hereby) and the obligation of any Lender
to make its initial Loan hereunder is also subject to the payment by the
Company of such fees as the Company shall have agreed to pay to any Lender or
the Administrative Agent in connection herewith, including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Loan
Documents and the making of the Loans hereunder (to the extent that statements
for such fees and expenses have been delivered to the Company).
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6.02 Initial and Subsequent Loans. The obligation of the
Lenders to make any Loan to the Company upon the occasion of each borrowing
hereunder (including the initial borrowing) is subject to the further
conditions precedent that, both immediately prior to the making of such Loan
and also after giving effect thereto and to the intended use thereof
(including, without limitation, in the case of the initial Loan hereunder,
after giving effect to the Cox Acquisition):
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Company in
Section 7 hereof, and by each Obligor in each of the other Loan
Documents to which it is a party, shall be true and complete on and as
of the date of the making of such Loan with the same force and effect
as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date,
as of such specific date).
Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Company otherwise notifies
the Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
6.03 Determinations Under Section 6.01. For purposes of
determining compliance with the conditions specified in Section 6.01 hereof,
each Lender shall be deemed to be consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders unless
an officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
prior to the initial Loan hereunder specifying its objection thereto, and such
Lender shall not have made
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available to the Administrative Agent such Lender's ratable portion of such
Loan.
Section 7. Representations and Warranties. The Company
represents and warrants to the Administrative Agent and the Lenders that:
7.01 Corporate Existence. Each of the Company and its
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
7.02 Financial Condition. The Company has heretofore
furnished to the Administrative Agent (in sufficient copies for each of the
Lenders) and the other Agents the following financial statements:
(i) unaudited balance sheets of the CATV Systems being
acquired pursuant to the Cox Acquisition as at December 31, 1994 and
December 31, 1995 and the related statements of income and cash flows
for the respective fiscal years ended on said dates; and
(ii) the Pro Forma Financial Statements.
None of the Company nor any of its Subsidiaries has on the date hereof any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheets
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as at said dates and except as disclosed in Schedule VII hereto. Since
December 31, 1995, there has been no material adverse change in the
consolidated financial condition, operations, business or prospects (x) of the
Company and its Subsidiaries taken as a whole from that set forth in said pro
forma financial statements as at said date referred to in clause (ii) above, or
(y) of the CATV Systems (taken as a whole) to be purchased by the Company on or
before the Effective Date from that set forth in said financial statements
referred to in clause (i) above.
7.03 Litigation. Except as disclosed in Schedule V hereto,
there are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the
knowledge of the Company) threatened against the Company or any of its
Subsidiaries or against Cox (and in respect of which the Company would be
obligated after giving effect to the Cox Acquisition), that, if adversely
determined could (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this
Agreement and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will (a) conflict with or result in a breach of,
or require any consent under, (i) the Partnership Agreement, the partnership
agreement of the General Partner or the partnership agreement of its general
partner or the charter or by-laws of its general partner, or (ii) any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency (except as otherwise provided in
Section 7.06 hereof), or (iii) any agreement or instrument to which the General
Partner or the Company or any of its Subsidiaries is a party or by which any of
them or any of their Property is bound or to which any of them is subject
(except for any such conflict, breach or unobtained consent that could not have
a Material Adverse Effect and that could not result in any liability of any
Agent or any Lender), or (b) constitute a default under any such agreement or
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instrument (except for any such default that could not have a Material Adverse
Effect and that could not result in any liability of any Agent or any Lender),
or (c) except for the Liens created pursuant to the Security Documents, result
in the creation or imposition of any Lien upon any Property of the General
Partner, the Company or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument.
7.05 Action. The Company has all necessary partnership
power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party; the
execution, delivery and performance by the Company of each of the Basic
Documents to which it is a party have been duly authorized by all necessary
partnership action on its part; and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes
and the other Basic Documents to which it is a party when executed and
delivered (in the case of the Notes, for value) will constitute, its legal,
valid and binding obligation, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any governmental or regulatory authority
or agency, or any securities exchange, are necessary for the execution,
delivery or performance by the Company of this Agreement or any of the other
Basic Documents to which it is a party or for the legality, validity or
enforceability hereof or thereof, except for (i) filings and recordings in
respect of the Liens created pursuant to the Security Documents, (ii) the
authorizations, approvals, consents, filings and registrations contemplated by
the Acquisition Agreements (each of which shall have been made or obtained on
or before the date of the closing of the respective
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acquisition thereunder, to the extent required under the respective Acquisition
Agreement to be obtained before such date) and (iii) the exercise of remedies
under the Security Documents (and the creation of a valid security interest in
Franchises and the other Collateral as described in Sections 6.01(f) and 8.19
hereof) may require the prior approval of the FCC or the issuing municipalities
or States under one or more of the Franchises.
7.07 Use of Credit. None of the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
the Loans hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company,
each Multiemployer Plan, is in compliance in all material respects with, and
has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Federal or State law,
and no event or condition has occurred and is continuing as to which the
Company would be under an obligation to furnish a report to the Administrative
Agent under Section 8.01(e) hereof.
7.09 Taxes. The Company and the General Partner are
partnerships for Federal income tax purposes. The Company and its Subsidiaries
(and the General Partner) have filed all Federal income tax returns and all
other material tax returns and information statements that are required to be
filed by them and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by the Company or any of its Subsidiaries. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of taxes and other governmental charges are, in the opinion of the
Company, adequate. The Company has not given or been requested to give a
waiver of the statute of limitations relating to the payment of any Federal,
state, local and foreign taxes or other impositions.
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7.10 Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company
nor any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct
list of each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement providing for or otherwise
relating to any Indebtedness or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, the Company or any of its
Subsidiaries, outstanding on the date hereof, or that (after giving effect to
the transactions contemplated hereunder to occur on or before the Effective
Date) will be outstanding on the Effective Date, the aggregate principal or
face amount of which equals or exceeds (or may equal or exceed) $1,000,000, and
the aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct
list of each Lien securing Indebtedness of any Person outstanding on the date
hereof, or that (after giving effect to the transactions contemplated hereunder
to occur on or before the Effective Date) will be outstanding on the Effective
Date, the aggregate principal or face amount of which equals or exceeds (or may
equal or exceed) $1,000,000 and covering any Property of the Company or any of
its Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Part B of said Schedule I.
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7.13 Environmental Matters. Each of the Company and its
Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization would not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect. Each of such permits, licenses and authorizations is
in full force and effect and each of the Company and its Subsidiaries is in
compliance with the terms and conditions thereof, and is also in compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not (either
individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect. On the date hereof, except as set forth in Schedule VIII
hereto, there are no underground storage tanks or surface impoundments for
Hazardous Materials, active or abandoned, at any site or facility owned,
operated or leased by the Company.
7.14 Capitalization. The Company has heretofore delivered to
the Administrative Agent (in sufficient copies for each Lender) and the other
Agents a true and complete copy of the Partnership Agreement; the only General
Partner of the Company on the date hereof is FrontierVision LP; and the only
Limited Partner of the Company on the date hereof is FrontierVision. As of the
date hereof, except as set forth on Schedule IX hereto, (x) there are no
outstanding Equity Rights with respect to the Company and (y) there are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem, or otherwise acquire any partnership or other equity
interests in the Company nor are there any outstanding obligations of the
Company or any of its Subsidiaries to make payments to any Person, such as
"phantom stock" payments, where the amount
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thereof is calculated with reference to the fair market value or equity value
of the Company or any of its Subsidiaries.
7.15 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule II hereto is a complete
and correct list of all of the Subsidiaries of the Company as of the date
hereof or that will be Subsidiaries of the Company on the Effective Date (after
giving effect to the transactions contemplated hereunder to occur on or before
the Effective Date) together with, for each Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests
in such Subsidiary and (iii) the nature of the ownership interest held by each
such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule II hereto,
(x) each of the Company and its Subsidiaries owns, or will own on the Effective
Date (after giving effect to the transactions contemplated hereunder to occur
on or before the Effective Date), free and clear of Liens, and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule II hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly, issued fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule II hereto is a
complete and correct list of all Investments (other than Investments of the
type referred to in paragraphs (b), (c) and (e) of Section 8.08 hereof or
Investments disclosed in Part A of Schedule II hereto) held by the Company or
any of its Subsidiaries in any Person on the date hereof, or that will be held
on the Effective Date (after giving effect to the transactions contemplated
hereunder to occur on or before the Effective Date) and, for each such
Investment, (x) the identity of the Person or Persons holding such Investment
and (y) the nature of such Investment. Except as disclosed in Part B of
Schedule II hereto, each of the Company and its Subsidiaries owns
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(or will own, after giving effect to the transactions contemplated hereunder to
occur on or before the Effective Date), free and clear of all Liens (other than
Liens created pursuant to the Security Documents), all such Investments.
7.16 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole (together with the Information Memorandum) do
not contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Company and its Subsidiaries
to the Administrative Agent and the Lenders in connection with this Agreement
and the other Loan Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of which
such information is stated or certified. There is no fact known to the Company
that could reasonably be expected to have a Material Adverse Effect that has
not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
7.17 Real Property. Set forth in Schedule IV hereto is a
list of all of the real property interests of the Company and its Subsidiaries
as of the date hereof or that (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date) will be owned
by the Company or any of its Subsidiaries on the Effective Date, indicating, in
each case, whether (i) the respective Property is owned or leased (and if
leased, the term of such lease and the nature and extent of the operations of
the Company conducted or to be conducted on such
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Property), (ii) the identity of the owner or lessee and (iii) the location of
the respective Property. All of such Property owned by the Company and its
Subsidiaries is identified in Part A of said Schedule IV and all such Property
leased by the Company and its Subsidiaries is identified in Part B of said
Schedule IV.
7.18 Franchises. Set forth in Schedule III hereto is a
complete and correct list of all Franchises (identified by issuing authority,
franchisee and expiration date) owned by the Company and its Subsidiaries as of
the date hereof or that (after giving effect to the transactions contemplated
hereunder to occur on or before the Effective Date) will be owned by the
Company and its Subsidiaries on the Effective Date. Each of the Company and
its Subsidiaries possesses or has the right to use or will possess or have the
right to use on the Effective Date (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date) all such
Franchises, and all copyrights, licenses, trademarks, service marks, trade
names or other rights, including licenses and permits granted by the FCC,
agreements with public utilities and microwave transmission companies, pole or
conduit attachment, use, access or rental agreements and utility easements that
are necessary for the conduct of the CATV Systems of the Company and its
Subsidiaries (after giving effect to the transactions contemplated hereunder to
occur on or before the Effective Date), except for such of the foregoing the
absence of which could not reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries, and each of such Franchises,
copyrights, licenses, patents, trademarks, service marks, trade names and
rights is (or on the Effective Date will be) in full force and effect and no
material default has occurred and is continuing thereunder. No approval,
application, filing, registration, consent or other action of any local, state
or federal authority is required to enable the Company or any of its
Subsidiaries to take advantage of the rights and privileges intended to be
conferred by any Franchise, except for approvals, applications, filings,
registrations, consents or other actions that (if not made or obtained) could
not reasonably be expected to have a Material Adverse Effect on the Company or
any of its Subsidiaries.
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Neither the Company nor any of its Subsidiaries has received any notice from
the granting body or any other governmental authority with respect to any
breach of any covenant under, or any default with respect to, any Franchise.
Complete and correct copies of all Franchises (other than those relating to
communities covered by the provisions of Section 505.91 of the Ohio Revised
Code) have heretofore been delivered to the Administrative Agent.
7.19 The CATV Systems.
(a) Each of the Company and its Subsidiaries, and, (after
giving effect to the transactions contemplated hereunder to occur on or before
the Effective Date), the CATV Systems to be owned by it, are in compliance with
all applicable federal, state and local laws, rules and regulations, including
without limitation, the Telecommunications Act of 1996, the Communications Act
of 1934, as amended, the Cable Communications Policy Act of 1984, the Cable
Television Consumer Protection and Competition Act of 1992, the Copyright
Revision Act of 1976, and the rules and policies of the FCC and the United
States Copyright Office, including, without limitation, rules and laws
governing system registration, use of aeronautical frequencies and signal
carriage, equal employment opportunity, cumulative leakage index testing and
reporting, signal leakage, and subscriber privacy, except to the extent that
the failure to so comply with any of the foregoing could not (either
individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing (except to
the extent that the failure to comply with any of the following could not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect and except as set forth in Schedule VI hereto:
(i) the communities included in the areas covered by
the Franchises have been registered with the FCC;
(ii) all of the annual performance tests on such CATV
Systems required under the rules and policies of the FCC have been
performed and the results of such tests
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demonstrate satisfactory compliance with the applicable requirements
being tested in all material respects;
(iii) such CATV Systems currently meet or exceed the
technical standards set forth in the rules and policies of the FCC,
including, without limitation, the leakage limits contained in 47
C.F.R. Section 76.605(a)(11);
(iv) such CATV Systems are being operated in compliance
with the provisions of 47 C.F.R. Sections 76.610 through 76.619
(mid-band and super-band signal carriage), including 47 C.F.R. Section
76.611 (compliance with the cumulative signal leakage index);
(v) where required, appropriate authorizations from
the FCC have been obtained for the use of all aeronautical frequencies
in use in such CATV Systems and such CATV Systems are presently being
operated in compliance with such authorizations (and all required
certificates, permits and clearances from governmental agencies,
including the Federal Aviation Administration, with respect to all
towers, earth stations, business radios and frequencies utilized and
carried by such CATV Systems have been obtained);
(vi) all notices to subscribers of such CATV Systems
and such CATV Systems required by the rules and policies of the FCC
have been provided;
(vii) such CATV Systems are in compliance with Part V of
Title VI of the Communications Act of 1934, as amended, as well as any
and all rules and policies adopted by the FCC to implement said Part
V; and
(viii) such CATV Systems are in compliance with the
provisions of the Communications Decency Act of 1996 in effect, as
well as any and all FCC rules and policies in effect to implement said
Act.
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(b) All notices, statements of account, supplements and other
documents required under Section 111 of the Copyright Act of
1976 and under the rules of the Copyright Office with respect to the
carriage of off-air signals by the CATV Systems to be owned by the
Company and its Subsidiaries (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date) have
been duly filed, and the proper amount of copyright fees have been
paid on a timely basis, and each such CATV System qualifies for the
compulsory license under Section 111 of the Copyright Act of 1976,
except to the extent that the failure to so file or pay could not
(either individually or in the aggregate) reasonably be expected to
have a Material Adverse Effect.
(c) The carriage of all off-air signals by the CATV Systems
to be owned by the Company and its Subsidiaries (after giving effect to the
transactions contemplated hereunder to occur on or before the Effective Date)
is permitted by valid transmission consent agreements or by must-carry
elections by broadcasters, except to the extent the failure to obtain any of
the foregoing could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect.
(d) Each of the Company and its Subsidiaries and each Seller
have complied with their respective obligations with regard to protecting the
privacy rights of any past or present customers of the CATV Systems to be owned
by the Company and its Subsidiaries (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date) except to the
extent that the failure to so comply could not (either individually or in the
aggregate) reasonably be expected to have a Material Adverse Effect.
(e) None of the Company nor its Subsidiaries has been denied
EEO certification by the FCC, and no FCC proceedings against any such Person in
respect of EEO violation are pending or, to the Company's knowledge,
threatened.
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(f) The assets of the CATV Systems to be owned by the Company
and its Subsidiaries (after giving effect to the transactions contemplated
hereunder to occur on or before the Effective Date) are adequate and sufficient
for all of the current operations of such CATV System.
7.20 Rate Regulation. Each of the Company and its
Subsidiaries have each reviewed and evaluated in detail the FCC rules currently
in effect (the "Rate Regulation Rules") implementing the rate regulation
provisions of the Cable Television Consumer Protection and Competition Act of
1992 as amended by the Telecommunications Act of 1996 (as so amended, the "Rate
Regulation Act"). Based upon such review and completion by the Company and its
Subsidiaries of all applicable worksheets contemplated by the Rate Regulation
Rules for each CATV System to be owned by the Company and its Subsidiaries
(after giving effect to the transactions contemplated hereunder to occur on or
before the Effective Date):
(i) none of such CATV Systems is subject to effective
competition as of the date hereof;
(ii) except as set forth in Schedule III hereto, no
franchising authority has notified the Company or any of its
Subsidiaries or any Seller of its application to be certified to
regulate rates as provided in Section 76.910 of the Rate Regulation
Rules;
(iii) except as set forth in Schedule VI hereto, no
franchising authority has notified the Company or any of its
Subsidiaries or any Seller that it has been certified and has adopted
regulations required to commence regulation as provided in Section
76.910(e)(2) of the Rate Regulation Rules;
(iv) except to the extent that a franchising authority
regulates rates pursuant to the Rate Regulation Rules, such CATV
Systems may continue to charge their
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current rates in compliance with the Rate Regulation Act and the Rate
Regulation Rules;
(v) such CATV Systems are otherwise in material
compliance with the Rate Regulation Act and the Rate Regulation Rules
applicable to them;
(vi) no reduction of rates or refunds to subscribers is
required thereunder as of the date hereof; and
(vii) except as set forth on Schedule III hereto, such
CATV Systems are not subject to any complaint at the FCC by any
franchising authority concerning rates for cable programming services,
and neither the Company nor any of its Subsidiaries is aware of any
threat of or basis for the filing of any such complaint.
7.21 Acquisition Agreements. The Borrower has heretofore
delivered to the Administrative Agent and the other Agents a true and complete
copy of each Initial Acquisition Agreement and the Cox Acquisition Agreement
(including all modifications or supplements to each thereof) and each of such
Acquisition Agreements has been duly executed and delivered by each party
thereto and is in full force and effect. After the consummation of the Cox
Acquisition, the Company and its Subsidiaries will have good title to all of
the assets purported to be transferred to them pursuant to the Cox Acquisition
Agreement, free and clear of all Liens (other than Liens described in Section
8.06 hereof).
Section 8. Covenants of the Company. The Company covenants
and agrees with the Lenders and the Administrative Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Company hereunder:
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8.01 Financial Statements Etc. The Company shall deliver to
the Administrative Agent (in sufficient copies for each Lender) and the other
Agents:
(a) as soon as available and in any event within 45 days
after the end of each quarterly fiscal period of each fiscal year of
the Company, consolidated and consolidating statements of income,
changes in partners' capital and cash flows of the Company and its
Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such period, setting forth in each case
in comparative form the corresponding consolidated and consolidating
figures for the corresponding periods in the preceding fiscal year
(except that, in the case of balance sheets, such comparison shall be
to the last day of the prior fiscal year), accompanied by a
certificate of a Senior Officer, which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries, and said consolidating financial statements fairly
present the respective individual unconsolidated financial condition
and results of operations of the Company and of each of its
Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days (or
within 120 days, in the case of the first fiscal year after the
Closing Date) after the end of each fiscal year of the Company,
consolidated and consolidating statements of income, changes in
partners' capital and cash flows of the Company and its Subsidiaries
for such fiscal year and the related consolidated and consolidating
balance sheets of the Company and its Subsidiaries as at the end of
such fiscal year, setting forth in each case in comparative
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form the corresponding consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the case of said
consolidated statements and balance sheet of the Company, by an
opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that said
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries as at the end of, and for, such fiscal year in accordance
with generally accepted accounting principles, and a statement of such
accountants to the effect that, in making the examination necessary
for their opinion, nothing came to their attention that caused them to
believe that the Company was not in compliance with Sections 8.07,
8.08, 8.09, 8.10 or 8.11 hereof as at the end of such fiscal year,
insofar as such Sections relate to accounting matters, and (ii) in the
case of said consolidating statements and balance sheets, by a
certificate of a Senior Officer, which certificate shall state that
said consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each
case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(d) promptly upon the mailing thereof to the partners of the
Company or FrontierVision generally, or to holders of Subordinated
Indebtedness generally, copies of all financial statements, reports
and proxy statements so mailed;
(e) as soon as possible, and in any event within ten days
after the Company knows or has reason to believe that
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any of the events or conditions specified below with respect to any
Plan or Multiemployer Plan has occurred or exists, a statement signed
by a Senior Officer setting forth details respecting such event or
condition and the action, if any, that the Company or its ERISA
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to the PBGC by the
Company or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in
Section 4043(c) of ERISA and the regulations issued
thereunder, with respect to a Plan, as to which the PBGC has
not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of
such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of
ERISA, including, without limitation, the failure to make on
or before its due date a required installment under Section
412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of
ERISA of a notice of intent to terminate any Plan or any
action taken by the Company or an ERISA Affiliate to terminate
any Plan;
(iii) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan;
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(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by the Company
or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company or any
ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA, would result in the loss of tax-exempt status of
the trust of which such Plan is a part if the Company or an
ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(f) within 45 days after the end of each quarterly fiscal
period of the Company, a Quarterly Officer's Report as at the end of
such period;
(g) promptly after the Company knows or has reason to believe
that any Default has occurred, a notice of such Default describing the
same in reasonable detail and, together with such notice or as soon
thereafter as possible, a description of the action that the Company
has taken or proposes to take with respect thereto; and
(h) from time to time such other information regarding the
financial condition, operations, business or prospects of the Company
or any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any
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reports or other information required to be filed under ERISA) as any
Lender or the Administrative Agent may reasonably request.
The Company will furnish to the Administrative Agent (in sufficient copies for
each Lender) and the other Agents, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Company has taken or
proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Company is in
compliance with Sections 8.07(f), 8.07(g), 8.09, 8.10 and 8.11 hereof, and a
calculation of the Debt Ratio and Senior Debt Ratio, as of the end of the
respective quarterly fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to the
Administrative Agent (in sufficient copies for each Lender) and the other
Agents notice of all legal or arbitral proceedings, and of all proceedings by
or before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Company or any of its Subsidiaries or any of their Franchises, except
proceedings that, if adversely determined, could not (either individually or in
the aggregate) reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company will give to the
Administrative Agent (in sufficient copies for each Lender) and the other
Agents (i) notice of the assertion of any Environmental Claim by any Person
against, or with respect to the activities of, the Company or any of its
Subsidiaries and notice of any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations, other than any
Environmental Claim or alleged violation that, if adversely determined, could
not (either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect and (ii) copies of any notices received by the Company
or any of its Subsidiaries under any
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Franchise of a material default by the Company or Subsidiary in the performance
of its obligations thereunder.
8.03 Existence, Etc. The Company will, and will cause each
of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 8.03 shall prohibit any transaction expressly
permitted under Section 8.05 hereof);
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory
authorities if failure to comply with such requirements could (either
individually or in the aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied; and
(f) permit representatives of any Lender or the
Administrative Agent, during normal business hours, to examine, copy
and make extracts from its books and records, to inspect any of its
Properties, and to discuss its
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business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may
be).
8.04 Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations, provided that the Company
will in any event maintain (with respect to itself and each of its
Subsidiaries) casualty insurance and insurance against claims for damages with
respect to defamation, libel, slander, privacy or other similar injury to
person or reputation (including misappropriation of personal likeness), in such
amounts as are then customary for Persons engaged in the same or similar
business similarly situated (such insurance to cover claims arising out of
events occurring prior to the Closing Date), and shall designate the
Administrative Agent as loss payee with respect to any such casualty insurance
covering tangible Property).
8.05 Prohibition of Fundamental Changes.
(a) Mergers and Consolidations, Etc. The Company will not,
nor will it permit any of its Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution); provided that, subject to
Section 8.14 hereof, and so long as after giving effect thereto no Default
shall have occurred and be continuing hereunder, (i) any Subsidiary of the
Company may be merged into or consolidated with the Company or any Subsidiary
Guarantor so long as the Company or a Subsidiary Guarantor is the continuing or
surviving party, (ii) any Subsidiary of the Company may liquidate or dissolve
into the Company or any Subsidiary Guarantor and (iii) the Company and its
Subsidiaries may enter into the transactions permitted under clause (iv) of
paragraph (b) below.
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(b) Acquisitions. The Company will not, nor will it permit
any of its Subsidiaries to, acquire any business or Property from or capital
stock of, or be a party to any acquisition of, any Person except:
(i) the Initial Acquisitions;
(ii) purchases of equipment, programming rights and
other Property to be sold or used in the ordinary course of business;
(iii) Capital Expenditures permitted under Section 8.11
hereof; and
(iv) the Company and its Wholly Owned Subsidiaries may
acquire any CATV System, and the related assets (any such CATV System
being hereinafter referred to as an "Acquired System"), whether by way
of an exchange of CATV Systems, the purchase of assets or stock, by
merger or consolidation or otherwise, so long as:
(A) (1) the aggregate Purchase Price of all such
acquisitions (other than CATV Systems acquired in exchange for
other CATV Systems) shall not exceed $50,000,000 and the
aggregate Purchase Price of any individual such acquisition
(other than a CATV System acquired in exchange for one or more
other CATV Systems) shall not exceed $10,000,000 and (2) the
aggregate Purchase Price of all such CATV Systems acquired in
exchange for other CATV Systems shall not exceed $50,000,000
and the aggregate Purchase Price of any individual such CATV
System acquired in exchange for one or more other CATV Systems
shall not exceed $10,000,000 (it being understood that, if the
acquisition involves an exchange of CATV Systems and the
aggregate Purchase Price for such acquisition includes cash
and/or cash equivalents, then the portion of such aggregate
Purchase Price so constituting cash and cash equivalents shall
be deemed to be applied to
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reduce the then-unused portion of the amounts specified in
clause (1) of this Section 8.05(b)(iv)(A), and the remainder
of such aggregate Purchase Price shall be deemed to be applied
to reduce the then-unused portion of the amounts specified in
clause (2) of this Section 8.05(b)(iv)(A));
(B) such acquisition (if by purchase of stock or
other ownership interests) shall be effected in such manner so
that the acquired entity becomes a Wholly Owned Subsidiary of
the Company;
(C) no later than (1) thirty days prior to the
consummation of such acquisition (or such earlier date as
shall be five Business Days after the execution and delivery
thereof), the Company shall have delivered to the
Administrative Agent and the other Agents executed
counterparts of the respective Acquisition Agreement pursuant
to which such acquisition is to be consummated (and forms, to
the extent agreed to, of any other agreements, including any
management, non-compete, employment, option or other material
agreements to be executed in connection with the closing
thereunder), any schedules to such agreements or instruments
and all other material ancillary documents to be executed or
delivered in connection therewith, (2) promptly following
request therefor, copies of such other information or
documents relating to such acquisition as any Lender shall
have requested, and (3) promptly following the consummation of
such acquisition, certified copies of the agreements,
instruments and documents referred to in the foregoing clause
(1) as shall have been executed and delivered in connection
therewith;
(D) the agreements, instruments and other documents
referred to in the foregoing clause (C) shall, except to the
extent otherwise consented to by the Majority Lenders, provide
that:
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(1) the entire amount of the consideration
payable by the Company and its Subsidiaries in
connection with such acquisition (other than (x)
customary post-closing adjustments, escrow and
purchase price holdback and indemnity obligations,
(y) Indebtedness incurred in connection with such
acquisition that is permitted under Section 8.07(g)
hereof and (z) Other Equity Interests issued to the
relevant Seller or Sellers in connection with such
acquisition in accordance with Section 8.13 hereof)
shall be payable on the date of such acquisition,
(2) neither the Company nor any of its
Subsidiaries shall, in connection with such
acquisition, assume or remain liable in respect of
(x) any Indebtedness of the Seller or Sellers of such
Acquired System (or the entity owning such Acquired
System) except for Indebtedness permitted under
Sections 8.07(g) hereof or (y) other obligations of
the Seller or Sellers of such Acquired System, except
for obligations incurred by the respective Seller in
the ordinary course of business in operating such
CATV System and that are necessary or desirable to
the continued operation of such CATV System (and, in
the event such Acquired System (or the entity owning
such Acquired System) is obligated in respect of any
Indebtedness or other obligations not permitted under
the foregoing subclauses (x) or (y), then
concurrently with such acquisition any such
Indebtedness or other obligations shall be released
as to the assets or entity being so acquired) and
(3) all Property to be acquired in
connection with such acquisition (or that is owned by
the Seller of such Acquired System on the date of
such acquisition) shall be free and clear of
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any and all Liens, except to the extent permitted by
Section 8.06 hereof (and in the event any such
Property is subject to any Lien not permitted by this
clause (3) then concurrently with such acquisition
such Lien shall be released);
(E) to the extent applicable, the Company shall have
complied with the provisions of Sections 8.17 and 8.19 hereof,
including, without limitation, (1) delivery to the
Administrative Agent of the certificates evidencing the
capital stock or other ownership interests of any new
Subsidiary acquired pursuant to such acquisition, accompanied
by undated stock or other powers executed in blank and (2)
delivery to the Administrative Agent of the agreements,
instruments, opinions of counsel and other documents required
under Section 8.17 hereof;
(F) immediately prior to such acquisition and after
giving effect thereto, no Default shall have occurred or be
continuing;
(G) after giving effect to such acquisition the
Company shall be in compliance with Section 8.10 hereof (the
determination of such compliance to be calculated on a pro
forma basis, as at the end of and for the period of four
fiscal quarters most recently ended prior to the date of such
acquisition for which financial statements of the Company and
its Subsidiaries are available, under the assumption that such
acquisition shall have occurred, and any Indebtedness in
connection therewith shall have been incurred, at the
beginning of the applicable period, and under the assumption
that interest for such period had been equal to the actual
weighted average interest rate in effect for the Loans
hereunder on the date of such acquisition, and the Company
shall have delivered to the Administrative Agent and the other
Agents a certificate of a Senior Officer showing such
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calculations in reasonable detail to demonstrate such
compliance;
(H) in connection with such acquisition, if
requested by the Majority Lenders (through the Administrative
Agent), the Company shall have delivered to the Administrative
Agent an Acquisition Environmental Survey, in form and
substance reasonably satisfactory to the Majority Lenders
reflecting that the Acquired System will not be subject to any
material environmental liabilities;
(I) to the extent requested by the Majority Lenders
(through the Administrative Agent), the Company shall have
delivered evidence satisfactory to the Administrative Agent
and the Majority Lenders that the Company and its Subsidiaries
will not become liable, contingently or otherwise, in respect
of any material tax or ERISA liability of the Seller of the
Acquired System as a result of such acquisition; and
(J) the Company shall have delivered to the
Administrative Agent (which shall promptly forward copies
thereof to each Lender) a revised Part A of Schedule II
hereto, and revised Schedules III, IV and VI hereto, such that
after giving effect to such acquisition, the representations
set forth in Sections 7.15(a), 7.17, 7.18, 7.19 and 7.20
hereof (assuming that each reference to the Effective Date
therein referred to the date such acquisition is consummated
(after giving effect thereto)) shall be true and complete as
of such date.
(c) Dispositions. The Company will not, nor will it permit
any of its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or a substantial part
of its business or Property, whether now owned or hereafter acquired
(including,
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without limitation, receivables and leasehold interests, but excluding:
(i) obsolete or worn-out Property, tools or equipment
no longer used or useful in its business,
(ii) any equipment, programming rights or other
Property sold or disposed of in the ordinary course of business and on
ordinary business terms,
(iii) any such conveyance, sale, lease, transfer or
other disposition by any Subsidiary of the Company to the Company or
to any other Subsidiary of the Company,
(iv) dispositions of one or more CATV Systems (whether
for cash or for Disposition Investments, but excluding dispositions in
exchange for other CATV Systems), so long as the aggregate fair market
value of the CATV Systems disposed of in any single transaction shall
not exceed $10,000,000 and the fair market value of the CATV Systems
disposed of in all such dispositions shall not exceed $50,000,000,
(v) dispositions of one or more CATV Systems in
exchange for other CATV Systems, so long as the aggregate fair market
value of the CATV Systems disposed of in any single such exchange
shall not exceed $10,000,000 and the fair market value of the CATV
Systems disposed of in all such exchanges shall not exceed
$50,000,000, and
(vi) dispositions by the Company of the Woodstock,
Virginia, New Market, Virginia, and Chatsworth, Georgia, systems
acquired pursuant to the C4 Acquisition to one or more Persons (other
than to Affiliates of the Company) at an average price per Subscriber
of not less than $1,188 pursuant to one or more agreements between the
Company and such other Persons entered into before May 31, 1996.
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8.06 Limitation on Liens. The Company will not, nor will it
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part
B of Schedule I hereto (excluding, however, following the making of
the initial Loans hereunder, Liens securing Indebtedness to be repaid
with the proceeds of such Loans, as indicated on said Schedule I), and
first priority Liens on cash and cash equivalents securing obligations
of the Company in respect of Interest Rate Protection Agreements, so
long as the aggregate fair market value of the cash and cash
equivalents subject to such Liens does not exceed $3,000,000;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or
that are being contested in good faith and by appropriate proceedings
and Liens securing judgments but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 9(i)
hereof;
(e) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
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(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory
obligations, surety and appeal bonds, performance bonds (including,
without limitation, performance bonds required pursuant to the terms
of any Franchise) and other obligations of a like nature incurred in
the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that
do not interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries with respect to any CATV System or
CATV Systems that in the aggregate provide service to more than 5% of
Subscribers of the Company and its Subsidiaries (determined as at any
date); and
(h) Liens upon real and/or tangible personal Property
acquired after the date hereof (by purchase, construction or
otherwise) by the Company or any of its Subsidiaries, each of which
Liens either (A) existed on such Property before the time of its
acquisition and was not created in anticipation thereof or (B) was
created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund, the cost (including the
cost of construction) of such Property; provided that (i) no such Lien
shall extend to or cover any Property of the Company or such
Subsidiary other than the Property so acquired and improvements
thereon and (ii) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed the fair market value (as determined
in good faith by a Senior Officer) of such Property at the time it was
acquired (by purchase, construction or otherwise).
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8.07 Indebtedness. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in
Part A of Schedule I hereto (excluding, however, following the making
of the initial Loans hereunder, Indebtedness to be repaid with the
proceeds of such Loans, as indicated on said Schedule I);
(c) Indebtedness in respect of the UVC Notes;
(d) Permitted Subordinated Indebtedness incurred in
accordance with Section 8.13 hereof up to an aggregate principal
amount not exceeding $150,000,000;
(e) Indebtedness of Subsidiaries of the Company to the
Company or to other Subsidiaries of the Company;
(f) Indebtedness of the Company and its Subsidiaries in
respect of letters of credit or performance bonds required pursuant to
the terms of Franchises or other agreements to which the Company or
any of its Subsidiaries may be parties, so long as the aggregate
amount thereof does not exceed $20,000,000 at any one time
outstanding; and
(g) additional Indebtedness of the Company and its
Subsidiaries (including, without limitation, Capital Lease Obligations
and other Indebtedness secured by Liens permitted under Sections
8.06(h) hereof) up to but not exceeding $5,000,000 at any one time
outstanding.
8.08 Investments. The Company will not, nor will it permit
any of its Subsidiaries to, make or permit to remain outstanding any
Investments except:
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(a) Investments outstanding on the date hereof and identified
in Schedule II hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) escrow or deposit accounts established in connection with
Subsequent Acquisitions, so long as the funds held in such accounts
are held in the form of cash or Permitted Investments;
(e) Investments by the Company and its Subsidiaries in the
Company and its Subsidiaries;
(f) Investments constituting Subsequent Acquisitions by the
Company and its Subsidiaries made in accordance with Section
8.05(b)(iv) hereof;
(g) Interest Rate Protection Agreements entered into in
accordance with Section 8.12 hereof;
(h) loans to employees of the Company or any of its
Subsidiaries or Affiliates in an aggregate amount (as to all such
employees) up to $500,000 at any one time outstanding; and
(i) Investments (collectively, "Disposition Investments")
received in connection with any Disposition by the Company or any of
its Subsidiaries permitted hereunder and representing all or a part of
the non-cash portion of the consideration received by the Company and
its Subsidiaries pursuant to such Disposition, provided that (i) the
aggregate amount of Disposition Investments received in connection
with any single Disposition shall not exceed 10% of the fair market
value of the consideration received in connection therewith, and the
aggregate amount of Disposition Investments received in connection
with all Dispositions shall not exceed $25,000,000 and (ii) the
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respective certificates and notes evidencing such Disposition
Investments are delivered in pledge to the Administrative Agent
pursuant to the Security Agreement.
8.09 Restricted Payments. The Company will not make any
Restricted Payment at any time, except that so long as at the time thereof and
after giving effect thereto no Default shall have occurred and be continuing,
the Company may:
(a) make Partnership Distributions to its Partners on or
after April 12 of each fiscal year (the "current year") in an amount
equal to the Tax Payment Amount for the immediately preceding fiscal
year (the "prior year"), so long as at least fifteen days prior to
making any such Partnership Distribution, the Company shall have
delivered to the Administrative Agent (in sufficient copies for each
Lender) and the other Agents (i) notification of the amount and
proposed payment date of such Partnership Distribution and (ii) a
statement from the Company's independent certified public accountants
setting forth a detailed calculation of the Tax Payment Amount for the
prior year and showing the amount of such Partnership Distribution and
all prior Partnership Distributions made pursuant to this Section 8.09
and
(b) make interest payments in cash in respect of the UVC
Notes, at any time after December 31, 1998,
provided that the aggregate amount of Restricted Payments pursuant to the
foregoing clause (b) during any fiscal year, together with the aggregate amount
of Capital Expenditures made pursuant to Section 8.11(b) hereof during such
fiscal year, shall not exceed the Net Company Portion of Excess Cash Flow for
the immediately preceding fiscal year. Notwithstanding the foregoing:
(1) the Company may at any time make payments of principal or
interest in respect of the UVC Notes from the proceeds of a Special
Debt or Special Equity Issuance,
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provided that any such payments from the proceeds of a Special Debt
Issuance shall only be made in conjunction with the payment in full of
the principal of and interest on the UVC Notes; and
(2) the Company may, simultaneously with the cancellation of
UVC Notes in an aggregate outstanding principal amount equal to
$5,000,000 in exchange for the issuance by the Company of Other Equity
Interests to UVC as provided in Section 8.13(b)(1) hereof, repay the
remaining principal of, and accrued interest on, the UVC Notes.
Nothing herein shall be deemed to prohibit the payment of
dividends by any Subsidiary of the Company to the Company or to any other
Subsidiary of the Company.
8.10 Certain Financial Covenants.
(a) Debt Ratio. The Company will not permit the Debt Ratio
to exceed the following respective ratios at any time during the following
respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date
through and including
June 30, 1997 6.25 to 1
From July 1, 1997
through and including
December 31, 1997 5.75 to 1
From January 1, 1998
through and including
June 30, 1998 5.25 to 1
From July 1, 1998
through and including
December 31, 1998 5.00 to 1
</TABLE>
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<TABLE>
<S> <C>
From January 1, 1999
through and including
December 31, 1999 4.50 to 1
From January 1, 2000 and at
all times thereafter 4.00 to 1
</TABLE>
(b) Interest Coverage Ratio. The Company will not permit
the Interest Coverage Ratio to be less than the following respective amounts at
any time during the following respective periods:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From the Effective Date
through and including
December 31, 1996 1.50
From January 1, 1997
through and including
December 31, 1997 1.75
From January 1, 1998
through and including
December 31, 1998 2.00
From January 1, 1999
through and including
December 31, 1999 2.25
From January 1, 2000
and at all times thereafter 2.50
</TABLE>
(c) Fixed Charges Ratio. The Company will not permit the
Fixed Charges Ratio to be less than 1.05 to 1 at any time on or after December
31, 1996.
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8.11 Capital Expenditures.
(a) The Company will not permit the aggregate amount of
Capital Expenditures by the Company and its Subsidiaries to exceed for the
following respective periods the respective amounts set forth below opposite
such period:
<TABLE>
<CAPTION>
Period Amount ($)
------ ----------
<S> <C>
From the Effective Date
to and including
December 31, 1996 14,500,000
Fiscal year ending
December 31, 1997 13,500,000
Fiscal year ending
December 31, 1998 13,250,000
Fiscal year ending
December 31, 1999 12,500,000
Fiscal year ending
December 31, 2000 12,500,000
Each fiscal year
thereafter 7,000,000
</TABLE>
If the aggregate amount of Capital Expenditures for any period
set forth in the schedule above shall be less than the amount set forth
opposite such period in the schedule above, then the shortfall shall be added
to the amount of Capital Expenditures permitted for the immediately succeeding
(but not any other) period and, for purposes hereof, the amount of Capital
Expenditures made during any period shall be deemed to have been made first
from the amount of any carryover from any previous fiscal year and last from
the permitted amount set forth in the schedule above.
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(b) Notwithstanding the provisions of the foregoing paragraph
(a), the Company and its Subsidiaries may make additional Capital Expenditures,
provided that the aggregate amount of Capital Expenditures under this paragraph
(b) during any fiscal year, together with the aggregate amount of Restricted
Payments made pursuant to Section 8.09(b) hereof during such fiscal year, shall
not exceed the amount of the Net Company Portion of Excess Cash Flow for the
immediately preceding fiscal year.
8.12 Interest Rate Protection Agreements. The Company will
within 90 days of the Effective Date (to the extent necessary after taking into
account the Interest Rate Protection Agreements entered into pursuant to the
requirements of Section 8.12 of the Existing Credit Agreement) enter into, and
thereafter maintain in full force and effect, one or more Interest Rate
Protection Agreements with one or more of the Lenders (and/or with a bank or
other financial institution having capital, surplus and undivided profits of at
least $500,000,000), that effectively enables the Company (in a manner
satisfactory to the Majority Lenders) to protect itself against three-month
London interbank offered rates exceeding 8.5% per annum as to a notional
principal amount at least equal to $132,500,000 for a period of at least three
years measured from the Effective Date.
8.13 Subordinated Indebtedness; Other Equity Interests.
(a) The Company may, after the date of this Agreement, incur
additional Indebtedness (i) for which the Company is directly and primarily
liable, (ii) that is subordinated to the obligations of the Company to pay
principal of and interest on the Loans, Notes and other obligations hereunder
on terms of subordination satisfactory to the Majority Lenders, and pursuant to
documentation containing other terms (including, without limitation, interest,
amortization, mandatory prepayments, covenants and events of default) in form
and substance satisfactory to the Majority Lenders), (iii) in respect of which
none of its Subsidiaries is contingently or otherwise obligated
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other than pursuant to a Guarantee that is subordinated to the obligations of
such Subsidiaries pursuant to the Subsidiary Guarantee Agreements executed and
delivered pursuant to Section 8.17(a) hereof, (iv) if at the time of issuance
of such Indebtedness and after giving effect thereto and to the application of
the proceeds thereof, the Company shall be in compliance with Section 8.10
hereof (the determination of such ratios shall be calculated on a pro forma
basis as if such Indebtedness was incurred, and the proceeds thereof were so
applied, in each case, at the beginning of such period, and the Administrative
Agent shall have received a certificate of a Senior Officer to such effect
setting forth in reasonable detail the computations necessary to determine such
compliance) and (v) if immediately prior thereto and after giving effect to the
incurrence thereof, no Default shall have occurred and be continuing, and the
Administrative Agent shall have received a certificate of a Senior Officer to
such effect; provided that the proceeds of any such Indebtedness shall be
applied solely to make Subsequent Acquisitions, to make payments in respect of
the UVC Notes as contemplated in the last sentence of the first paragraph of
Section 8.09 hereof, to refinance other Subordinated Indebtedness or to prepay
the Loans and reduce the Commitments as provided in Section 2.09(e) hereof.
(b) The Company may, after the date of this Agreement, issue
limited partnership interests:
(1) to UVC in exchange for the cancellation of UVC Notes in
an aggregate outstanding principal amount not exceeding $5,000,000 and
the simultaneous repayment of the remaining principal of, and accrued
interest on, the UVC Notes;
(2) to one or more Seller as all or part of the Purchase
Price of CATV Systems acquired in Subsequent Acquisitions; and
(3) to officers and employees of the Company and its
Subsidiaries,
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in each case provided that (i) the agreements, instruments and other documents
evidencing or representing such limited partnership interests expressly provide
that no payments of any Partnership Distributions in respect thereof may be
made at any time prior to the payment in full in cash of the principal of and
interest on, and all other amounts owing in respect of, the Loans, Notes and
other obligations hereunder and under the other Loan Documents, (ii) none of
the Company's Subsidiaries is contingently or otherwise obligated in respect
thereof, (iii) such limited partnership interests shall be pledged to the
Administrative Agent for the benefit of the Lenders to secure the obligations
of the Company hereunder and under the other Basic Documents and to secure the
Pari Passu Obligations and (iv) both immediately prior thereto and after giving
effect to the issuance thereof no Default shall have occurred and be continuing
(and the Administrative Agent shall have received a certificate of a Senior
Officer to such effect), all on terms and conditions, and pursuant to
documentation, in form and substance satisfactory the Majority Lenders.
(c) The Company will not, nor will it permit any of its
Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or
set apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Subordinated Indebtedness, except for regularly
scheduled payments or prepayments of principal and interest in respect thereof
required pursuant to the instruments evidencing such Subordinated Indebtedness;
provided that (i) notwithstanding the foregoing, except as expressly permitted
under Section 8.09 hereof, the Company shall not make any payment of interest
or premiums in cash in respect of the UVC Notes (and, in furtherance of the
foregoing, the Company shall elect to the maximum extent permissible to issue
PIK Notes under and as defined in the UVC Notes pursuant thereto) and (ii) the
Company may issue Other Equity Interests in exchange for UVC Notes in
accordance with Section 8.13(b) hereof. The Company will not, nor will it
permit any of its Subsidiaries to, purchase, redeem,
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retire or otherwise acquire for value, or set apart any money for a sinking,
defeasance or other analogous fund for the purchase, redemption, retirement or
other acquisition of, or make any Partnership Distribution or other payment in
respect of, any Other Equity Interest.
8.14 Lines of Business. The Company will not, nor will it
permit any of its Subsidiaries to, engage to any substantial extent in any line
or lines of business activity other than the business of owning and operating
CATV Systems and related businesses.
8.15 Transactions with Affiliates. Except as expressly
permitted by this Agreement, the Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; (d) make any contribution towards, or
reimbursement for, any Federal income taxes payable by any Partner (or the
holders of any direct or indirect ownership interest in any Partner) in respect
of income of the Company; or (e) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that, notwithstanding the foregoing:
(x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its
Subsidiaries and receive reasonable compensation for his or her
services in such capacity,
(y) the Company and its Subsidiaries may enter into
transactions (other than extensions of credit by the Company or any of
its Subsidiaries to an Affiliate) providing for the leasing of
Property, the rendering or receipt of services (other than investment
banking services, unless the Advisory Committee of FrontierVision LP
shall have approved such services) or the purchase or sale of
equipment,
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programming rights, advertising time and other Property in the
ordinary course of business if the monetary or business consideration
arising therefrom would be substantially as advantageous to the
Company and its Subsidiaries as the monetary or business consideration
that would obtain in a comparable transaction with a Person not an
Affiliate and
(z) any Lender (and any Control Affiliate of a Lender) may
extend credit to the Company and its Subsidiaries, enter into Interest
Rate Protection Agreements with the Company and its Subsidiaries or
provide other services (other than investment banking services, which
shall be governed by clause (y) above) to the Company and its
Subsidiaries in the ordinary course of business of such Lender (and
such Control Affiliate), in each case to the extent that the Company
and the respective Subsidiary are permitted to engage in such
transaction hereunder and the monetary or business consideration
arising therefrom would be substantially as advantageous to the
Company and its Subsidiaries as the monetary or business consideration
that would obtain in a comparable transaction with a Person not an
Affiliate.
8.16 Use of Proceeds. The Company will use the proceeds of
the Loans hereunder (i) to finance the Acquisitions, (ii) to finance payments
of fees, commissions and expenses in connection with the Acquisitions and (iii)
for general business purposes (in compliance with all applicable legal and
regulatory requirements, including, without limitation, Regulations G, T, U and
X and the Securities Act of 1933 and the Securities Exchange Act of 1934 and
the regulations thereunder); provided that (i) any borrowing of Revolving
Credit Loans hereunder that would constitute a utilization of any Reserved
Commitment Amount shall be applied solely to make Subsequent Acquisitions
permitted under Section 8.05(b)(iv) hereof, or to make prepayments of Loans
under Section 2.09(d)(y)(B) hereof and (ii) neither the Administrative Agent
nor any Lender shall have any responsibility as to the use of any of the
proceeds of any Loans hereunder.
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8.17 Certain Obligations Respecting Subsidiaries.
(a) Subsidiary Guarantors. In the event that the Company or
any of its Subsidiaries shall form or acquire any Subsidiary after the
Effective Date (after obtaining any necessary consent of the Lenders), the
Company shall cause, and shall cause its Subsidiaries to cause, such Subsidiary
to:
(i) execute and deliver to the Administrative Agent a
Subsidiary Guarantee Agreement in the form of Exhibit F hereto (and,
thereby, to become a "Subsidiary Guarantor", and an "Obligor"
hereunder and a "Securing Party" under the Security Agreement);
(ii) deliver the shares of its stock accompanied by
undated stock powers executed in blank to the Administrative Agent,
and to take other such action, to the extent required under Section
8.19 hereof (including, without limitation, executing and delivering
such Uniform Commercial Code financing statements and executing and
delivering Mortgages covering the real Property and fixtures owned or
leased by such Subsidiary), as shall be necessary to create and
perfect valid and enforceable first priority Liens (subject to Liens
permitted under Section 8.06 hereof) on substantially all of the
Property of such new Subsidiary as collateral security for the
obligations of such new Subsidiary under the Subsidiary Guarantee
Agreement, and
(iii) deliver such proof of corporate action, incumbency
of officers, opinions of counsel and other documents as is consistent
with those delivered by each Obligor pursuant to Section 6.01 hereof
on the Effective Date or as the Administrative Agent shall have
reasonably requested.
(b) Ownership of Subsidiaries. The Company will, and will
cause each of its Subsidiaries to, take such action from time to time as shall
be necessary to ensure that each of its Subsidiaries is a Wholly Owned
Subsidiary. In the event that any
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additional shares of stock or other ownership interests shall be issued by any
Subsidiary, the Company agrees forthwith to deliver to the Administrative Agent
pursuant to the Security Agreement the certificates evidencing such shares of
stock or other ownership interests, accompanied by undated stock or other
powers executed in blank and to take such other action as the Administrative
Agent shall request to perfect the security interest created therein pursuant
to the Security Agreement.
(c) Certain Restrictions. The Company will not permit any of
its Subsidiaries to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of dividends,
the making of loans, advances or Investments or the sale, assignment, transfer
or other disposition of Property.
8.18 Modifications of Certain Documents. The Company will
not consent to any modification, supplement or waiver of any of the provisions
of
(i) any agreement, instrument or other document
evidencing or relating to Subordinated Indebtedness (other than the
cancellation of UVC Notes in accordance with Section 8.13(b)(1)
hereof),
(ii) any Initial Acquisition Agreement or the Cox
Acquisition Agreement either to increase the aggregate consideration
payable by the Company thereunder or any other provision of such
Agreements (or of any agreement executed in connection therewith) to
the extent the same would materially adversely affect the Lenders or
the Administrative Agent (or the rights of the Lenders or the
Administrative Agent under any of the Loan Documents), or
(iii) the Partnership Agreement or, following the
execution and delivery thereof, any Acquisition Agreement
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for any Subsequent Acquisition (or any agreements executed in
connection with any Subsequent Acquisition) to the extent the same
would materially adversely affect the Lenders or the Administrative
Agent (or the rights of the Lenders or the Administrative Agent under
any of the Loan Documents),
without in each case, the prior consent of the Administrative Agent (with the
approval of the Majority Lenders).
8.19 Certain Obligations Respecting the Collateral.
(a) Following the Effective Date, the Company will use
reasonable efforts to obtain any consents of municipal franchising authorities
necessary to create and perfect a valid and enforceable first priority Lien on
the Franchises acquired by the Company on or before the Effective Date, so that
to the maximum extent practicable the Lien of the Administrative Agent created
therein pursuant to the Security Agreement will be such a valid and enforceable
first priority Lien on all of the Franchises (other than Excluded Franchises)
of the Company and its Subsidiaries.
(b) In the event that after the Effective Date, the Company
or any of its Subsidiaries shall acquire any real property interests, whether
owned or leased (other than an Excluded Leasehold Interest), the Company will,
and will cause such Subsidiary to, promptly (and in any event within 30 days of
the acquisition thereof) execute and deliver to the Administrative Agent a
Mortgage (in recordable form and in such number of copies as the Administrative
Agent shall have requested) covering such Property, together with any necessary
consents to such Mortgages by the respective lessors, to the extent that the
Majority Lenders shall have determined that the respective leasehold property
shall be material and shall have requested the Company to obtain such consents.
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Section 9. Events of Default. If one or more of the
following events (herein called "Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
(whether at stated maturity or upon mandatory or optional prepayment)
of any principal of or interest on any Loan, any fee or any other
amount payable by it hereunder or under any other Loan Document; or
(b) The Company or any of its Subsidiaries shall default in
the payment when due of any principal of or interest on any of its
other Indebtedness aggregating $2,000,000 or more; or any event
specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or
the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid
in full (whether by redemption, purchase, offer to purchase or
otherwise), prior to its stated maturity or to have the interest rate
thereon reset to a level so that securities evidencing such
Indebtedness trade at a level specified in relation to the par value
thereof; or the Company shall default in the payment when due of any
amount aggregating $100,000 or more under any Interest Rate Protection
Agreement; or any event specified in any Interest Rate Protection
Agreement shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to
permit, termination or liquidation payment or payments aggregating
$2,000,000 or more to become due; or
(c) Any representation, warranty or certification made or
deemed made herein or in any other Loan Document (or in any
modification or supplement hereto or thereto) by any Obligor, or any
certificate furnished to any Lender or the
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Administrative Agent pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or any representation or warranty
made in the UVC Acquisition Agreement by UVC, in the Americable
Acquisition Agreement by Americable or in the Cox Acquisition
Agreement by Cox shall prove to have been false or misleading as of
the time made or furnished in any material respect; or
(d) Any of the following shall occur: (i) the Company shall
default in the performance of any of its obligations under any of
Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11, 8.12,
8.13, 8.15, 8.17 or 8.18 hereof; (ii) any Securing Party shall default
in the performance of any of its obligations under Section 5.02 of the
Security Agreement; (iii) any Partner Pledgor shall default in the
performance of its obligations under Section 5.02 of the Partner
Pledge Agreement; (iv) any Stock Pledgor shall default in the
performance of its obligations under Section 4.02 of the Stock Pledge
Agreement; or (v) the Company shall default in the performance of its
obligations hereunder, or any Obligor shall default in the performance
of its obligations under any other Loan Document to which it is a
party, and such default shall continue unremedied for a period of
thirty or more days after notice thereof to the Company by the
Administrative Agent or any Lender (through the Administrative Agent);
or
(e) The Company or any of its Subsidiaries, or
FrontierVision, shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) The Company or any of its Subsidiaries, or
FrontierVision, shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of
its Property, (ii) make a general assignment for the benefit of its
creditors,
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(iii) commence a voluntary case under the Bankruptcy Code, (iv) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Company or any of its Subsidiaries, or
FrontierVision, in any court of competent jurisdiction, seeking (i)
its reorganization, liquidation, dissolution, arrangement or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner, liquidator or
the like of the Company, any such Subsidiary or FrontierVision (as the
case may be) or of all or any substantial part of its Property or
(iii) similar relief in respect of the Company, any such Subsidiary or
FrontierVision (as the case may be) under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against the
Company, any such Subsidiary or FrontierVision shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) The Company or FrontierVision shall be terminated,
dissolved or liquidated (as a matter of law or otherwise) or
proceedings shall be commenced by any Person (including the Company or
FrontierVision) seeking the termination, dissolution or liquidation of
the Company or FrontierVision; or
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(i) A final judgment or judgments for the payment of money of
$2,000,000 or more in the aggregate (exclusive of judgment amounts
fully covered by insurance where the insurer has admitted liability in
respect of such judgment) or of $5,000,000 or more in the aggregate
(regardless of insurance coverage) shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against the Company or any of its Subsidiaries, or FrontierVision, and
the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company, the
relevant Subsidiary or FrontierVision (as the case may be) shall not,
within said period of 30 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(j) An event or condition specified in Section 8.01(e) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other
such events or conditions, the Company or any ERISA Affiliate shall
incur or in the opinion of the Majority Lenders shall be reasonably
likely to incur a liability to a Plan, a Multiemployer Plan or the
PBGC (or any combination of the foregoing) that, in the determination
of the Majority Lenders, would (either individually or in the
aggregate) have a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against
the Company or any of its Subsidiaries, or any predecessor in interest
of the Company or any of its Subsidiaries or Affiliates, of (or there
shall have been asserted against the Company or any of its
Subsidiaries) an Environmental Claim that, in the judgment of the
Majority Lenders is reasonably likely to be determined adversely to
the Company or any of its Subsidiaries, and the amount thereof (either
individually or in the aggregate) is
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reasonably likely to have a Material Adverse Effect (insofar as such
amount is payable by the Company or any of its Subsidiaries but after
deducting any portion thereof that is reasonably expected to be paid
by other creditworthy Persons jointly and severally liable therefor);
or
(l) Any one or more of the following events shall occur and
be continuing:
(i) FrontierVision LP shall cease to either
(x) own general partnership interests in the Company
representing at least 99.9% of the aggregate partnership
interests in the Company not constituting Other Equity
Interests or (y) be the sole general partner of the Company;
or FrontierVision and holders of Other Equity Interests shall
cease to be the sole limited partners of the Company; or
(ii) either James Vaughn or John S. Koo shall,
for any reason, cease to be actively involved in the day to
day management and operation of the Company and its
Subsidiaries (and Persons with equivalent knowledge and
experience in the cable television industry reasonably
acceptable to the Majority Lenders are not appointed to
replace one or both of the them within 90 days thereof); or
(iii) prior to a Qualified Public Offering,
either (x) the Initial Equityholders shall cease to own,
collectively, on a fully-diluted basis (in other words, giving
effect to the exercise of any warrants, options and conversion
and other rights), equity interests representing at least 51%
of the aggregate fair market value (or, if greater, the
aggregate liquidation value) of the equity interests of all
classes of FrontierVision LP or (y) James Vaughn or John S.
Koo shall sell, transfer, hypothecate or otherwise dispose of
more than 20% of their direct or indirect economic interest in
FrontierVision LP (other
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than any transfer to the spouse of either of such individuals,
to his immediate family members, or to trusts for the benefit
of such spouse or immediate family members); or
(iv) after a Qualified Public Offering either
(x) the Initial Equityholders shall cease to own,
collectively, on a fully-diluted basis (in other words, giving
effect to the exercise of any warrants, options and conversion
and other rights), equity interests representing at least 30%
of the aggregate fair market value (or, if greater, the
aggregate liquidation value) of the equity interests of all
classes of FrontierVision LP, (y) any person or group (within
the meaning of Rule 13d-5 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and Section 13(d) and
14(d) of the Exchange Act (other than the Initial
Equityholders) becomes, directly or indirectly, in a single
transaction or in a related series of transactions by way of
merger, consolidation or other business combination or
otherwise, the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 30% of the equity
interest of FrontierVision LP on a fully-diluted basis (in
other words, giving effect to the exercise of any warrants,
options and conversion and other rights) or (z) James Vaughn
or John S. Koo shall sell, transfer, hypothecate or otherwise
dispose of more than 50% of their direct or indirect economic
interest in FrontierVision LP (other than any transfer to the
spouse of either of such individuals, to his immediate family
members, or to trusts for the benefit of such spouse or
immediate family members); or
(m) Except for Franchises that cover in the aggregate fewer
than 5% of the Subscribers of the Company and its Subsidiaries
(determined as at the last day of the most recent fiscal quarter for
which a Quarterly Officers' Report shall have been delivered), one or
more Franchises relating
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to the CATV Systems of the Company and its Subsidiaries shall be
terminated or revoked such that the Company or the respective
Subsidiary is no longer able to operate such Franchises and retain the
revenue received therefrom; or the Company or the respective
Subsidiary or the grantors of such Franchises shall fail to renew such
Franchises at the stated expiration thereof such that the Company or
the respective Subsidiary is no longer able to operate such Franchises
and retain the revenue received therefrom; or
(n) The Liens created by the Security Documents shall at any
time not constitute a valid Lien on the collateral intended to be
covered thereby, or (at any time after the date five Business Days
after the Closing Date) shall not constitute a perfected Lien (to the
extent perfection by filing, registration, recordation or possession
is required herein or therein) on substantially all of the Property of
the Company and its Subsidiaries as contemplated herein and in the
other Loan Documents, in favor of the Administrative Agent, free and
clear of all other Liens (other than Liens permitted under Section
8.06 hereof or under the respective Security Documents), or, except
for expiration in accordance with its terms, any of the Security
Documents shall for whatever reason be terminated or cease to be in
full force and effect, or the enforceability thereof shall be
contested by the Company;
THEREUPON: (1) in the case of an Event of Default other than one referred to
in paragraph (f) or (g) of this Section 9 with respect to the Company or
FrontierVision, the Administrative Agent may and, upon request of the Majority
Lenders, will, by notice to the Company, terminate the Commitments and/or
declare the principal amount then outstanding of, and the accrued interest on,
the Loans and all other amounts payable by the Company hereunder and under the
Notes (including, without limitation, any amounts payable under Section 5.05
hereof) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby
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expressly waived by the Company; and (2) in the case of the occurrence of an
Event of Default referred to in paragraph (f) or (g) of this Section 9 with
respect to the Company or FrontierVision, the Commitments shall automatically
be terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Company hereunder
and under the Notes (including, without limitation, any amounts payable under
Section 5.05 hereof) shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Company.
Section 10. The Agents.
10.01 Appointment, Powers and Immunities. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 10.05 and the first sentence of Section 10.06 hereof
shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document
be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement
or in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or
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sufficiency of this Agreement, any Note or any other Loan Document or
any other document referred to or provided for herein or therein or
for any failure by the Company or any other Person to perform any of
its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by
the Majority Lenders with respect to collateral security under the
Security Documents, be required to initiate or conduct any litigation
or collection proceedings hereunder or under any other Loan Document;
and
(d) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee (or Registered Holder, as the case may be) of a Note
as the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent.
10.02 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by telephone,
telecopy, telegram or cable) reasonably believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Administrative Agent. As to any
matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
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acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Majority Lenders or, if provided herein, in
accordance with the instructions given by the Majority Revolving Credit
Lenders, the Majority Facility A Term Loan Lenders, the Majority Facility B
Term Loan Lenders or all of the Lenders as is required in such circumstance,
and such instructions of such Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Lender or the Company
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall (subject to Section
10.07 hereof) take such action with respect to such Default as shall be
directed by the Majority Lenders or, if provided herein, the Majority Revolving
Credit Lenders, the Majority Facility A Term Loan Lenders or the Majority
Facility B Term Loan Lenders, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Lenders except to the extent that this Agreement
expressly requires that such action be taken, or not be taken, only with the
consent or upon the authorization of the Majority Lenders, the Majority
Revolving Credit Lenders, the Majority Facility A Term Loan Lenders, the
Majority Facility B Term Loan Lenders or all of the Lenders.
10.04 Rights as a Lender. With respect to its Commitments
and the Loans made by it, Chase (and any successor acting as Administrative
Agent) in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it
were not acting as the Administrative Agent, and the term "Lender" or
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"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. Chase (and any successor
acting as Administrative Agent) and its affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with the Company (and any of its Subsidiaries or Affiliates) as if it
were not acting as the Administrative Agent, and Chase (and any such successor)
and its affiliates may accept fees and other consideration from the Company for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
10.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03)
ratably in accordance with the aggregate principal amount of the Loans held by
the Lenders (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in any way relating to
or arising out of this Agreement or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses that the Company is obligated to pay under Section 11.03 hereof, but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents, provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Administrative Agent.
Credit Agreement
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10.06 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Loan
Document. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by the Company of this Agreement
or any of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the Properties or books of the
Company or any of its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of
their affiliates) that may come into the possession of the Administrative Agent
or any of its affiliates.
10.07 Failure to Act. Except for action expressly required
of the Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take
any such action.
10.08 Resignation or Removal of Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent
Credit Agreement
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may resign at any time by giving notice thereof to the Lenders and the Company,
and the Administrative Agent may be removed at any time with or without cause
by the Majority Lenders. Upon any such resignation or removal, the Majority
Lenders shall have the right (after consultation with the Company) to appoint a
successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank
that has an office in New York, New York with a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Section 10 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent.
10.09 Consents under Other Loan Documents. Except as
otherwise provided in Section 11.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, provided that, without the prior consent of each Lender,
the Administrative Agent shall not (except as provided herein or in the
Security Documents) release any collateral or otherwise terminate any Lien
under any Security Document providing for collateral security, agree to
additional obligations being secured by such collateral security (unless the
Lien for such additional obligations shall be junior to the Lien in favor of
the other obligations secured by such Security
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Document, in which event the Administrative Agent may consent to such junior
Lien provided that it obtains the consent of the Majority Lenders thereto),
alter the relative priorities of the obligations entitled to the benefits of
the Liens created under the Security Documents or release any guarantor under
any Security Document from its guarantee obligations thereunder, except that no
such consent shall be required, and the Administrative Agent is hereby
authorized (and, the Administrative Agent hereby agrees with the Company) to,
release any Lien covering Property (and release any such guarantor) that is the
subject of either a disposition of Property permitted hereunder or a
disposition to which the Majority Lenders have consented.
10.10 The Syndication Agent and the Managing Agent. Except
as expressly provided herein, neither the Syndication Agent nor the Managing
Agent shall have any rights or obligations under this Agreement or any of the
other Loan Documents except (in the case of the Managing Agent) in its capacity
as a "Lender" hereunder.
10.11 Control Affiliates of Lenders. Each Lender hereby
agrees with the Administrative Agent that, to the extent any of such Lender's
Control Affiliates shall be entitled to the benefits of any of the collateral
security or guaranties provided pursuant to any of the Security Documents, such
Lender will cause such Control Affiliate to perform and be bound by the
provisions of this Section 10 as if such Control Affiliate constituted a Lender
hereunder and had appointed the Administrative Agent as its agent for purposes
of the Security Documents; in taking any action hereunder at the instruction or
authorization of any Lender (including any such action taken at the instruction
or authorization of the Majority Lenders), the Administrative Agent shall be
entitled to conclusively presume that the instruction or authorization of a
Lender constitutes a like instruction or authorization of each Control
Affiliate of such Lender entitled to the benefits of the Security Documents.
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Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement or
any Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any Note
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
11.02 Notices. All notices, requests and other
communications provided for herein and under the Security Documents (including,
without limitation, any modifications of, or waivers, requests or consents
under, this Agreement) shall be given or made in writing (including, without
limitation, by telecopy) delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof); or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or reimburse
each of the Lenders and the Administrative Agent for: (a) all reasonable
out-of-pocket costs and expenses of the Agents (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
making of the Loans hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated); (b) all reasonable
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out-of-pocket costs and expenses of the Lenders and the Administrative Agent
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
11.03; (c) all transfer, stamp, documentary or other similar taxes, assessments
or charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document referred to
herein or therein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection
of any security interest contemplated by any Security Document or any other
document referred to therein; and (d) all costs, expenses and other charges in
respect of title insurance procured with respect to the Liens created pursuant
to the Mortgages.
The Company hereby agrees to indemnify the Administrative
Agent, the Syndication Agent and each Lender and their respective directors,
officers, employees, attorneys and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses incurred
by any of them (including, without limitation, any and all losses, liabilities,
claims, damages or expenses incurred by the Administrative Agent to any Lender,
whether or not the Administrative Agent or any Lender is a party thereto)
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the Loans hereunder or any actual or proposed use by
the Company or any of its Subsidiaries of the proceeds of any of the Loans
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation
Credit Agreement
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or other proceedings (but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). Without limiting the generality
of the foregoing, the Company will indemnify the Administrative Agent and each
Lender from, and hold the Administrative Agent and each Lender harmless
against, any losses, liabilities, claims, damages or expenses described in the
preceding sentence (including any Lien filed against any Property covered by
the Mortgages or any part of the Mortgage Estate thereunder in favor of any
governmental entity, but excluding, as provided in the preceding sentence, any
loss, liability, claim, damage or expense incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) arising under
any Environmental Law as a result of the past, present or future operations of
the Company or any of its Subsidiaries (or any predecessor in interest to the
Company or any of its Subsidiaries), or the past, present or future condition
of any site or facility owned, operated or leased at any time by the Company or
any of its Subsidiaries (or any such predecessor in interest), or any Release
or threatened Release of any Hazardous Materials at or from any such site or
facility, excluding any such Release or threatened Release that shall occur
during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents, but including any such Release or
threatened Release occurring during such period that is a continuation of
conditions previously in existence, or of practices employed by the Company and
its Subsidiaries, at such site or facility.
11.04 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Company and the
Majority Lenders, or by the Company and the Administrative Agent acting with
the consent of the Majority Lenders, and any provision of this Agreement may be
waived by the Majority Lenders or by the Administrative Agent acting with the
consent of the Majority Lenders; provided that:
Credit Agreement
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(a) no modification, supplement or waiver shall, unless by an instrument signed
by all of the Lenders or by the Administrative Agent acting with the consent of
all of the Lenders: (i) increase, or extend the term of any of the
Commitments, or extend the time or waive any requirement for the reduction or
termination of any of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v) alter
the rights or obligations of the Company to prepay Loans (other than
obligations under Section 2.09(e) hereof), (vi) alter the manner in which
payments or prepayments of principal, interest or other amounts hereunder shall
be applied as between the Lenders or Classes of Loans, (vii) alter the terms of
this Section 11.04, (viii) modify the definition of the term "Majority
Lenders", "Majority Revolving Credit Lenders", "Majority Facility A Term Loan
Lenders" or "Majority Facility B Term Loan Lenders" or modify in any other
manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
or (ix) waive any of the conditions precedent set forth in Section 6.01 hereof;
and (b) any modification or supplement of Section 10 hereof, or of any of the
rights or duties of the Administrative Agent hereunder, shall require the
consent of the Administrative Agent.
Anything in the Agreement to the contrary notwithstanding, no
waiver or modification of any provision of this Agreement that has the effect
(either immediately or at some later time) of enabling the Company to satisfy a
condition precedent to the making of a Revolving Credit Loan shall be effective
against the Revolving Credit Lenders for purposes of the Revolving Credit
Commitments unless the Majority Revolving Credit Lenders shall have concurred
with such waiver or modification.
11.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Credit Agreement
<PAGE> 162
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11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or
obligations hereunder or under the Notes without the prior consent of all of
the Lenders and the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, and
its Commitments (but only with the consent of each of the Administrative Agent,
the Syndication Agent and the Company, which consents shall not be unreasonably
withheld or delayed); provided that:
(i) no such consent by such Agents shall be required
in the case of any assignment to another Lender;
(ii) except to the extent such Agents and the Company
shall otherwise consent, any such partial assignment (other than to
another Lender) shall be in an amount at least equal to $3,000,000;
(iii) each such assignment by a Lender of its Revolving
Credit Loans, Revolving Credit Note or Revolving Credit Commitment
shall be made in such manner so that the same portion of its Revolving
Credit Loans, Revolving Credit Note and Revolving Credit Commitment is
assigned to the respective assignee;
(iv) each such assignment by a Lender of its Facility A
Term Loans, Facility A Term Loan Note or Facility A Term Loan
Commitment shall be made in such manner so that the same portion of
its Facility A Term Loans, Facility A Term Loan Note and Facility A
Term Loan Commitment is assigned to the respective assignee; and
(v) each such assignment by a Lender of its Facility B
Term Loans, Facility B Term Loan Note or Facility B Term Loan
Commitment shall be made in such manner so that the same portion of
its Facility B Term Loans,
Credit Agreement
<PAGE> 163
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Facility B Term Loan Note and Facility B Term Loan Commitment is
assigned to the respective assignee; and
(vi) upon each such assignment, the assignor and
assignee shall deliver to the Company and each of such Agents a Notice
of Assignment in the form of Exhibit J hereto.
Upon execution and delivery by the assignor and the assignee to the Company and
the Administrative Agent and Syndication Agent of such Notice of Assignment,
and upon consent thereto by such Agents to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise
consented to by the Company and such Agents), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s) and Loans (or portions
thereof) assigned to it and specified in such Notice of Assignment (in addition
to the Commitment(s) and Loans, if any, theretofore held by such assignee) and
the assigning Lender shall, to the extent of such assignment, be released from
the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Administrative Agent an
assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other
Persons (each a "Participant") a participation in all or any part of any Loans
held by it, or in its Commitments, provided that such Participant shall not
have any rights or obligations under this Agreement or any Note or any other
Loan Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender
in favor of the Participant). All amounts payable by the Company to any Lender
under Section 5 hereof in respect of Loans held by it, and its Commitments,
shall be determined as if such Lender had not sold or agreed to sell any
participations in such Loans and Commitments, and as if such Lender were
funding each of such Loan and Commitments in the same way that it is funding
the portion of such Loan and Commitments in which no participations have been
sold. In no event shall a Lender that sells a participation agree with the
Participant to take or
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<PAGE> 164
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refrain from taking any action hereunder or under any other Loan Document
except that such Lender may agree with the Participant that it will not,
without the consent of the Participant, agree to (i) increase or extend the
term of such Lender's Commitments or extend the amount or date of any scheduled
reduction of such Commitments pursuant to Section 2.03 hereof, (ii) extend the
date fixed for the payment of principal of or interest on the related Loan or
Loans or any portion of any fee hereunder payable to the Participant, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon, or any fee hereunder payable to the
Participant, to a level below the rate at which the Participant is entitled to
receive such interest or fee or (v) consent to any modification, supplement or
waiver hereof or of any of the other Loan Documents to the extent that the
same, under Section 10.09 or 11.04 hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 11.06, any Lender may
(without notice to the Company, the Agents or any other Lender and without
payment of any fee) (i) assign and pledge all or any portion of its Loans and
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its Loans
and its Note to an affiliate. No such assignment shall release the assigning
Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the
Company or any of its Subsidiaries in the possession of such Lender from time
to time to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary
notwithstanding, no Lender may assign or participate any interest in any Loan
held by it hereunder to the Company or any of its
Credit Agreement
<PAGE> 165
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Affiliates or Subsidiaries without the prior consent of each Lender.
(g) At the request of any Lender that is not a U.S. Person
and is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the
Company shall maintain, or cause to be maintained, a register (the "Register")
that, at the request of the Company, shall be kept by the Administrative Agent
on behalf of the Company at no charge to the Company at the address to which
notices to the Administrative Agent are to be sent hereunder, on which it
enters the name of such Lender as the registered owner of each Registered Loan
held by such Lender. A Registered Loan (and the Registered Note, if any,
evidencing the same) may be assigned or otherwise transferred in whole or in
part by registration of such assignment or transfer on the Register (and each
Registered Note shall expressly so provide). Any assignment or transfer of all
or part of such Loan (and the Registered Note, if any, evidencing the same) may
be effected by registration of such assignment or transfer on the Register,
together with the surrender of the Registered Note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or
transfer duly executed by) the holder of such Registered Note, whereupon, at
the request of the designated assignee(s) or transferee(s), one or more new
Registered Notes in the same aggregate principal amount shall be issued to the
designated assignee(s) or transferee(s). Prior to the registration of
assignment or transfer of any Registered Loan (and the Registered Note, if any,
evidencing the same), the Company shall treat the Person in whose name such
Loan (and the Registered Note, if any, evidencing the same) is registered as
the owner thereof for the purpose of receiving all payments thereon and for all
other purposes, notwithstanding notice to the contrary.
(h) The Register shall be available for inspection by the
Company and any Lender that is a Registered Holder at any reasonable time upon
reasonable prior notice.
Credit Agreement
<PAGE> 166
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11.07 Survival. The obligations of the Company under
Sections 5.01, 5.05, 5.06 and 11.03 hereof, and the obligations of the Lenders
under Section 10.05 hereof, shall survive the repayment of the Loans and the
termination of the Commitments and, in the case of any Lender that may assign
any interest in its Commitments or Loans hereunder, shall survive the making of
such assignment, notwithstanding that such assigning Lender may cease to be a
"Lender" hereunder. In addition, each representation and warranty made, or
deemed to be made by a notice of any Loan, herein or pursuant hereto shall
survive the making of such representation and warranty, and no Lender shall be
deemed to have waived, by reason of making any Loan, any Default that may arise
by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that such Lender or the Administrative Agent may
have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
11.08 Captions. The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
11.09 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. The Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York, for the purposes of all legal
proceedings arising out of or relating to this Agreement or
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<PAGE> 167
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the transactions contemplated hereby. The Company hereby irrevocably waives,
to the fullest extent permitted by applicable law, any objection that it may
now or hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENTS
AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to
share any information delivered to such Lender by the Company and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or affiliate,
it being understood that any such subsidiary or affiliate receiving such
information shall be bound by the provisions of paragraph (b) below as if it
were a Lender hereunder. Such authorization shall survive the repayment of the
Loans and the termination of the Commitments.
(b) Each of the Lenders and the Agents agree (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential
information of the same nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by any Obligor pursuant to
this Agreement or any other Loan Document to which it is party that is
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<PAGE> 168
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identified by such Obligor as being confidential at the time the same is
delivered to the Lenders or the Agents, provided that nothing herein shall
limit the disclosure of any such information (i) after such information shall
have become public (other than through a violation of this Section 11.12), (ii)
to the extent required by statute, rule, regulation or judicial process, (iii)
to counsel for any of the Lenders or the Agents, (iv) to bank examiners (or any
other regulatory authority having jurisdiction over any Lender or the Agents),
or to auditors or accountants, (v) to the Agents or any other Lender (or to
Chase Securities, Inc. or J.P. Morgan Securities Inc.), (vi) in connection with
any litigation to which any one or more of the Lenders or the Agents is a
party, or in connection with the enforcement of rights or remedies hereunder or
under any other Loan Document, (vii) to a subsidiary or affiliate of such
Lender as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee
or participant (or prospective assignee or participant) first executes and
delivers to the respective Lender a Confidentiality Agreement for the benefit
of the Company substantially in the form of Exhibit I hereto (or executes and
delivers to such Lender an acknowledgement to the effect that it is bound by
the provisions of this Section 11.12(b), which acknowledgement may be included
as part of the respective assignment or participation agreement pursuant to
which such assignee or participant acquires an interest in the Loans
hereunder); provided, further, that in no event shall any Lender or the
Administrative Agent be obligated or required to return any materials furnished
by the Company. The obligations of each Lender under this Section 11.12 shall
supersede and replace the obligations of such Lender under the confidentiality
letter in respect of this financing signed and delivered by such Lender to the
Company prior to the date hereof; in addition, the obligations of any assignee
that has executed a Confidentiality Agreement in the form of Exhibit I hereto
shall be superseded by this Section 11.12 upon the date upon which such
assignee becomes a Lender hereunder pursuant to Section 11.06(b) hereof.
Credit Agreement
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11.13 Limitation of Liability. Anything herein or in any of
the other Loan Documents to the contrary notwithstanding, the Lenders and the
Agents shall have no recourse to the assets of any of the general or limited
partners of FrontierVision LP (including, without limitation, FVP GP, L.P.)
with respect to the obligations of the Company under this Agreement or any of
the other Loan Documents.
Credit Agreement
<PAGE> 170
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
FRONTIERVISION OPERATING
PARTNERS, L.P.
By: Frontiervision Partners, L.P., as
general partner of FrontierVision
Operating Partners, L.P.
By: FVP GP, L.P., as general
partner of FrontierVision
Partners, L.P.
By: FrontierVision Inc., as
general partner of FVP
GP, L.P.
By /s/ JOHN S. KOO
------------------------------
Title: SVP & CFO
Address for Notices:
FrontierVision Operating
Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attention: John S. Koo
Senior Vice President and
Chief Financial Officer
Telecopier No.: 303-757-6105
Telephone No.: 303-757-1588
Credit Agreement
<PAGE> 171
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with a copy to:
Edwards & Angell
101 Federal Street
23rd Floor
Boston, Massachusetts 02100
Attention: Stephen O. Meredith, Esq.
Telecopier No.: 617-439-4170
Telephone No.: 617-439-4444
Credit Agreement
<PAGE> 172
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LENDERS
<TABLE>
<S> <C>
Revolving Credit Commitment THE CHASE MANHATTAN BANK
--------------------------- (NATIONAL ASSOCIATION)
$10,070,000.00
By /s/ THOMAS M. MALONE
---------------------
Facility A Term Loan Commitment Title: MD
-------------------------------
$13,430,000.00 Lending Office for all Loans:
The Chase Manhattan Bank
Facility B Term Loan Commitment (National Association)
------------------------------- 1 Chase Manhattan Plaza
New York, New York 10081
$20,333,334.00
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Victor Miller
Telecopier No.: 212-552-0259
Telephone No.: 212-552-4436
</TABLE>
Credit Agreement
<PAGE> 173
- 167 -
<TABLE>
<S> <C>
Revolving Credit Commitment MORGAN GUARANTY TRUST COMPANY
--------------------------- OF NEW YORK
$10,065,000.00
By /s/ [illegible]
----------------------
Facility A Term Loan Commitment Title:
-------------------------------
$13,435,000.00 Lending Office for Base Rate Loans:
Morgan Guaranty Trust
Facility B Term Loan Commitment Company of New York
------------------------------- 60 Wall Street
New York, New York 10260
$ 5,333,333.00
Lending Office for Eurodollar Loans:
Morgan Guaranty Trust
Company of New York
Nassau, Bahamas
Address for Notices:
J.P. Morgan (Delaware)
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Mark Connor
Associate
Telecopier No.: 302-634-4218
Telephone No.: 302-634-1092
</TABLE>
Credit Agreement
<PAGE> 174
- 168 -
<TABLE>
<S> <C>
Revolving Credit Commitment CIBC INC.
---------------------------
$10,065,000.00
By /s/ [illegible]
-------------------------
Title: Managing Director
Facility A Term Loan Commitment
-------------------------------
Lending Office for all Loans:
$13,435,000.00
CIBC Inc.
2727 Paces Ferry Road
Facility B Term Loan Commitment Suite 1200
------------------------------- Atlanta, Georgia 30339
$ 5,333,333.00
Attention: Donna Corcoran
Address for Notices:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Martin W. Friedman
Managing Director
Telecopier No.: 212-856-3558
Telephone No.: 212-856-3617
</TABLE>
Credit Agreement
<PAGE> 175
- 169 -
NEW LENDERS
<TABLE>
<S> <C>
Revolving Credit Commitment FIRST NATIONAL BANK OF CHICAGO
---------------------------
$10,700,000.00
By /s/ [illegible]
----------------------
Title: AVP
Facility A Term Loan Commitment
-------------------------------
Lending Office for all Loans:
$14,300,000.00
First National Bank
of Chicago
Facility B Term Loan Commitment One First National Plaza
------------------------------- Suite 0634 1-10
Chicago, Illinois 60670
$ - 0 -
Address for Notices:
First National Bank
of Chicago
One First National Plaza
Suite 0634 1-10
Chicago, Illinois 60670
Attention: Ron Cromey
Telecopier No.: 312-732-4840
-7091
Telephone No.: 312-732-7494
</TABLE>
Credit Agreement
<PAGE> 176
- 170 -
<TABLE>
<S> <C>
Revolving Credit Commitment UNION BANK, a division of Union
--------------------------- Bank of California, N.A.
$10,700,000.00
Facility A Term Loan Commitment By /s/ STEVEN D. OLSON
------------------------------- -----------------------
Title: Vice President
$14,300,000.00
Lending Office for all Loans:
Facility B Term Loan Commitment Union Bank, a division
------------------------------- of Union Bank of
California, N.A.
$ - 0 - 445 South Figueroa Street
15th Floor
Los Angeles, California
90071
Attention: Communications/
Media Division
Address for Notices:
Union Bank, a division
of Union Bank of
California, N.A.
445 South Figueroa Street
15th Floor
Los Angles, California
90071
Attention: Steven Olson
Telecopier No.: 213-236-5276
-5747
Telephone No.: 213-236-6903
</TABLE>
Credit Agreement
<PAGE> 177
- 171 -
<TABLE>
<S> <C>
Revolving Credit Commitment BANK OF MONTREAL
---------------------------
$ 8,600,000.00
By /s/ ALLEGRA GRIFFITHS
----------------------
Title: Director
Facility A Term Loan Commitment
-------------------------------
Lending Office for all Loans:
$11,400,000.00
Bank of Montreal
430 Park Avenue
Facility B Term Loan Commitment New York, New York 10022
-------------------------------
$ - 0 - Address for Notices:
Bank of Montreal
430 Park Avenue
New York, New York 10022
Attention: Patrick Keleher
Telecopier No.: 212-605-1618
-1525
Telephone No.: 212-605-1477
</TABLE>
Credit Agreement
<PAGE> 178
- 172 -
<TABLE>
<S> <C>
Revolving Credit Commitment FLEET NATIONAL BANK
---------------------------
$ 8,600,000.00
By /s/ [illegible]
----------------------
Title: V.P.
Facility A Term Loan Commitment
-------------------------------
Lending Office for all Loans:
$11,400,000.00
Fleet National Bank
111 Westminster Street
Facility B Term Loan Commitment Providence, Rhode Island
------------------------------- 02903
$ - 0 -
Attention: Denise Berard
Telecopier No.: 401:278-3431
Telephone No.: 401-278-5535
Address for Notices:
Fleet National Bank
56 East 42nd Street
New York, New York 10017
Attention: Lynne S. Randall
Telecopier No.: 212-907-5610
Telephone No.: 212-907-5207
</TABLE>
Credit Agreement
<PAGE> 179
- 173 -
<TABLE>
<S> <C>
Revolving Credit Commitment VAN KAMPEN AMERICAN CAPITAL
--------------------------- PRIME RATE INCOME TRUST
$ - 0 -
By /s/ JEFFREY W. MAILLET
Facility A Term Loan Commitment -----------------------
------------------------------- Title: Sr. Vice President - Portfolio Mg.
$ - 0 -
Lending Office for all Loans:
Facility B Term Loan Commitment Van Kampen American Capital
------------------------------- Prime Rate Income Trust
$26,500,000.00 One Parkview Plaza
Oakbrook Terrace, Illinois
60181
Address for Notices:
Van Kampen American Capital
Prime Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, Illinois
60181
Attention: Jeffrey Maillet
Senior Vice
President
Portfolio Manager
Telecopier No.: 708-684-6740
-6741
Telephone No.: 708-684-6438
with a copy to:
State Street Bank & Trust
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102
</TABLE>
Credit Agreement
<PAGE> 180
- 174 -
Attention: Laura Magazu
Telecopier No.: 617-664-5366
-5367
Telephone No.: 617-664-5481
Credit Agreement
<PAGE> 181
- 175 -
<TABLE>
<S> <C>
Revolving Credit Commitment CHL HIGH YIELD LOAN PORTFOLIO,
--------------------------- a unit of Chemical Bank
$ - 0 -
By /s/ ANDREW D. GORDON
----------------------------
Facility A Term Loan Commitment Title: Managing Director
-------------------------------
$ - 0 - Lending Office for all Loans
CHL High Yield
Facility B Term Loan Commitment 140 East 45th Street
------------------------------- New York, New York 10017
$10,000,000.00
Address for Notices
CHL High Yield
140 East 45th Street
New York, New York 10017
Attention: Joe Nerich
Telecopier No.:
Telephone No.: 212-622-0621
</TABLE>
Credit Agreement
<PAGE> 182
- 176 -
[Page Intentionally Left Blank]
Credit Agreement
<PAGE> 183
- 177 -
[Page Intentionally Left Blank]
Credit Agreement
<PAGE> 184
- 178 -
<TABLE>
<S> <C>
Revolving Credit Commitment THE LONG-TERM CREDIT BANK OF
---------------------------
JAPAN, LTD., LOS ANGELES
$ 4,300,000.00 AGENCY
Facility A Term Loan Commitment By /s/ [illegible]
------------------------------- ---------------------
Title: Deputy General Manager
$ 5,700,000.00
Lending Office for all Loans:
Facility B Term Loan Commitment The Long-Term Credit Bank
------------------------------- of Japan, Ltd., Los
Angeles Agency
$ - 0 - 444 South Flower Street
Suite 3700
Los Angeles, California 90071-2938
Address for Notices:
The Long-Term Credit Bank
of Japan, Ltd., Los
Angeles Agency
444 South Flower Street
Suite 3700
Los Angeles, California
90071-2938
Attention: Takaomi Tomioka
Telecopier No.: 213-626-1067
Telephone No.: 213-689-6355
</TABLE>
Credit Agreement
<PAGE> 185
- 179 -
<TABLE>
<S> <C>
Revolving Credit Commitment PILGRIM PRIME RATE TRUST
---------------------------
$ - 0 -
By /s/ [illegible]
----------------------
Title: Senior Vice President
Facility A Term Loan Commitment
-------------------------------
Lending Office for all Loans:
$ - 0 -
Pilgrim Prime Rate Trust
Two Renaissance Square
Facility B Term Loan Commitment 40 North Central Avenue
------------------------------- Suite 1200
Phoenix, Arizona 85004-3444
$10,000,000.00
Address for Notices:
Pilgrim Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-3444
Attention: Thomas (Tim) C. Hunt
Portfolio Analyst
Telecopier No.: 602-417-8327
Telephone No.: 602-417-8257
</TABLE>
Credit Agreement
<PAGE> 186
- 180 -
<TABLE>
<S> <C>
Revolving Credit Commitment BANQUE FRANCAISE DU COMMERCE
---------------------------
EXTERIEUR
$ 1,900,000.00
By /s/ BRIAN J. CUMBERLAND
Facility A Term Loan Commitment ------------------------
------------------------------- Title: Assistant Treasurer
$ 2,600,000.00
By /s/ FREDERICK K. KAMMLER
Facility B Term Loan Commitment ------------------------
------------------------------- Title: Vice President
$ 2,500,000.00 Lending Office for all Loans:
Banque Francaise du Commerce
Exterieur
645 Fifth Avenue
20th Floor
New York, New York 10022
Address for Notices:
Banque Francaise du Commerce
Exterieur
645 Fifth Avenue
20th Floor
New York, New York 10022
Attention: Frederick Kammler
Telecopier No.: 212-872-5045
Telephone No.: 212-872-5041
</TABLE>
Credit Agreement
<PAGE> 187
- 181 -
<TABLE>
<S> <C>
Revolving Credit Commitment MERRILL LYNCH SENIOR FLOATING
---------------------------
RATE FUND, INC.
$ - 0 -
By /s/ R. DOUGLAS HENDERSON
Facility A Term Loan Commitment ---------------------
------------------------------- Title:
$ - 0 - Lending Office for all Loans:
Merrill Lynch Senior
Facility B Term Loan Commitment Floating Rate Fund, Inc.
------------------------------- 800 Scudders Mill Road -
Area 2C
$ 5,000,000.00 Plainsboro, New Jersey 08536
Address for Notices:
Merrill Lynch Senior
Floating Rate Fund, Inc.
800 Scudders Mill Road -
Area 2C
Plainsboro, New Jersey 08536
Attention: Jill Montanye
Telecopier No.: 609-282-2550
Telephone No.: 609-282-3102
with a copy to:
MLAM Accounting
500 College Road-4E
Plainsboro, New Jersey
08536
Attention: Benjamin Genek
Telecopier No.: 609-282-7612
Telephone No.: 609-282-7705
</TABLE>
Credit Agreement
<PAGE> 188
- 182 -
<TABLE>
<S> <C>
Revolving Credit Commitment PROTECTIVE LIFE INSURANCE
---------------------------
COMPANY
$ - 0 -
By /s/ [illegible]
Facility A Term Loan Commitment ----------------------
------------------------------- Title:
$ - 0 - Lending Office for all Loans:
Protective Life Insurance
Facility B Term Loan Commitment Company
------------------------------- 1150 Two Galleria Tower
13455 Noel Road LB #45
$ 5,000,000.00 Dallas, Texas 75240
Address for Notices:
Protective Life Insurance
Company
1150 Two Galleria Tower
13455 Noel Road LB #45
Dallas, Texas 75240
Attention: Mark Okada
Telecopier No.: 214-233-4343
-6143
Telephone No.: 214-233-4300
</TABLE>
Credit Agreement
<PAGE> 189
- 183 -
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By /s/ THOMAS M. MALONE
---------------------------------
Title: MD
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
(National Association)
4 Chase Metrotech Center-13th
Floor
Brooklyn, New York 11245
Attention: New York Agency
Telecopier No.: (718) 242-6910
Telephone No.: (718) 242-7979
Credit Agreement
<PAGE> 190
- 184 -
J.P. MORGAN SECURITIES INC.,
as Syndication Agent
By /s/ [illegible]
---------------------------------
Title: MD
Address for Notices to
Syndication Agent:
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention: Barbara Asch
Telecopier No.: (212) 648-5016
Telephone No.: (212) 648-6991
Credit Agreement
<PAGE> 191
- 185 -
CIBC INC., as Managing Agent
By /s/ [illegible]
---------------------------------
Title: Managing Director
Address for Notices to Managing Agent:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Martin W. Friedman
Managing Director
Telecopier No.: (212) 856-3558
Telephone No.: (212) 856-3617
Credit Agreement
<PAGE> 192
SCHEDULE II
Subsidiaries and Investments
[See Sections 7.15 and 8.08(a)]
Part A: Subsidiaries
None.
Part B: Investments
<PAGE> 193
SCHEDULE III
Franchises
[See definition of "Franchises" in Section 1.01, and
Sections 7.18, 7.20 and 8.05]
[Name of Franchisee]
<TABLE>
<CAPTION>
Franchisor Document Date Expiration
- ---------- -------- ---- ----------
<S> <C>
[Complete as appropriate]
[Repeat as appropriate]
</TABLE>
<PAGE> 194
SCHEDULE IV
Real Property
[See Sections 6.01(i)(i), 7.17 and 8.05]
<PAGE> 195
SCHEDULE V
Litigation
[See Section 7.03]
<PAGE> 196
SCHEDULE VI
Certain Matters Related to CATV Systems
[See Sections 7.19, 7.20 and 8.05]
<PAGE> 197
SCHEDULE VII
Certain Matters Related to Financial Statements
[See Section 7.02]
<PAGE> 198
SCHEDULE VIII
Certain Environmental Matters
[See Section 7.13]
<PAGE> 199
SCHEDULE IX
Certain Equity Rights
[See Section 7.14]
<PAGE> 200
SCHEDULE X
Certain Adjustments to EBITDA
[See definition of "EBITDA", Section 1.01]
C4 Media
Americable
<PAGE> 1
EXHIBIT 10.2
FRONTIERVISION PARTNERS, L.P.
1777 SOUTH HARRISON STREET, SUITE P200
DENVER, COLORADO 80210
As of April 17, 1995
Mr. James C. Vaughn
2337 South Cook Street
Denver, Colorado 80210
Dear Mr. Vaughn:
We write to set forth our agreement with respect to your
employment as President and Chief Executive Officer of FrontierVision
Partners, L.P., a Delaware limited partnership (the "Partnership").
1. Services. The Partnership hereby agrees to
employ you, and you hereby agree to be employed by the Partnership, on the
terms and conditions hereinafter set forth. You will serve as President and
Chief Executive Officer of the Partnership, and will render such services and
perform such duties for the Partnership, its general partner and the
Partnership's direct and indirect subsidiaries (collectively, the "Partnership
Group") as customarily are performed by chief executive officers, including,
without limitation, those services and duties consistent with your position as
may from time to time be assigned to you. You will, in addition, hold such
offices, directorships and other positions with the Partnership Group, as are
consistent with your status as Chief Executive Officer, to which you may from
time to time be elected or appointed. Your authority shall be subject at all
times to (i) the direction and control of the general partner of the
Partnership and to the general partner's discretion to determine the policies
of the Partnership and (ii) the terms and provisions of the Agreement of
Limited Partnership of the Partnership, as from time to time in effect. You
agree to serve the Partnership Group faithfully, diligently and to the best of
your ability and, except for your responsibilities in assisting in the sale of
the partnership interests of Triax Associates V, L.P., you shall devote your
full working time, attention, energy and skills exclusively to the business and
affairs of the Partnership Group and to the promotion and advancement of its
interests. During your employment hereunder, except as aforesaid, you shall
not render any services, whether or not compensated, to any person or entity
other than the Partnership Group, as an employee, independent contractor or
otherwise or engage in any other business activities whether or not pursued for
gain, profit or other pecuniary advantage. You agree that you will not
participate in any activity detrimental to the best interests of the
Partnership Group, and that you will not
<PAGE> 2
Mr. James C. Vaughn
As of April 17, 1995
Page 2
adversely interfere in any way with the Partnership Group's pursuit of its
business interests.
2. Compensation. (a) As full compensation for all of your
services (including services as an officer and director of members of the
Partnership Group, if you are so appointed or elected), you shall receive a
base salary at the rate of Two Hundred Seventy-Five Thousand Dollars ($275,000)
per annum, payable in accordance with the Partnership's normal payroll
practices. Commencing with the second year of your employment hereunder, your
base salary shall be adjusted each year of your employment hereunder to reflect
increases in the "CPI-U" (as hereinafter defined), using February 1995 as the
base period, provided that at the time of such proposed increase no event of
default (or event which, with the passage of time or giving of notice or both,
would constitute an event of default) shall have occurred and shall be
continuing under any indebtedness of the Partnership or any of its subsidiaries
to any bank or other institutional lender for borrowed money. Thus, for the
second year of your employment hereunder, you shall receive base compensation
at the rate of Two Hundred Seventy-Five Thousand Dollars ($275,000) per annum,
increased by that percentage by which the CPI-U for February 1996 shall exceed
the CPI-U for February 1995; if you are employed for a third year, you shall
receive base compensation at the rate of Two Hundred Seventy-Five Thousand
Dollars ($275,000) per annum, increased by that percentage by which the CPI-U
for February 1997 shall exceed the CPI-U for February 1995; and so on. "CPI-U"
shall mean the Consumer Price Index for All Urban Consumers, all items (1982-84
= 100), as published by the Bureau of Labor Statistics of the United States
Department of Labor (or, in the event of the discontinuance thereof, another
appropriate index selected by the Partnership, with the approval of its
Advisory Committee). The Partnership may from time to time increase the base
salary to be paid to you if the Partnership shall deem it advisable to do so in
order fairly to compensate you for services to be rendered, provided that any
such increase is first approved by the Advisory Committee of the Partnership.
(b) In addition to your base salary, you shall be
eligible for a bonus of up to Seventy-Five Thousand Dollars ($75,000) per
annum based upon achieving performance targets to be mutually agreed upon by
you and the Partnership. You and the Partnership have agreed that during the
first two years of this Agreement, your bonus will be determined as follows:
(i) 75% of your bonus for the first year, and 50% of your bonus for the second
year, will be based upon the Partnership having,
<PAGE> 3
Mr. James C. Vaughn
As of April 17, 1995
Page 3
respectively, at least 100,000 subscribers during the first year and 200,000
subscribers during the second year (including, in each case, subscribers to be
acquired pursuant to definitive purchase agreements) and (ii) 25% of your bonus
for the first year, and 50% of your bonus for the second year, will be based
upon the Partnership having achieved its budgeted cash flows for the cable
systems it owns during the respective years. Your bonus shall be paid to you
no later than ninety (90) days after the end of the year for which it is
payable.
3. Term. (a) Your employment hereunder shall commence on
the date hereof and shall end on the earliest of the following dates:
(i) the second anniversary of the date hereof or, if the term of this
Agreement is renewed as provided below, the last day of the renewal term, (ii)
the date of your death, (iii) if you shall have been unable to perform any
material duties hereunder by reason of physical or mental disability (with such
disability to be determined by a qualified physician selected by the
Partnership) for a period of more than three (3) consecutive months, or a
period of more than 180 days in the aggregate in any eighteen-month period, the
date on which the Partnership shall elect to terminate your employment by
reason of such disability, (iv) the date on which the Partnership shall elect
to terminate your employment for "cause" (as defined below), (v) the date on
which the Partnership shall elect to terminate your employment because you are
neither a general partner of the Partnership, a general partner of any such
general partner of the Partnership, nor a shareholder of any corporation that
is a general partner of the general partner of the Partnership, (vi) the date
on which the Partnership shall elect to terminate your employment because you
cease to own beneficially for your own account, directly or indirectly, at
least one of the following: (A) at least two-thirds of the general partner's
share of the "carried interest" in the Partnership or (B) at least two-thirds
of the interests in the general partner that correlate to the general partner's
share of the "carried interest" in the Partnership, and (vii) the date on which
the Partnership terminates. The Partnership may, at its option, renew the term
of your employment hereunder for successive one-year terms until the earlier of
December 31, 2000 and the date the Partnership terminates (with the last
renewal term expiring on the earlier of such dates), by giving written notice
of renewal to you at least thirty days prior to the end of the then current
term.
<PAGE> 4
Mr. James C. Vaughn
As of April 17, 1995
Page 4
(b) For purposes of this Agreement "cause" means any one
or more of the following: (i) your personal dishonesty, incompetence or
willful misconduct; (ii) your breach in any material respect of fiduciary duty;
(iii) your willful and material failure to perform stated duties; (iv) your
willful and material violation of any law, rule or regulation (other than
traffic violations or similar minor offenses); (v) your excessive absenteeism
not related to illness; (vi) your repeated drunkenness or your abuse of any
controlled substance; (vii) your material breach of any provision of this
Agreement; or (viii) your action or failure to act or status or condition as a
result of which the Partnership has suffered, or there is a reasonable
likelihood the Partnership may suffer, an "FCC Regulatory Issue" (as defined
below), unless such action or failure to act, or status or condition, or FCC
Regulatory Issue, as applicable, is cured within 15 days after you become aware
thereof. "FCC Regulatory Issue" shall mean any event, occurrence or
circumstance that would cause the Partnership and/or any of its subsidiaries to
be disqualified as an operator of cable systems under the Communications Act of
1934, as amended from time to time, or the rules and regulations promulgated
thereunder (with or without an actual finding thereof by the FCC).
(c) In the event your employment is terminated by the
Partnership without "cause" (including, without limitation, by reason of
your disability), you shall receive a severance payment equal to 25% of your
then base salary, payable over three months in accordance with the
Partnership's normal payroll practices.
4. Certain Benefits. (a) During your employment hereunder,
the Partnership shall provide you with such life, disability, health
insurance and other benefits as are provided to the Partnership's salaried
employees generally.
(b) You shall be entitled to receive three weeks of paid
vacation in each year of the term of your employment hereunder, with such
vacation to be taken at a time or times agreed upon by you and the Partnership.
5. Reimbursement of Expenses. During your employment
hereunder, the Partnership will reimburse you for your reasonable travel and
other expenses incident to your rendering of services hereunder, in conformity
with the Partnership's regular policies
<PAGE> 5
Mr. James C. Vaughn
As of April 17, 1995
Page 5
from time to time in effect regarding reimbursement of expenses. Payments to
you for such expenses will be made upon presentation of expense statements in
such detail as the Partnership may from time to time reasonably require.
6. Other Interests. During your employment, you shall not
directly or indirectly: (i) enter into any other business affiliation or
enterprise, including, without limitation, the establishment of a
proprietorship or the participation in a partnership or joint venture or (ii)
make any investment, other than passive investments. You represent and warrant
that, as of the date hereof, you are not engaged in any such business
affiliation and do not own any such investments.
7. Key-Man Insurance. The Partnership may, in its
discretion and for its benefit, insure you against disability or death under
policies which are payable to such persons as the Partnership shall designate.
You agree to cooperate in such physical examinations and to supply such
information as the Partnership shall reasonably require in connection with
obtaining and continuing such insurance. You have advised us that you have no
reason to believe that your life is not insurable at rates now prevailing for
healthy men of your age.
8. Confidentiality and Non-competition. You acknowledge
that, in the course of your employment, you will be occupying a position of
trust and confidence with the Partnership Group. You agree that all
information pertaining to the prior, current or future business of the
Partnership Group (excluding publicly available information, in substantially
the form in which it is publicly available, unless such information is publicly
available by reason of unauthorized disclosure) constitutes valuable and
confidential assets of the Partnership Group to which you will have access
solely as a result of your position with the Partnership. You acknowledge that
your agreement to comply with this paragraph 8 is a material inducement to the
Partnership to enter into this Agreement.
(a) You shall never use, divulge, furnish or make
accessible to any third person or organization other than in the proper course
of performing your duties hereunder and in connection with the Partnership's
business, any confidential or proprietary information concerning the
Partnership Group or its
<PAGE> 6
Mr. James C. Vaughn
As of April 17, 1995
Page 6
businesses or affairs, including, without limitation, confidential methods of
operation and organization, trade secrets, intangible property rights,
marketing techniques and plans, advertiser lists, accounts, computer software
or financial information, whether or not marked or otherwise identified as
confidential or secret, and you shall not disparage or deprecate any member of
the Partnership Group or its businesses or affairs or any individual connected
with the Partnership Group.
(b) During your employment with the
Partnership and in addition, for a period of two years following the
termination of your employment with the Partnership you shall not, directly or
indirectly, individually or on behalf of other persons, (i) engage or be
interested (whether as owner, partner, lender, consultant, employee, agent, or
otherwise) in any business, activity or enterprise within five (5) miles of any
location at which any member of the Partnership Group owned or operated a cable
television system at any time during your employment with the Partnership,
which is competitive with any aspect of the business being conducted by the
Partnership Group, (ii) employ or otherwise engage, or offer to employ or
otherwise engage, any person who has been an employee, sales or advertising
representative or agent of any member of the Partnership Group at any time
during your employment by the Partnership, (iii) solicit, aid or induce any
person who has been an employee, sales or advertising representative or agent
of any member of the Partnership Group at any time during your employment to
leave his employment with any member of the Partnership Group in order to
accept employment with another person or entity, or (iv) solicit, take away or
attempt to take away customers or advertisers of, or the business of any person
or entity that purchases advertising time from or enters into any barter
relationships with any member of the Partnership Group at any time during your
employment by the Partnership. The provisions of this paragraph 8(b) shall
cease to apply to you if the Partnership shall file a petition for relief under
any bankruptcy or insolvency law or shall have any such petition filed against
it in which an order for relief is entered and remains undismissed for a period
of ninety (90) days, or the Partnership shall cease operations as a going
concern (other than by reason of a sale of all or substantially all of the
Partnership's assets). In addition, the provisions of clause (i) of this
paragraph 8(b) shall cease to apply to you upon a sale of all or substantially
all the partnership interests in the Partnership or a sale of all or
substantially all of the Partnership's assets, as a result of which the
Partnership has no significant continuing operations.
<PAGE> 7
Mr. James C. Vaughn
As of April 17, 1995
Page 7
(c) You agree that inasmuch as your breach or attempted
or threatened breach of any provision contained in this paragraph 8 would
result in immediate and irreparable injury to the Partnership for which the
Partnership will not have an adequate remedy at law, the Partnership shall be
entitled, in addition to all other remedies, to a temporary and permanent
injunction and/or a decree for specific performance of the terms of this
paragraph 8, without the necessity of showing any actual damage or posting bond
or furnishing other security.
(d) The provisions of this paragraph 8 shall survive the
termination or expiration of this Agreement (without regard to the reasons
therefor), and are in addition to and independent of any agreements or
covenants contained in any other agreement and to any rights the Partnership
may have at law or in equity.
9. Representations. You hereby represent and warrant to
the Partnership that you have full legal authority to enter into this Agreement
and to perform your obligations hereunder, that you have no obligation to any
other person or entity that would affect or conflict with any of your
obligations hereunder, and that the complete performance of your obligations
hereunder will not violate, result in a breach of, or constitute a default
under, any law, regulation, order or decree of any governmental or judicial
body or any contract by which you are bound.
10. Compliance with Law. You hereby agree to conform and
to use your reasonable best efforts to cause the Partnership and the
Partnership Group to conform in all material respects to all applicable laws
and regulations and not at any time to commit any act or become involved in any
situation or occurrence that could reasonably be expected to cause the
Partnership or any subsidiary in the Partnership Group to suffer an FCC
Regulatory Issue (as herein defined), or could reasonably be expected to bring
the Partnership, any member of the Partnership Group or any cable system owned
by any of the foregoing into public scandal. You understand that upon your
violation of any of the terms or provisions of this paragraph, the Partnership
shall have the right to immediately terminate this Agreement for cause, in
addition to and not in limitation of any other rights which the Partnership may
have under this Agreement or otherwise.
<PAGE> 8
Mr. James C. Vaughn
As of April 17, 1995
Page 8
11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be deemed to have been duly given when
personally delivered or when sent by certified mail, return receipt requested,
postage prepaid, as follows:
If to the Partnership:
FrontierVision Partners, L.P.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
Attention: Chief Financial Officer
With a copy to:
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
Attention: Bruce L. Lieb, Esq.
If to you, at your address as set forth above.
Either party may change its or his address for the purpose of this paragraph by
written notice similarly given.
12. Severability. If any clause or provision of this
Agreement shall be held to be invalid or unenforceable, such clause or
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be invalid or unenforceable, and such invalidity or
unenforceability shall not affect or render invalid or unenforceable any other
provision of this Agreement.
13. Miscellaneous. This Agreement sets forth the parties'
final and entire agreement, and supersedes any and all prior understandings,
with respect to its subject matter. The headings in this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement. This Agreement shall inure to the benefit of and be binding upon
the
<PAGE> 9
Mr. James C. Vaughn
As of April 17, 1995
Page 9
Partnership, its successors and assigns, and upon you, your heirs,
administrators and legal representatives, but no right or obligation hereunder
may be assigned or delegated. No failure or delay by either party in
exercising any right, option, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof, or the exercise of any other right, option,
power or privilege. This Agreement can only be changed, waived or terminated
only by a writing signed by both you and the Partnership and shall be governed
by the internal laws of the State of Delaware (without reference to its rules
as to conflicts of laws).
14. JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING INVOLVING
ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER ARISING DURING THE
TERM OF THIS AGREEMENT OR AT OR AFTER ITS TERMINATION (EACH OF THE FOREGOING
DISPUTES, CONTROVERSIES AND CLAIMS IS HEREINAFTER REFERRED TO AS A "DISPUTE"),
SHALL BE BROUGHT ONLY IN A COURT LOCATED IN THE STATE OF DELAWARE, AND EACH OF
THE PARTIES HERETO (I) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF
SUCH COURTS AND ANY RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH
PARTY MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE
PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
THEY ARE PARTIES INVOLVING A DISPUTE.
<PAGE> 10
Mr. James C. Vaughn
As of April 17, 1995
Page 10
If the foregoing correctly sets forth your
understanding of our agreement, please so indicate by signing and returning to
us a copy of this letter.
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P.,
its general partner
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
----------------------------------
Name: James C. Vaughn
Title: President
ACCEPTED AND AGREED TO:
/s/ James C. Vaughn
- ------------------------------
James C. Vaughn
Dated: As of April 17, 1995
<PAGE> 1
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
BETWEEN
UNITED VIDEO CABLEVISION, INC.
(SELLER)
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
(BUYER)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Sale and Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Sale of Assets to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Amount of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Estimate of Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Date of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Outside Date for the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Representations and Warranties by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Seller's Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Consents of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Easements; Crossing Permits; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Pole Attachment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.9 Franchises; 1992 Cable Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.10 System Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.11 Copyright Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.12 Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 List of Agreements, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Status of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.16 Insurance and Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.19 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.20 Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.21 Marketing and Promotions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.22 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C> <C>
6. Representations and Warranties by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 The Buyer's Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Consents of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 Business and Operations of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 35
7. Further Agreements of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Filings with the Commission and Municipal Authorities; Hart-Scott-Rodino Act . . . . . 35
7.2 Operations of the Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.5 Consents; Assignments of Agreements and Assets . . . . . . . . . . . . . . . . . . . . 40
7.6 Sales or Use Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.7 No Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.8 Employee Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.10 Notice of Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.11 Delivery of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.12 Additional Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8. Conditions Precedent to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.1 Conditions Precedent to the Obligations of the Buyer . . . . . . . . . . . . . . . . . 48
8.2 Conditions Precedent to the Obligations of the Seller . . . . . . . . . . . . . . . . 49
8.3 Conditions Precedent to Each Party's Obligations . . . . . . . . . . . . . . . . . . . 50
9. Transactions at and After the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.1 Documents to be Delivered by the Seller . . . . . . . . . . . . . . . . . . . . . . . 52
9.2 Documents to be Delivered by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 54
9.3 Subsequent Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.4 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.5 Documents to be Delivered by Both Parties . . . . . . . . . . . . . . . . . . . . . . 59
10. Survival of Representations and Warranties; Indemnification . . . . . . . . . . . . . . . . . 59
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.3 Liability Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.4 Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C> <C>
10.5 Conditions of Indemnifications for Third Party Claims . . . . . . . . . . . . . . . . 61
10.6 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.2 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12. Risk of Loss; Damage to Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.2 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.8 Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.9 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
LISTING OF SCHEDULES
<TABLE>
<S> <C>
Schedule 2 Owned and Operated Cable Television Systems
Schedule 2.1(a) Franchises, Licenses, Permits, Etc.
Schedule 2.1(b) Tangible Personal Property
Schedule 2.1(c) Real Property
Schedule 2.2(b) Excluded Agreements
Schedule 5.3 Consent of Third Parties
Schedule 5.6 Non-Ordinary Transactions
Schedule 5.10(b) System Data
Schedule 5.10(c) Acquisition Rights Disclosures; Overbuilds
Schedule 5.10(d) Broadcast Retransmission Disclosures
Schedule 5.10(f) Rate Regulation Disclosures
Schedule 5.12 Pending Proceedings Against Seller or Assets
Schedule 5.13 Commitments and Contracts
Schedule 5.14(a) Employee List
Schedule 5.14(b) Employee Benefit Plans
Schedule 5.14(f) Employee Pension Benefit Plans
Schedule 5.15 Agreements in Default; Renewal Provisions
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Schedule 5.16(a) Casualty and Liability Insurance
Schedule 5.16(b) Performance, Surety or Other Bonds
Schedule 5.17(a) Environmental Matters - Tanks Below Surface
Schedule 5.19 Affiliate Relationships
Schedule 5.21 Marketing Plans
Schedule 7.2(c) Calais Rebuild Expenditures
Schedule 7.2(d) Capital Expenditure Budget
Schedule 8.1(c) Consents and Approvals
Schedule 8.1(g) Required Transferable Franchise Areas
</TABLE>
LISTING OF EXHIBITS
<TABLE>
<S> <C>
Exhibit 3.1 Deposit Escrow Agreement
Exhibit 3.3(a) Promissory Note
Exhibit 9.1(a) Bills of Sale, Assignments, Deeds
Exhibit 9.1(e) Opinion of Holme Roberts & Owen LLC
Exhibit 9.1(f) Opinion of Cole, Raywid & Braverman, L.L.P.
Exhibit 9.2(f) Opinion of Dow, Lohnes & Albertson
Exhibit 9.3(b)(v) Consent Escrow Agreement
Exhibit 9.3(b)(vi) Management Agreement
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
July 20, 1995
The parties to this agreement are United Video Cablevision, Inc., a
Delaware corporation (the "Seller"), and FrontierVision Operating Partners,
L.P., a Delaware limited partnership (the "Buyer").
The Seller owns and operates the cable television systems listed on
schedule 2 (the "Systems"). The Seller desires to sell to the Buyer all of the
assets of the Seller that are described in section 2.1 (the "Assets"), and the
Buyer desires to purchase the Assets, on the terms and conditions contained in
this agreement.
Accordingly, it is agreed as follows:
1. Definitions. For purposes of this agreement except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this section shall have the meanings assigned to them below, such
meanings to be applicable to singular and plural nouns and verbs of any tense;
(b) all references in this agreement to designated sections and other
subdivisions are to the designated sections and other subdivisions of this
agreement as originally executed and as amended from time to time; and (c) the
words "herein," "hereunder" and other words of similar import refer to this
agreement as a whole.
Accounts Receivable. All accounts receivable of the Seller from
subscribers of the Systems and for services or advertising time provided by the
Seller in connection with the business of the Systems.
Antenna Service. The lowest level of cable television service
offered by any of the
1
<PAGE> 7
Systems.
Assumed Liabilities. All of the obligations and liabilities of
the Seller as of the Determination Time that relate to the operations of the
Systems that would be required to be reflected as current liabilities on a
balance sheet of the Systems as of the Determination Time prepared in
accordance with generally accepted accounting principles applied consistently
with prior periods, including, but not limited to, accounts payable, accrued
expenses, taxes payable (other than income, sales and payroll taxes) and
obligations to provide cable services after the Determination Time; provided,
however, that "Assumed Liabilities" shall not include (a) liabilities existing
on March 31, 1995, that are not disclosed on the balance sheet dated as of that
date delivered by the Seller pursuant to section 5.5 and liabilities arising
after March 31, 1995 and prior to the date of this agreement other than accrued
expenses and trade payables arising in the ordinary course of business of the
Systems; (b) liabilities incurred after the date of this agreement in violation
of the Seller's covenants in this agreement; (c) liabilities arising other than
in the ordinary course of the Systems' business; (d) the current portion of any
long-term debt; and (e) liabilities under contracts that are not assigned to
the Buyer or for which the Buyer otherwise does not receive the full benefit as
of the Closing. Notwithstanding any generally accepted accounting principles
to the contrary, "Assumed Liabilities" shall include the accrued vacation
benefits of any employee of the Systems who becomes an employee of Buyer at the
Closing in an amount equal to the cash compensation that would be payable to
such employee at his or her current level of compensation for a period equal to
such employee's accrued vacation.
Base Amount. The sum of $120,500,000.
Basic Subscribers. The sum of (1) the aggregate number of
households (exclusive
2
<PAGE> 8
of "second outlets," as such term is commonly understood in the cable
television industry, and exclusive of customers billed on a bulk-account basis)
who: subscribe to Antenna Service (provided, however, that if the number of
Satellite Tier (as defined below) subscribers is less than 90% of the number of
Basic Subscribers to the Systems pursuant to this clause (1) before giving
effect to this parenthetical, then the number of Basic Subscribers shall be
reduced by the number equal to the difference between 90% of Basic Subscribers
pursuant to this clause (1) before giving effect to this parenthetical and the
number of Satellite Tier subscribers; for purposes of this parenthetical,
Satellite Tier subscribers shall be calculated in the same manner as Basic
Subscribers); have paid for at least one month's Antenna Service; have no
outstanding balance more than two billing periods past due from the earliest
date for which service has been provided; pay the applicable standard monthly
service fees and charges imposed by Seller for Antenna Service; have not
requested disconnection for any reason; and were not solicited by Seller within
90 days prior to the date of determination by any promotions or by offers of
discounts other than those described on schedule 5.21, plus (2) with respect to
each System, the quotient of (i) the aggregate bulk rate revenues for that
System for the calendar month preceeding the date of determination from the
provision of Antenna Service and the Satellite Tier (excluding any revenues in
excess of a single month's charges for any account, any installation or other
non-recurring charge, any charge for equipment, and any pass-through charge,
such as those for sales taxes and line-itemized franchise fees) to bulk
accounts that have paid for at least one month's service; have no outstanding
balance more than two billing periods' past due from the earliest date on which
service was provided; have not requested disconnection for any reason; and were
not solicited by Seller within 90 days prior to the date of determination by
any promotions or by
3
<PAGE> 9
offers of discounts other than those described on schedule 5.21, divided by
(ii) the combined standard monthly rate charged to single-family households for
Antenna Service and the Satellite Tier for that System.
Closing. The consummation of the transactions contemplated by
this agreement.
Closing Date. The date on which the Closing is held.
Commission. The Federal Communications Commission.
Communications Act. The Communications Act of 1934, as amended.
Contract Liabilities. All of the obligations and liabilities of
the Seller that relate to the period after the Determination Time under those
leases, commitments and other agreements relating to the operations of the
Systems that are assigned to the Buyer pursuant to section 2.1(d).
Covered Employees. All employees of the Systems who become
employees of the Buyer on the Closing Date.
Current Assets. Accounts Receivable, petty cash, prepaid
expenses (excluding insurance expenses, prepaid expenses under contracts that
are not assigned to the Buyer and prepaid expenses to the extent the Buyer
cannot receive the full benefit of such prepaid expenses after the Closing) of
the Seller relating to the Systems as well as those amounts referred to in
section 7.2(c).
Deposit. The sum of $3,000,000.
Determination Time. The close of business on the day preceding
the Closing.
Escrow Agent. Colorado National Bank.
Franchises. The governmental franchises, licenses and
authorizations used or held for use in the operations of the Systems, including
those listed on schedule 2.1(a).
4
<PAGE> 10
Homes Passed. The sum of each single family residence or
dwelling unit within a building containing multiple dwelling units that is
located within 500 feet of the activated trunk or feeder cable of a System,
plus commercial and other buildings (including hotels) actually served by a
System.
HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
Legal Requirements. Any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any governmental authority, including but not limited to judicial
decisions applying common law or interpreting any other Legal Requirement.
Lien. Lien, claim, charge or encumbrance upon any of the Assets.
Material Adverse Effect. A material adverse effect on the
operations of a single System or a material adverse effect on the operations of
the Systems taken as a whole or on the ability of Seller to perform any of its
obligations under this agreement.
Municipal Authorities. The governmental authorities that have
issued the Franchises.
1992 Cable Act. The Cable Television Consumer Protection and
Competition Act of 1992.
Outside Closing Date. February 29, 1996.
Permits. Easements, highway, railroad and canal crossing permits
and other rights of ingress and egress, including rights of access to private
property.
Permitted Encumbrances. All of the following: (a) liens for
taxes, assessments
5
<PAGE> 11
and governmental charges not yet due and payable; (b) zoning laws and
ordinances and similar regulations; (c) rights reserved to any Municipal
Authority to regulate the affected property; (d) as to leased Assets, interests
or lessors; (e) the encumbrances imposed by the Franchises; and (f) any
easements, rights-of-way, conditions, and restrictions that do not have a
material adverse effect on the value or use of the affected Asset as it is
currently being used by Seller.
Person. An individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
Promissory Note. The promissory note in the form of exhibit
3.3(a) executed by the Buyer and delivered to the Seller at the Closing.
Real Property. The real property owned or leased by the Seller
and used or held for use primarily in the operations of the Systems.
Satellite Tier. That level of cable service containing the
majority of each System's satellite programming.
Seller's Plan. United Video Management, Inc. and Affiliates
Employee Benefit Plan.
2. Sale and Purchase of Assets.
2.1 Sale of Assets to Buyer. At the Closing, the Seller shall
sell and assign to the Buyer, and the Buyer shall purchase and acquire from the
Seller, all of the business of the Seller relating primarily to the Systems and
all other assets of the Seller relating primarily to the Systems (excluding the
assets referred to in section 2.2) as they exist on the date of this agreement,
plus additions thereto between the date of this agreement and the Closing Date
and less
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any dispositions thereof that have been made in compliance with this agreement.
Except as otherwise provided in section 2.2 and section 7.5, the Assets
include, but are not limited to, the following:
(a) all municipal, state and federal franchises, licenses,
permits and authorizations (and applications for any of them) relating to the
operations of the Systems, including, but not limited to, those listed on
schedule 2.1(a) together with any additions thereto between the date of this
agreement and the Closing Date;
(b) all equipment, supplies, vehicles, furniture,
fixtures and leasehold improvements, improvements on land, and all other
tangible personal property, wherever located, which is owned by the Seller and
used or held for use primarily in the operations of the Systems, including, but
not limited to, the items listed on schedule 2.1(b) together with any additions
thereto between the date of this agreement and the Closing Date, but excluding
retirements during such period that are permitted by this agreement;
(c) all Real Property, including, but not limited to, the
property listed on schedule 2.1(c), and all rights of way, licenses, easements
and related rights of ingress and egress, including, but not limited to, those
listed on schedule 5.13 together with any additions thereto between the date of
this agreement and the Closing Date;
(d) all rights of the Seller relating to the operations
of the Systems, to the extent that those rights relate to the period after the
Closing under (i) the leases, commitments and other agreements listed on
schedule 5.13 and (ii) any other leases, commitments and other agreements
relating to the operations of the Systems that are entered into in accordance
with the provisions of section 7.2 between the date of this agreement and the
Closing Date;
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(e) all Accounts Receivable in existence as of the
Closing;
(f) all files, logs and other records and data relating
primarily to the operations of the Systems, including, but not limited to,
technical information and engineering data, lists of subscribers, promotional
materials and credit and sales records, other than account books of original
entry and general ledgers; and
(g) all trademarks, trade names, logos, copyrights and
other intangible personal property relating to the operations of the Systems,
together with the goodwill of the business associated with those trademarks,
trade names, logos and copyrights.
2.2 Excluded Assets. The following assets used in the
operations of the Systems shall be retained by the Seller and shall not be sold
or assigned to the Buyer:
(a) all cash (except petty cash), certificates of
deposit, commercial paper, treasury bills and notes and all other marketable
securities;
(b) any leases, commitments, or other agreements listed
on schedule 2.2(b);
(c) the account books of original entry and general
ledgers and all corporate and similar records of the Seller, including tax
returns;
(d) the trade names "United Video Cablevision, Inc." and
"United Video," their related logo and any rights in those names and logos;
(e) all employee benefit plans, as defined in Section
3(3) of ERISA, that are sponsored by the Seller or any trade or business that
is treated as a single employer with or under common control with the Seller
within the meaning of Section 414(b), Section 414(c), Section 414(m), or
Section 414(o) of the Internal Revenue Code;
(f) the management agreement between the Systems and
United Video
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Management, Inc.; and
(g) any assets of the Seller (excluding assets listed on
schedules 2.1(a), 2.1(b), 2.1(c), or 5.13, tangible assets physically located
in the States of Ohio or Maine, and any Accounts Receivable) that are not used
or held for use primarily in the operations of the Systems.
3. Purchase Price.
3.1 Deposit. Upon execution of this agreement, the Buyer is
delivering to the Escrow Agent the Deposit, to be held by the Escrow Agent
pursuant to the terms of an escrow agreement in the form of exhibit 3.1 (which
is being executed simultaneously with the execution of this agreement) and
subject to the following:
(a) If the purchase of the Assets under this agreement is
not consummated as a result of a material breach by the Buyer of any of its
obligations under this agreement and the Seller is not in breach of any of its
material obligations under this agreement, the Seller shall be entitled to the
Deposit (together with all interest earned). The payment of the Deposit by the
Escrow Agent to the Seller shall be liquidated damages for the default by the
Buyer and shall be in full settlement of any damages of any nature or kind that
the Seller may suffer or allege to have suffered as a result of any such breach
by the Buyer. The receipt by the Seller of the Deposit (together with all
interest earned) shall be the Seller's sole and exclusive remedy in the event
of any such breach by the Buyer. The Seller and the Buyer agree that actual
damages would be difficult to ascertain and that the amount of the payment to
be made to the Seller pursuant to this section 3.1(a) is a fair and equitable
amount to reimburse the Seller for damages sustained due to the Buyer's
material breach of this agreement
(b) If the purchase of the Assets under this agreement is
not consummated
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for any reason other than as set forth in section 3.1(a), the Seller shall not
be entitled to the Deposit and, promptly after the termination of this
agreement, the Deposit (together with all interest earned thereon) shall be
disbursed by the Escrow Agent to the Buyer. If the purchase of the Assets
under this agreement is not consummated due to the Seller's breach of any
provision of this agreement, the Buyer shall have all rights and remedies
available at law or equity.
(c) If the purchase is consummated, the Deposit (together
with all interest earned thereon) shall be disbursed by the Escrow Agent to or
at the direction of the Buyer.
3.2 Amount of Consideration. (a) As the purchase price for
the Assets, the Buyer shall pay to the Seller the Base Amount, adjusted as
provided in sections 3.2(b) and (c). At the Closing, the Buyer shall also
assume, and shall agree to pay, perform and discharge and shall agree to
indemnify and hold the Seller harmless from the Assumed Liabilities and
Contract Liabilities.
(b) (i) If the aggregate amount of the Assumed
Liabilities as of the Determination Time exceeds the aggregate amount of the
Current Assets as of the Determination Time, the purchase price shall be
decreased by an amount equal to that excess.
(ii) If the aggregate amount of the Current Assets
as of the Determination Time exceeds the aggregate amount of the Assumed
Liabilities as of the Determination Time, the purchase price shall be increased
by an amount equal to that excess.
For the purpose of calculating Current Assets, each
Account Receivable shall be valued at 100% of its face amount if the receivable
has been outstanding for two billing periods or less from the day for which
service was first provided, 75% of its face amount if the receivable has been
outstanding for more than two but less than three monthly
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billing periods, and 0% of its face value if the receivable has been
outstanding for more than three billing periods.
(c) If the number of Basic Subscribers serviced by the
Systems as of the Determination Time is (i) less than (a) 86,285 (86,285 x
1.000) if the Closing Date is on or prior to September 30, 1995, the purchase
price shall be decreased by an amount equal to the product of $1,397 and the
difference between 86,285 and such number of Basic Subscribers, (b) 85,854
(86,285 x 0.995) if the Closing Date is after September 30, 1995 and on or
prior to October 31, 1995, the purchase price shall be decreased by an amount
equal to the product of $1,404 and the difference between 85,854 and such
number of Basic Subscribers, or (c) 85,422 (86,285 x 0.990) if the Closing Date
is after October 31, 1995, the purchase price shall be decreased by an amount
equal to the product of $1,411 and the difference between 85,422 and such
number of Basic Subscribers or (ii) (a) more than 88,011 (86,285 x 1.020) if
the Closing Date is on or prior to September 30, 1995, the purchase price shall
be increased by an amount equal to the product of $1,369 and the difference
between such number of Basic Subscribers and 88,011, (b) more than 87,579
(86,285 x 1.015) if the Closing Date is after September 30, 1995 and on or
prior to October 31, 1995, the purchase price shall be increased by an amount
equal to the product of $1,376 and the difference between such number of Basic
Subscribers and 87,579, or (c) more than 87,148 (86,285 x 1.010) if the Closing
Date is after October 31, 1995, the purchase price shall be increased by an
amount equal to the product of $1,383 and the difference between such number of
Basic Subscribers and 87,148.
(d) Within 90 days after the Closing Date, the Buyer
shall deliver to the Seller a statement of the Current Assets and Assumed
Liabilities as of the Determination Time,
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determined in accordance with generally accepted accounting principles
consistently applied, a report setting forth the number of Basic Subscribers
serviced by the Systems (including Basic Subscribers in Franchise Areas which
are not Transferable Franchise Areas as of the Determination Time) as of the
Determination Time and a statement of the aggregate amount of the adjustments
to the purchase price to be made pursuant to sections 3.2(b) and (c). The
Buyer's statement and report shall be final and binding on the parties unless
the Seller delivers a notice to the Buyer disputing any matter within 30 days
after delivery of the statement and report stating the Seller's position with
respect to any disputed matter. If the Seller delivers such notice and the
parties are unable to resolve all disputed matters within 30 additional days,
either the Buyer or the Seller may elect to submit the disputed matters to
Deloitte & Touche, independent certified public accountants. The determination
of all disputed matters pursuant to the preceding sentence shall be final and
binding on the parties and the fees and expenses of Deloitte & Touche shall be
borne by the Seller and the Buyer in proportion to the amount by which the
determination of all matters varies from the positions of the Buyer and the
Seller on all matters.
3.3 Payment of Purchase Price. The aggregate purchase price
for the Assets shall be paid at the Closing as follows:
(a) At the Closing, the Buyer shall execute and deliver
to the Seller the Promissory Note, in the original principal amount of
$7,200,000, such note to be substantially in the form of exhibit 3.3(a).
(b) At the Closing, the Buyer shall pay or cause to be
paid to the Seller, by wire transfer of federal reserve funds, an amount which,
together with the original principal
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balance of the Promissory Note, equals the Base Amount adjusted by the
estimated amount (determined in accordance with section 3.4) of the adjustments
to the purchase price pursuant to sections 3.2(b) and (c).
(c) Not later than five business days after the final
determination of the Current Assets and Assumed Liabilities and the number of
Basic Subscribers served by the Systems as of the Determination Time pursuant
to section 3.2(d), (i) if the purchase price as finally adjusted under section
3.2(b) and section 3.2(c) exceeds the Base Amount as adjusted by the estimated
adjustments pursuant to section 3.4, the Buyer shall pay to the Seller the
amount of such excess, and (ii) if the Base Amount as adjusted by the estimated
adjustments pursuant to section 3.4 exceeds the purchase price as finally
adjusted under section 3.2(b) and section 3.2(c), the Seller shall pay to the
Buyer the amount of such excess. Any payment pursuant to this section 3.3(c)
shall be made by federal wire transfer of immediately available funds.
3.4 Estimate of Adjustments. The Seller shall prepare and
submit to the Buyer, not later than five days prior to the date of the Closing,
a written estimate of the amount of the adjustments to the purchase price under
sections 3.2(b) and (c). The estimate shall be based upon the books and
records of the Systems, including the number of Basic Subscribers and the
Accounts Receivable (including the aging reports) as shown on the latest
records of the Seller kept in the ordinary course of business. The estimate
submitted to the Buyer shall be accompanied by (a) a statement setting forth in
reasonable detail the calculation of the estimate and (b) a certificate signed
by the Seller confirming that the estimate was calculated in accordance with
this provision. The Seller shall also deliver to the Buyer such other
information as may be reasonably requested by the Buyer to verify the estimated
amount of Assumed Liabilities and Current Assets and the
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number of Basic Subscribers.
3.5 Allocation of Purchase Price. As contemplated under
Section 1060 of the Internal Revenue Code, the Buyer and the Seller shall each
submit Form 8594 to the Internal Revenue Service following the Closing. Such
forms shall be consistent in their allocation of the purchase price to the
Assets that constitute tangible personal property and real property in an
amount equal to $40,000,000.
4. Closing.
4.1 Date of Closing. The Closing shall occur at the offices
of counsel to the Buyer's senior lender, or if the Buyer has no senior lender,
at the offices of counsel to the Seller (or at such other place as may be
mutually agreeable to the Buyer and the Seller) on a date designated by the
Buyer that shall be at least five and no more than 15 days after the Seller
delivers a notice to the Buyer that the conditions specified in sections 8.1(g)
and 8.3(a), (b), and (d) have been fulfilled (or waived). The Seller shall
deliver a notice that the conditions of closing specified in sections 8.1(g)
and 8.3(a), (b), and (d) have been fulfilled (or waived) in accordance with the
preceding sentence within 15 days after such time. At the Closing, the parties
shall execute and deliver the documents referred to in section 9.
4.2 Outside Date for the Closing. If the Closing has not
occurred prior to the Outside Closing Date, either the Seller or the Buyer if
not then in default under this agreement may terminate its obligations under
this agreement by notice to the other. Upon such termination, neither of the
parties shall have any liability or obligations to the other under this
agreement, except with respect to provisions which expressly survive
termination and except for any liability resulting from its breach of this
agreement.
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5. Representations and Warranties by the Seller.
The Seller represents and warrants to the Buyer as follows:
5.1 Seller's Organization and Authority. The Seller is a
corporation, duly organized and validly existing under the laws of the State of
Delaware and has the full power and authority to enter into and to perform its
obligations under this agreement and to own and operate the Systems. The
Seller is duly qualified to conduct business as a foreign corporation in the
States of Maine and Ohio. The Seller is not a participant in any joint venture
or partnership with any other Person with respect to any part of the operations
of the Systems or any of the Assets.
5.2 Authorization of Agreement. The execution, delivery and
performance of this agreement by the Seller have been duly authorized by all
necessary corporate action, this agreement has been duly executed and delivered
by the Seller, and this agreement constitutes a valid and binding obligation
enforceable against the Seller in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5.3 Consents of Third Parties. Subject to receipt of the
consents and approvals listed on schedule 5.3, the execution and delivery by
the Seller of this agreement and the other documents contemplated by this
agreement and the consummation by Seller of the transactions contemplated
hereby and thereby (with or without the giving of notice, the lapse of time, or
both) will not: (a) conflict with, or result in a breach or termination of, or
constitute a default under, any lease, agreement, commitment or other
instrument, or any law, ordinance, rule, regulation, order, judgment or decree,
by which the Seller is bound, or to which any of the Assets is subject,
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except for conflicts, breaches, terminations or defaults that would not in the
aggregate have a Material Adverse Effect; or (b) result in the creation of any
Lien. The execution and delivery by the Seller of this agreement and the
consummation by the Seller of the transactions contemplated hereby will not
conflict with any provision of the Certificate of Incorporation or By-Laws of
the Seller. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is required on the part
of the Seller in connection with the execution, delivery and performance of
this agreement, except for the filings and consents listed on schedule 5.3.
5.4 Assets. (a) The Seller has, and at the Closing the Buyer
will receive, good title to all of the Assets, free and clear of all Liens
(except for Permitted Encumbrances). The Assets constitute all property and
assets (other than programming agreements) necessary to conduct the business
and operations of the Systems as now conducted.
(b) All of the Real Property is listed on schedule
2.1(c), which contains a complete and accurate description of such Real
Property (including street address, legal description (where reasonably
available or known), owner, and the Seller's use thereof). With respect to
each leasehold or subleasehold interest included in the Real Property, so long
as the Seller fulfills its obligations under the lease therefor, the Seller has
enforceable rights to nondisturbance and quiet enjoyment against its lessor or
sublessor, and, to the Seller's knowledge and except as set forth in schedule
2.1(b), no third party holds any interest in the leased premises with the right
to foreclose upon the Seller's leasehold or subleasehold interest. The Seller
has full legal and practical access to all of the Real Property. All Real
Property (including the improvements thereon) is in good condition and repair
consistent with its present use, and is
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available for immediate use in the conduct of the business and operations of
the Systems. The Real Property and the improvements thereon and the
continuation of the business presently being conducted thereon do not violate
existing building codes or zoning laws (after giving effect to all provisions
of such codes or laws that permit continuation of a condition or use that
precedes adoption of such codes or laws so long as such provisions will
continue to permit continuation of such use after the sale of the Real Property
to Buyer), except for violations that do not have a material adverse effect on
the use of the Real Property or materially detract from the value of the Real
Property. The Real Property is served by utilities and services necessary for
the normal and intended use of the Real Property by the Seller, and none of the
improvements on the Real Property encroaches upon the property of others,
except for encroachments that do not have a material adverse effect on the use
of the Real Property or materially detract from the value of the Real Property.
(c) Schedule 2.1(b) lists all material items of
tangible personal property used or held for use primarily in the operations of
the Systems, except such as have been retired after the date of such schedule
where suitable replacements, if necessary, have been made therefor. With
allowance for normal repairs, maintenance, wear and obsolescence, items
required to be listed on schedule 2.1(b) are in good condition and repair
consistent with their present use and are available for immediate use in the
conduct of the business and operations of the Systems.
5.5 Financial Statements. The Seller has previously delivered
to the Buyer unaudited financial statements of the Systems containing a balance
sheet, statement of income, and statement of cash flows as at and for the
fiscal years ended December 31, 1993, and December 31, 1994 and the three
months ended March 31, 1995 (collectively, the "Financial Statements").
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The Financial Statements have been prepared from the books and records of the
Systems, have been prepared in accordance with generally accepted accounting
principles consistently applied and maintained throughout the periods
indicated, accurately reflect the books, records, and accounts of the Systems
(which books, records, and accounts are complete and correct), and present
fairly the financial condition of the Systems as at their respective dates and
the results of operations for the periods then ended. None of the Financial
Statements materially understates the true costs and expenses of conducting the
business or operations of the Systems as currently conducted by the Seller or
otherwise inaccurately reflects the operations of the Systems.
5.6 Absence of Certain Changes. Since March 31, 1995, the
Seller has operated the Systems in the ordinary course of business, and, except
as set forth on schedule 5.6, the Seller has not:
(a) entered into any material transaction or incurred
any material liability or obligation relating to the Systems that was entered
into or incurred other than in the ordinary course of its business;
(b) sold or transferred any of the assets relating to
the Systems other than assets disposed of in the ordinary course of its
business where suitable replacements, if necessary, have been made therefor;
(c) granted or agreed to grant any bonus or any
increase in any rate or rates of salaries or compensation to employees of the
Systems (other than as required by law, regularly scheduled bonuses or
increases in the ordinary course of business as disclosed on schedule 5.14(a)
or one-time bonuses to induce employees to remain employed with the Seller
through the Closing Date);
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(d) suffered any material adverse change in the
business, assets, properties, or financial condition of the Systems, including
any material damage, destruction, or loss affecting any assets used or held for
use primarily in the operations of the Systems;
(e) made any material change in the personnel policies
of employees of the Systems;
(f) canceled any debts owed to or claims held by Seller
with respect to the Systems (other than the write-off of the accounts
receivable in the ordinary course of business); or
(g) suffered any material write-down in the value of
any of the Assets.
5.7 Easements; Crossing Permits; Etc. The Seller has such
Permits as are necessary for the conduct of the business of the Systems as it
is now being conducted, except where the failure to have any such Permit would
not have a Material Adverse Effect. The Seller is not in violation or default
of any Permit in any respect that would have a Material Adverse Effect.
5.8 Pole Attachment Agreements. The Seller is in possession
of all pole attachment agreements necessary for the conduct of the business of
the Systems as it is now being conducted and is not in violation or default of
any pole attachment agreement in any respect that would have a Material Adverse
Effect.
5.9 Franchises; 1992 Cable Act. The Franchises listed on
schedule 2.1(a) are the only franchises, and the only material licenses or
authorizations, of any federal, state or local governmental or regulatory body
(including, without limitation, the Commission and the Municipal Authorities)
that are necessary in the conduct of the business of the Systems. The
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Seller has complied with all of the terms and conditions of all of the
Franchises, except where noncompliance would not have a Material Adverse
Effect. The Seller reasonably believes that it has taken reasonable actions to
comply in all material respects with the rate regulation provisions of the 1992
Cable Act and the rules, regulations and policies of the Commission thereunder
with respect to rate regulation. No proceeding (administrative, judicial or
otherwise) is pending or, to the best of Seller's knowledge, threatened, to
revoke, suspend, modify, limit or deny renewal of any of the Franchises. All
reports, applications, financial statements and other documents required to be
filed by the Seller with respect to the Systems have been filed, except where
the failure to file would not have a Material Adverse Effect. All Franchises
have been validly issued and are in full force and effect, and the Seller is
the authorized legal holder thereof. The Seller has delivered to the Buyer
true and complete copies of all Franchises. The Seller has not made any
commitments (oral or written) to any governmental authorities with respect to
the Systems other than those contained in the Franchises. To Seller's
knowledge, no prior owner of any of the Systems has made any commitment (oral
or written) to any Municipal Authority with respect to any System other than
those contained in the Franchises. The Seller has not received any written
notice of any claimed or purported default under any Franchise. The Seller has
filed with the appropriate Municipal Authorities all appropriate requests for
renewal under the Communications Act within 30 to 36 months prior to the
expiration of each Franchise. The Seller has no reason to believe that, under
existing law, rules, and regulations, any of the Franchises would not be
renewed by the granting authority in the ordinary course.
5.10 System Data.
(a) As of April 30, 1995, the Systems consisted of
approximately 3,870
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linear miles of plant, and there were at least 117,311 Homes Passed.
(b) Schedule 5.10(b) sets forth (i) as of the date of
this agreement, for each System, its channel capacity, the communities served
by such System, a list of all Franchises that are necessary or required in
order to operate such System, the rates charged by the Seller in connection
with such System for every service, level of service, package of services,
installations, and outlets or other services, equipment or items for which the
Seller has an established charge, and the video signals carried on such System,
and (ii) as of May 31, 1995, for each System, the number of Basic Subscribers
of such System and the number of Homes Passed by such System.
(c) Except as set forth in schedule 5.10(c), no Person
(including any governmental authority) has any right to acquire any interest in
any System or any assets of the Seller used or held for use primarily in the
operations of the Systems (including any right of first refusal or similar
right), other than rights of condemnation or eminent domain afforded by law
with respect to which no proceedings are pending or, to Seller's knowledge,
threatened. To the best of the Seller's knowledge, except as set forth in
schedule 5.10(c), no other Person:
(i) has been granted or has applied for the
consent or approval of any governmental authority for the installation,
construction, development, ownership, or operation of a cable television
system, multichannel multipoint distribution service, or other multichannel
video programming service (other than any direct broadcast satellite service)
within all or part of the geographic area served by any System; or
(ii) operates, or has commenced the construction,
installation, or development of, any cable television system, multichannel
multipoint distribution service, or other multichannel video programming
service (other than any direct broadcast satellite service) within
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all or part of the geographic area served by any System, regardless of whether
the consent or approval of any governmental authority is required or has been
obtained.
(d) Other than as set forth in schedule 5.10(d), the
Seller has not received any written requests, notices, or demands from the
Commission, any other governmental authority, or any other Person, challenging
or questioning the legal rights of the Seller to operate any of the Systems or
carry any broadcast signal, or requesting signal carriage pursuant to the
Commission's "must-carry" rules, other than any such request, notice, or demand
that has since been resolved. All of the broadcast television signals
(excluding superstations) carried by the Systems are carried either pursuant to
the must-carry requirements or pursuant to effective retransmission consent
agreements. Except as set forth in schedule 5.10(d), as of the date of this
agreement, the Seller has not received any notification of any petition or
submission that is currently pending before the Commission to modify any
television market or for a waiver of any rules and regulations of the
Commission as they apply to any System.
(e) The Seller has delivered to the Buyer complete and
correct copies of all reports and filings for the past three years made or
filed pursuant to the Communications Act and the rules and regulations of the
Commission with respect to the Systems.
(f) The Seller has delivered to the Buyer true,
correct, and complete copies of (i) all Commission Forms 393, 1200, 1205, 1210,
1215 and 1220 that have been prepared with respect to the Systems, (ii) all
material correspondence with any governmental body, subscriber, or other
interested party relating to rate regulation generally or specific rates
charged to subscribers of the Systems, including any complaints filed with the
Commission with respect to any rates charged to subscribers of the Systems, and
(iii) any documentation supporting
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an exemption from the rate regulation provisions of the 1992 Cable Act claimed
by the Seller with respect to the Systems. Schedule 5.10(f) sets forth (i) a
list of all rate complaints filed pursuant to the 1992 Cable Act and received
by the Seller which have not been deemed invalid by the Commission, and further
sets forth those Franchises that have been certified or filed for certification
under the 1992 Cable Act with respect to rate regulation and (ii) a list of all
letters of inquiry from the Commission received by the Seller since September
1, 1993 with regard to rate restructuring.
5.11 Copyright Matters. (a) The Seller has deposited with
the United States Copyright Office all statements of account and other
documents and instruments, and paid all royalties, supplemental royalties, fees
and other sums to the United States Copyright Office required under the
Copyright Act of 1976, and the rules and regulations promulgated thereunder
(collectively, the "Copyright Act") with respect to the business and operations
of the Systems as are required to obtain, hold and maintain the compulsory
copyright license for cable television systems prescribed in Section 111 of the
Copyright Act.
(b) The Systems are in compliance with the Copyright
Act except where noncompliance would not have a Material Adverse Effect. In
connection with the Systems, the Seller is entitled to hold and does now hold
the compulsory copyright license described in Section 111 of the Copyright Act,
which compulsory copyright license is in full force and effect and has not been
revoked, cancelled, encumbered or materially adversely affected in any manner.
(c) The carriage, transmission or use of the signals of
the Systems has not subjected and does not subject any System or the Seller to
any Commission or other sanctions or any suits or actions, including, without
limitation, suits or actions for copyright infringement,
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except those that may be applicable to a majority of cable systems in the
United States.
(d) The Seller has delivered to the Buyer complete and
correct copies of all current reports and filings, and all reports and filings
for the past five years, made or filed pursuant to copyright rules and
regulations with respect to the business of the Systems.
(e) The Seller does not possess any patent, patent
right, trademark or copyright used or held for use primarily in the operations
of the Systems and is not a party to any license or royalty agreement with
respect to any patent, trademark or copyright except for licenses respecting
program material and obligations under the Copyright Act applicable to cable
television systems generally.
5.12 Litigation; Compliance with Laws. Except for those listed
on schedule 5.12 and except for proceedings (both administrative and judicial)
affecting the cable television industry in general to which the Seller is not a
party, there is no claim, litigation, proceeding or governmental investigation
pending or, to the best of Seller's knowledge, threatened, or any order,
injunction or decrees outstanding, against the Seller or the Assets, which
seeks monetary damages against the Seller in excess of $10,000, seeks any
material equitable remedy against the Seller, alleges any failure by the Seller
to comply with any law, rule, or regulation concerning the environment, public
health and safety, or employee health and safety, or if adversely determined in
a manner or amount that can be reasonably foreseen, might have a Material
Adverse Effect. There is no violation by Seller that would have a Material
Adverse Effect of any law, regulation or ordinance or any other requirement of
any governmental body or court (other than the rate regulation provisions of
the 1992 Cable Act and the rules, regulations and policies of the Commission
thereunder with respect to rate regulation, which are covered by the
representation
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in section 5.9).
5.13 List of Agreements, Etc. Schedule 5.13 contains a
complete list of the following: (a) all commitments and other agreements for
the purchase of any programming (other than the programming agreements listed
on schedule 2.2(b)), materials, supplies or equipment used or held for use
primarily in the operations of the Systems, other than commitments and other
agreements that involve an annual expenditure by the Seller of less than $5,000
for any one commitment; (b) all leases or other rental agreements under which
the Seller is either lessor or lessee of property used or held for use
primarily in the operations of the Systems that call for annual lease payments
in excess of $1,000 individually; (c) all agreements for the retransmission by
any of the Systems of any signals; and (d) all other agreements, commitments
and understandings (written or oral) relating to the operations of the Systems,
other than Franchises and non-bulk subscriber agreements, that require payment
by the Seller of more than $1,000 individually and cannot be terminated by
their terms on less than 60 days' notice without liability. The Seller has
delivered to the Buyer true and complete copies of all agreements listed on
schedule 5.13.
5.14 Employees. (a) Schedule 5.14(a) includes a complete and
correct list of names and positions of all employees and independent
contractors of the Systems and their current hourly wages or monthly salaries
and other compensation. The Seller has complied in all material respects with
all legal requirements relating to the employment of labor, including the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
continuation coverage requirements with respect to group health plans, and
those relating to wages, hours, collective bargaining, unemployment
compensation, workers' compensation, equal employment opportunity,
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age and disability discrimination, immigration control and the payment and
withholding of taxes. No reportable event for which the reporting requirement
has not been waived, within the meaning of Title IV of ERISA, has occurred and
is continuing with respect to any "employee benefit plan" or "multiemployer
plan" (as those terms are defined in ERISA) maintained by Seller or any
affiliate of Seller. No prohibited transaction, within the meaning of Title I
of ERISA, has occurred with respect to any such employee benefit plan or
multiemployer plan, and no material accumulated funding deficiency (as defined
in Title I of ERISA) or withdrawal liability (as defined in Title IV of ERISA)
exists with respect to any such employee benefit plan or multiemployer plan.
(b) Except as set forth on schedules 5.14(b), the
Seller is not a party to or bound by any pension, annuity, retirement, stock
option, stock purchase, savings, profit sharing or deferred compensation plan
or agreement, or any retainer, consultant, bonus, group insurance or other
incentive or benefit contract, plan or arrangement or any employment agreement
with respect to employees of the Systems. No employee of the Systems is
represented by any union or other collective bargaining agent and there are no
collective bargaining or other labor agreements with respect to those
employees. The Seller has no written contract prohibiting the termination of
any employee of the Systems. No material controversies, disputes, or
proceedings are pending or, to the Seller's knowledge, threatened, between it
and any employee (singly or collectively) of the Systems. There is no union
campaign being conducted to solicit cards from employees to authorize a union
to request a National Labor Relations Board certification election with respect
to any employees of the Systems.
(c) Schedule 5.14(b) contains a true and complete list
of all employee
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benefit plans or arrangements applicable to the employees of the Systems,
including any:
(i) "Employee welfare benefit plan," as defined
in Section 3(1) of ERISA, that is maintained or administered by the Seller or
to which the Seller contributes or is required to contribute and that covers
any employees of the Systems or under which the Seller has any liability (a
"Welfare Plan");
(ii) Employee plan that is maintained in
connection with any trust described in Section 501(c)(9) of the Internal
Revenue Code of 1986, as amended; and
(iii) Employment, severance, or other similar
contract, arrangement, or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits that (A) is not a Welfare Plan, "employee
pension benefit plan" (as defined in Section 3(2) of ERISA), or "multiemployer
pension plan" (as defined in Section 3(37) of ERISA), (B) is entered into,
maintained, contributed to, or required to be contributed to by the Seller or
under which the Seller has any liability, and (C) covers any employees of the
Systems. The contracts, arrangements, policies and plans required to be listed
on schedule 5.14(b) pursuant to this paragraph are referred to collectively as
the "Benefit Arrangements."
(d) Each Welfare Plan complies currently in all
material respects and has been maintained in material compliance with its terms
and, both as to form and in operation, with the requirements prescribed by any
and all statutes, orders, rules, and regulations that are
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applicable to such plans, including ERISA and the Internal Revenue Code of
1986, as amended.
(e) Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
all statutes, orders, rules, and regulations that are applicable to such
Benefit Arrangement.
(f) Except as set forth in schedule 5.14(f), the Seller
does not contribute and is not required to contribute to any "employee pension
benefit plan," as defined in Section 3(2) of ERISA.
(g) The Seller has not at any time been a participant
in any "multiemployer pension plan," as defined in Section 3(37) of ERISA, that
covers any employees of the Systems or under which the Seller has any
liability.
(h) The Seller has delivered to the Buyer true and
complete copies of each Welfare Plan and Benefit Arrangement (and, if
applicable, related trust agreements) and all amendments thereto, all written
descriptions thereof that have been distributed to employees of the Systems,
all annuity contracts or other funding instruments, and complete descriptions
of any Benefit Arrangement that is not in writing.
5.15 Status of Agreements. Except as set forth on schedule
5.15, the Seller is not in default and, to the best of the Seller's knowledge,
no other party is in default under any agreement referred to in section 5.13 or
5.14 where such default would have a Material Adverse Effect. All of such
agreements are in full force and effect and are valid, binding, and enforceable
against the Seller and, to the best of the Seller's knowledge, against the
other parties thereto, in accordance with their terms. Except as disclosed on
schedule 5.15, the Seller is not aware of any intention by any party to any
such agreement (a) to terminate such agreement or amend the terms
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thereof without the consent of the Seller, (b) to refuse to renew such
agreement upon expiration of its term, or (c) to renew such agreement upon
expiration only on terms and conditions that are materially more onerous than
those now existing. Except for the need to obtain the consents listed on
schedule 5.3, the Seller has full legal power and authority to assign its
rights under all such agreements to the Buyer in accordance with this
agreement, and such assignment will not affect the validity, enforceability, or
continuation of any of such agreements.
5.16 Insurance and Bonds. The Seller currently has, or there
exists for the Seller's benefit, in full force and effect:
(a) the casualty and liability insurance set forth on
schedule 5.16(a), which covers and insures the Seller, the Systems and the
Assets, against risks in such amounts which Seller believes are usually and
customarily insured against in the cable television industry, subject to
reasonable deductibles, including, without limitation, (i) fire and extended
coverage insurance on all of the Assets in amounts typical for such insurance
in the cable television industry, and on the business of the Systems, covering
property damage and loss of income by fire or other casualty, and (ii) adequate
insurance protection against all liabilities, claims and risks arising in the
ordinary course of business customarily included within a form of comprehensive
liability coverage; and
(b) the performance, surety and other bonds set forth
on schedule 5.16(b), which represent all such bonds required under the
Franchises, except where the requirement has been waived by the grantor or
other party to any such Franchise or except where the failure to have such
bonds would not have a Material Adverse Effect.
5.17 Environmental Matters. (a) To the best of Seller's
knowledge: (i) the Real
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Property is free of all asbestos; (ii) there has been no reportable quantity of
any Hazardous Substance on the Real Property, nor has any reportable quantity
of any Hazardous Substance been released into, on, over or under the Real
Property; (iii) Seller is in past and current compliance in all material
respects with all Legal Requirements relating to the environment with respect
to the Assets and the operation of the Business and the Systems; (iv) the
Business is capable of continued operation in compliance with all Legal
Requirements relating to the environment; (v) no Hazardous Substances have been
treated or disposed of on, under or in the Real Property, except for such
substances which are in such amounts and of the type typically found in
commercial cleaning products or standard office supplies of businesses similar
to the Business, as to which Seller is in compliance with all applicable Legal
Requirements; and (vi) except as set forth on schedule 5.17(a), there are no
tanks on or below the surface of the Real Property.
(b) The Seller has not received any notice from any
Governmental Authority indicating that the Real Property or any property
adjacent thereto has been or may be placed on any federal or state "Superfund"
or "Superlien" list.
(c) The Seller is not in violation of and has no
liability under any Environmental Law (as defined below).
(d) The Seller has no liability relating to Seller's
ownership or operation of the Systems (and to the best of Seller's knowledge,
there is likely no basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against Seller
giving rise to any such liability) under the Occupational Safety and Health
Act, as amended, or under any other law, rule or regulation of any similar
federal, state or local government (or agency thereof) concerning employee
health and safety.
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(e) The Seller has no liability relating to Seller's
ownership or operation of the Systems for any illness or personal injury to any
employee other than such matters for which claims have been filed under
applicable Workers' Compensation regulations (and to the best of Seller's
knowledge, there is no likely basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand
(under the common law or pursuant to statute) against the Seller giving rise to
any such liability). The Seller has not exposed any employee to any Hazardous
Substance.
(f) For these purposes, the term "Hazardous Substances"
includes any substance heretofore or hereafter designated as "hazardous" or
"toxic", including, without limitation, petroleum and petroleum related
substances, or having characteristics identified as "hazardous" or "toxic"
under any Environmental Law. As used hereunder, the term "Environmental Law"
shall include the Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 U.S.C. Section 6601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251, et seq., the Clean Air
Act, 42 U.S.C. Section 7401, et seq., or the Community Right to Know Act, 42
U.S.C. Section 11001, et seq., all as amended, or any other law, rule, or
regulation of any federal, state, or local government (or agency thereof)
concerning release or threatened release of hazardous substances, public health
and safety, or pollution or protection of the environment.
5.18 Taxes. The Seller has filed or caused to be filed all
federal, state, county, local, or city tax returns that are required to be
filed with respect to the ownership and operation of the Systems, and it has
paid or caused to be paid all taxes shown on those returns or on any tax
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assessment received by it to the extent that such taxes have become due, or has
set aside on its books adequate reserves (segregated to the extent required by
generally accepted accounting principles) with respect thereto. There are no
legal, administrative, or tax proceedings pursuant to which the Seller is or
could be made liable for any taxes, penalties, interest, or other charges, the
liability for which could extend to the Buyer as transferee of the business of
the Systems, and no event has occurred that could impose on the Buyer any
transferee liability for any taxes, penalties, or interest due or to become due
from the Seller.
5.19 Transactions with Affiliates. Except as disclosed in
schedule 5.19, the Seller has not been involved in any business arrangement or
relationship relating to the Systems with any affiliate of the Seller, and no
affiliate of the Seller owns any property or right, tangible or intangible,
that is used or held for use primarily in the operations of the Systems. As
used in this paragraph, "affiliate" has the meaning set forth in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934.
5.20 Broker. Neither the Seller nor any Person acting on its
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this agreement,
other than commissions payable to Waller Capital Corporation.
5.21 Marketing and Promotions. Schedule 5.21 is an accurate
description of the marketing and promotional programs currently in effect for
the Systems. Schedule 5.21 also sets forth Seller's policies with respect to
the provision of cable television service by Seller at no cost or at discounted
cost (other than discounts that may be offered or provided pursuant to
marketing and promotional programs). Except as described on schedule 5.21,
Seller is not providing cable television service at no cost or at discounted
cost other than pursuant to such policies or pursuant
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to Seller's marketing and promotional programs that are described on schedule
5.21
5.22 Full Disclosure. No representation or warranty made by
the Seller in this agreement or in any certificate, document, or other
instrument furnished or to be furnished by the Seller pursuant hereto contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact that is required to make any statement made herein
or therein not misleading.
6. Representations and Warranties by the Buyer.
The Buyer represents and warrants to the Seller as follows:
6.1 The Buyer's Organization. The Buyer is a limited
partnership duly organized, validly existing and in good standing under the law
of the State of Delaware and has the full partnership power and authority to
enter into and perform this agreement in accordance with its terms.
6.2 Authorization of Agreement. The execution and delivery
of this agreement and the Promissory Note by the Buyer and consummation by the
Buyer of the transactions contemplated hereby have been duly authorized by all
necessary partnership action on the part of the Buyer, and this agreement
constitutes, and when executed and delivered by the Buyer the Promissory Note
will constitute, the valid and binding obligation of the Buyer enforceable
against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.3 Consents of Third Parties. The execution and delivery of
this agreement
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and the Promissory Note by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not conflict with the certificate of
limited partnership or partnership agreement of the Buyer and will not conflict
with or result in the breach or termination of, or constitute a default under,
any lease, agreement, commitment or other instrument, or any order, judgment or
decree to which the Buyer is a party or by which the Buyer is bound. No
consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority is required on the part of the Buyer in
connection with the execution, delivery and performance of this agreement and
the Promissory Note, except for the filings and consents referred to in section
7.1.
6.4 Litigation. There is no claim, litigation, proceeding or
governmental investigation pending or, to the best of Buyer's knowledge,
threatened, or any order, injunction or decree outstanding, against the Buyer
or any of its affiliates that would prevent the consummation of the
transactions contemplated by this agreement.
6.5 Business and Operations of the Buyer. The Buyer has been
formed and intends as of the date of this agreement to conduct its operations
substantially in accordance with the Private Placement Memorandum for
FrontierVision Partners, L.P. dated April 1995, as supplemented with respect to
the Proposed Initial Acquisition - Maine and Ohio and as further supplemented
prior to the date of this agreement.
7. Further Agreements of the Parties.
7.1 Filings with the Commission and Municipal Authorities;
Hart-Scott-Rodino Act.
(a) As soon as practicable, but in no event later than
30 days after the
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date of this agreement, the parties shall file with the Commission and the
Seller shall file with any Municipal Authorities from which consent to the
transactions contemplated by this agreement must be obtained, an application or
applications requesting consent to such transactions; the parties shall take
with due diligence all reasonable steps necessary to expedite the processing of
the application or applications and to secure such consent or approval. Seller
and Buyer shall furnish each other with any correspondence from or to, and
notify each other of any other communications with, Municipal Authorities that
relate to the obtaining of such consents and approvals, and each party shall
have the right to participate in any hearings or proceedings before Municipal
Authorities with respect to such consents and approvals. Each party shall bear
its own costs and expenses (including the fees and disbursements of its
counsel) in connection with the preparation of the portion of any such
application to be prepared by it and in connection with the processing of that
application.
(b) Within 30 days after the execution of this
agreement, the Seller and the Buyer shall, in cooperation with the other, file
in connection with the transactions contemplated by this agreement any reports
or notifications that may be required to be filed by them under the HSR Act,
with each of the Department of Justice and the Federal Trade Commission, and
each of the Seller and the Buyer shall comply promptly with all requests for
further documents and information made by the Department of Justice or the
Federal Trade Commission, and shall furnish to the other all such information
in its possession as may be necessary for the completion of the reports or
notifications to be filed by the other. The Seller and the Buyer shall furnish
each other with any correspondence from or to, and notify each other of any
other communications with, the Federal Trade Commission or Department of
Justice that
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relates to the transactions contemplated by this agreement, and to the extent
practicable, to permit each other to participate in any conferences with the
Federal Trade Commission or Department of Justice. Any filing fee required by
the Federal Trade Commission or Department of Justice in connection with any
reports or notifications required to be filed by either the Buyer or the Seller
under the HSR Act in connection with the transactions contemplated by this
agreement shall be paid one-half by the Buyer and one-half by the Seller.
7.2 Operations of the Systems. From the date of this
agreement through the Closing Date:
(a) the Seller shall operate the business of the
Systems in the ordinary course of business;
(b) the Seller shall use reasonable efforts (i) to
preserve the business of the Systems and Assets intact and to preserve the
goodwill and business of the subscribers, advertisers, suppliers and others
having business relations with the Systems; and (ii) to retain the services of
the employees of the Systems;
(c) the Seller shall continue to work toward the
completion of the Calais, Maine system rebuild, and any reasonable expenditures
associated with such rebuild and described on schedule 7.2(c) (excluding
overhead and similar expenses and any expenses relating to the use of the
Seller's employees) from May 1, 1995 to the Determination Time shall be
reflected as part of the Current Assets as contemplated in section 3.2; and
(d) the Seller shall not, without written consent of
Buyer, (i) enter into any transaction or incur any liability or obligation
that, if entered into or incurred prior to the date of this agreement, would
have to be listed on schedule 5.13, (ii) sell, lease, hypothecate, transfer
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or otherwise dispose of any of the assets relating to the Systems, other than
dispositions in the ordinary course of business of assets where suitable
replacements, if necessary, have been made therefor, (iii) grant or agree to
grant any increase in the rates of salaries or compensation payable to
employees of the Systems (other than as required by law and regularly scheduled
bonuses and increases in the ordinary course of business as disclosed on
schedule 5.14(a) or one-time bonuses to induce employees to remain employed
with the Seller through the Closing Date), (iv) provide for any new and
material pension, retirement or other employment benefits for employees of the
Systems or any material increase in any existing benefits (other than as
required by law), (v) fail to make capital expenditures substantially in
accordance with the capital expenditure budget attached as schedule 7.2(d);
(vi) implement any retiering or repackaging of cable television programming
offered by the Systems; or (vii) take or agree to take, any of the foregoing
actions or any actions that would (A) make any representation or warranty of
the Seller contained in this agreement untrue or incorrect as of the Closing
Date, or (B) result in any of the conditions to Closing in this agreement not
being satisfied;
(e) The Seller shall not cause or permit, by any act or
failure to act, any of the Franchises to expire or to be revoked, suspended, or
modified, or take any action that could reasonably be expected to cause any
governmental authority to institute proceedings for the suspension, revocation,
or material adverse modification of any Franchise;
(f) The Seller shall pay all obligations relating to
the Systems as they become due, consistent with past practices, so that all
such obligations shall be current as of the Closing Date;
(g) The Seller shall not take any action that is
inconsistent with its
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obligations under this agreement or that could reasonably be expected to hinder
or delay the consummation of the transactions contemplated by this agreement;
(h) The Seller shall maintain all of the Assets in good
condition (ordinary wear and tear excepted), consistent with their overall
condition on the date of this agreement, and shall use, operate, and maintain
all of the Assets in a reasonable manner;
(i) The Seller shall maintain inventories at levels
consistent with past practices;
(j) The Seller shall comply in all material respects
with all laws, rules, and regulations applicable or relating to the ownership
and operation of the Systems; and
(k) The Seller shall maintain levels of marketing and
promotion efforts and expenditures consistent with its past practices as
described on schedule 5.21.
7.3 Expenses. The Buyer and the Seller shall each bear its
own expenses incurred in connection with the negotiation and preparation of
this agreement and in connection with all obligations required to be performed
by it under this agreement, except where specific expenses have been otherwise
allocated by this agreement. Any filing fee required by the Commission in
connection with the transfer by Seller to Buyer of any license, permit or other
authorization in connection with the transactions contemplated by this
agreement shall be paid one-half by Buyer and one-half by Seller. Buyer and
Seller shall each pay one-half of the cost of obtaining the searches of tax,
lien, and judgment filings required to be delivered by Seller pursuant to
section 9.1(g).
7.4 Access to Information. Prior to the Closing, the Buyer
and its representatives may make such reasonable investigation of the property,
assets and businesses of
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the Seller relating to the Systems, and the Seller shall give to the Buyer and
to its counsel, accountants and other representatives, upon reasonable notice,
reasonable access throughout the period prior to the Closing to all of the
assets, books, commitments, agreements, records and files of the Seller
relating to the Systems, and the Seller shall furnish to the Buyer during that
period all documents and copies of documents and information concerning the
businesses and affairs of the Systems as the Buyer reasonably may request.
Except as necessary for the consummation of the transactions contemplated by
this agreement, including the Buyer's obtaining of financing related hereto,
and except as and to the extent required by law, the Buyer shall hold, and
shall cause its representatives to hold, all such information and documents and
all other information and documents delivered pursuant to this agreement
confidential and, if the purchase and sale contemplated by this agreement is
not consummated for any reason, shall return to the Seller within 10 days, all
such information and documents and any copies as soon as practicable, and shall
not disclose any such information (that has not previously been disclosed by a
party other than the Buyer) to any third party unless required to do so
pursuant to a subpoena or other legal process. The Buyer's obligations under
this section shall survive the termination of this agreement.
7.5 Consents; Assignments of Agreements and Assets. (a) The
Seller shall use reasonable efforts (but shall not be required to make any
payment except as may be required to cure any default by the Seller under any
Franchise or agreement and except for the incidental costs of preparing and
submitting applications and other requests, costs of responding to reasonable
inquiries and ordinary and customary filing fees and processing charges), and
the Buyer shall assist the Seller in all reasonable respects, to obtain (i) all
consents and approvals of third parties
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required for the transfer to the Buyer of any of the Assets (whether or not
listed on schedule 5.3), including, but not limited to, the agreements referred
to in section 2.1(d), without any conditions materially adverse to the Buyer,
and (ii) with respect to those leases, commitments, or other agreement listed
on schedule 2.2(b) that are not to be assigned to, or assumed in whole by, the
Buyer, agreements that provide the Buyer with the rights and obligations under
those leases, agreements and other commitments that relate to the Systems to be
acquired by the Buyer. Notwithstanding the foregoing, the Buyer shall have no
obligation to make any payment to any Franchise authority or to any other party
to any agreement in assisting the Seller in obtaining any of the consents,
amendments, releases or agreements described in this section or to agree to any
materially adverse change in any Franchise or other agreement to be assigned to
the Buyer. Any application to any governmental authority for any
authorization, consent, order, or approval necessary for the transfer of any
Franchise shall be reasonably acceptable to the Buyer. The Seller will not
agree to any materially adverse change in any Franchise as a condition to
obtaining any authorization, consent, order, or approval necessary for the
transfer of such Franchise unless the Buyer shall consent otherwise.
(b) If, with respect to any lease, commitment or
agreement to be assigned to the Buyer (other than a Franchise), a required
consent to its assignment is not obtained and the Buyer, in its discretion,
waives the requirement under this agreement that such consent be obtained and
the requirement that such lease, commitment or agreement be assigned to the
Buyer at the Closing, the Seller shall keep it in effect and shall use its
reasonable efforts to give the Buyer the benefit of it to the same extent as if
it had been assigned, and the Buyer shall perform the Seller's obligations
under the agreement relating to the benefit obtained by the Buyer.
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Nothing in this agreement shall be construed as an attempt to assign any
agreement or other instrument that is by its terms nonassignable without the
consent of the other party or as a waiver by the Buyer of any requirement under
this agreement that consent to the assignment of such agreement be obtained
prior to Closing.
(c) If, with respect to any agreement listed on
schedule 2.2(b), the Buyer has not been able to enter into a similar agreement,
in form and substance reasonably satisfactory to the Buyer, that provides the
Buyer with all rights under such agreement that relate to the Systems and the
Assets and imposes on the Buyer only those obligations under any such
substitute agreement that relates to the Systems and the Assets (or other terms
that, in the Buyer's reasonable judgment, are not more onerous than the terms
of such agreement insofar as it relates to the Systems and Assets, but taking
into account the number of subscribers in the Systems and related rates), then,
with respect to any agreement for which no substitute agreement is obtained,
the Seller shall keep such original agreement in effect and shall enter into a
separate agreement with Buyer, in form and substance reasonably satisfactory to
Seller and Buyer, to give the Buyer the benefit of it to the same extent as if
it had been assigned to Buyer with respect to the Systems and the Assets, and
the Buyer shall perform the Seller's obligations under the agreement relating
to the benefit obtained by the Buyer.
(d) With respect to any Franchise for which a required
consent to transfer has not been obtained as of the Closing Date, both the
Buyer and the Seller shall continue to work together in good faith and shall
use their respective reasonable efforts to obtain such consent, up to and
including, if reasonable and necessary, the pursuit of all legal remedies.
Except for Seller's out-of-pocket expenses, the Buyer shall pay for all costs
associated with any
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action, suit, proceeding, claim, or judgment in connection with the Buyer's and
the Seller's collective pursuit of obtaining such required consents, and at the
closing with respect to any such Franchise (pursuant to section 9.3), the
Seller shall reimburse the Buyer for 50% of all reasonable, third-party,
documented, out-of-pocket costs and expenses associated therewith. In the
event that either the Buyer or the Seller wishes to pursue any such legal
remedies without the consent and cooperation of the other party, such party may
pursue such legal remedies at its own cost and expense.
7.6 Sales or Use Taxes. The Buyer and the Seller shall each
pay one-half of any state or local sales and use taxes payable in connection
with the sale of the Assets and any documentary transfer taxes or recording
fees assessed in connection with a sale of any parcel of the Real Property.
7.7 No Control. Between the date of this agreement and the
Closing, the Buyer shall not, directly or indirectly, control, supervise or
direct, or attempt to control, supervise or direct, the operations of any of
the Systems, but such operations shall be solely the responsibility of the
Seller, and, subject to the provisions of this agreement, shall be in its
complete discretion.
7.8 Employee Retention. (a) The Buyer may determine to
which of the Seller's employees who perform services primarily for the Systems
the Buyer wishes to offer employment and shall so notify the Seller at least 30
days prior to the Closing Date. The Buyer shall pay to any employee of the
Seller as of the Closing Date who performs services primarily for the Systems
on the date of this agreement and is so identified on schedule 5.14(a) (or
replacements for those listed that are hired in the ordinary course of
business) (a) to whom the Buyer does not offer employment on the Closing Date
or (b) whose employment by the Buyer is
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terminated by Buyer within 180 days after the Closing Date accrued vacation pay
(in an amount equal to the employee's then current cash compensation for a
period equal to such employee's then current accrued vacation, each as
disclosed as of June 15, 1995 on schedule 5.14(a)) and severance pay (in an
amount equal to the employee's then current cash compensation, as disclosed as
of June 15, 1995 on schedule 5.14(a), for a period equal to the shorter of (i)
180 days minus the number of days that such employee is an employee of Buyer or
(ii) 90 days). Notwithstanding the foregoing, if an employee of the Seller who
performs services primarily for the Systems is (i) not hired by the Buyer for
cause (as determined by the Buyer in its reasonable discretion), the Buyer
shall not be obligated to make either part of such payment, or (ii) terminated
for cause (as determined by Buyer in its reasonable discretion) within such
180-day period after the Closing Date, the Buyer shall not be obligated to make
the severance portion of such payment. The Buyer shall give each of the
employees of the Systems that it employs past service credit for purposes of
eligibility and vesting under all employee benefit plans and payroll practices
for employees of the Buyer at or after Closing. This section 7.8 is intended
to set out the relative obligations of the parties with respect to certain
personnel matters and is not intended to confer any third-party benefits on any
employee or former employee of the Seller.
(b) Certain employees of the Systems participate in the
United Video Management, Inc. and Affiliates Employee Benefit Plan (the
"Seller's Plan"). As of the Closing Date, the Buyer shall make available to
Covered Employees (and their dependents) medical benefit coverage under plan(s)
maintained or established by the Buyer. The Buyer shall cause its plan(s) to
waive any pre-existing condition exclusions and waiting periods (except to the
extent that such exclusions would have then applied or waiting periods were not
satisfied under Seller's Plan) and
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to credit or otherwise consider any monies paid (or accrued) under Seller's
Plan by Covered Employees (or their dependents) prior to the Closing Date
toward any deductibles, co-pays or other maximums under its plan(s) during the
first plan year after the Closing Date. The Buyer shall be responsible for
satisfying the obligations under Section 601 et seq. of ERISA and Section 4980B
of the Internal Revenue Code to provide continuation coverage ("COBRA") (i) to
any Covered Employee in accordance with law if the event that creates the
obligation for continuation coverage occurs after the Closing Date and (ii) to
any employee of the Seller who performs services primarily for the Systems and
who is terminated by the Seller at the request of the Buyer (except for those
who the Buyer requests be terminated for cause, as determined by the Buyer in
its reasonable discretion) in accordance with law.
7.9 Insurance. The Seller shall maintain all insurance
policies currently in effect with respect to the Systems (or purchase policies
providing similar coverage) until the Closing Date.
7.10 Notice of Adverse Changes. Between the date of this
agreement and the Closing Date, the Seller shall promptly notify the Buyer in
writing of any materially adverse developments affecting the Systems which
become known to the Seller, including, without limitation, (i) any change in
the condition, financial or otherwise, of the Systems that could have a
Material Adverse Effect, (ii) any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of the Systems, or
(iii) any notice of any violation, forfeiture, or complaint under any of the
Franchises that might have a Material Adverse Effect.
7.11 Delivery of Financial Information. The Seller shall
furnish to the Buyer
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within 30 days after the end of each month ending between the date of this
agreement and the Closing Date a statement of income and expense for the month
just ended and such other financial information (including information on
payables and receivables) as the Buyer may reasonably request. The income
statements delivered by the Seller to the Buyer pursuant to this section shall
be prepared from the books and records of the Seller in accordance with
generally accepted accounting principles consistently applied, shall accurately
reflect the books, records, and accounts of the Systems, shall be complete and
correct in all material respects, and shall present fairly the results of
operations of the Systems for the periods then ended. Promptly after the
preparation thereof, the Seller shall deliver to the Buyer copies of any other
financial statements, subscriber counts and other operational data regularly
prepared by the Seller for its internal use; provided that the Seller shall not
be required to make and shall not be deemed to make any representation or
warranty concerning any such information delivered to the Buyer (other than
that the information furnished to the Buyer is a true and complete copy of the
information prepared by the Seller for its internal use). The Seller also
shall provide the Buyer on a periodic basis with reports of capital
expenditures made with respect to the Systems.
7.12 Additional Financial Information.
(a) To the extent requested by Buyer and required by
Securities and Exchange Commission ("SEC") Regulations S-K and S-X to be
included in any registration statement or other offering document (each, a
"Registration Statement") proposed to be prepared by Buyer in connection with
its financing of the Purchase Price, Seller agrees to prepare or cause Seller's
independent accountants to prepare the following financial statements with
respect to the Systems, and related management discussions and analyses
(collectively, the "Additional Financial
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Statements"), conforming with the requirements specified in this section 7.12:
(i) Balance sheets as at December 31, 1993 and
1994, and income statements and statements of cash flows and changes in equity
for the years ended December 31, 1992, 1993, and 1994, together with the
required footnotes and the auditor's report thereon.
(ii) A balance sheet, income statement, and
statement of cash flows as of and for the quarter ended June 30, 1995, together
with the required footnotes.
(iii) A balance sheet, income statement, and
statement of cash flows as of and for each fiscal quarter subsequent to the
quarter ended June 30, 1995 and ending prior to the Closing Date, together with
the required footnotes.
(b) Seller shall prepare or cause Seller's independent
accountants to prepare the Additional Financial Statements within forty-five
days after Buyer's request therefor.
(c) The Additional Financial Statements shall be prepared
from the books and records of Seller in accordance with generally accepted
accounting principles, consistently applied, and in the form required by SEC
Regulations S-K and S-X, so as to fairly present the financial condition,
results of operations, and cash flows of Seller for the periods indicated, and,
with respect to the quarterly financial statements required by this section
7.12, subject to normal year-end adjustments.
(d) To the extent required by SEC Regulation S-X, the
Additional Financial Statements shall be audited by Seller's independent
accountants. The cost of any audit or preparation of any of the Additional
Financial Statements shall be paid by Buyer.
(e) Seller agrees to provide one or more audit
representation letters as to the information provided by Seller to its
independent accountants in connection with any audit
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required under this section 7.12. The representation letter will be in such
form and make the representations reasonably required by such independent
accountants to enable them to issue an opinion acceptable to the SEC for
purposes of any Registration Statement with respect to the audit of those
Additional Financial Statements required to be audited by SEC regulations S-K
and S-X and to be included in such Registration Statement. Seller will use its
best efforts to cause its independent accountants to provide all consents that
are necessary for the inclusion of their opinion and the Additional Financial
Statements in any such Registration Statement.
7.13 Further Assurances. At any time and from time to time
after the Closing, each of the parties shall, without further consideration,
execute and deliver to the other such additional instruments and shall take
such other action as the other may request to carry out the transactions
contemplated by this agreement. For a period of five years after the Closing,
each party shall grant the other reasonable access and the right to copy during
normal business hours upon reasonable prior notice to the books and records of
that party for any reasonable purpose, including compliance with any
applicable law or governmental rule or request relating to the period during
which the other party operated the Systems.
8. Conditions Precedent to Closing.
8.1 Conditions Precedent to the Obligations of the Buyer. The
Buyer's obligations to consummate the purchase under this agreement is subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions (any of which may be waived in writing by the Buyer):
(a) The representations and warranties of the Seller
under this agreement shall be true in all material respects at and as of the
Closing Date with the same effect as though
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those representations and warranties had been made again at and as of that
time;
(b) The Seller shall have performed and complied in all
material respects with all obligations, covenants and conditions required by
this agreement to be performed or complied with by it prior to or at the
closing;
(c) The Seller shall have duly received and delivered
to the Buyer all authorizations, consents, orders, and approvals necessary for
(i) the transfer of the Assets to the Buyer and (ii) the consummation of the
transactions contemplated by this agreement that are listed on schedule 8.1(c),
and all other such authorizations, consents, orders, and approvals except those
relating to Franchises (which are covered by sections 8.1(g), 8.3(a), and
8.3(b)), and those where the failure to obtain such authorizations, consents,
orders, or approvals would not have a Material Adverse Effect;
(d) The Buyer shall have been furnished with a
certificate of an officer of the Seller, dated the Closing Date, in form and
substance reasonably satisfactory to the Buyer, certifying to the fulfillment
of the conditions set forth in sections 8.1(a) and (b);
(e) No proceeding shall be pending the effect of which
could be to revoke, cancel, suspend, or materially modify adversely any
Franchise;
(f) The Seller shall have made or stand willing to make
all the deliveries to the Buyer set forth in section 9.1; and
(g) Each of the Franchise Areas (as defined in section
8.3(a)(i)) designated on schedule 8.1(g) shall be a Transferable Franchise Area
(as defined in section 8.3(a)(iii)).
8.2 Conditions Precedent to the Obligations of the Seller.
The Seller's
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obligations to consummate the sale under this agreement are subject to the
fulfillment, at or prior to the Closing, of each of the following conditions
(any of which may be waived in writing by the Seller):
(a) Payment by the Buyer of the amount payable at the
Closing and delivery of the Promissory Note in accordance with section 3.3;
(b) The representations and warranties of the Buyer
under this agreement shall be true in all material respects at and as of the
Closing Date with the same effect as though those representations and
warranties had been made again at and as of that time;
(c) The Buyer shall have performed and complied in all
material respects with all obligations, covenants and conditions required by
this agreement to be performed or complied with by the Buyer prior to or at the
Closing;
(d) The Seller shall have been furnished with a
certificate of an officer of the general partner of the Buyer, dated the
Closing Date, in form and substance reasonably satisfactory to the Seller,
certifying to the fulfillment of the conditions set forth in sections 8.2(b)
and (c); and
(e) The Buyer shall have received at least $32,000,000
in capital contributions and shall have delivered to the Seller a certificate
of an officer of the general partner of the Buyer to that effect, together with
appropriate supporting information. Buyer shall notify Seller as soon as it
has received at least $32,000,000 in binding commitments for capital
contributions.
8.3 Conditions Precedent to Each Party's Obligations. The
respective obligations of the Buyer and the Seller to consummate the
transactions contemplated by this
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agreement are subject to the fulfillment, at or prior to the Closing, of each
of the following conditions:
(a) The aggregate number of Basic Subscribers in those
Franchise Areas that are Transferable Franchise Areas shall be at least 93% of
the aggregate number of Basic Subscribers in all Franchise Areas. For purposes
of this section 8.3(a) and section 8.3(b):
(i) A "Franchise Area" means any of the geographic
areas in which Seller is authorized to provide cable television service
pursuant to a Franchise granted by a Municipal Authority or provides cable
television service in any geographic area in which a Franchise granted by a
Municipal Authority is not required pursuant to applicable law;
(ii) The number of Basic Subscribers in a
Franchise Area shall be the number of Basic Subscribers set forth next to the
name of such Franchise Area on schedule 5.10(b) (regardless of any change in
the number of Basic Subscribers in such Franchise Area between May 31, 1995 and
the Closing Date); and
(iii) A "Transferable Franchise Area" means any
Franchise Area with respect to which (A) any authorization, consent, order, or
approval of any Municipal Authority necessary for the assignment of the
Franchise for such Franchise Area in connection with the consummation of the
transactions contemplated by this agreement shall have been obtained and shall
be final and effective, without any condition or qualification materially
adverse to Buyer or Seller or that would have a Material Adverse Effect, or (B)
no authorization, consent, order, or approval of any Municipal Authority is
necessary for the assignment of the Franchise for such Franchise Area in
connection with the consummation of the transactions contemplated by this
agreement, or (C) no Franchise granted by a Municipal Authority is required for
the
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provision of cable television service in the Franchise Area;
(b) The Commission shall have consented, to the extent
such consent is legally required, to the transfer to Buyer of all Franchises
issued by the Commission with respect to the operation of the Systems in all
Transferable Franchise Areas, and such consents shall have become Final Orders.
For purposes of this agreement, "Final Order" shall mean action by the
Commission (a) which has not been vacated, reversed, stayed, set aside,
annulled or suspended, and (b) with respect to which no appeal, request for
stay, or petition for rehearing, reconsideration or review by any party or by
the commission on its motion, is pending, and as to which the time for filing
any such appeal, request, petition, or similar document for the reconsideration
or review by the Commission on its own motion under the express provisions of
the Communication Act and the rules and regulations of the Commission, has
expired.
(c) There shall not be in effect an injunction or
restraining order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transaction contemplated by this
agreement and no action or proceeding brought by any governmental authority
shall be pending that may result in a judgment, decree, or order that would
prevent or make unlawful the consummation of the transactions under this
agreement.
(d) All applicable waiting periods under the HSR Act
with respect to the transactions contemplated by this agreement shall have
expired or been terminated.
9. Transactions at and After the Closing.
9.1 Documents to be Delivered by the Seller. At the Closing,
the Seller shall deliver to the Buyer the following:
(a) duly executed bills of sale, assignments, deeds or
other instruments
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of transfer and assignment that are sufficient to vest in Buyer good title to
the Assets, free and clear of Liens, except for Permitted Encumbrances;
(b) a copy of resolutions of the Directors of the
Seller authorizing the execution, delivery and performance of this agreement by
the Seller, and a certificate of the Secretary of the Seller dated the Closing
Date, that such resolutions were duly adopted and are in full force and effect
on the Closing Date;
(c) the certificate referred to in section 8.1 (d);
(d) copies of all consents and approvals received
pursuant to section 7.5;
(e) an opinion of Holme Roberts & Owen LLC, corporate
counsel to the Seller, dated as of the Closing Date, in substantially the form
of exhibit 9.1 (e);
(f) an opinion of Cole, Raywid & Braverman, L.L.P.,
FCC counsel to the Buyer, dated as of the Closing Date, in substantially the
form of exhibit 9.1 (f);
(g) the results of a search for tax, lien, and judgment
filings in the Secretary of State's records of the States of Maine and Ohio and
in the records of each county in the States of Maine and Ohio in which any of
the Assets are located, which searches shall evidence that the Assets are free
and clear of all mortgages, liens, restrictions, encumbrances, claims, and
obligations except for Liens for current taxes not yet due and for easements,
covenants, conditions, and restrictions affecting Real Property that do not
have a material adverse effect on the use of any parcel of Real Property or
materially detract from the value of any parcel of Real Property;
(h) such estoppel certificates of the lessors of
leasehold and subleasehold interests included in the Real Property and estoppel
certificates of contracting parties to those
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contracts, leases and other agreements listed in schedule 5.13 that are
designated to indicate that estoppel certificates are to be delivered by the
Seller, in either case as may be obtained through the reasonable efforts of the
Seller;
(i) a manually executed copy of any instrument
evidencing receipt of any authorization, consent, order, or approval obtained
pursuant to section 8.1(c); and
(j) any intercreditor agreements or other instruments
requested by Buyer and reasonably satisfactory to Seller and the holders of
Buyer's long-term indebtedness to evidence or effectuate the subordination of
the Promissory Note to such indebtedness to the extent provided in the
Promissory Note.
(k) a copy of Good Standing Certificates issued by the
Secretaries of State of Maine and Ohio certifying that Seller is duly qualified
and in good standing as a foreign corporation in such states.
9.2 Documents to be Delivered by the Buyer. At the Closing,
the Buyer shall deliver to the Seller the following:
(a) wire transferred funds in the amount provided in
section 3.3 (b);
(b) the Promissory Note pursuant to section 3.3(a);
(c) instruments, in form and substance reasonably
satisfactory to the Seller and its counsel, pursuant to which the Buyer shall
assume the Assumed Liabilities and Contract Liabilities to be assumed by the
Buyer pursuant to section 3.2 (a);
(d) a copy of resolutions of the general partner of the
Buyer authorizing the execution, delivery and performance of this agreement by
the Buyer, and a certificate of the general partner of the Buyer, dated the
Closing Date, that such resolutions were duly adopted and are in full force
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and effect on the Closing Date;
(e) the certificate referred to in section 8.2(d); and
(f) an opinion of Dow, Lohnes & Albertson, counsel to
the Buyer, dated as of the Closing Date, in substantially the form of exhibit
9.2(f) (which opinion may rely on the opinions of other counsel for Buyer).
9.3 Subsequent Closings. If on the date specified for the
Closing pursuant to section 4.1, any Franchise Area is not a Transferable
Franchise Area, then, notwithstanding any other provision of this agreement,
the following provisions shall apply:
(a) At the Closing, Seller shall sell and assign to
Buyer, and Buyer shall purchase and acquire from the Seller, only those Assets
relating to the Transferable Franchise Areas and those Assets of any System
encompassing one or more Transferable Franchise Areas that do not relate solely
to a Franchise Area that is not a Transferable Franchise Area (including any
Assets, such as head-ends and business offices and the Real Property and
equipment related thereto, that may relate both to Transferable Franchise Areas
and Franchise Areas that are not Transferable Franchise Areas). The Assets
that are not purchased by Buyer at the Closing in accordance with the preceding
sentence are referred to in this section 9.3 as the "Retained Assets." From
and after the Closing, Seller shall retain the Retained Assets, and, subject to
the terms and conditions in this section 9.3, Seller shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Seller, the Retained Assets in
accordance with the terms of this section 9.3.
(b) At the Closing:
(i) The amount payable by Buyer to Seller pursuant
to section 3.3(b)
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and section 9.2(a) shall be reduced by the amount that Buyer is required to
deposit in escrow pursuant to section 9.3(b)(v).
(ii) The Buyer shall deliver to Seller the
Promissory Note in the amount specified in section 3.3(a).
(iii) All conveyancing documents, certificates,
opinions, and other documents contemplated by this agreement to be delivered at
the Closing shall be in the form and substance provided for in this agreement
with such modifications as are necessary or appropriate to reflect the
provisions of this section 9.3 and to relate only to the Assets being purchased
by Buyer at the Closing.
(iv) The entire amount of the Deposit (together
with all interest earned thereon) shall be disbursed in the manner provided in
section 3.1(c).
(v) Buyer shall deliver to the Escrow Agent, by
wire transfer of federal reserve funds, the product of the number of Basic
Subscribers as of the Closing Date in the Franchise Areas that are not
Transferable Franchise Areas (as set forth in the estimate provided by Seller
pursuant to section 3.4) times the "Per-Subscriber Amount," which shall be:
(A) $1,397, if the Closing Date is on or prior to September 30, 1995, (b)
$1,404, if the Closing Date is after September 30, 1995 and on or prior to
October 31, 1995, and (c) $1,411, if the Closing Date is after October 31,
1995. The amount delivered to the Escrow Agent pursuant to this section shall
be held in escrow pursuant to the terms of an escrow agreement substantially in
the form of exhibit 9.3(b)(v), with any revisions thereto that are reasonably
requested by Buyer's senior lender to grant it a security interest in all
amounts held by it (subject to the rights of Seller under this agreement).
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(vi) Buyer and Seller shall enter into a
management agreement, substantially in the form of exhibit 9.3(b)(vi) (with
appropriate modifications to the extent required to comply with any Franchise
relating to the respective Retained Assets) pending the purchase and sale of
the Retained Assets whereby Buyer shall assume responsibility for management of
the Retained Assets and shall be entitled to the economic burdens of ownership
of the Retained Assets.
(c) After the Closing, Buyer and Seller shall cooperate
in obtaining any authorizations, consents, orders, or approvals of any
Municipal Authority necessary to cause any Franchise Area that was not a
Transferable Franchise Area on the Closing Date to become a Transferable
Franchise Area, and the agreements and obligations or Buyer and Seller under
sections 7.1 and 7.5 shall be fully applicable in seeking such authorizations,
consents, orders, or approvals after the Closing. Seller shall give to Buyer
written notice of the receipt of any authorizations, consents, orders, or
approvals of any Municipal Authority necessary to cause any Franchise Area that
was not a Transferable Franchise Area on the Closing Date to become a
Transferable Franchise Area. With respect to each Franchise Area that was not
a Transferable Franchise Area on the Closing Date, a closing shall be held at
which Seller shall sell and assign to Buyer, and Buyer shall purchase and
acquire from the Seller, those Retained Assets relating to such Franchise Area,
in accordance with the following provisions:
(i) The closing shall occur (A) if such
Franchise Area becomes a Transferable Franchise Area prior to the later of the
first anniversary of the Closing and the expiration of the current term (as of
the Closing Date) of the Franchise issued by a Municipal Authority with respect
to such Franchise Area, on the first business day that is at least ten
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business days after such Franchise Area becomes a Transferable Franchise Area,
and (B) in all other cases, on the later of the first anniversary of the
Closing and the expiration of the current term (as of the Closing Date) of the
Franchise issued by a Municipal Authority with respect to such Franchise Area;
(ii) The closing conditions of Buyer and Seller in
section 8 shall apply to such closing insofar as such conditions relate to such
Retained Assets;
(iii) At such closing, Buyer and Seller shall
direct the Escrow Agent to disburse (A) to Seller as the purchase price for
those Retained Assets, (1) if such Franchise Area is a Transferable Franchise
Area, the product of the number of Basic Subscribers as of the Closing Date in
such Franchise Area (as set forth in the estimate provided by Seller pursuant
to section 3.4) times the Per-Subscriber Amount, together with any interest or
other earnings thereon, and (2) if such Franchise Area is not a Transferable
Franchise Area, 90% of the product of the number of Basic Subscribers as of the
Closing Date in such Franchise Area (as set forth in the estimate provided by
Seller pursuant to section 3.4) times the Per-Subscriber Amount, together with
any interest or other earnings thereon, and (B) to Buyer, if such Franchise
Area is not a Transferable Franchise Area, 10% of the product of the number of
Basic Subscribers as of the Closing Date in such Franchise Area (as set forth
in the estimate provided by Seller pursuant to section 3.4) times the
Per-Subscriber Amount, together with any interest or other earnings thereon;
and
(iv) At such closing, Buyer and Seller shall
execute and deliver conveyancing documents, certificates, opinions, and other
documents corresponding to those delivered at the Closing with such
modifications as are necessary or appropriate to reflect the
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provisions of this section 9.3 and to relate only to the Retained Assets being
purchased by Buyer at such closing.
(c) With respect to any claim by Buyer for
indemnification pursuant to section 10 relating to any Retained Assets, the
limitation in the second sentence of section 10.1 shall be applied as if the
date on which such Retained Assets are purchased by Buyer were the Closing
Date.
(d) Buyer and Seller shall negotiate in good faith any
other changes to this agreement necessary or appropriate to effectuate the
intent of this section 9.3.
9.4 Certain Agreements. Buyer shall use its best efforts to
secure, immediately following, and effective as of, the Closing Date, the
release, in form and substance reasonably satisfactory to Seller, of Seller of
any carriage requirements or other obligations under the agreements listed on
schedule 2.2(b) with respect to the Systems or the Assets.
9.5 Documents to be Delivered by Both Parties. At the
Closing, the Buyer and the Seller shall execute and deliver the Indemnity
Escrow Agreement and the Consent Escrow Agreement, if applicable.
10. Survival of Representations and Warranties; Indemnification.
10.1 Survival. All representations and warranties by the
Seller and the Buyer in this agreement shall survive the Closing. The Seller
shall not, however, have any liability for misrepresentation or breach of
warranty or for violation of any covenant or agreement that is to be performed
before Closing, except to the extent that notice of a claim is asserted in
writing and delivered to the Seller not later than one year after the Closing
Date.
10.2 Indemnification. After the Closing, but subject to
sections 10.1, 10.3, 10.4,
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and 10.5, the Seller shall indemnify and hold harmless the Buyer against: (i)
all loss, liability, damage or expense (including the reasonable fees and
expenses of counsel) (together, "Losses"), that the Buyer may suffer, sustain
or become subject to as a result of (a) any misrepresentations by the Seller or
breach by the Seller of any warranties, covenants or other agreements contained
in this agreement or in any instrument delivered pursuant to this agreement, or
(b) the failure by the Seller to perform any of its obligations under this
agreement; (ii) any obligations of the Seller that are not assumed by the Buyer
pursuant to this agreement, including any liabilities arising at any time under
any contract, lease, or other agreement not included in the Assets, (iii) any
Losses resulting from the failure of the parties to comply with the provisions
of any bulk sales law applicable to the transfer of the Assets, (iv) any Losses
resulting from the operation or ownership of the Systems prior to the Closing,
including any liabilities arising under the Franchises, contracts, leases, or
other agreements that relate to events occurring prior the Closing Date, and
(v) to the extent that Buyer is entitled to indemnification from Seller
pursuant to this section 10.2 (before giving effect to the limitations in
sections 10.3 and 10.4) with respect to any action, suit, proceeding, claim,
demand, assessment, or judgment, any reasonable out-of-pocket costs and
expenses, including reasonable legal fees and expenses, incident to such
action, suit, proceeding, claim, demand, assessment, or judgment incident to
the foregoing or incurred in investigating or attempting to avoid the same or
to oppose the imposition thereof, or in enforcing this indemnity with respect
thereto. In calculating any Losses to the Buyer or determining whether any
misrepresentation or breach of warranty exists, any materiality qualifications
contained in the representations and warranties shall be disregarded. The
Buyer shall indemnify and hold harmless the Seller against all losses that the
Seller may suffer, sustain or become subject to as a result of
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(i) any misrepresentation by the Buyer or breach by the Buyer of any
warranties, covenants or other agreements contained in this agreement, or (ii)
any loss, liability, damage, cost or expense arising under the agreements
listed on schedule 2.2(b) in connection with the consummation of the Closing or
after the Closing Date (the "2.2(b) Liabilities"). Notwithstanding clause (ii)
of the preceding sentence, the Seller shall be responsible for 25% of the
2.2(b) Liabilities claimed during the period following the Closing through the
first anniversary of the Closing, to the extent that such 2.2(b) Liabilities
relate to any breach of the agreements listed on schedule 2.2(b) as a direct
result of the consummation of the Closing. The 25% of the 2.2(b) Liabilities
for which the Seller is responsible shall be deemed to be included in Losses
for purposes of section 10.3. Notwithstanding the above, the Seller shall be
responsible for only 50% of any Losses arising from Seller's breach of the
representations and warranties contained in section 5.17(c), (d), and (e);
provided, however, the Seller shall be responsible for 100% of the Losses
arising from any such breach attributable to facts that were known to Seller at
the time such representations were made.
10.3 Liability Threshold. The Seller shall not be liable for
misrepresentations or breach of any warranty or for failure to perform any
covenant or agreement under this agreement required to be performed prior to
the Closing Date, unless the aggregate amount of the Losses incurred as a
result of all such misrepresentations and breaches of warranty, covenant or
agreement exceeds the sum of $300,000.
10.4 Limitation on Liability. The aggregate liability of the
Seller to the Buyer for indemnification arising out of any misrepresentations
or breach of warranty by Seller or for Seller's failure to perform any covenant
or agreement under this agreement required to be
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performed prior to the Closing Date shall not exceed $6,000,000.
10.5 Conditions of Indemnifications for Third Party Claims.
The obligations and liabilities of the parties under this agreement with, as a
result of, or relating to claims of third parties (individually, a "Third Party
Claim" and collectively, "Third Party Claims"), shall be subject to the
following additional terms and conditions:
(a) The party entitled to be indemnified hereunder (the
"Indemnified Party") shall give the party obligated to provide the indemnity
(the "Indemnifying Party") prompt notice of any Third Party Claim. The
Indemnifying Party may undertake the defense of that claim by representatives
chosen by it unless the Indemnifying Party fails to notify the Indemnified
Party in writing within 15 business days of its receipt of the notice of the
Third-Party Claim that the Indemnifying Party acknowledges its potential
liability to the Indemnified Party under this agreement and elects to assume
the defense of the Third-Party Claim. Any notice of a Third Party Claim shall
identify with reasonable specificity the basis for the Third Party Claim, the
facts giving rise to the Third Party Claim, and the amount of the Third Party
Claim (or, if such amount is not yet known, a reasonable estimate of the amount
of the Third Party Claim). The Indemnified Party shall make available to the
Indemnifying Party copies of all relevant documents and records in its
possession.
(b) If the Indemnifying Party, within 15 business days
after notice of any such Third Party Claim, fails to notify the Indemnified
Party in writing that the Indemnifying Party acknowledges its potential
liability to the Indemnified Party under this agreement and elects to assume
the defense of the Third-Party Claim, the Indemnified Party shall (upon further
notice to the Indemnifying Party) have the right to undertake the defense,
compromise or settlement of
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the Third Party Claim.
(c) Anything in this section 10.5 to the contrary
notwithstanding, (i) the Indemnifying Party shall not, without the written
consent of the Indemnified Party, settle or compromise any Third Party Claim or
consent to the entry of judgment unless the settlement, compromise or consent
(1) does not involve the sale, forfeiture or loss of, or the creation of any
lien on, any property of the Indemnified Party or any of its affiliates, (2)
does not involve any equitable remedies against the Indemnified Party or any of
its affiliates, and (3) includes as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of an unconditional
release from all liability in respect of the Third Party Claim; and (ii) the
Indemnified Party shall have the right, at its own cost and expense (subject to
the following sentence), to participate in the defense of any Third Party Claim
(control of the defense to remain with the Indemnifying Party except as
provided in sections 10.5(a) and 10.5(b)). If there exists a conflict of
interest that would make it inappropriate for the same counsel to represent the
Indemnifying Party and the Indemnified Party with respect to the Third Party
Claim, the Indemnifying Party shall reimburse the Indemnified Party for the
costs and expenses of the separate counsel retained by the Indemnified Party in
connection with the matters with respect to which there is a conflict of
interest.
10.6 Right of Offset. Buyer shall offset any amounts owed to
it by Seller under the indemnification provisions of this agreement against the
then outstanding principal amount of, and any interest accrued and not then
distributed to Seller under, the Promissory Note or under any PIK Note (as
defined in the Promissory Note or in any PIK Note) issued pursuant to the
Promissory Note or any PIK Note (collectively, the "Seller Notes"), to the
extent of the then
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outstanding balance of the Seller Notes, in accordance with the following
provisions:
(a) Any offset pursuant to this section 10.6 shall be
effective as of the first date on which Buyer is entitled to payment from
Seller under the indemnification provisions of this agreement. Notwithstanding
the preceding sentence, if Seller disputes any claim by Buyer for
indemnification under this agreement, Buyer's right to offset with respect to
such claim shall not excuse Buyer from making any payment otherwise required to
be made under any Seller Note until such time as the claim is finally resolved
in accordance with this agreement, subject to section 10.6(b).
(b) If Buyer is required or otherwise desires to make
any payment in cash under any Seller Note at the time that any claim by Buyer
for indemnification by Seller under this agreement is pending and if after
giving effect to such payment the aggregate amount of all pending claims by
Buyer for indemnification by Seller under this agreement would exceed the sum
of Buyer's remaining obligations under all Seller Notes plus any amounts
previously deposited in escrow pursuant to this section 10.6(b) and not
disbursed, then Buyer may deposit in escrow with the Escrow Agent that portion
of such payment under the Seller Note that would cause the sum of Buyer's
remaining obligations under all Seller Notes (after giving effect to such
payment) plus all amounts deposited in escrow pursuant to this section 10.6(b)
and not disbursed to equal the aggregate amount of all pending claims by Buyer
for indemnification by Seller under this agreement, in accordance with the
following provisions:
(i) Any amounts deposited in escrow with the
Escrow Agent pursuant to this section 10.6(b) shall be held pursuant to an
escrow agreement substantially in the form of exhibit 3.1 with such changes
thereto as are necessary to incorporate the provisions of this
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section 10.6(b).
(ii) If at any time the sum of Buyer's remaining
obligations under all Seller Notes plus all amounts held in escrow pursuant to
this section 10.6(b) exceeds the aggregate amount of all pending claims by
Buyer for indemnification by Seller under this agreement, Buyer and Seller
shall jointly instruct the Escrow Agent to disburse to Seller the amount of
such excess.
(iii) If any claim by Buyer for indemnification
under this agreement is resolved in accordance with this agreement, Buyer and
Seller shall jointly instruct the Escrow Agent to disburse to Buyer that
portion of the amounts held in escrow by the Escrow Agent, if any, that is
equal to the amount of indemnification to which Buyer is entitled with respect
to such claim and to disburse to Seller the amount, if any, by which the sum of
Buyer's remaining obligations under all Seller Notes plus all amounts held in
escrow by the Escrow Agent exceeds the aggregate amount of all pending claims
by Buyer for indemnification.
(iv) At such time as all claims by Buyer for
indemnification under this agreement are resolved in accordance with this
agreement, Buyer and Seller shall jointly instruct the Escrow Agent to disburse
to Seller all amounts held in escrow by the Escrow Agent.
(v) Any amounts deposited in escrow with the
Escrow Agent pursuant to this section 10.6(b) shall be deemed to have been paid
with respect to the applicable Seller Note for purposes of such Seller Note.
(vi) All interest earned on any portion of the
funds deposited in escrow pursuant to this section 10.6 shall be disbursed to
the party entitled to such portion of such funds in accordance with this
agreement.
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(c) Seller agrees that, as a condition to, prior to the
later of the first anniversary of the Closing Date or the date on which the
last valid claim for indemnification has been resolved, (i) its assignment of
any Seller Note to its stockholders upon the liquidation of Seller, as
permitted by paragraph 12 of each Seller Note, or (ii) the distribution to any
stockholder of Seller, whether or not in liquidation of Seller, of any payment
made by Buyer under the Seller Note, each stockholder of Seller to which such
assignment or distribution is made shall agree to guaranty the obligations of
Seller under the indemnification provisions of this agreement (i) to the extent
of the amount of any payments made to such stockholder under the Seller Note or
made to Seller under the Seller Note and distributed to such stockholder and
(ii) in an amount which does not exceed, in aggregate for all such
stockholders, $6,000,000, less any amounts previously paid under the
indemnification provisions of this agreement.
11. Termination.
11.1 Termination. Except with respect to provisions which
expressly survive termination and the payment of any amount owed by one party
to the other for the prior performance of certain obligations under this
agreement, this agreement may be terminated:
(a) by written agreement of the Buyer and the Seller;
(b) by the Buyer or the Seller by notice to the other,
if at any time prior to the Outside Closing Date any event shall have occurred
or any state of facts shall exist that renders any of the conditions to the
obligations of the terminating party provided in this agreement impossible to
fulfill by the Outside Closing Date;
(c) by the Buyer as provided in section 12;
(d) by the Buyer or the Seller as provided in section
4.2; or
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(e) by the Buyer or the Seller if on the date that
would otherwise be the Closing Date (after giving effect to any postponement
pursuant to section 12) (1) any of the conditions precedent to the obligations
of such party set forth in this agreement have not been satisfied or waived in
writing by such party or (2) there shall be in effect any judgment, decree or
order that would prevent or make unlawful the Closing.
11.2 Liability. The termination of this agreement under
section 11.1 shall not relieve any party of any liability for breach of this
agreement prior to the date of termination.
12. Risk of Loss; Damage to Facilities. The risk of loss or damage
to any of the Assets shall be on the Seller prior to the Determination Time and
thereafter shall be on the Buyer. If any of the Assets is damaged or destroyed
prior to the Determination Time (any such event being referred as an "Event of
Loss"), the Seller shall, at its expense, use reasonable efforts to replace or
repair the item with comparable property of like value and quality as soon as
possible before the Determination Time. If any Event of Loss prevents any
condition of Closing in section 8 of this agreement from being satisfied on the
date specified for Closing pursuant to section 4.1, the Closing shall be
postponed for up to 120 days after the date specified for Closing pursuant to
section 4.1; if, however, the repair or replacement cannot be accomplished
within the 120-day period, the Buyer may elect by written notice to the Seller
at any time after such 120-day period:
(a) to fulfill its obligations under this agreement,
close the transaction and accept the Assets as is (in which event, any
insurance proceeds payable to the Seller with respect to the Event of Loss
shall be assigned to the Buyer, except to the extent the Seller has applied
such proceeds to repair, replace or restore the property); or
(b) to terminate this agreement without liability.
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If the date of the Closing is postponed beyond the original effective
period of any consent of the Commission or any Municipal Authority, the parties
shall amend their application or applications to the Commission or such
Municipal Authority to request an extension of the effective period of its
consent.
Nothing in this section 12 shall limit the exercise by either party of
its right to terminate this agreement pursuant to section 11.
13. Miscellaneous.
13.1 Notices. Any notice or other communication under this
agreement shall be in writing and shall be considered given when received,
whether personally, by mail courier, or by facsimile transmission, to the
parties at the addresses set forth below (or at such other address as a party
may specify by notice to the other).
If to the Buyer, to it at:
FrontierVision Operating Partners, L.P.
1777 South Harrison Street, Suite P-200
Denver, CO 80210
Attention: James C. Vaughn, President
Telecopy: (303) 757-6105
with a copy to:
Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Washington, DC 20036
Attention: David D. Wild, Esq.
Telecopy: (202) 776-2900
If to the Seller, to it at:
United Video Cablevision, Inc.
100 First Stamford Place
P.O. Box 420
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Stamford, CT 06904-0420
Attention: Lawrence Flinn, Jr., President
Telecopy: (203) 363-0349
with a copy to:
Holme Roberts & Owen LLC
1700 Lincoln
Suite 4100
Denver, CO 80203
Attention: Francis R. Wheeler, Esq.
Telecopy: (303) 866-0200
13.2 Finders. Each of the Buyer and the Seller represents and
warrants to the other that is has not retained or dealt with any broker or
finder in connection with the transactions contemplated by this agreement
except for Waller Capital Corporation, and Seller shall by responsible for any
fee payable to it.
13.3 Entire Agreement. This agreement, including the
schedules, contain a complete statement of all the arrangements between the
parties with respect to its subject matter, supersedes any previous agreement
among them relating to that subject matter, and cannot be changed or terminated
orally. Except as specifically set forth in this agreement, there are no
representations or warranties by either party in connection with the
transactions contemplated by this agreement. This agreement cannot be amended,
supplemented, or changed except by an agreement in writing that makes specific
reference to this agreement and that is signed by the party against which
enforcement of any such amendment, supplement, or modification is sought.
13.4 Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
13.5 Governing Law. This agreement shall be governed by and
construed in
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accordance with the law of the State of Delaware applicable to agreements made
and to be performed in Delaware.
13.6 Publicity. Except as required by applicable law, no party
shall issue any press release or other public statement regarding the
transactions contemplated by this agreement without consulting with the other
party and obtaining the other party's approval of the contents of the press
release or public statement.
13.7 Assignment. No party may assign any of its rights or
delegate any of its duties under this agreement, by operation of law or
otherwise, without the consent of the other, except that the Buyer shall have
the right to assign this agreement, without the consent of the Seller, to any
Person controlled by, controlling or under common control with the Buyer. A
change in control of the assignee of the Buyer after any such assignment shall
constitute a breach by the Buyer of its obligations under this agreement.
Subject to the foregoing, this agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
13.8 Waiver of Compliance; Consents. Any failure of any of the
parties to comply with any obligation, representation, warranty, covenant,
agreement, or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement, or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set
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forth in this section 13.8.
13.9 Specific Performance. The parties recognize that if the
Seller breaches this agreement and refuses to perform under the provisions of
this Agreement, monetary damages alone would not be adequate to compensate the
Buyer for its injury. The Buyer shall therefore be entitled, in addition to
any other remedies that may be available, to obtain specific performance of the
terms of this agreement. If any action is brought by the Buyer to enforce this
agreement, the Seller shall waive the defense that there is an adequate remedy
at law.
13.10 Counterparts. This agreement may be executed in any
number of counterparts which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF the parties hereto have executed this
agreement as of the date set forth above.
FRONTIERVISION OPERATING PARTNERS, L.P.,
a Delaware limited partnership
By: FrontierVision Partners, L.P., its general
partner
By: FVP GP, L.P., its general partner
By: FrontierVision, Inc., its general
partner
By: /s/ James C. Vaughn
-------------------
UNITED VIDEO CABLEVISION, INC.,
a Delaware corporation
By: /s/ Lawrence Flinn, Jr.
-----------------------
Lawrence Flinn, Jr., President
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EXHIBIT 10.5
Execution Copy
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of October 27,
1995, is by and among FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware
limited partnership with its principal office at 1777 South Harrison Street,
Suite P-200, Denver, Colorado (or the assignee thereof) ("Buyer"), C4 MEDIA
CABLE SOUTHEAST, LIMITED PARTNERSHIP, a limited partnership organized and
existing under the laws of Delaware ("Media Cable"), by and through its general
partner, Southeast Cable, Inc., a Delaware corporation ("Southeast Cable"), and
COUNTY CABLE COMPANY, L.P., a limited partnership organized and existing under
the laws of Delaware ("County Cable"), by and through its general partner,
Media Cable (Media Cable and County Cable are sometimes referred to hereafter
individually by name or as "Seller", or collectively, as "Sellers").
A. Sellers own and hold the franchises for and operate the community
antenna television ("CATV") systems located in and servicing the communities
listed on Schedule A to this Agreement (referred to individually as "System"
and collectively as the "Systems").
B. On the terms and subject to the conditions of this Agreement, and
subject to the performance by each of the parties of their respective
obligations under this Agreement, Sellers desire to sell, transfer and assign
to Buyer and Buyer desires to purchase, acquire and receive all assets (real
and personal, tangible and intangible) used by Sellers in each of the
respective Systems, all as more fully set forth in Section 1.02 of this
Agreement (collectively, the "Purchased Assets").
C. Southeast Cable is the managing general partner of Media Cable, and
Media Cable is the sole general partner of County Cable (Media Cable, in its
capacity as general partner of County Cable, and Southeast Cable are sometimes
referred to individually as a "General Partner" or collectively as the "General
Partners"). Each General Partner has the power and authority to enter into
this Agreement on behalf of each Seller and the knowledge to make the
representations, warranties and covenants that pertain to the Sellers contained
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, promises and agreements contained
herein and intending to be legally bound hereby, the parties covenant and agree
as follows:
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ARTICLE I
SALE AND PURCHASE
1.01 Sale and Purchase. On the terms and subject to the conditions of
this Agreement, Sellers shall sell to Buyer, and Buyer shall purchase, for the
consideration described in this Article I, the Purchased Assets. Each Seller
shall sell all of its right, title and interest in and to the Purchased Assets
to Buyer free and clear of all claims, charges, liens, mortgages, security
interests, encumbrances, liabilities and/or rights of others whatsoever, and at
the Closing (as hereafter defined) each Seller shall deliver to Buyer the
Purchased Assets.
1.02 Purchased Assets and Assumed Liabilities.
(a) Purchased Assets. The Purchased Assets shall consist of (i)
all real and personal property, tangible and intangible, franchises, licenses,
permits and privileges used or useful in the operation of the Systems and to
permit their continued, uninterrupted operations as going concerns, including
without limitation, all machinery, equipment, furniture, fixtures, furnishings,
vehicles, inventory, head ends, antennae, transmission systems, cable plant,
cable television plant and systems, all contracts, agreements, leases,
easements, rights-of-way, pole attachment agreements and real property
interests pertaining to the Systems, all franchises, licenses, permits relating
to the Systems, all subscriber contracts and orders for cable television
service, customer lists, marketing records and information, penetration
analysis, reservations, information and billing data, copies of financial and
accounting files, computer software, telephone listings and numbers and all
other books and records relating to the Systems and their operations and
management, and all schematics, blueprints, drawings, engineering data,
warranties, guaranties and technical information or data relating thereto, and
all other assets of any nature related to the Systems and operations, and those
assets listed on Schedules 4.09, 4.10, 4.12 and 4.14 to this Agreement, and
(ii) without duplication of the foregoing, all of Sellers' accounts receivable
which have not been paid (collectively, "Sellers' Receivables") and which exist
as of 12:00 midnight of the day preceding the Closing Date.
(b) Assumed Liabilities. On the Closing Date, Buyer shall assume,
pursuant to an Assignment and Assumption Agreement between Sellers and Buyer,
and discharge as they become due, the following liabilities and obligations of
the Sellers (except Excluded Liabilities) and no others:
(i) Those liabilities and obligations of each Seller
shown on the August 31, 1995 balance sheets of Sellers
as current
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liabilities (other than (i) liabilities relating to
any Excluded Assets, (ii) any liabilities that did not arise
in the ordinary course of business of the Systems; (iii) the
current portion of any long-term debt; and (iv) liabilities
under any Franchises, Contracts or other agreements that are
not assigned to Buyer), being a part of the financial
statements delivered by Sellers to Buyer and referenced in
Section 4.07 hereof, to the extent that such liabilities are
so shown and have not been paid prior to the Closing Date;
(ii) All unpaid liabilities and obligations of Sellers incurred
in their operations in the ordinary course of business from
September 1, 1995 to the Closing Date which would appear as
current liabilities on the Sellers' balance sheets prepared in
accordance with generally accepted accounting principles
("GAAP") (other than (i) liabilities relating to any Excluded
Assets, (ii) liabilities incurred after the date of this
Agreement in violation of Seller's covenants in this
Agreement; (iii) the current portion of any long-term debt;
and (iv) liabilities under any Franchises, Contracts or other
agreements that are not assigned to Buyer) and are identified
by name and amount on a schedule to be delivered by the
Sellers to Buyer on or prior to the Closing Date; and
(iii) All liabilities created on and after the Closing Date,
including all such liabilities created on and after the
Closing Date under those Franchises, contracts and other
agreements which are assigned to Buyer at Closing (other than
undisclosed liabilities thereunder and other than with respect
to any Franchises, contracts and other agreements that are not
assigned to Buyer), other than liabilities relating to
defaults, breaches and obligations arising prior to the
Closing Date with respect to the Purchased Assets, any of the
Systems and the operation and business of each of the
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Systems (collectively, "Sellers' Operations").
The liabilities and obligations described in this Section 1.02(b)
to the extent to be assumed by Buyer are herein referred to as the "Assumed
Liabilities."
1.03 Excluded Assets and Excluded Liabilities
(a) Excluded Assets. Sellers are not selling and Buyer is neither
purchasing nor accepting Sellers': (i) cash (other than petty cash, if any),
bank deposits, securities or equivalents; (ii) limited partnership
organizational documents or records; (iii) employment agreements, consulting
agreements or other understandings of Sellers with any employee, agent or
consultant (unless specifically assumed pursuant to the terms hereof); (iv)
prepaid insurance and surety bonds; (v) all rights to refunds of federal and
state taxes (and penalties and interest thereon) previously paid by either
Seller; (vi) all books or records of Sellers which pertain to the financial
accounting and tax aspects of the operation of the Systems prior to the Closing
Date; and (vii) all rights which accrue to or are retained by Sellers under and
by virtue of this Agreement (collectively the "Excluded Assets").
(b) Excluded Liabilities. Buyer shall not and does not accept or
assume any liability or obligation of Sellers other than those liabilities and
obligations which Buyer is expressly agreeing to accept or assume pursuant to
this Agreement. Without limiting the foregoing, Sellers shall not and do not
assign or transfer to Buyer and Buyer shall not and does not accept or assume
any liability or obligation of Sellers which arise from Sellers' Operations, or
any liability or obligation: (i) arising from or related to any taxes with
respect to any period prior to the Closing Date; (ii) arising from or related
to any litigation to which the Sellers, either Seller or Sellers' Operation is
a party or subject at the Closing Date, or arising from or related to any
litigation arising on or after the Closing Date which relates to any events,
occurrences or facts arising prior to the Closing Date; (iii) relating to
employees, former employees or retirees of Sellers or either Seller arising
prior to the Closing Date or arising by reason of any such person's employment
or termination of employment by either Seller, including, without limitation,
those relating to Sellers' terms or conditions of employment, policies,
practices, compensation, wages, payroll expenses, accrued vacation and sick
leave, medical benefits, benefit or welfare plans, compliance with applicable
federal, state or local labor and/or employment laws, rules, regulation or
orders, or any other employment-related obligation; (iv) arising from or
related to any personal injury
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or property damage whatsoever by negligence, strict liability or otherwise
arising or accruing prior to the Closing Date; (v) any compensation or benefits
(including, without limitation, pension, profit-sharing or vacation benefits)
for services rendered prior to the Closing Date; (vi) relating to compliance
with legal requirements imposed on maintenance of subscriber deposits; or (vii)
arising from or related to Sellers' or either Seller's lack of compliance with
any applicable federal, state or local laws, rules, regulations, ordinances or
orders, including, without limitation, all applicable employment,
environmental, health and safety matters, Federal Communication Commission
("FCC") matters, copyright matters and/or Franchise matters (the foregoing
collectively referred to as the "Excluded Liabilities").
1.04 Purchase Price and Adjustments.
(a) Purchase Price. The purchase price for the Purchased Assets
shall be Forty-Eight Million U.S. Dollars ($48,000,000), as such amount may be
adjusted pursuant to this Section 1.04 (the "Purchase Price").
(b) Prorations. All expenses arising from the operation of the
Systems, including, but not limited to, pole rental fees, sales and use taxes,
power and utility charges, if any, real and personal property taxes and
assessments levied against the Systems and the Purchased Assets, advances,
property and equipment rentals, applicable franchise, copyright or other fees,
sales and service charges, taxes, and similar prepaid, deferred or other items
shall be prorated between Buyer and Sellers as of the Closing Date in
accordance with the principle that Sellers shall receive all refunds and
revenues and shall be responsible for all expenses, costs and liabilities
allocable in accordance with GAAP to the period prior to 12:01 a.m. on the
Closing Date and Buyer shall receive all revenues and shall be responsible for
all expenses, costs and liabilities allocable in accordance with GAAP to the
period after 12:01 a.m. on the Closing Date,subject to the following:
(i) There shall be no adjustment or proration for, and
Sellers shall remain solely liable with respect to,
any Franchise, contract or other agreement not assumed
by Buyer and any other obligation or liability not
assumed by Buyer in accordance with Sections 1.02 and
1.03.
(ii) Seller shall be responsible for the payment of
employee expenses and benefits as provided in Section
7.06 of this Agreement.
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(c) Adjustments for Subscriber Advanced Payments or Deposits. The
Purchase Price shall be adjusted by subtracting any subscriber advance
payments, deposits or similar prepayments as of 12:00 midnight of the day
preceding the Closing Date.
(d) Adjustments for Net Working Capital. If the Net Working
Capital (as hereinafter defined) is a negative amount as of the Closing Date,
the Purchase Price payable on the Closing Date shall be decreased by an amount
equal to the absolute value of such Net Working Capital. If the Net Working
Capital is a positive amount as of the Closing Date, the Purchase Price payable
on the Closing Date shall be increased by an amount equal to such Net Working
Capital. For purposes of this Agreement, "Net Working Capital" means Adjustment
Assets less Adjustment Liabilities. "Adjustment Assets" means, as of the
Closing Date, petty cash and prepaid expenses (excluding insurance expenses and
prepaid expenses under contracts that are not assigned to Buyer) of Sellers
relating to any of the Systems, and Sellers' Receivables, provided that, for
this purpose, Sellers' Receivables shall be valued at an amount equal to the
aggregate of (i) 100% of the book amount of all such Sellers' Receivables
which, as at the Closing Date, remain unpaid for not more than thirty (30)
days, (ii) 90% of the book amount of all such Sellers' Receivables which, as at
the Closing Date, remain unpaid between thirty-one (31) and sixty (60) days
from the billing date, and (iii) 0% of the book amount of all other Sellers'
Receivables. "Adjustment Liabilities" means the current liabilities (as defined
and determined in accordance with GAAP) of the Sellers relating to any of the
Systems which constitute Assumed Liabilities on the Closing Date, provided
that, for this purpose, all Assumed Liabilities under clauses (i) and (ii) of
Section 1.02(b) shall be included in Adjustment Liabilities, notwithstanding
any generally accepted accounting principles to the contrary. Adjustments to
the Purchase Price under Section 1.04(b) and this Section 1.04(d) shall be made
so as to avoid duplication in crediting Sellers or Buyer with any item of
revenue or expense.
(e) Adjustment for Shortfall in Subscribers or Annualized Cash
Flow. In the event that (i) Sellers' Annualized Cash Flow is less than
$5,600,000, and/or (ii) the actual number of Subscribers on the Closing Date is
less than 40,000, then the Purchase Price shall be reduced by the greater of
(A) an amount equal to $48,000,000 multiplied by (($5,600,000 minus Sellers'
Annualized Cash Flow) divided by $5,600,000), or (B) an amount equal to $1,200
multiplied by (40,000 minus such actual number of Subscribers). For purposes
of this paragraph (e), the term "Sellers' Annualized Cash Flow" shall mean,
with respect to Sellers on a consolidated basis, for the three calendar month
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period ending on or immediately prior to the Closing Date (such three calendar
month period, herein the "Closing Period") and determined in accordance with
GAAP, net operating profit (calculated before interest, income taxes,
management fees, depreciation and amortization), multiplied by four (4);
provided that (x) in calculating Cash Flow there shall be excluded therefrom
(A) any income not attributable to the ownership and operation of the Systems,
and (B) non-recurring gains, losses and extraordinary expenses (including
without limitation costs and expenses relating to (1) termination of employees
of Sellers in connection with the consummation of the transactions contemplated
by this Agreement, (2) the transactions contemplated hereby and the
consummation of those transactions (including legal, brokerage, financial
advisory and consulting fees), and (3) corporate overhead expenses which should
not be allocated as expenses consistent with past practice), and (y) for
purposes of estimating any adjustments pursuant to this paragraph (e) on or
immediately prior to the Closing Date (as contemplated in paragraph (f) below),
"Seller's Annualized Cash Flow" shall be calculated for the first two calendar
months of the Closing Period, multiplied by six (6). For purposes of this
paragraph (e), a "Subscriber" is a person who subscribes to a particular System
for a period of at least two (2) full calendar months preceding the Closing
Date and who is not more than sixty (60) days past due, was not solicitated by
Sellers within 90 days prior to the date of determination by any promotion or
offer other than in the ordinary course of business, and has not been
persistently delinquent or subject to disconnect consideration within six (6)
months preceding Closing (provided that in computing the number of Subscribers
hereunder (1) there shall be included only the first outlet of a residential
Subscriber, and (2) as to all commercial or bulk billing accounts of any
System, such number of Subscribers shall be the result obtained by dividing the
aggregate of the gross billings from such accounts from the provision of basic
service (excluding any installation or non-recurring charge, any charge for
equipment, and any pass-through charge) for the calendar month immediately
preceding the Closing by the average standard monthly rate charged to
single-family households for basic service for that System.
(f) Procedure for Determination. At least five (5) business days
prior to the Closing Date, Sellers shall deliver to Buyer a certificate in the
form, content and reasonable detail acceptable to Buyer (the "Adjustments
Certificate"), to be certified by Sellers to be true and complete to Sellers'
knowledge as of the date thereof and setting forth Sellers' good faith
estimates of the Net Working Capital, Subscribers, Sellers' Annualized Cash
Flow and all other adjustments required pursuant to this Section 1.04, together
with (i) copies of Sellers' consolidated income statements for the
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first two calendar months of the Closing Period, and Sellers' consolidated
balance sheets as at the last day of the Closing Period (collectively, the
"Closing Financial Statements"), (ii) copies of Sellers' most recent accounts
receivable aging reports, schedules of liabilities and subscriber lists, (iii)
any other written information used in or relied upon in making the proposed
purchase price adjustment and preparing the Adjustment Certificate, and (iv)
such other supporting documents as Buyer reasonably shall request. Buyer shall
have the right to review, question and dispute in good faith the adjustments
set forth in the Adjustments Certificate. If Buyer does raise questions
regarding any adjustments, Buyer and Sellers shall negotiate in good faith to
resolve all adjustments questioned by Buyer; provided that any of the foregoing
adjustments and prorations which is not capable of final calculation or which
is not finally resolved between Sellers and Buyer in good faith negotiations by
the Closing Date shall be settled after the Closing in the manner set forth in
Section 1.08 hereof.
1.05 Allocation. The Purchase Price shall be allocated among
the Purchased Assets for purposes of Section 1060 of the Internal Revenue Code
of 1986, as amended, and the regulations thereunder, in accordance with an
appraisal to be performed after the Closing by an appraiser selected by Buyer.
All costs of the appraisal of the Purchased Assets pursuant to this Section
1.05 shall be borne by Buyer. Buyer and Sellers each agree to file with their
respective federal income tax returns an initial asset acquisition statement
and any supplemental statements on Internal Revenue Service Form 8594 required
by Temporary Treasury Regulation Section 1. 1060-1T, all in accordance with and
accurately reflecting the agreed upon allocation of the Purchase Price.
1.06 Payment of Purchase Price. On the Closing Date, Buyer shall pay or
cause to be paid to Sellers or Sellers' designee the Purchase Price, less (i)
the amount paid to Sellers as provided in Section 1.07 below, and (ii) the
aggregate amount of any unresolved purchase price adjustments subject to
resolution under Section 1.08 below, in immediately available U.S. funds by
wire transfer to a bank designated by Sellers in writing at least two business
days prior to Closing.
1.07 Deposit. Upon execution of this Agreement, Buyer is depositing
$2,500,000 (the "Deposit") in an account with Bank of New York ("Escrow Agent").
The Escrow Agent shall hold the Deposit in escrow pursuant to and in accordance
with the terms of an Escrow Agreement, in the form of Exhibit "1" hereto. On
the Closing Date, the Deposit, together with all interest accrued thereon,
calculated from the date of the deposit to but excluding the date of its
application, shall be credited and be
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paid to Sellers or Sellers' designee as part of the Purchase Price. In the
event this Agreement is terminated by Sellers or Buyer pursuant to Section
11.01 hereof, the Escrow Agent shall return to Buyer or pay to Sellers or
Sellers' designee (as the case may be) the Deposit, together with accrued
interest thereon, all as provided in Section 11.02 hereof and in the Escrow
Agreement.
1.08 Final Adjustment. Within forty-five (45) days after the Closing
Date, Sellers shall deliver to Buyer, (i) copies of Sellers' consolidated
income statements for the Closing Period, and Sellers' income statements for
the Closing Period, and Sellers' consolidated balance sheets as at the last day
of the Closing Period, (ii) copies of Sellers' consolidated balance sheets and
schedules of liabilities as at the day immediately preceding the Closing Date,
and (iii) a complete list of all Subscribers as at the day immediately
preceding the Closing Date. No later than thirty-five (35) days after Buyer's
receipt thereof, Buyer shall notify Sellers in writing as to its final
determination of adjustments to the Purchase Price pursuant to Sections
1.04(b), (c), (d) and (e) hereof. Sellers shall have ten (10) days to review
Buyer's determinations and advise Buyer whether they agree or disagree with
Buyer's determination and proposed adjustments to the Purchase Price, if any.
If Sellers agree with Buyer's determination and adjustments then, within five
(5) days after Sellers' response to Buyer, (i) if the Purchase Price as finally
determined is greater than the amount paid by Buyer to Sellers at the Closing,
then Buyer shall pay to Seller an amount equal to such excess and (ii) if the
Purchase Price as finally determined is less than the amount paid by Buyer to
Sellers at the Closing, then Sellers shall pay to Buyer an amount equal to such
excess (in either case, such amount being the "Final Payment Amount"), in each
case together with interest thereon from the Closing Date to the date of
payment at the rate announced from time to time by Citibank N.A. as its prime
lending rate (the "Prime Rate"). If Sellers and Buyer disagree as to the
Purchase Price adjustments, then the parties shall forthwith submit to Dispute
Resolution pursuant to Section 12.12 hereof, with any Final Payment Amount as
finally determined being paid by the appropriate party with interest from the
Closing Date until the date of payment at the Prime Rate.
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ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CLOSING
3.01 Closing. Subject to the terms and conditions set forth herein, the
closing on the transactions contemplated by this Agreement (the "Closing")
shall be held at the offices of Nixon, Hargrave, Devans & Doyle LLP, 437
Madison Avenue, 24th floor, New York, New York at 10:00 a.m., prevailing local
time on a date specified by Buyer in writing to Sellers which is at least seven
(7) days but not more than twenty (20) days after Sellers deliver a notice to
the Buyer that the conditions specified in Sections 8.02(e), (f), (g) and (h)
have been fulfilled (or waived). Sellers shall deliver a notice that the
conditions of closing specified in Sections 8.02(e), (f), (g) and (h) have been
fulfilled (or waived) in accordance with the preceding sentence within 15 days
of such time. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date". Notwithstanding the foregoing, this Agreement
may be terminated pursuant to Section 11.01 hereof if the Closing has not
occurred by February 29, 1996 (the "Termination Date").
3.02 Termination of Business. In connection with the Closing, the
Sellers shall be deemed to have terminated their business activities as of the
date and time of Closing and shall be responsible for all matters relating to
the Systems, the Purchased Assets and Sellers' Operations prior to the date and
time of Closing.
3.03 Deliveries. At Closing, Sellers shall deliver or cause to be
delivered to Buyer the instruments of conveyance, transfer, assignments and
assumptions, all in form and content reasonably acceptable to Buyer, necessary
or appropriate to convey, sell, transfer and assign to Buyer, the quality of
title of all Purchased Assets required under the terms of this Agreement and
necessary for Buyer's assumption of the Assumed Liabilities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally hereby represent and warrant to Buyer that
the following statements and representations are true and correct as of the
date of this Agreement. To the extent that any representation or warranty of
Sellers contained in this Section 4 is limited to "the best of
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Sellers' knowledge, after due inquiry," or "to the best of Sellers' knowledge"
such representation and warranty is made based solely upon the knowledge of the
General Partners, Doucette Management Company or its assigns (collectively the
"Manager"). Unless otherwise specified or the context otherwise requires, as
used in this Agreement, "Material Adverse Effect" shall mean a material adverse
effect on the operations of a single System or a material adverse effect on the
operations of the Systems taken as a whole or on the ability of Sellers to
perform any of their obligations under this Agreement. "Material Adverse
Change" shall have a correlative meaning.
4.01 Due Authorization: Enforceability. Each Seller has the authority
and legal capacity to execute and deliver to Buyer this Agreement and the
Transaction Documents (as hereafter defined) to which such Seller is a party.
This Agreement constitutes and, when executed and delivered by each Seller,
such Transaction Documents will constitute the legal, valid and binding
obligation of each Seller enforceable against each in accordance with their
respective terms. All necessary and appropriate partnership action has been
taken by Sellers with respect to their execution, delivery and performance of
this Agreement and all other agreements contemplated hereby, including the
Transaction Documents. Except as expressly set forth on Schedule 4.20 to this
Agreement, no consent, authorization or approval of, or declaration, filing or
registration with, any governmental or regulatory authority or any consent,
authorization or approval of any other third party is required to enable
Sellers to enter into and perform their obligations under this Agreement.
4.02 Limited Partnership Agreements and Articles and By-laws. The
copies of the Limited Partnership Agreement ("Limited Partnership Agreements")
of each Seller and Certificate of Incorporation and By-laws of Southeast Cable
delivered to Buyer on the date hereof are true and correct and complete copies
thereof and include all amendments to the date hereof.
4.03 No Conflict. The execution, delivery and performance of this
Agreement and the Transaction Documents by Sellers will not, except as
disclosed in this Agreement or in the Schedules hereto, (a) violate any
provision of, or require any consent, authorization or approval under, any law
or any judgment, decree or order of any court or federal, state or local
governmental agency to which either Seller, any System or the Purchased Assets
is subject or bound, (b) result in a breach of any of the terms of the Limited
Partnership Agreements of the Sellers or the Certificate of Incorporation or
By-laws of Southeast Cable, (c) result in a material breach of any of the terms
of, or constitute a default by either Seller under, any
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indenture, mortgage, loan agreement, lease or other agreement or instrument to
which either Seller is a party or by which either is bound, (d) create or
impose any lien, charge, encumbrance, or restriction upon any of the Systems or
the Purchased Assets, or (e) create a right in any person to accelerate payment
of principal of any indebtedness due from either Seller nor increase the amount
of any interest due under such indebtedness.
4.04 Litigation. Except as disclosed on Schedule 4.18 hereto, there is
no litigation, at law or in equity, nor any proceeding before any commission or
other governmental agency or authority, pending, or, to the best of Sellers'
knowledge after due inquiry, threatened against either of the Sellers which
would prevent or restrict either Seller's right or ability to consummate the
transfer of the Purchased Assets as contemplated herein.
4.05 Disclosure. The representations and warranties of the Sellers in
this Agreement do not contain any untrue statement of a material fact nor omit
to state a material fact required to be stated herein which is necessary to make
the statements contained herein not misleading.
4.06 Title to Assets. Sellers have good, valid and marketable title to
all the Purchased Assets (real and personal, tangible and intangible), in each
case subject to no liens, security interests, encumbrances, charges or adverse
claims of any nature whatsoever, except for (i) security interests in favor of
Philips Credit Corporation ("Philips") as secured lender to Sellers (which
security interests are to be terminated, satisfied and released on the Closing
Date); (ii) interest of the owners or minor imperfections of title with respect
to property under lease used in any of the Systems which do not materially
interfere with the use of said property; and (iii) liens for current local real
estate taxes not yet due and payable. The Purchased Assets constitute all
property and assets necessary to conduct the business and operations of each
System as presently conducted.
4.07 Financial Statements. Sellers have provided to Buyer true,
complete and correct copies of (i) the balance sheets and statements of income
and retained earnings and changes in financial position at and for the fiscal
years ended December 31, 1993 and December 31, 1994, respectively, together
with the audit report of Williams, Rogers, Lewis Co., P.C. (the "Audited
Financial Statements") and (ii) the unaudited balance sheet and statements of
income for the eight-month period ended August 31, 1995 (the "Unaudited
Financial Statements). The Audited Financial Statements have been prepared in
accordance with GAAP (except as indicated in the notes thereto) and fairly
present each Seller's financial condition, results of its operations and
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changes in its financial position at and for the periods therein specified.
The Unaudited Financial Statements were prepared in accordance with GAAP and
fairly present each Seller's financial condition, results of its operations and
changes in its financial position at and for the period therein specified. The
books and records of each Seller from which the Audited Financial Statements
and the Unaudited Financial Statements are prepared properly and accurately
record the transactions and activities which they purport to record, and such
books and records will properly and accurately so record such transactions and
activities through the Closing Date.
4.08 Absence of Certain Changes. Since August 31, 1995, each Seller has
conducted its business in the ordinary course and there has not been any
materially adverse change in the condition (financial or otherwise), results of
operations, assets, liabilities, properties, or businesses of the Sellers,
whether as a result of any legislative or regulatory change, revocation of any
permits, franchises, fire, explosion, accident, casualty, labor trouble, flood,
drought, riot, storm, condemnation or act of God or other public force or
otherwise, nor has either Seller undertaken or committed to any business
practice which is inconsistent with past practices, and without limiting the
foregoing, except as set forth on Schedule 4.08, Sellers have not:
(a) entered into any material transaction
or incurred any material liability or obligation
relating to any System that was entered into or incurred
other than in the ordinary course of business;
(b) sold or transferred any of the assets
relating to any System other than assets disposed of in
the ordinary course of its business where suitable
replacements, if necessary, have been made therefor;
(c) suffered any Material Adverse Change in the business,
assets, properties, or financial condition of any
System, including any damage, destruction, or loss
affecting any assets used or useful in the conduct of
the business of any System;
(d) canceled any debts owed to or claims held by Sellers
with respect to any System; or
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(e) suffered any material write-down of the value of any
Purchased Assets.
4.09 Real Property. Sellers do not own any real property used in
connection with the Systems. Schedule 4.09 contains a true and complete list
of (i) all real property leased by each Seller ("Real Property"), (ii) the
location of such Real Property, and (iii) the name of lessor, the rental rate
and the lease term. Except as set forth on Schedule 4.09:
(a) Each Seller has a valid leasehold interest in
all Real Property which such Seller leases,
and such Seller has duly complied with all of the terms
and conditions of such leases and has not done or
performed or failed to perform any act which would
materially impair its right to use the Real Property
leased thereunder on the terms of such leases. There is
no existing material default by either Seller or by the
landlord under any such leases.
(b) Sellers do not occupy or use any parcel of real
property that is material to its business which
is not now leased by either Seller and disclosed
on Schedule 4.09.
(c) The Real Property listed on Schedule 4.09
constitutes all of the Real Property required for
the operation of each System as conducted at present.
All Real Property (including improvements thereon) is in
good condition and repair consistent with its present
use, and is available for immediate use in the conduct
of the business and operations of the Systems. To
Sellers' knowledge, the Real Property and the
improvements thereon do not violate existing building
codes or zoning laws (after giving effect to all
provisions of such codes or laws that permit
continuation of a condition or use that precedes
adoptions of such codes or laws so long as such
provision will continue to permit continuation of such
use after the sale of the Real Property to Buyer),
except for violations that do not have a material
adverse effect on the use of the Real Property or
materially detract from the value of the Real Property.
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(d) There are no leases, subleases, licenses,
concessions, or other agreements, written or
oral, granting to any party or parties the right of use
or occupancy of any portion of the parcels of the Real
Property which would materially impair either Seller's
ability to use such Real Property for its intended
purpose.
(e) Sellers shall transfer to Buyer all licenses and/or
permits necessary or incidental to use of the Real
Property set forth on Schedule 4.09 in the operation of
the Systems. Sellers are not in violation or default
of any permit or license in any respect that would have
a Material Adverse Effect. Sellers have received no
written notices, citations or complaints from
governmental or non-governmental parties regarding any
aspect of the use and enjoyment of said Real Property.
(f) There are no pending or, to the Sellers'
knowledge, threatened condemnation proceedings,
lawsuits, or administrative actions relating to the Real
Property, or other matters affecting adversely the
current use, occupancy, or value thereof.
(g) Sellers' facilities located on the parcels
of Real Property are supplied with utilities and
other services necessary for Sellers' operation of such
facilities, including, as applicable, gas, electricity,
water, telephone, sanitary sewer, and storm sewer, all
of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and
are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the
parcels of Real Property.
(h) The parcels of Real Property abut on and/or
have vehicular access to public roads.
4.10 Tangible Personal Property. Schedule 4.10 contains a true and
complete list of (i) each item of tangible personal property that is owned,
used or leased by each Seller and included in the Purchased Assets ("Personal
Property"), (ii) the type and quantity of such property, and (iii) the name of
the
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lessor, the rental rate and the lease term with respect to such property
which is leased. Except as set forth in Schedule 4.10:
(a) Each Seller has good and marketable title to
each item of such Personal Property listed on
Schedule 4.10 as being owned by a Seller; each item of
Personal Property is owned free and clear of all liens,
security interests, encumbrances, charges or
restrictions of any nature whatsoever, except for
security interests in favor of Philips as secured lender
to Sellers (which security interests are to be released
on the Closing Date);
(b) Each item of such Personal Property listed on
Schedule 4.10 as being leased by a Seller is
leased under a lease or other instrument pursuant to
which such Seller has a valid leasehold interest in such
Personal Property, and such Seller has duly complied
with all of the terms and conditions of such leases and
has not done or performed or failed to perform any act
which would materially impair its rights to use such
Personal Property for its intended purpose on the terms
of the lease therefor. There is no existing material
default by either Seller or by the lessor under any such
leases;
(c) Each such item of Personal Property is in
good operating condition and repair, subject to
ordinary wear and tear;
(d) Sellers do not possess or use any material
item of tangible Personal Property that is
material or necessary to the operation of any of their
respective Systems which is not now owned or leased by a
Seller and disclosed on Schedule 4.10;
(e) The Personal Property listed on Schedule
4.10 constitutes all the material items of
personal property used by either Seller in the operation
of any System; and
(f) Sellers have and shall transfer to Buyer
all licenses and/or permits necessary or
incidental to the use of said Personal
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Property set forth on Schedule 4.10 in the operation of
the Systems. Sellers have received no written notices,
citations or complaints from governmental or
non-governmental parties regarding any aspect of the
material use and enjoyment of said Personal Property.
4.11 Patents, Trademarks and Copyrights. Neither Seller possesses any
patent, patent right, trademark or copyright or is a party to any license or
royalty agreement with respect to any patent, trademark or copyright, except
for licenses respecting program material and obligations under the Copyright
Act of 1976 applicable to CATV systems generally.
4.12 Franchises. All of the cable television franchises, licenses and
authorizations used or held for use in the operations of each of the Systems
(together with all amendments and supplements thereto, collectively herein the
"Franchises") are listed on Schedule 4.12, which sets forth in summary fashion
the name of the governmental authority that has issued the Franchise (the
"Municipal Authorities"), the area encompassed by the Franchise, the dates of
grant and expiration of the Franchise and the franchise fee). Sellers have
delivered to Buyer true and complete copies of all Franchises. Except as set
forth on Schedule 4.12 hereto, each Franchise is in full force and effect and
constitutes a valid and binding obligation of the franchising authority which
is a party to such franchise, is legally enforceable against such franchising
authority in accordance with its terms, and each Seller is validly and lawfully
operating each of its Systems under the Franchises. Except as set forth in
Schedule 4.12 hereto, Sellers are not in violation of or default under any
material provision of any Franchise, and Sellers are not in violation of or
default in the performance of their respective material obligations under any
Franchise. To Sellers' knowledge,
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there exists no fact or circumstance, which with the passage of time or the
giving of notice or both, would constitute a default under any Franchise or
permit the franchising authority to cancel or terminate the rights thereunder,
except upon the expiration of the full term thereof. The Franchises are the
only franchises, licenses and authorizations necessary for Sellers to operate
each of its Systems lawfully and in the manner in which they are presently
being operated. Sellers have filed with the appropriate Municipal Authorities
all appropriate requests for renewal under the Communications Act (as defined
in Section 4.13(k) below) within 30 to 36 months prior to the expiration of
each Franchise. Sellers have not made any commitments (oral or written) to any
governmental authorities with respect to any System other than those contained
in the Franchises. To Sellers' knowledge (without inquiry), no prior owner of
any of the Systems has made any commitment (oral or written) to any Municipal
Authority with respect to any System other than those contained in the
Franchises. All reports, applications, financial statements and other
documents required to be filed by Sellers with respect to each System have been
filed, except where the failure to file would not have a Material Adverse
Effect. Except as otherwise provided in Sections 8.02(f) and 9.02 hereof, the
Franchises shall be assigned to Buyer at Closing with the consent and approval
of applicable franchising authorities. Except as specified on Schedules 4.12,
no community serviced by any of the Systems has become certified by the FCC for
the purpose of regulating a System's operations and/or rates.
4.13 Systems Information.
(a) Schedule 4.13 is a true and complete list of the current channel
alignment (including all broadcast stations and satellite services carried,
cable channel assignment, frequencies utilized and pilot frequencies) for each
of the Systems. Schedule 4.13 also sets forth, as of August 31, 1995, the
number of Subscribers of each System and the number of Homes Passed by each
System. "Homes Passed" means the sum of each single family residence or
dwelling unit within a building containing multiple dwelling units that is
located within 500 feet of the activated trunk or feeder cable of a System,
plus commercial and other buildings (including hotels) actually served by a
System.
(b) Each Seller has filed offset notifications for or obtained
appropriate waivers for all aeronautical frequencies in use by any of the
Systems. Each Seller's use of such aeronautical frequencies is in material
compliance with all applicable FCC rules, regulations and requirements. Each
System has the capability of carrying channels and providing reception on all
such channels. Except as set forth on Schedule 4.13 hereto, each System is
presently carrying channels and is providing reception on all such channels in
compliance with the technical standards set forth in all applicable FCC rules,
regulations and requirements. Schedule 4.13 is a true and complete list of
such frequencies, the geographic coordinates of the approximate center of each
of the System's service areas and the authorized radius of each such System.
(c) At the Closing, the Systems collectively will contain
approximately 2,460 miles of aerial plant and approximately 120 miles of
underground plant.
(d) Except as set forth in Schedule 4.13, (i) the Systems are the only
cable television systems, multichannel
<PAGE> 19
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multipoint distribution service, or other multichannel video programming
service (other than any direct broadcast satellite service) presently servicing
the area included in the Franchises or in any area in which either Seller
operates that does not require a Franchise and (ii) to Sellers' knowledge,
after due inquiry, no other cable television franchises or other franchises,
licenses or authorizations have been issued and no applications for such
franchises, licenses or other authorizations are pending with respect to
providing such services to those areas.
(e) Each Seller has complied in all respects with all applicable
governmental laws, rules and regulations, the violation of which would have a
material adverse effect on the Buyer's right or ability to operate any of the
Systems. There is no legal action or governmental proceeding pending or, to
Seller's knowledge after due inquiry, threatened for the purpose of modifying,
revoking, terminating, suspending, canceling or reforming any of either
Seller's FCC licenses or which might have any other material adverse effect
upon, or cause disruption to, the Buyer's operation of any of the Systems after
Closing.
(f) All material royalties, fees, reports, schedules and returns of
any administrative agency of the federal or any state or local government or any
utility relating to each of the Systems which are required to be filed and paid
have been filed and paid.
(g) All necessary Federal Aviation Administration ("FAA") and FCC
approvals with respect to each System's towers have been obtained and
maintained in compliance with the rules, policies and regulations of the FAA
and the FCC. Schedule 4.13 contains a true and complete list of each of the
System's towers and copies of all relevant FAA determinations with respect
thereto.
(h) Each Seller has all material agreements, leases, easements, pole
attachments, rights-of-way, contracts, licenses, franchises, permits and uses
of real property necessary for the current operation of each of the Systems and
is not in violation or default of any such agreements or contracts in any
respect that would have a Material Adverse Effect.
(i) Each Seller has filed all material copyright notices and reports
required to be filed by it and has paid all material fees required to be paid
by it with respect thereto for the operation of each of the Systems. Neither
Seller is aware of any inquiry, claim, action or demand pending before the
Copyright Office or any court which questions the copyright
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filings or payments made by such Seller with respect to any of the Systems.
(j) To Sellers' knowledge, each of the Systems shown on Schedule 4.13
under "Effective Competition" are subject to effective competition under
Section 623(l) of the Communications Act.
(k) Except as set forth on Schedule 4.13, each Seller is in material
compliance with the rules and regulations of the FCC, the rules and regulations
of the Copyright Office, the Copyright Act, the Communications Act of 1934, as
amended by the Cable Communications Policy Act of 1984 and by the Cable
Television Consumer Protection and Competition Act of 1992 (collectively, the
"Communications Act") and the rules and regulations thereunder of each act, and
the applicable rules and regulations of the FAA with respect to hazards to air
navigation. Sellers have provided appropriate notices to subscribers of their
right to privacy in accordance with the requirements of the Communications Act.
Except as set forth on Schedule 4.13, the Sellers are currently in compliance
with 47 C.F.R. Section 76.92 and 76.151, with respect to network
non-duplication protection and syndicated exclusivity, and Sellers are not
aware of any complaint filed with the FCC alleging Sellers' non-compliance with
such regulations.
(l) All of the communities to which Sellers provide service have been
registered with the FCC. Schedule 4.12 contains a true and complete list of
each such community and its corresponding community unit identification number.
Sellers hold all FCC licenses, permits and authorizations which are required
by law in connection with their operation of each of the Systems. Each such
license is listed in Schedule 4.13 hereto. Each such licensed facility is
being operated in all material respects in accordance with the requirements of
the relevant license and the rules and regulations of the FCC. Each employment
unit operated by Sellers, including headquarters offices, is currently and,
since November 1, 1992, has been in compliance with the equal employment
opportunity requirements of Section 554 of the Communications Act and the FCC's
implementing rules and regulations.
(m) Except as set forth on Schedule 4.13 hereto, all broadcast
television station signals carried on any of the Systems, excluding
superstations carried pursuant to 47 C.F.R. Section 76.64, are being carried
either pursuant to a must carry election or retransmission consent agreement
between a Seller and the broadcast station licensee authorizing the
retransmission of the station's signal, as the case may be. Except as set
forth on Schedule 4.13 hereto, (i) each such retransmission consent agreement
is in full force and effect and
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consistent with FCC rules, and (ii) there is no dispute pending or, to Sellers'
actual knowledge, without inquiry, threatened with respect to the carriage or
channel position of any broadcast station. Sellers have complied in all
material respects with the must carry and retransmission consent provisions of
the Communications Act and the FCC rules and regulations promulgated
thereunder.
4.14 Contracts. Schedule 4.14 is a true and complete list of each of the
following contracts (the "Contracts") to which either Seller is a party or by
which either or either's property is bound:
(a) Pole attachment and underground conduit agreements;
(b) Right-of-way agreements;
(c) Contracts for the purchase or sale of
goods, programming or services (other than individual
subscribers agreements) not terminable on less than 30
days' notice and which (i) require or are reasonably
anticipated to require the payment by Sellers of more
than $10,000 in any twelve month period, (ii) under
which either Seller is entitled to receive $10,000 or
more annually, or (iii) which affect any of the Systems
in any material way;
(d) all leases or other rental agreements (other than
those included on Schedule 4.09 hereto) under which
either Seller is either lessor or lessee of property
used or held for use primarily in the operations of any
System that call for annual lease payments in excess of
$2,500 individually; and
(e) all agreements for the retransmission
by any of the Systems of any signals.
Sellers have delivered to the Buyer true and complete copies of all Contracts
listed on Schedule 4.14.
All of the Contracts are validly existing and in full force and effect.
Sellers have obtained and each now holds all of the contracts which are
necessary or required for the lawful ownership and operation of each of the
Systems as presently owned and operated. Except as set forth in Schedule 4.14,
Sellers warrant that they have not at any time prior hereto failed to
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operate and maintain any of the Systems in a manner which could now or
hereafter result in cancellation or termination of, or liability for damages
under, such Contracts nor has either Seller defaulted in its obligations
pursuant to said Contracts which default could result in the cancellation of
any such Contract or adversely affect any material rights of such Seller
thereunder. Each Seller is in compliance in all material respects with all
requirements of all governing or regulatory authorities relating to the
Contracts. Except as disclosed on Schedule 4.14, without inquiry Sellers have
not been made aware of any intention by any party to any Contract (i) to
terminate such Contract or amend the terms thereof without the consent of
Sellers, (ii) to refuse to renew such Contract upon expiration of its term, or
(iii) to renew such Contract upon expiration only on terms and conditions that
are materially more onerous than those now existing. Except for the need to
obtain the consents listed on Schedule 4.20, Sellers have full legal power and
authority to assign its rights under all Contracts to the Buyer in accordance
with this Agreement, and such assignment will not affect the validity,
enforceability or continuation of any such Contract.
4.15 Insurance. Each of the Systems and all of the Purchased Assets are
insured against risks in such amounts which Sellers believe are usually and
customarily insured against in the cable television industry, subject to
reasonable deductibles, including, without limitation, (i) fire and extended
coverage insurance on all of the Purchased Assets in amounts typical for such
insurance in the cable television industry, and on the business of the Systems,
covering property damage and loss of income by fire or other casualty, and (ii)
adequate insurance protection against all liabilities, claims and risks arising
in the ordinary course of business customarily included within a form of
comprehensive liability insurance and each insurance policy is summarized in
Schedule 4.15 hereof. All insurance policies are in full force and effect.
Sellers have not received any notice of cancellation under any of these
policies. Sellers currently have, or there exists for the Sellers' benefit, in
full force and effect, the performance, surety or other bonds set forth on
Schedule 4.15, which represent all such bonds required under the Franchises,
except where the requirement has been waived by the grantor or other party to
any such Franchise or except where the failure to have such bonds would not
have a Material Adverse Effect.
4.16 Agreements with Employees; Labor Relations. Except as set forth on
Schedule 4.16, neither Seller is party to any employment agreement, written or
oral, with employees engaged in business operations of any of the Systems which
cannot be terminated at will by such Seller, and, except as set forth on
Schedule 4.16, neither Seller has any pension or profit sharing
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or other employee benefit plan for the employees of any of the Systems
including but not limited to any plans subject to the Employee Retirement
Income Security Act of 1974, as amended. The names, titles and rates of
compensation of all of the employees of Sellers involved in the operation of
any of the Systems, are listed on Schedule 4.16 (collectively, the
"Employees"). The Employees are not parties to any collective bargaining
agreement with either Seller and there are no grievances or disputes, nor have
there been any grievances or disputes since January 1, 1994, with any union or
any other organization of either Seller's employees or any demands for
collective bargaining by any union or organization or threats of strikes or
work stoppages. There is not pending or, to Sellers' knowledge, threatened any
charge or complaint against either Seller by the National Labor Relations Board
or any state labor relations board or equal employment opportunity or any
similar state agency or commission or any representative thereof.
4.17 Taxes, Returns and Other Reports. Except as set forth on Schedule
4.17:
(a) Each Seller has filed all reports and returns
relating to all income, excise, property, sales,
use, franchise or any other fees, assessments or taxes
imposed by the United States or any state, local or
foreign government required to be filed by it since
November 1, 1992 (which returns and reports are true,
correct and complete in all material respects) and has
paid all such fees, assessments or taxes shown as due on
such returns.
(b) No notices respecting material asserted
or assessed and unresolved deficiencies for any
fees, assessments or taxes have been received by either
Seller since November 1, 1992 for any period.
(c) There is, to the knowledge of Sellers, without
inquiry, no investigation by any tax agency or authority
presently pending or threatened, and the Sellers are
not a party to any action or proceeding by any
governmental authority for the assessment or
collection of fees, assessments or taxes.
(d) There are no audits pending nor has either Seller
extended or waived any statute of
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limitation with respect to any tax, which extension or
waiver has not expired.
(e) Since November 1, 1992, neither Seller has
been subject to audit or adjustment or resettlements
relating to taxes by any federal, state or local
taxing authority.
(f) None of the Purchased Assets is subject to any
lien in favor of the United States or any
state or local taxing authority.
4.18 Litigation. Except as set forth on Schedule 4.18, there is no
action, suit, claim, demand, arbitration or other proceeding (or, to the
knowledge of Sellers, any investigation), administrative or judicial, pending
(or, to the knowledge of Sellers, threatened) against or relating to the
Sellers or either of them, or the Purchased Assets, nor has any order of any
court or other governmental authority or agency been issued against or relating
to any of the foregoing.
4.19 Environmental Matters. (i) Each Seller is currently in compliance
with all applicable environmental laws, and has obtained all permits and other
authorizations needed to operate its facilities, (ii) to Sellers' knowledge,
there is no present requirement of any applicable environmental law which is
due to be imposed upon it which will increase its cost of complying with the
environmental laws, (iii) to the best of Sellers' knowledge, after due inquiry,
there has not been and is not now on or under the leased Real Property any
treatment, storage, recycling, disposal or arrangement therefor, of any
hazardous waste or any underground storage tanks, in use or abandoned. As used
in this Agreement, the terms (A) "Environmental Laws" include but are not
limited to any federal, state or local law, statute, charter or ordinance, and
any rule, regulation, binding interpretation, binding policy, permit, order,
court order or consent decree issued pursuant to any of the foregoing, which
pertains to, governs or otherwise regulates any of the following activities,
including without limitation (a) the emission, discharge, release or spilling
of any substance into the air, surface water, groundwater, soil or substrata;
(b) the manufacturing, processing, sale, generation, treatment, storage,
disposal labeling or other management of any waste, hazardous substance or
hazardous waste, and (B) "waste", "hazardous substance" and "hazardous waste"
include any substance defined as such by any applicable environmental law.
4.20 Consents. Except for the consents, approvals, permits,
authorizations of, declarations to, or filings with the governmental or
regulatory authorities and other third parties
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(collectively, the "Consents") listed on Schedule 4.20, no other Consents are
legally or contractually required (a) for Sellers to consummate this Agreement
and the transactions contemplated hereby, (b) to permit Sellers to assign or
transfer the Purchased Assets to Buyer or (c) to enable Buyer to lawfully
operate each System as it is presently operated by Sellers.
4.21 Suppliers and Subscribers. Schedule 4.21, to be delivered to Buyer
not less than five (5) business days prior to the Closing Date, sets forth a
list which is accurate as of the date specified therein (which shall be within
thirty-one (31) days prior to the Closing Date), as follows:
(a) Any supplier from whom any of the
Systems purchased supplies within the most recent
twelve-month period prior to the date of such Schedule
4.21, excluding, however, those suppliers who during
such period have delivered supplies with an aggregate
value of less than $10,000.
(b) A listing of all subscribers to each
of the Systems.
4.22 Compliance With Laws. Except as disclosed on Schedule 4.22 hereof or
elsewhere in this Article IV or the other Schedules hereto, Sellers are not in
violation of any applicable order, judgment, injunction, award or decree
relating to any of the Systems, nor are the Sellers in violation of any
federal, state or local law, ordinance or regulation or any other requirement
of any governmental or regulatory body, court or arbitrator applicable to any
of the Systems or the Purchased Assets (excluding, in each case, violations
which do not individually or in the aggregate materially adversely affect
Sellers' ownership and operation of any of the Systems or Sellers' ability to
perform its obligations under this Agreement). Without limiting the generality
of the foregoing, except as disclosed on Schedule 4.22 hereof or elsewhere in
this Article IV or the other Schedules hereto, (a) there is not pending or, to
Sellers' knowledge, threatened any notification of any governmental authority
that the Sellers or either of them is not in compliance with applicable laws
and regulations respecting employment and employment practices, occupational
safety and health laws and regulations, the laws or regulations relating to the
quality of the environment, FCC matters and the Sellers know of no basis
therefor, and (b) the Sellers have not received any notification of past
violations of such laws or regulations (except for such violations which no
longer exist).
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4.23 Restrictive Provisions. The Sellers are not subject to, or party to,
any charter, by-law, mortgage, lien, lease, license, permit, agreement,
contract, instrument or any law, rule, ordinance, regulation, order, judgment
or decree, or any other restriction of any kind or character, which adversely
affects the business practices, operations or condition of the Purchased Assets
or any of the Systems in any material respect, or which would prevent the
consummation of the transactions contemplated by this Agreement or the
continued operations of each of the Systems on substantially the same basis
following the Closing Date as heretofore operated.
4.24 No WARN Obligation. No notices to employees of either Seller are
required under the federal Worker Adjustment and Retraining Notification Act as
a result of the transactions contemplated hereby.
4.25 Transactions with Affiliates. Except as disclosed on Schedule 4.25
hereto and except for transactions contemplated by existing management
arrangements with the Manager and existing financing arrangements between
Philips Credit Corporation and the Sellers, the Sellers have not been involved
in any business arrangement or relationship relating to any System with any
Affiliate of either Seller, and no Affiliate of either Seller owns any property
or right, tangible or intangible, that is used or held for use primarily in the
operations of any System. As used in this Agreement, "Affiliate" has the
meaning given to such term in Rule 12b-2 promulgated under the Securities and
Exchange Act of 1934, as amended; provided that, notwithstanding the foregoing
definition to the contrary, the term "Affiliate" shall not include any person
or entity that, directly or indirectly through one or more intermediaries,
controls Philips Credit Corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers that the following
statements and representations are true and correct as of the date hereof:
5.01 Organization and Standing. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Prior to the Closing Date, Buyer will be qualified to do business as
a foreign limited partnership in the states of Tennessee, Georgia and Virginia.
5.02 Due Authorization; Enforceability. Buyer has the partnership power
and authority to execute and deliver this
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Agreement and the Transaction Documents to which it is a party and to perform
its obligations hereunder and thereunder. The execution and delivery by Buyer
of this Agreement and the Transaction Documents and the performance by it of
the obligations to be performed by it hereunder and thereunder have been duly
authorized by all necessary partnership proceedings on the part of Buyer. This
Agreement constitutes, and the Transaction Documents, when executed and
delivered by Buyer, will constitute, the legal, valid and binding obligations
of Buyer enforceable against Buyer in accordance with their respective terms
except as the enforceability of this Agreement may be affected by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by
judicial discretion in the enforcement of equitable remedies.
5.03 No conflict. Except for the filings and consents referred to in
Section 4.20 or otherwise listed on Schedule 5.03, neither the execution and
delivery by Buyer of this Agreement, the performance by Buyer of the terms and
conditions hereof or thereof, nor the consummation by Buyer of the transactions
contemplated hereby will:
(a) conflict with or result in any breach
of any of the terms, conditions or provisions of the
certificate of limited partnership or partnership
agreement of Buyer,
(b) breach or violate any provision of,
or require any consent, authorization or approval under,
any law or administrative regulation or any judgment,
decree or order, applicable to, or any governmental
permit or license issued to Buyer, or
(c) result in a breach or violation of or
require any consent, authorization or approval under,
any of the material terms of any material indenture,
mortgage, lien, lease, agreement or constraint to which
Buyer is a party or to which it is bound.
5.04 Litigation. There is no litigation, at law or in equity, or any
proceedings before any commission or other governmental authority, pending or,
to the knowledge of Buyer, threatened against or which may adversely affect
Buyer involving the possibility of any judgment, order or other decision which
might impair materially the ability of Buyer to consummate the transactions
contemplated by this Agreement.
<PAGE> 28
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5.05 Adequate Assignee. Buyer, standing alone or with the support of
its affiliates, has sufficient technical and business experience, management
and financial resources to meet its obligations hereunder (including without
limitation its obligation to pay the Purchase Price to Sellers on the Closing
Date), and the customary and reasonable requirements generally imposed by
franchising authorities, utilities or landlords of head-end sites as a
condition to their consents to assignments of Franchises, pole attachment
agreements, lease agreements and other agreements affecting any of the Systems
from Sellers to Buyer.
5.06 Buyer's Due Diligence. Buyer is a sophisticated operator of CATV
systems. Buyer has independently conducted such inspections, tests, audits and
analyses of the Systems, the Purchased Assets and Sellers' books and records
pertaining thereto as Buyer deems necessary or prudent. As of the date of this
Agreement, Buyer is not aware from its due diligence investigation of any fact
or circumstance which renders any of Sellers' representations and warranties
set forth in Article IV hereof or in Sellers' Schedules to this Agreement false
or inaccurate, except such facts or circumstances, if any, which have been
disclosed in writing to Sellers prior to the date hereof. Neither this
representation or any review, examination or investigation by Buyer shall
diminish or obviate any of the obligations of Sellers under this Agreement.
5.07 Accurate Information. All information furnished by Buyer to any
party who must provide a consent to assignment of any of the Purchased Assets,
and all information provided in connection with the filings and reports
specified in Section 7.02 hereof, shall be accurate and complete in all
material respects.
ARTICLE VI
COVENANTS PRIOR TO CLOSING
Sellers jointly and severally covenant and agree as follows:
6.01 Conduct of Business. From and after the date of this Agreement and
until the Closing Date, Sellers (whether individually or collectively) without
the prior written consent of Buyer (which shall not be unreasonably withheld):
(a) will not enter into or commit to any transaction
other than in the usual and ordinary course
of business,
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(b) will operate its business only in the ordinary
course consistent with past practice consistently
applied,
(c) will maintain and repair the Purchased
Assets in accordance with good standards of
maintenance,
(d) will not sell or otherwise dispose of any of the
Purchased Assets, except for routine sales of
obsolete assets, and
(e) will not permit any Franchise, permit, lease,
right of way or other authorization or right
material to any System to lapse or to be
terminated, restricted or impaired.
6.02 Preservation of Systems' Business. Sellers shall exert their
reasonable best efforts consistent with past business practices to preserve
the business of any System and preserve their good will.
6.03 Notice of Events. Sellers shall promptly upon becoming aware
notify the Buyer in writing of (a) any event, condition or circumstance
occurring from the date hereof through the Closing Date that would constitute a
breach of this Agreement, or (b) any event, occurrence, transaction or other
item which would have been required to be disclosed on any schedule, exhibit or
statement delivered hereunder, had such event, occurrence, transaction or item
existed on the date of this Agreement, other than matters arising in the
ordinary course of business which would not render any of the representations,
warranties or other undertakings of Sellers under this Agreement false or
misleading.
6.04 [Intentionally Omitted]
6.05 Periodic Financial Information. The Sellers shall furnish to the
Buyer within 25 days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense for the month
just ended and such other financial information (including information on
payables and receivables) as the Buyer may reasonably request. The income
statements delivered by the Sellers to Buyer pursuant to this Section 6.05
shall be prepared from the books and records of the Sellers in accordance with
generally accepted accounting principles consistently applied, shall accurately
reflect the books, records and accounts of the Systems, shall be complete and
correct in all material respects, and shall present fairly the results of
operations of the Systems for the periods then ended.
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Promptly after the preparation thereof, the Sellers shall deliver to the Buyer
copies of any other financial statements, subscriber counts and other
operational data regularly prepared by the Sellers or the Manager for Sellers'
internal use or for delivery to their Lenders. The Sellers shall also provide
Buyer on a periodic basis with reports of capital expenditures made with
respect to the Systems.
6.06 No Negotiations by Sellers. Between the date hereof and the
Closing Date, Sellers shall not, directly or indirectly: (a) solicit, initiate
or encourage the submission of inquiries, proposals or offers from any person
(other than Buyer) relating to any acquisition or purchase of assets of, or any
equity interest in, the Sellers or any of the Systems, or any exchange, offer,
merger, consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the Sellers or any of the Systems, (b) enter into or
participate in any discussion or negotiation regarding any of the foregoing, or
furnish to any person (other than the Buyer and its representatives) any
information with respect to the Sellers or any of the Systems (provided that
Sellers shall be permitted to furnish such information to the Manager and to
such persons, entities and governmental authorities in connection with
procuring any third-party consent contemplated hereby), or (c) except as
otherwise permitted hereunder, otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any person
(other than Buyer) to do or to seek any of the foregoing. Sellers will notify
Buyer immediately if any such proposal is received or if any such discussions,
negotiations or other events occur or are sought to be initiated, and such
notice will be set forth in detail and the terms and other particulars thereof.
6.07 Change of Sellers' Names. At such time after the Closing as shall
be reasonable in view of Sellers' actual or contingent obligations hereunder and
Sellers' anticipated winding-up of their business operations, Sellers shall
change their names to ones which are dissimilar to any name used in connection
with any of the Systems.
6.08 Cure of Certain Exceptions to Sellers' Representations. Schedule
6.08 hereto lists certain exceptions to the representations and warranties of
Sellers which have been disclosed by Sellers in this Agreement or on certain
Schedules hereto, which deficiencies Sellers intend to cure prior to the
Closing. Sellers at their sole cost and expense shall cure all such
deficiencies listed on such Schedule, and, to the extent reasonably requested
by Buyer, provide Buyer with evidence of such cure, prior to the Closing Date.
<PAGE> 31
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6.09 Covenant Not to Compete.
(a) Each Seller covenants and agrees that for a period of five years
after the Closing Date, neither Seller nor any of the General Partners, Philips
Credit Corporation or James E. Doucette, or entities controlled by him
(collectively, the "Restricted Group") will, without prior written consent of
Buyer, except as provided in clause (b) of this Section 6.09 and except as
otherwise contemplated by Section 9.02 hereof, directly or indirectly, own,
manage, operate, join, control, or engage or participate in the ownership,
management, operation, or control of, or be connected as a shareholder,
director, officer, agent, partner, joint venturer, or otherwise with, any
business or organization any part of which engages in the business of owning or
operating cable television systems within any Franchise Area (as defined in
Section 8.02(f) hereof).
(b) Notwithstanding clause (a) of this Section 6.09, the ownership
of a company's securities listed on a national securities exchange or quoted
on the National Association of Securities Dealers Automated Quotation System,
which constitute less than five percent (5 %) of the outstanding voting stock
thereof and does not otherwise constitute control over such company, shall not
be prohibited.
(c) Each Seller agrees that if either Seller or any member of the
Restricted Group engages or threatens to engage in any activity that
constitutes a violation of the provisions of this Section 6.09, Buyer shall
have the right and remedy to have the provisions of this Section 6.09
specifically enforced to the extent permitted by law by any court having
jurisdiction, it being acknowledged and agreed that any breach of this Section
6.09 would cause immediate irreparable injury to Buyer and that money damages
would not provide an adequate remedy at law for any breach. Such right and
remedy shall be in addition to, and not in lieu of, any other rights and
remedies available to Buyer at law or in equity.
(d) If any of the provisions or covenants contained in this Section
6.09 are held to be unenforceable in any jurisdiction because of the duration or
scope thereof, the court making such determination shall have the power to
reduce the duration and/or scope of the provision or covenant, and the
provision or covenant in its reduced form shall be enforceable; provided,
however, that the determination of such court shall not affect the
enforceability of this Section 6.09 in any other jurisdiction.
(e) At Closing, Philips Credit Corporation shall provide the Buyer
with a written undertaking to cause the
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members of the Restricted Group to abide by the covenants in this Section 6.09.
6.10 Philips Credit Corporation. Prior to or at Closing the Sellers shall
cause the security interests in favor of Philips Credit Corporation with
respect to the Systems and/or the Purchased Assets to be satisfied, terminated
and released.
ARTICLE VII
ADDITIONAL AGREEMENTS
Buyer covenants and agrees as follows:
7.01 Information Kept Confidential. Unless and until the transactions
contemplated hereby have been consummated, Sellers and Buyer will hold in
strict confidence, and not use in any way except in connection with the
transactions contemplated by this Agreement, all data and information obtained
in connection with the transactions contemplated by this Agreement from or on
behalf of the other party, except any of the same which:
(a) was in the public domain prior to
being furnished to the receiving party, or
(b) is required to be disclosed by the receiving
party or by any of its agents or representatives
in connection with any court action or any proceeding
before a governmental regulatory or administrative
body or in connection with securing any consent or
approval required hereunder or any financing
contemplated hereby.
In the event that this Agreement shall be terminated in accordance with Article
XI of this Agreement, the receiving party shall promptly return or destroy (and
promptly confirm in writing that it has been destroyed) all such information
without retention of any copies or extracts thereof.
7.02 Filings with the FCC and Municipal Authorities: Hart-Scott-Rodino-
Act.
(a) As soon as practicable, but in no event later than 30 days
after the date of this Agreement, the parties shall file with the FCC and the
Sellers shall file with any Municipal Authorities from which consent to the
transactions contemplated by this Agreement must be obtained, an application or
applications requesting consent to such transactions; the
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Buyer shall assist the Sellers in all reasonable respects (including, without
limitation, by attending meetings with the parties who must provide such
consents and by providing the financial data, information as to operating
experience, appropriate insurance and surety bonds reasonably required in order
to obtain such consents), and the parties shall take with due diligence all
reasonable steps necessary to expedite the processing of the application or
applications and to secure such consent or approval. The Sellers and Buyer
shall furnish each other with any correspondence from or to, and notify each
other of any other communications with, Municipal Authorities that relate to
the obtaining of such consents and approvals, and each party shall have the
right to participate in any hearings or proceedings before Municipal
Authorities with respect to such consents and approvals. Each party shall bear
its own costs and expenses (including the fees and disbursements of its
counsel) in connection with the preparation of the portion of any such
application to be prepared by it and in connection with the processing of that
application. In the event that the party from whom such consent is requested
shall propose to issue in the name of Buyer a new system agreement in lieu of
consenting to an assignment, Buyer shall agree to accept such proposal so long
as, in Buyer's reasonable business judgment, the terms and conditions of the
new agreement are no less favorable, in any material respect, than those
presently held by Sellers.
(b) Within 30 days after the execution of this Agreement, the
Sellers and the Buyer shall, in cooperation with the other, file in connection
with the transactions contemplated by this Agreement any reports or
notifications that may be required to be filed by them pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R")
with each of the Department of Justice and the Federal Trade Commission, and
each Seller and the Buyer shall comply promptly with all requests for further
documents and information made by the Department of Justice or the Federal
Trade Commission, and shall furnish to the other all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other. The Sellers and the Buyer shall
furnish each other with any correspondence from or to, and notify each other of
any other communications with, the Federal Trade Commission or Department of
Justice that relates to the transactions contemplated by this Agreement, and to
the extent practicable, to permit each other to participate in any conferences
with the Federal Trade Commission or Department of Justice. Any filing fee
required by the Federal Trade Commission or Department of Justice in connection
with any report or notifications required to be filed by either the Buyer or
the Sellers under the H-S-R in connection with the transactions
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contemplated by this Agreement shall be paid one-half by the Buyer and one-half
by the Sellers.
7.03 Consents: Assignments of Agreements and Assets.
(a) The Sellers shall use reasonable efforts (but shall not be
required to make any payment except as may be required to cure any default by
the Sellers under any Franchise or agreement and except for the incidental
costs of preparing and submitting applications and other requests, costs of
responding to reasonable inquiries and in-person meetings and ordinary and
customary filing fees and processing charges), and the Buyer shall assist the
Sellers in any reasonable respects (including, without limitation, by attending
meetings with the parties who must provide such consents and by providing the
financial data, information as to operating experience, appropriate insurance
and surety bonds reasonably required in order to obtain such consents), to
obtain all consents and approvals of third parties required for the transfer to
the Buyer of any of the Purchased Assets (whether or not listed on Schedule
4.20), including, but not limited to, the Contracts referred to in Section
4.14, without any conditions materially adverse to the Buyer. Notwithstanding
the foregoing, the Buyer shall have no obligation to make any payment in
assisting the Sellers in obtaining any of the consents, amendments, releases or
agreements described in this Section 7.03(a) (except for Buyer's incidental
costs of preparing and submitting applications and other requests, costs of
responding to reasonable inquiries and in-person meetings) or to agree to any
materially adverse change in any Franchise or other agreement to be assigned to
the Buyer. Any application to any governmental authority for any
authorization, consent, order, or approval necessary for the transfer of any
Franchise shall be reasonably acceptable to the Buyer. The Sellers will not
agree to any materially adverse change in any Franchise as a condition to
obtaining any authorization, consent, order, or approval necessary for the
transfer of such Franchise unless the Buyer shall consent otherwise.
(b) With respect to any Franchise for which a required consent to
transfer has not been obtained as of the Closing Date, both the Buyer and the
Sellers shall continue to work together in good faith and shall use their
respective reasonable efforts to obtain such consent, including, if reasonable
and necessary, the pursuit of all legal remedies. Except for Sellers'
out-of-pocket expenses, the Buyer shall pay for all costs associated with any
action, suit, proceeding, claim, or judgment in connection with the Buyer's and
the Sellers' collective pursuit of obtaining such required consents, and at the
closing with respect to any such Franchise (pursuant to Section 9.02) the
Sellers shall reimburse the Buyer for 50% of
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all reasonable, third-party, documented, out-of-pocket costs and expenses
associated therewith. In the event that either the Buyer or the Sellers wish
to pursue any such legal remedies without the consent and cooperation of the
other party, such party may pursue such legal remedies at its own cost and
expense.
7.04 All Reasonable Efforts. Subject to the limitations in Section 7.03,
Sellers and Buyer shall use all reasonable best efforts to cause all the
conditions precedent to the consummation of the transactions contemplated
hereby applicable to such party to be met as promptly as practicable.
7.05 Examination and Investigation. Prior to the Closing Date, Buyer
shall be entitled, through its employees and representatives, and its lenders,
appraisers and accountants, to make such investigation of the Purchased Assets,
properties, business and operations of the Systems and such examination of the
books, records and financial condition of the Systems as Buyer shall desire.
Any such investigations and examinations shall be conducted at reasonable times
and under reasonable circumstances so as not to interfere with the conduct of
Sellers' business, and Sellers shall cause their employees and representatives
to extend their reasonable cooperation with Buyer. Sellers shall furnish to
representatives of the Buyer all information and copies of documents concerning
the affairs of the Systems as representatives of the Buyer may reasonably
request, and shall cause its officers, employees, consultants, agents,
accountants and attorneys to fully cooperate with Buyer's representatives in
connection with such review, examination and investigation. No review,
examination or investigation by Buyer shall diminish or obviate any of the
representations, warranties, covenants or agreements of Sellers under this
Agreement.
7.06 Employee Transition. Immediately prior to the Closing Date, the
Sellers will terminate all Employees (except for any employees that Sellers
desire to retain for their remaining business operations), and will pay all
compensation due and provide all benefits required for such employees on or
before the Closing Date. Sellers will be responsible for all salaried and
hourly pension and retirement obligations and all salary and hourly health and
life insurance obligations incurred prior to the Closing Date, including
payment of all claims to insurance, payment of all premiums applicable to
coverage of the Employees to the Closing Date, assumption of all preexisting
claims, including unfunded pension liabilities. All liabilities relating to
terminated employees of any System arising on or before the Closing Date will
be the responsibility of Sellers, including those accruing by reason of
termination by Sellers. All liabilities relating to Sellers' benefit plans
shall be the responsibility of Sellers. Buyer shall have no obligation to
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offer employment to any of the Employees, but shall use the same lawful
criteria in making employment decisions with respect to the Employees as Buyer
uses in evaluating all other applicants for employment with Buyer. Buyer shall
notify Sellers at least five (5) days prior to the Closing Date of those
Employees to whom Buyer intends to offer employment. Sellers shall comply with
the provisions of COBRA relating to the continuation of health benefits to
employees as they apply to the transactions contemplated by this Agreement.
7.07 Bulk Sales Compliance. Buyer hereby waives compliance by the
Sellers with the provisions of any bulk sales law in any jurisdiction, if
applicable to transfer of the Purchased Assets.
7.08 PENAC Guaranty. Sellers covenant and agree to cause Philips
Electronics North America Corporation ("PENAC") to execute and deliver to Buyer
on the Closing Date the Guaranty Agreement contemplated in Section 10.05 of this
Agreement.
ARTICLE VIII
CONDITIONS OF CLOSING
8.01 Preamble. The respective obligations set forth herein of Sellers
and of Buyer, to consummate the agreements and the transactions contemplated
hereby shall be subject to the fulfillment, on or before the Closing, in the
case of the obligations of Buyer of the conditions set forth in Sections 8.02
and 8.03, and, in the case of the obligations of Sellers of the conditions set
forth in Sections 8.02 and 8.04. Any of the following conditions may be waived
in whole or in part by the party or parties whose obligations are subject to
such conditions.
8.02 Conditions to Obligations of Sellers and Buyer
(a) No Orders. There shall be in force no order or decree
restraining, enjoining, prohibiting, invalidating or otherwise preventing the
consummation of the transactions contemplated by this Agreement nor to the
knowledge of Buyer or Sellers, shall any proceeding therefor be pending or
threatened.
(b) No Litigation. No governmental department, agency, commission
or other governmental entity shall have notified Buyer or Sellers of its
intention to institute any suit, proceeding or investigation, and no such suit,
proceeding or investigation and no suit (or, to the knowledge of Buyer or
Sellers, no proceeding or investigation) instituted by any person shall be
pending (except for suits, proceedings or investigations
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which, in the opinions of counsel for Buyer and Sellers, have no substantial
likelihood of success) against any party hereto to restrain, enjoin, prohibit,
invalidate or otherwise prevent to a material degree the transactions
contemplated by this Agreement or to obtain damages from any party hereto in
connection with this Agreement.
(c) Consents and Approvals. All consents and approvals set forth on
Schedules 4.20 and 5.03 shall have been obtained or waived by Buyer or the
Sellers, as the case may be.
(d) Assignment and Assumption Agreement. The Assignment and
Assumption Agreement contemplated in Section 1.02(b) in form and substance
mutually satisfactory to Buyer and Sellers (the "Assignment and Assumption
Agreement") shall have been executed and delivered by the parties thereto.
(e) H-S-R Waiting Period. The applicable waiting periods provided
by H-S-R shall have expired or early termination of the waiting period shall
have been granted.
(f) The aggregate number of Subscribers in those Franchise Areas
that are Transferable Franchise Areas shall be at least 32,690. For purposes
of this Agreement:
(i) A "Franchise Area" means any of the geographic
areas in which the Sellers are authorized to
provide cable television service pursuant to a Franchise
granted by a Municipal Authority or where the Sellers are
authorized to provide such service without requirement of
such Franchise;
(ii) the number of Subscribers in a Franchise Area
shall be the number of Subscribers set forth next
to the name of such Franchise Area on Schedule
4.13 (regardless of any change in the number of
Subscribers in such Franchise Area between September 30,
1995 and the Closing Date); and
(iii) a "Transferable Franchise Area" means any
Franchise Area with respect to which (A) any
authorization, consent, order, or approval of any
Municipal Authority necessary for the assignment of the
Franchise in connection with the consummation of the
transactions contemplated by this Agreement shall have
been obtained and shall be final and
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effective, without any condition or qualification
materially adverse to Buyer or the Sellers or that would have
a Material Adverse Effect, or (B) no authorization, consent,
order, or approval of any Municipal Authority is necessary for
the assignment of the Franchise for such Franchise Area in
connection with the consummation of the transactions
contemplated by this Agreement, or (C) no Franchise granted by
a Municipal Authority is required for the provision of cable
television service in the Franchise Area.
(g) Each Franchise Area listed on Schedule 4.13 as having 1,000 or
more Subscribers must satisfy the applicable requirements in Section
8.02(f)(iii) so as to qualify as a Transferable Franchise Area.
(h) The FCC shall have consented, to the extent such consent is
legally required, to the transfer to Buyer of all licenses, permits or other
authorizations issued by the FCC with respect to the operation of the Systems
in all Transferable Franchise Areas, and such consents shall have become Final
Orders. For purposes of this Agreement, "Final Order" shall mean action by the
FCC (i) which has not been vacated, reversed, stayed, set aside, annulled or
suspended, and (ii) with respect to which no appeal, request for stay, or
petition for rehearing, reconsideration or review by any party or by the FCC
on its motion, is pending, and as to which the time for filing any such appeal,
request, petition, or similar document for the reconsideration or review by the
FCC on its own motion under the express provisions of the Communications Act
and the rules and regulations of the FCC, have expired.
8.03 Conditions to Obligations of Buyer
(a) Representations and Warranties of Sellers; Performance of
Covenants. Except as otherwise consented to in writing by Buyer, the
representations and warranties in Article IV hereof shall be true and correct
in all material respects (as the term "material" is defined in Section 8.05
hereof) at and as of the Closing with the same force and effect as though made
at and as of such time. Except as otherwise consented to in writing by Buyer,
Sellers shall have complied in all material respects with all covenants and
conditions contained herein required to be performed or complied with by
Sellers at or before the Closing. At the Closing Buyer shall have received a
certificate of Sellers to the foregoing effect.
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(b) Opinions of Counsel. Buyer shall have received (i) from Nixon,
Hargrave, Devans & Doyle LLP, as counsel for Sellers, an opinion dated the
Closing Date addressing such matters which are customary for transactions of
this type and size, which opinion shall be reasonably satisfactory to Buyer
and also be addressed to Buyer's lenders for the transactions contemplated by
this Agreement, and (ii) from Vorys, Sater, Seymour and Pease, as regulatory
counsel for the Sellers, an opinion, dated the Closing Date addressing
customary regulatory issues, which opinion shall be reasonably satisfactory to
Buyer and also be addressed to Buyer's lenders for the transactions
contemplated by this Agreement.
(c) Lien Searches. Buyer shall have received satisfactory UCC,
tax and judgment searches dated as of a recent date prior to the Closing Date
for filings in those jurisdictions where the assets of the Sellers are located
and where a filing would be required to perfect an interest or priority against
the Sellers or their assets, and true, complete and correct copies of such
search results shall have been delivered to Buyer by Sellers. The security
interests in favor of Philips Credit Corporation with respect to the Systems
and/or the Purchased Assets shall have been satisfied, terminated and released.
(d) Guaranty of PENAC. The Guaranty referred to in Section 10.05
hereof shall have been executed and delivered by PENAC.
(e) Non-Compete. The written undertaking referred to in Section
6.09(e) hereof shall have been executed and delivered by Philips Credit
Corporation.
(f) Legal Matters. All actions, proceedings, instruments and
documents required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be reasonably
satisfactory to counsel for Buyer.
(g) Estoppel Certificates. Buyer shall have received such Estoppel
Certificates from parties to any and all of the Leases or other material
agreements as Buyer may reasonably require.
(h) No Adverse Change. Since August 31, 1995, there shall have
been no material adverse change in the business of the Systems, or the Purchased
Assets, financial or otherwise, or to the subscribers of the Systems,
regardless of the reason, including but not limited to, those changes that are
as a result of any legislative or regulatory change, revocation, restrictions
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or material modifications made to any material permits, franchises, licenses or
other rights to do business of the Systems, failure to obtain any Permit,
Franchise or license, the occurrence of any fire, explosion, accident,
casualty, labor trouble, flood, riot, storm, condemnation, act of God or
otherwise which have a material adverse effect on the Systems and/or the
Purchased Assets, and Sellers shall have delivered to Buyer a Certificate,
dated the Closing Date, to such effect.
(i) Transaction Documents. Buyer shall have received such bills of
sale, assignments, assumptions, motor vehicle titles and such other instruments
of sale, transfer, conveyance and assignment transferring all of the Purchased
Assets from the Sellers, each in form and substance acceptable to Buyer and
Sellers (collectively, the "Transaction Documents").
(j) Books and Records. Buyer shall have received all the books of
account, papers, records, correspondence and other documents relating to the
Purchased Assets and/or the Systems (other than the Excluded Assets).
(k) Authorizations. Sellers shall have delivered to Buyer certified
copies of appropriate authorizing resolutions duly adopted by the Sellers,
authorizing and approving the execution and delivery by Sellers of this
Agreement and consummation of the transactions contemplated by this Agreement.
(l) Certificates of Sellers. Sellers shall have delivered all
certificates, documents and other matters regarding authority as Buyer's
counsel may reasonably request prior to the Closing Date.
8.04 Conditions to Obligations of Sellers.
(a) Representations and Warranties of Buyer; Performance of
Covenants. Except as otherwise consented to in writing by Sellers, the
representations and warranties in Article V hereof and in the Transaction
Documents to which Buyer is a party shall be true and correct in all material
respects at and as of the Closing with the same force and effect as though made
at and as of such time. At the Closing, Sellers shall have received a
certificate of Buyer to the foregoing effect. Except as otherwise consented to
in writing by Sellers, Buyer shall have complied in all material respects with
all covenants and conditions contained herein or in the Transaction Documents
to which Buyer is a party required to be performed or complied by it at or
before the Closing.
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(b) Opinion of Counsel for Buyer. Sellers shall have received from
Dow, Lohnes & Albertson, an opinion dated the Closing Date addressing such
matters which are customary for transactions of this type and size and which is
reasonably satisfactory to Sellers.
(c) Payments. Buyer shall have made, or caused to be made, the
payments specified in Sections 1.06 and 1.07 hereof.
(d) Legal Matters. All actions, proceedings, instruments and
documents required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be reasonably
satisfactory to counsel for Sellers.
(e) Authorization. Buyer shall have delivered to Sellers certified
copies of appropriate authorizing resolutions duly adopted by the Buyer,
authorizing and approving the execution and delivery by Buyer of this Agreement
and consummation of the transactions contemplated by this Agreement.
(f) Certificate of Buyer. Buyer shall have delivered all
certificates, documents and other matters regarding authority as Sellers'
counsel may reasonably request prior to the Closing Date.
8.05 Conditions and Events Which Will Not Excuse Performance by Buyer.
For purposes of determining whether a breach of any of Sellers' warranties and
representations or covenants is material and, thus, a failure to fulfill a
closing condition specified in subsections 8.03(a) and 8.03(h) hereof, the
following standards shall apply (it being understood that if the impact is not
deemed to be material as provided below and all other closing conditions have
been satisfied or waived, Buyer shall then be obligated to close on the
transactions contemplated hereunder but without waiver of any of its rights to
indemnification under Article X hereof):
(A) The impact of any and all such breaches or failures in the
aggregate existing on the Closing Date is material if it can reasonably be
expected to:
(x) Diminish the current fair market
value of the Systems to an amount which is ten percent
(10%) or more below what it otherwise would have been in
the absence of such breaches and failures; or
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(y) Reduce the cash flow with respect to the Systems,
on a consolidated basis, for the one year period
immediately following the Closing Date to $5,040,000 or
less (such cash flow to be determined in accordance
with GAAP and consistent with the principles applicable
to the determination of Sellers' Annualized Cash Flow
as set forth in Section 1.04(e) hereof; or
(z) Decrease the actual number of Subscribers to the
Systems to 36,000 or less as of the Closing Date.
ARTICLE IX
ACTION TO BE TAKEN AT AND AFTER CLOSING
9.01 Action at Closing. The following actions shall be taken at the
Closing, each of which shall be conditioned upon completion of all others and
all of which shall be deemed to have taken place at the same time:
(a) At Closing, Sellers shall deliver to Buyer:
(a)(1) Such bills of sale, assignments, deeds, terminations,
releases and other instruments of transfer, assignment and
release (including the Assignment and Assumption Agreement)
as shall be reasonably deemed necessary by Buyer to vest in
Buyer good and marketable title to the Purchased Assets, free
and clear of any and all liens, security interests,
mortgages, charges or encumbrances of any kind and the
Consents listed in Schedule 4.20;
(a)(2) updated or additional Schedules to the extent
necessary to make the representations and warranties of the
Sellers contained in Article IV hereof and in the other
documents to which the Sellers are party true and correct in
all material respects at and as of the Closing Date,
provided, however, that such updating and delivery shall not
diminish (i) Buyer's rights to indemnification under Article
X hereof or (ii) Buyer's right to terminate this Agreement
under Article XI hereof; or (iii) Buyer's right to refuse to
close the transactions contemplated hereby as permitted by
Article VIII hereof;
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(a)(3) actual possession and operating control of the
Systems;
(a)(4) a certified copy of the authorizations referred to in
Section 8.03(k) hereof;
(a)(5) the opinions of counsel for Sellers dated as of the
Closing Date as provided for in Section 8.03(b) hereof; and
(a)(6) all of the other documents and instruments to be
delivered by Sellers to Buyer pursuant to the terms of
Sections 8.02 and 8.03 hereof.
(b) After Closing, Sellers shall deliver to Buyer, as received
from time to time:
(b)(1) Any cash or other property that they may receive
relating to the business and operations of the Purchased
Assets arising on or after the Closing Date and in respect of
Sellers' Receivables;
(b)(2) subject to Section 9.02 hereof, any Purchased Assets
not effectively transferred to Buyer at the Closing; and
(b)(3) from time to time at the request of Buyer and without
further consideration, such further instruments of
conveyance, transfer and assignment as Buyer may reasonably
request in order to convey more effectively and transfer to
Buyer any of the Purchased Assets, and Sellers shall assist
Buyer in the reduction to possession of any such assets,
possession of which was not delivered to Buyer at Closing.
Buyer (at its expense) shall be responsible for the
preparation of all of the documents incidental to such
conveyance, transfer and reduction to possession.
(c) At Closing, Buyer shall deliver, or cause to be delivered, to
Sellers:
(c)(1) Payment of the Purchase Price (subject to post-closing
adjustment) as computed pursuant to Section 1.04(f) hereof;
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(c)(2) the Assignment and Assumption Agreement duly executed
on behalf of Buyer;
(c)(3) a certified copy of the authorizations referred to in
Section 8.04(f) hereof;
(c)(4) the opinions of counsel for Buyer dated as of the
Closing Date as provided for in Section 8.04(b) hereof; and
(c)(5) all of the other documents and instruments to be
delivered by Buyer to Sellers pursuant to Sections 8.02 and
8.04 hereof.
(d) After Closing, Buyer shall deliver to Sellers, as received
from time to time, all cash and other property that it may receive in respect
of any of the Excluded Assets.
9.02 Subsequent Closings. If, on the date specified for the Closing
pursuant to Section 3.01, any Franchise Area is not a Transferable Franchise
Area (the "Non-Transferable Franchise Area"), then, notwithstanding any other
provision of this Agreement, the following provisions shall apply with respect
to such Non-Transferable Franchise Area:
(a) At the Closing, the Sellers shall sell and assign to Buyer, and
Buyer shall purchase and acquire from the Sellers, all Purchased Assets, except
only for any Franchise which relates to a Non-Transferable Franchise Area
(each such Franchise, a "Retained Franchise") and all of the other Purchased
Assets which are used exclusively in the operation of the Franchise Areas
serviced pursuant to such Retained Franchises (the "Retained Assets"). From
and after the Closing, the Sellers shall retain the Retained Franchises and the
Retained Assets, and, subject to the terms and conditions in this Section 9.02,
the Sellers shall sell and assign to Buyer, and Buyer shall purchase and
acquire from the Sellers, the Retained Franchises and the Retained Assets in
accordance with the terms of this Section 9.02.
(b) At the Closing:
(i) The amount payable by Buyer to the Sellers
pursuant to Section 1.06 and Section 9.01(c)(1)
shall be reduced by the amount that Buyer is required to
deposit in escrow pursuant to Section 9.02(b)(iv).
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(ii) All conveyance documents, certificates,
opinions, and other documents contemplated by this
Agreement to be delivered at the Closing shall be in the
form and substance provided for in this Agreement with
such modifications as are necessary or appropriate to
reflect the provisions of this Section 9.02.
(iii) The entire amount of the Deposit (together
with all interest earned thereon) shall be
disbursed in the manner provided in Section 1.07.
(iv) Buyer shall deliver to Buyer's senior lender,
as escrow agent (the "Retained Franchise Escrow
Agent"), by wire transfer of federal reserve funds, an
amount equal to that portion of the Purchase Price
allocable to the Retained Franchises and the Retained
Assets which amount shall be the product of the number of
Subscribers in the Franchise Areas serviced under such
Retained Franchises multiplied by $1,200 (such number of
Subscribers to be determined based on the number of
Subscribers shown in the Adjustment Certificate referred
to in Section 1.04(f) hereof). The amount delivered to
the Retained Franchise Escrow Agent, (the "Retained
Franchise Escrow Amount") shall be held in an escrow
account (the "Retained Franchise Escrow Account")
pursuant to the terms of an escrow agreement on terms
mutually satisfactory to Buyer and Seller (the "Retained
Franchise Escrow Agreement"), with any revisions thereto
that are reasonably requested by Buyer's senior lender to
grant it a security interest in the Retained Franchise
Escrow Amount (subject to the rights of the Sellers under
this Agreement). All interest earned on the Retained
Franchise Escrow Amount shall be disbursed to Sellers as
provided in this Section 9.02.
(v) Buyer and the Sellers shall enter into a mutually
acceptable management agreement (the "Management
Agreement") pursuant to which Buyer shall manage the
System
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serviced by the Retained Franchises for Sellers
benefit. The Management Agreement shall provide that
Buyer will be entitled to receive and retain all
revenues, and will be responsible for all costs and
expenses, attributable to the operations of the
Retained Franchises and the Retained Assets.
(c) After the Closing, Buyer and the Sellers shall cooperate in
obtaining any authorizations, consents, orders, or approvals of any Municipal
Authority necessary to cause any Franchise Area that was not a Transferable
Franchise Area on the Closing Date to become a Transferable Franchise Area, and
the agreements and obligations of Buyer and the Sellers under sections 7.02 and
7.03 shall be fully applicable in seeking such authorizations, consents,
orders, or approvals after the Closing. The Sellers shall give to Buyer
written notice of the receipt of any authorizations, consents, orders, or
approvals of any Municipal Authority necessary to cause any Franchise Area that
was not a Transferable Franchise Area on the Closing Date to become a
Transferable Franchise Area.
(d) If any Franchise Area that was not a Transferable Franchise
Area on the Closing Date becomes a Transferable Franchise Area within sixty
days after the Closing Date, then, if Sellers so elect, a closing shall be held
on a date to be agreed to between Buyer and Sellers (or, if Buyer and Sellers
fail to agree, on the first business day that is at least ten days after such
Franchise Area becomes a Transferable Franchise Area), in accordance with the
following:
(i) At such closing, the Sellers shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Sellers,
those Retained Franchises that cover Franchise Areas that have
become Transferable Franchise Areas by such closing date and
all Retained Assets relating thereto, as evidenced by bills of
sale and assignment and assumption agreements in form and
substance similar to those delivered by the parties at the
Closing;
(ii) The closing conditions of Buyer and Sellers in
Article VIII shall apply to such closing insofar as such
conditions relate to the Retained Franchises and Retained
Assets described in paragraph (i) above;
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(iii) At such closing, Buyer and Seller shall execute and
deliver certifications, opinions, and other documents
corresponding to those delivered at the Closing with such
modifications as are necessary or appropriate to reflect the
provisions of this Section 9.02 and to relate only to the
Retained Franchises and Retained Assets being purchased by
Buyer at such closing;
(iv) Upon such closing, the Management Agreement shall be
terminated with respect to the Franchises Areas covered by the
Retained Franchises that are transferred at such closing; and
(v) At such closing, Buyer and Sellers shall direct the
Retained Franchise Escrow Agent to disburse to Sellers, as the
purchase price for the Retained Franchises and Retained Assets
described in paragraph (i) above, the product of $1,200 times
the number of Subscribers in the Franchises Areas covered by
the Retained Franchises described in paragraph (i) above (as
shown in the Adjustment Certificate referred to in Section
1.04(f)), together with all interest then earned under and
credited to the Retained Franchise Escrow Account.
(e) If no closing was held pursuant to Section 9.02(d) or if any
Retained Franchises or Retained Assets were not transferred to Buyer at a
closing pursuant to Section 9.02(d), then a closing shall be held on the first
business day that is ninety days after the Closing Date, in accordance with the
following:
(i) At such closing, the Sellers shall sell and assign to
Buyer, and Buyer shall be obligated to purchase from Sellers,
(A) those Retained Franchises not previously transferred to
Buyer that cover Franchise Areas that have become Transferable
Franchise Areas, (B) except as provided in paragraph (ii)
below and unless Buyer otherwise shall have reasonable basis
to refuse to so purchase, at Sellers' option all other
Retained Franchises not previously transferred to Buyer, and
(C) all Retained Assets relating to the Retained Franchises
described in clauses (A) and (B), as evidenced by bills of
sale and assignment and assumption agreements in form and
substance similar to those delivered by the parties at the
Closing;
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(ii) Buyer shall not be obligated (and shall have
reasonable basis to refuse) to purchase any Retained Franchise
at such closing if (A) the parties' application for any
authorization, consent, order, or approval of any Municipal
Authority necessary for the transfer of such Retained
Franchise was denied, (B) the failure of the Municipal
Authority to issue its authorization, consent, order, or
approval was a result of any actual or alleged breach or
default on the part of either Seller under such Retained
Franchise, (C) the Municipal Authority that issued such
Retained Franchise has threatened to revoke such Retained
Franchise if it is transferred without such Municipal
Authority's authorization, consent, order, or approval, or (D)
the transfer of such Retained Franchise to Buyer would violate
any injunction, order, decree, or judgment.
(iii) The closing conditions of Buyer and Sellers in
Article VIII shall apply to such closing insofar as such
conditions relate to the Retained Franchises and Retained
Assets described in paragraph (i) above, except that, with
respect to any Retained Franchise described in clause (B) of
paragraph (i), Buyer shall be deemed to have waived the
condition that any authorization, consent, order, or approval
of any Municipal Authority necessary for the transfer of such
Retained Franchise shall have been obtained and shall have
become final;
(iv) At such closing, Buyer and Seller shall execute and
deliver certificates, opinions, and other documents
corresponding to those delivered at the Closing with such
modifications as are necessary or appropriate to reflect the
provisions of this Section 9.02 and to relate only to the
Retained Franchises and Retained Assets being purchase by
Buyer at such closing;
(v) Upon such closing, the Management Agreement shall be
terminated with respect to the Franchise Areas covered by the
Retained Franchises that are transferred at such closing; and
(vi) At such closing, (A) Buyer and Sellers shall direct
the Retained Franchise Escrow Agent to disburse to Sellers, as
the purchase price for the Retained Franchises described in
clause (A) of
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paragraph (i) above and the Retained Assets related
thereto, the product of $1,200 times the number of Subscribers
in the Franchise Areas covered by such Retained Franchises (as
shown in the Adjustment Certificate referred to in Section
1.04(f)); (B) Buyer and Sellers shall direct the Retained
Franchise Escrow Agent to disburse to Sellers, as the purchase
price for the Retained Franchise described in clause (B) of
paragraph (i) above and the Retained Assets related thereto,
the product of $1,080 times the number of Subscribers in the
Franchise Area covered by such Retained Franchises (as shown
in the Adjustment Certificate referred to in Section 1.04(f));
(C) Buyer and Sellers shall direct the Retained Franchise
Escrow Agent to disburse to Sellers all interest then earned
under and credited to the Retained Franchise Escrow Account
(to the extent not previously disbursed to Sellers); and (D)
Buyer and Sellers shall direct the Retained Franchise Escrow
Agent to disburse to Buyer the product of $120 times the
number of Subscribers in the Franchise Areas covered by the
Retained Franchises described in clause (B) of paragraph (i)
above (as shown in the Adjustment Certificate referred to in
Section 1.04(f)).
(f) If any Retained Franchises or Retained Assets were not
transferred to Buyer at the closing or closings pursuant to Section 9.02(d) and
Section 9.02(e), then a closing shall be held on the earlier of (A) the first
business day that is at least ten days after the last Franchise Area that is
covered by a Franchise that has not been transferred to Buyer becomes a
Transferable Franchise Area, or (B) the first business day that is nine months
after the Closing Date, in accordance with the following:
(i) At such closing, the Sellers shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Sellers, all
Retained Franchises and Retained Assets that were not
previously transferred to Buyer, as evidenced by bills of sale
and assignment and assumption agreements in form and substance
similar to those delivered by the parties at the Closing;
(ii) The closing conditions of Buyer and Sellers in
Article VIII shall apply to such closing insofar as such
conditions relate to the Retained Franchises and Retained
Assets described in paragraph (i) above, except that Buyer
shall be
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deemed to have waived the condition that any
authorization, consent, order or approval of any Municipal
Authority necessary for the transfer of such Retained
Franchise shall have been obtained and shall be final;
(iii) At such closing, Buyer and Seller shall execute and
deliver certificates, opinions, and other documents
corresponding to those delivered at the Closing with such
modifications as are necessary or appropriate to reflect the
provisions of this Section 9.02 and to relate only to the
Retained Franchises and Retained Assets being purchased by
Buyer at such closing;
(iv) Upon such closing, the Management Agreement shall be
terminated; and
(v) At such closing, (A) Buyer and Sellers shall direct
the Retained Franchise Escrow Agent to disburse to Sellers, as
the purchase price for the Retained Franchises described in
paragraph (i) above that cover Franchise Areas that have
become Transferable Franchise Areas and the Retained Assets
related thereto, the product of $1,200 times the number of
Subscribers in the Franchise Areas covered by such Retained
Franchises (as shown in the Adjustment Certificate referred to
in Section 1.04(f)); (B) Buyer and Sellers shall direct the
Retained Franchise Escrow Agent to disburse to Sellers, as the
purchase price for all other Retained Franchises described in
paragraph (i) above and the Retained Assets related thereto,
the product of $900 times the number of Subscribers in the
Franchise Areas covered by such Retained Franchises (as shown
in the Adjustment Certificate referred to in Section 1.04(f));
(C) Buyer and Sellers shall direct the Retained Franchise
Escrow Agent to disburse to Sellers all interest then earned
under and credited to the Retained Franchise Escrow Account
(to the extent not previously disbursed to Sellers); and (D)
Buyer and Sellers shall direct the Retained Franchise Escrow
Agent to disburse to Buyer the product of $300 times the
number of Subscribers in the Franchise Areas covered by the
other Retained Franchises described in paragraph (i) above (as
shown in the Adjustment Certificate referred to in Section
1.04(f)).
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(g) With respect to any claim by Buyer for indemnification pursuant
to Article X relating to any Retained Franchise, the March 31, 1997 date
limitation contained in various provisions of Section 10.02(c)(ii) respecting
the delivery of a Claims Notice shall be extended to a date which affords Buyer
the same indemnification rights time period with respect to any such Retained
Franchise as it was afforded with respect to the Purchased Assets purchased on
the Closing Date.
(h) Buyer and the Sellers shall negotiate in good faith any other
changes to this Agreement necessary or appropriate to effectuate the intent of
this Section 9.02.
ARTICLE X
INDEMNIFICATION
10.01 Survival. All representations and warranties of the Sellers and
Buyer herein and all covenants of the Sellers and Buyer herein with respect to
periods prior to Closing shall be deemed continuing representations, warranties
and covenants, and shall survive the Closing as long as claims for indemnity
may be made under this Article X. Except as the parties may agree in writing
from time to time prior to Closing, (i) any investigations by or on behalf of
any party hereto shall not constitute a waiver as to enforcement of any
representation, warranty, or covenant contained in this Agreement, and (ii) no
notice or information delivered by either party shall affect the other party's
right to rely on any representation, warranty, or covenant made by such party
or relieve such party of any obligations under this Agreement as the result of
a breach of any of its representations and warranties.
10.02 Sellers' Indemnity.
(a) Indemnity Events. Sellers shall, jointly and severally, defend,
indemnify and hold Buyer harmless from and against any and all claims,
liabilities, damages, losses, deficiencies and expenses including reasonable
attorney's fees and expenses and costs of suit (individually a "Loss" and
collectively "Losses") arising out of
(i) any and all inaccurate representations and
warranties (except for those in clause (ii) below)
and out of any and all breaches of covenants and
agreements made by or on behalf of Sellers (except
for those in clause (iii) below) in this Agreement
or the Exhibits and Schedules hereto;
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(ii) any inaccurate representations and warranties
by Sellers in Sections 4.01 and 4.03 hereof;
(iii) any and all breaches by Sellers of covenants
to be performed by Sellers after Closing;
and/or
(iv) any and all liabilities (including the Excluded
Liabilities) and obligations of Sellers not assumed
by Buyer hereunder as Assumed Liabilities.
(All of such items described in clauses (i), (ii), (iii) and (iv)
above are collectively referred to hereinafter as the "Aggregate Net Loss".)
(b) Exceptions. Notwithstanding anything to the contrary contained
in this Agreement, Sellers do not indemnify Buyer, and Buyer shall not assert a
claim for any of the following:
(i) Claims with respect to which Buyer fails in any
material respect to comply with its obligations
under this Agreement or under any of the Franchises,
authorizations, approvals, licenses or other
contracts or instruments included in the Purchased
Assets, but only as and to the extent caused by
Buyer's non-compliance;
(ii) Losses asserted by Buyer attributable to or
arising from Buyer's overhead allocations or general
and administrative costs or losses in the nature of
special, indirect or consequential damages, or for
lost profits;
(iii) Claims by a third party with respect to which,
upon Sellers' election not to defend, Buyer fails to
defend with the same reasonable degree of diligence
as Buyer asserts in the defense of claims for its
own account, provided, however, that such failure
shall only limit Buyer's ability to recover that
portion of the Losses solely resulting from Buyer's
lack of diligence; or
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(iv) Buyer's costs and expenses of asserting any
alleged claim against Sellers where it is ultimately
determined by agreement between the parties or by
Dispute Resolution that Buyer is not entitled to
indemnification by Sellers.
(c) Limitations. Sellers' indemnity liability to Buyer pursuant to
Section 10.02(a) is subject to the following amount limitations:
(i) Buyer shall not be entitled to be
indemnified by Sellers under this Agreement for the
Aggregate Net Loss arising out of any single claim or
aggregate of claims (other than Losses pursuant to
Sections 10.02(a)(ii), 10.02(a)(iii) or 10.02(a)(iv),
as to which the Buyer's Floor shall not apply) until
the amount of all such Aggregate Net Losses equals
$100,000 (hereinafter referred to as "Buyer's Floor").
Buyer shall then be entitled to be indemnified by
Sellers for the entire amount of any such Aggregate
Net Loss arising out of any single claim or aggregate
of claims relating to any of the Systems as to which
the Buyer's Floor has been exceeded, including Losses
within Buyer's Floor, up to the amount limitations set
forth in clause (ii) below;
(ii) (A) Sellers' total cumulative indemnity liability arising
under Section 10.02(a)(i) (except as provided in clause
(B) below) shall not exceed $2,500,000; provided, however,
that Sellers shall have no such liability whatsoever with
respect to such Losses as to which Claims Notices are
received by Sellers after 5:00 p.m. (New York time),
March 31, 1997;
(B) Sellers' total cumulative indemnity liability relating to
defects or failure of title to the Purchased Assets
or arising under Section 10.02(a)(ii) shall not exceed the
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Purchase Price (as finally determined in accordance
with this Agreement); provided, however, that Sellers
shall have no such liability whatever with respect to such
Losses as to which Claims Notices are received
by Sellers after 5:00 p.m. (New York time), March 31, 1997;
(C) Sellers' total cumulative indemnity liability arising
under clauses (iii) and (iv) of Section 10.02(a)
shall be unlimited in amount with respect to Losses
as to which Claim Notices are at any time received.
(d) Claims Notice. Whenever it shall come to the attention of Buyer
that it has suffered or incurred, or may suffer or incur, any Aggregate Net
Loss, Buyer shall give written notice to Sellers of such anticipated or actual
claim, providing reasonable detail as to the basis therefor (the "Claims
Notice"). If the Claims Notice specifies that the claim is a Third Party Claim
then the parties shall proceed in accordance with Section 10.04 hereof. In the
case of any other claim asserted by Buyer, promptly after Sellers receive the
Claims Notice, Buyer and Sellers shall attempt to agree mutually upon the
amount of Aggregate Net Loss for which Buyer is to be indemnified and if such
agreement is not reached within thirty (30) days, the parties shall resolve the
matter in accordance with Section 12.12 hereof.
10.03 Buyer's Indemnity.
(a) Indemnity Events. Buyer shall defend, indemnify and hold Sellers
harmless from and against any and all Losses (as defined in Section 10.02
hereof) arising out of
(i) any and all inaccurate representations and
warranties and out of any and all breaches
of covenants, agreements and certifications
made by or on behalf of Buyer in this Agreement or in
the Exhibits and Schedules hereto; and/or
(ii) any and all claims asserted against either
Seller for liabilities and obligations owing by,
suffered, incurred or accrued against Buyer
subsequent to the Closing Date, arising from the
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Assumed Liabilities or the business activities of
Buyer subsequent to the Closing Date.
(All of such items described in clauses (i) or (ii) above are
collectively referred to hereinafter as the "Aggregate Net Loss".)
(b) Exceptions. Notwithstanding anything to the contrary contained
in this Agreement, Buyer does not indemnify Sellers, and Sellers shall not
assert a claim for any of the following:
(i) Claims with respect to which Sellers fail in any
material respect to comply with their
obligations under this Agreement but only as and
to the extent caused by such Seller's non-compliance;
(ii) Losses asserted by Sellers attributable to or
arising from Sellers' overhead allocations or
general and administrative costs or losses in the
nature of special, indirect or consequential
damages, or for lost profits;
(iii) Claims by a third party with respect to
which, upon Buyer's election not to defend, Sellers
fail to defend with the same reasonable degree of
diligence as Sellers assert in the defense of
claims for their own account, provided, however,
that such failure shall only limit Sellers' ability
to recover that portion of the Losses solely
resulting from Sellers' lack of diligence; or
(iv) Sellers' costs and expenses of asserting any
alleged claim against Buyer where it is ultimately
determined by agreement between the parties or by
Dispute Resolution that Sellers are not entitled to
indemnification by Buyer.
(c) Limitations. Buyer's indemnity liability to Sellers pursuant to
Section 10.03(a) is subject to the following amount limitations:
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(i) Sellers shall not be entitled to be indemnified
by Buyer under this Agreement for the Aggregate
Net Loss arising out of any single claim or
aggregate of claims (other than Losses pursuant to
Section 10.03(a)(ii), as to which Sellers' Floor shall
not apply) until the amount of all such Aggregate Net
Losses equals $100,000 (hereinafter referred to as
"Sellers' Floor"). Sellers shall then be entitled to
be indemnified by Buyer for the entire amount of any
such Aggregate Net Loss arising out of any single
claim or aggregate of claims relating to the systems
as to which Sellers' Floor has been exceeded,
including Losses within Sellers' Floor, up to the
amount limitations set forth in clause (ii) below;
(ii) Except as provided below, Buyer's total
cumulative indemnity liability for any and all
Losses incurred by Sellers shall not exceed
$2,500,000 for Losses as to which Claims Notices
are received by Buyer by 5.00 p.m. (New York time),
March 31, 1997; and Buyer shall have no indemnity
liability whatsoever for Losses as to which Claims
Notices are received by Sellers after 5.00 p.m.
(New York time), March 31, 1997, provided, however,
that any Losses subject to indemnification by Buyer
arising under Section 10.03(a)(ii) of this
Agreement shall be unlimited in amount with respect
to losses as to which Claims Notices are at any
time received.
(d) Claims Notice. Whenever it shall come to the attention of
either Seller that it has suffered or incurred, or may suffer or incur, any
Aggregate Net Loss, Sellers shall give prompt written notice to Buyer of such
anticipated or actual Claim, providing reasonable detail as to the basis
therefor (the "Claims Notice"). If the Claims Notice specifies that the claim
is a Third Party Claim then the parties shall proceed in accordance with
Section 10.04 hereof. In the case of any other claim asserted by either
Seller, promptly after Buyer receives the Claims Notice, Sellers and Buyer
shall attempt to mutually agree upon the amount of Aggregate Net Loss for which
Sellers are
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to be indemnified and if such agreement is not reached within
thirty (30) days, the parties shall resolve the matter in accordance with
Section 12.12 hereof.
10.04 Indemnification with Respect to Third Party Claims.
(a) Definition. As used herein, "Third Party Claim" means a Loss or
potential Loss for which indemnification is claimed by Buyer or Sellers (the
"Indemnitee") under the provisions of this Article X and which is consequent to
a claim against the Indemnitee by a person, corporation, association,
partnership or other business organization or an individual or a government,
any political subdivision thereof or a governmental agency by commencement
against the Indemnitee of a legal action or proceeding or receipt by the
Indemnitee of an assertion of a claim for which indemnification is provided
pursuant to this Article X by Sellers or Buyer, as the case may be (the
"Indemnitor").
(b) Notice of Third Party Claim. The Indemnitee's Claims Notice
will give notice of a Third Party Claim to the Indemnitor stating the nature
thereof and enclosing copies of any complaint, summons, written assertion of
such Third Party Claim or similar document.
(c) Retention of Counsel by the Indemnitor. The Indemnitor may
undertake the defense of any such Third Party Claim by counsel chosen by it
unless the Indemnitor fails to notify the Indemnitee in writing within 15
business days following its receipt of the Claims Notice with respect to such a
Party Claim that the Indemnitor acknowledges its potential liability to the
Indemnitee under this Agreement and elects to assume the defense of such Third
Party Claim. The Indemnitee will fully cooperate with such counsel. The
Indemnitor will cause such counsel to consult with the Indemnitee as
appropriate, as to the defense of such claim, and the Indemnitee may, at its
own expense, participate in such defense, assistance or enforcement but the
Indemnitor shall control such defense, assistance or enforcement. The
Indemnitor will cause such counsel engaged by the Indemnitor to keep the
Indemnitee informed at all times of the status of such defense, assistance or
enforcement.
(d) Employment of Counsel by the Indemnitee.
(i) If the Indemnitor, within 15 business
days following its receipt of the Claims
Notice of any Third Party Claim, fails to notify
Indemnitee in writing that the
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Indemnitor acknowledges its potential liability to the
Indemnitee under this Agreement and elects to assume the
defense of such Third Party Claim, the Indemnitee shall (upon
further notice to the Indemnitor) have the right to undertake
the defense, compromise or settlement of such Third Party
Claim.
(ii) Notwithstanding the engagement of counsel by
the Indemnitor pursuant to Section 10.04(c), the
Indemnitee shall have the right, at its own expense
(subject to Clause (iv) below), to engage counsel
to participate jointly with the Indemnitor in, and
to control jointly with the Indemnitor, the defense
of a Third Party Claim if (x) the Third Party Claim
involves remedies other than monetary damages and
such remedies, in the Indemnitee's reasonable
judgment, could have an effect on the conduct of
the Indemnitee's business or (y) the Third Party
Claim relates to acts, omissions, conditions,
events or other matters occurring after the Closing
Date as well as to acts, omissions, conditions,
events or other matters occurring prior to the
Closing Date or (z) the Third Party Claim involves
a claim for monetary damages and the amount claimed
may exceed in whole or in part the limits of the
Indemnitor's liability as provided in this Article
X.
(iii) If the Indemnitee chooses to exercise its
right to appoint counsel under this Section
10.04(d), the Indemnitee shall deliver notice
thereof to the Indemnitor setting forth in
reasonable detail why it believes that it has such
right and the name of the counsel it proposes to
employ. The Indemnitee may deliver such notice at
any time that the conditions to the exercise of
such right appear to be fulfilled, it being
recognized that in the course of litigation, the
scope of litigation and the amount at stake may
change. The Indemnitee shall
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thereupon have the right to appoint such counsel.
(iv) The reasonable fees and expenses of counsel
and any accountants, experts or consultants engaged
by the Indemnitee in accordance with the provisions
of Section 10.04(d)(i) and 10.04(d)(ii)(x) in
connection with defending a Third Party Claim shall
be paid by the Indemnitor in accordance with the
provisions of this Article X. If the Indemnitee's
employment of counsel is for a Third Party Claim of
the type described in clauses (ii)(y) or (ii)(z) of
this Section 10.04(d), then subject to the
provisions of Section 10.04(e), the amount of fees
and expenses so payable by the Indemnitor shall be
that fraction of the aggregate of such fees and
expenses, the numerator of which is the portion of
the amount of any judgment on, or settlement of,
such Third Party Claim for which the Indemnitee is
indemnified pursuant to this Section 13 and the
denominator of which is the total amount of such
judgment or settlement, but provided further, if
such defense of a Third Party Claim is successful
(in the sense that as a consequence thereof, there
is no Loss (other than such fees and expenses) for
which the Indemnitee is indemnified pursuant to
this Article X), the Indemnitee and the Indemnitor
will attempt in good faith to reach an agreement on
the amount of such fees and expenses so payable by
the Indemnitor.
(e) Settlement of Third Party Claims.
(i) The Indemnitor may settle any Third Party Claim
solely involving monetary damages without the prior
written consent of the Indemnitee if the amount of
such settlement is to be paid entirely by the
Indemnitor pursuant to this Article X.
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(ii) The Indemnitor will not enter into a
settlement of a Third Party Claim which involves a
non-monetary remedy or which will not be paid
entirely by the Indemnitor pursuant to this Article
X without the prior written consent of the
Indemnitee (which consent shall not be unreasonably
withheld).
(iii) The Indemnitee will not enter into a
settlement of a Third Party Claim without the
written consent of the Indemnitor, which consent
shall not be unreasonably withheld, except where
the Indemnitee has assumed the defense pursuant to
Section 10.04(d)(i).
(iv) As to any Third Party Claim of the type
described in subsection (ii)(y) or subsection
(ii)(z) of Section 10.04(d), the Indemnitee and the
Indemnitor shall consult as to any proposed
settlement. If the Indemnitee notifies the
Indemnitor that it wishes to accept a proposed
settlement and the Indemnitor is unwilling to do
so, if the amount for which the Third Party Claim
is ultimately resolved is greater than the amount
for which the Indemnitee desired to settle, then
(x) the Indemnitee shall be liable only for the
amount, if any, which it would have paid had the
Third Party Claim been settled as proposed by the
Indemnitee, and (y) all reasonable attorneys' fees
and expenses and costs of suit incurred by the
Indemnitee subsequent to the time of the proposed
settlement shall be paid or reimbursed by the
Indemnitor.
(v) In determining whether to accept or reject any
settlement proposal, each party shall act in good
faith and with due regard for the reasonable
commercial and financial interests of the other.
(f) Cooperation, etc. The Indemnitee and the Indemnitor shall
cooperate with one another in good faith in connection with the defense,
compromise or settlement of any claim or action. Without limiting the
generality of the
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foregoing, the party controlling the defense or settlement of any matter shall
take steps reasonably designed to ensure that the other party and its counsel
are informed at all times of the status of such matter. Neither party shall
dispose of, compromise or settle any claim or action in a manner that is not
reasonable under the circumstances and in good faith. The Indemnitor shall
enter into such confidentiality and other non-disclosure agreements as the
Indemnitee shall reasonably request in order to protect trade secrets and other
confidential or proprietary information of the Indemnitee.
10.05 Guaranty Agreement of PENAC. Sellers shall cause PENAC to execute
and deliver to Buyer on the Closing Date a Guaranty Agreement, in form and
substance reasonably satisfactory to Buyer, pursuant to which PENAC shall agree
to guarantee the prompt payment to Buyer of all of Sellers' indemnity
obligations under this Article X (provided that, notwithstanding Section 10.02
to the contrary, (i) subject to any extension contemplated by Section 9.02(g)
hereof, such Guaranty Agreement shall only cover Losses incurred by Buyer as to
which Claims Notices are received by Sellers on or before March 31, 1997, and
(ii) the total cumulative indemnity liability under Section 10.02(c)(ii)(C)
shall not exceed the Purchase Price (as finally determined in accordance with
this Agreement)).
10.06 Exclusive Remedies. If this Agreement is consummated, the
indemnification provisions of this Article X shall be the exclusive remedies
of Buyer and Sellers under this Agreement for any breach of a representation or
warranty contained in this Agreement occurring on or prior to Closing or for
any breach of a covenant contained in this Agreement to be performed on or
prior to Closing in lieu of any other rights Buyer or Sellers may have at law
or in equity. If this Agreement is terminated pursuant to Section 11.01, the
provisions set forth in Section 11.02 shall be the exclusive remedy of Buyer or
Sellers in lieu of any other rights either party may have at law or in equity.
ARTICLE XI
TERMINATION
11.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written agreement of Sellers and Buyer,
(b) by Sellers after the Termination Date if the Closing of the
transactions contemplated hereby has not
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occurred by that date and if Sellers are not, at the time of such exercise, in
breach of any of their representations, warranties or covenants set forth in
this Agreement,
(c) by Buyer after the Termination Date if the Closing of the
transactions contemplated hereby has not occurred by that date and if Buyer is
not, at the time of such exercise, in breach of any of its representations,
warranties or covenants set forth in this Agreement,
(d) by Buyer if there has been a material violation or breach by
Sellers of any agreement, representation or warranty contained in this
Agreement and such violation or breach has not been waived by Buyer or cured by
Sellers within fifteen (15) days after written notice of such violation or
breach is received by Sellers from Buyer, or
(e) by Sellers if there has been a material violation or breach by
Buyer of any agreement, representation or warranty contained in this Agreement
and such violation or breach has not been waived by Sellers or cured by Buyer
within fifteen (15) days after written notice of such violation or breach is
received by Buyer from Sellers.
Sellers or Buyer, as the case may be, shall exercise a right of
termination provided above by written notice to the other parties.
11.02 Effect of Termination. (a) In the event of termination of this
Agreement other than as a result of a breach of this Agreement by Sellers or
Buyer, this Agreement shall forthwith become void and have no effect, without
any liability on the part of any party or its partners, directors, officers,
agents or shareholders and Sellers shall direct the Escrow Agent to promptly
return the Deposit, together with all interest accrued thereon, to Buyer.
(b) In the event of termination of this Agreement as a result of a
breach of this Agreement by Buyer, Sellers shall be entitled to receive from the
Escrow Agent the Deposit, including all interest accrued thereon. The payment
of the Deposit by the Escrow Agent to the Sellers shall be liquidated damages
for the breach by the Buyer and shall be in full settlement of any damages of
any nature or kind that the Sellers may suffer or allege to have suffered as a
result of any such breach by Buyer. The receipt by the Sellers of the Deposit
(together with all interest accrued thereon) shall be the Sellers' sole and
exclusive remedy in the event of any such breach by the Buyer. Sellers and
Buyer agree that actual damages would be difficult to ascertain and that the
amount of the
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payment to be made to Sellers pursuant to this Section 11.02(b) is a fair and
equitable amount to reimburse Sellers for damages sustained due to Buyer's
breach of this Agreement.
(c) In the event of termination of this Agreement as a result of a
breach of this Agreement by Sellers, Sellers shall not be entitled to the
Deposit and, promptly after such termination of this Agreement, the Deposit,
including all interest accrued thereon, shall be disbursed by the Escrow Agent
to the Buyer. In addition,Buyer shall have the right to bring an action against
Sellers and pursue all remedies which it may have at law or in equity,
including the right to specific performance, and the right to claim direct
damages actually incurred by it as a result of breach by Sellers of this
Agreement, excluding however any claim for special indirect or consequential
damages, or for lost profits.
11.03 Risk of Loss. The risk of loss or damage to any of the Purchased
Assets shall be on the Sellers prior to the Closing and thereafter shall be on
the Buyer. If any of the Purchased Assets is damaged or destroyed prior to the
Closing, the Sellers shall, at their expense, use reasonable efforts to replace
or repair the item with comparable property of like value and quality as soon
as possible before the Closing.
ARTICLE XII
MISCELLANEOUS
12.01 Brokers. Buyer and Sellers each represent to the others that,
except for Daniels & Associates, which has been retained by Sellers to assist
and advise them in connection with the sale of the Purchased Assets
contemplated by this Agreement, they have not employed any broker, finder or
intermediary who might be entitled to a fee or commission upon the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
12.02 Expenses. The parties agree that (a) the Sellers shall pay the
cost of their engagement of Daniels & Associates to advise them in connection
with the sale of the Purchased Assets; (b) Buyer and Sellers shall each pay
one-half of all real property transfer, sales or other transfer taxes imposed
upon the sale of the Purchased Assets; and (c) Sellers shall pay for title,
UCC, tax and judgment searches referred to in Section 8.03. Unless otherwise
expressly provided in this Agreement (including as provided in Section
7.02(b)), all other costs in connection with this Agreement and the
transactions contemplated hereby shall be paid by Buyer or Sellers, as the case
may be, depending upon which party incurred such costs.
<PAGE> 64
- 64 -
12.03 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of New York.
12.04 Entire Agreement; Modification; Waiver. This Agreement, including
the Exhibits and Schedules hereto, constitutes the entire Agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements, express or implied, made by any party to any other party in
connection with the subject matter hereof except as specifically set forth
herein or in documents delivered pursuant hereto. To the fullest extent
permitted by law, unless otherwise expressly provided for herein, no
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any provision of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
12.05 Notices. All notices, consents, requests, reports, demands or other
communications hereunder shall be in writing and may be given personally, by
registered or certified mail, by telex or telegram or by facsimile
transmission:
If to Buyer: FrontierVision Operating
Partners, L.P.
1777 South Harrison Street,
Suite P-200
Denver, CO 80210
Attention: James C. Vaughn,
President
With copies to: Dow, Lohnes & Albertson
1255 Twenty-Third Street, N.W.
Washington, D.C. 20037
Attention: David D. Wild, Esq.
If to Sellers:
C4 Media Cable Southeast, L.P.
Southeast Cable, Inc.
c/o Philips Credit Corporation
100 East 42nd Street
New York, NY 10017
Attention: President
<PAGE> 65
- 65 -
With copies to: Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, NY 10022
Attention: Mats G. Carlston, Esq.
or to such other address or to such other person as the addressee party shall
have last designated by notice to the other party. All notices shall be deemed
to have been given when received.
12.06 Construction. In the event any ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance.
12.07 Further Assurances. From and after the date of this Agreement,
each of the parties hereto shall cooperate with each other and will use their
reasonable best efforts to obtain all necessary waivers and consents from third
parties subject to Sections 8.02 and 8.03. The Sellers, at any time and from
time to time on and after the Closing Date, upon request by Buyer and without
further consideration, shall take or cause to be taken such actions and
execute, acknowledge and deliver, such transfers, conveyances and assurances as
may be reasonably required for the better conveyancing, transferring,
assigning, delivering, assuring and confirming the Purchased Assets to the
Buyer.
12.08 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instruments.
12.09 Headings. The Article and Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
12.10 Disclosure; Public Announcements. Except to the extent necessary
for Sellers or Buyer to make disclosure to their respective lenders of
professional or financial advisors of the existence of this Agreement and
except as otherwise permitted herein, neither Sellers nor Buyer will make any
disclosure of the
<PAGE> 66
- 66 -
same to any third parties prior to the Closing without the express written
approval of the others.
12.11 Assignment; Third Parties; Binding Effect. Buyer may assign its
rights under this Agreement to a separate entity affiliated with either Buyer
and/or an affiliated entity. Except for a permissible assignee, nothing
contained in this Agreement, express or implied, is intended to confer on any
person or entity, other than the parties hereto, and their successors in
interest, any rights or remedies under or by reason of this Agreement unless so
stated expressly to the contrary. All covenants, agreements, representations
and warranties of the parties contained herein will be binding on and inure to
the benefit of Buyer and its successors and permitted assigns and Sellers and
their respective successors and permitted assigns.
12.12 Dispute Resolution. Should Buyer and Sellers be unable to agree as
to any amount due or claimed to be due under this Agreement or as to
resolution of any controversy or claim arising out of this Agreement or the
breach thereof, then, at the request of either party, the matter shall be
submitted to binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association. Such arbitration shall take place in New
York, New York unless the parties select a different site by mutual agreement
and all costs of arbitration shall be shared equally by Buyer or Sellers,
unless the arbitrator finds that the position asserted by either party is
without merit, in which case such party shall bear the entire expenses of
arbitration, including reasonable counsel fees. The arbitration determination
shall be final and binding on the parties, judgment may be entered upon such
determination in any court having jurisdiction thereof and no appeals shall be
taken from such judgment. Any arbitration award shall bear interest from the
date of the award until paid at the Prime Rate plus two percent (2%) per annum.
<PAGE> 67
- 67 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BUYER:
FRONTIERVISION OPERATING PARTNERS,
L.P., a Delaware limited partnership
By: FrontierVision Partners, L.P.,
its general partner
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general partner
By: /s/ James C. Vaughn
---------------------------------
James C. Vaughn, President
SELLERS:
C4 MEDIA CABLE SOUTHEAST, LIMITED
PARTNERSHIP
By: Southeast Cable, Inc., its
General Partner
By: /s/ S.I. Cundey, Jr.
----------------------------
S.I. Cundey, Jr., President
COUNTY CABLE COMPANY, L.P.
By: C4 Media Cable Southeast, Limited
Partnership, its General Partner
By: Southeast Cable, Inc., its General Partner
BY: /s/ S.I. Cundey, Jr.
----------------------------
S.I. Cundey, Jr., President
<PAGE> 68
C4 MEDIA SOUTHEAST/FRONTIERVISION
ASSET PURCHASE AGREEMENT
SCHEDULE OF DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Adjustments Certificate 1.04(f)
Affiliate 4.25
Aggregate Net Loss 10.01(a) and 10.02(a)
Assignment and Assumption Agreement 8.02(f)
Assumed Liabilities 1.02
Audited Financial Statements 4.07
Buyer's Floor 10.01(c)(i)
CATV Recitals (A.)
Claims Notice 10.02(d) and 10.03(d)
Closing 3.01
Closing Date 3.01
Closing Financial Statements 1.04(f)
Closing Period 1.04(e)
Communications Act 4.13(k)
Contracts 4.14
County Cable Introduction
Deposit 1.07
Employees 4.16
Environmental Laws 4.19
Escrow Agent 1.07
Excluded Assets 1.03(a)
FAA 4.13(g)
FCC 1.03(b)
Franchises 4.12
GAAP 1.02(b)(ii)
General Partners Recitals (C.)
H-S-R 7.02(b)
Indemnitee 10.03(a)
Indemnitor 10.03(a)
</TABLE>
<PAGE> 69
<TABLE>
<S> <C>
Limited Partnership Agreements 4.02
Loss(es) 10.01(a)
Manager 4
Media Cable Introduction
Municipal Authorities 4.12
Net Working Capital 1.04(d)
PENAC 7.08(e)
Personal Property 4.10
Philips 4.06
Prime Rate 1.08
Purchase Price 1.04(a)
Purchased Assets Recitals (B.)
Real Property 4.09
Sellers' Floor 10.02(c)(i)
Sellers' Receivables 1.02(a)
Sellers' Annualized Cash Flow 1.04(e)
Sellers' Operations 1.02(b)(iii)
Subscriber 1.04(e)
Systems Recitals (A.)
Termination Date 3.01
Transaction Documents 8.03(i)
Third Party Claim 10.03(a)
Unaudited Financial Statements 4.07
</TABLE>
<PAGE> 1
EXHIBIT 10.6
==============================================================================
ASSET PURCHASE AGREEMENT
AMONG
COX COMMUNICATIONS OHIO, INC.,
TIMES MIRROR CABLE TELEVISION OF DEFIANCE, INC.,
CHILLICOTHE CABLEVISION, INC.,
COX COMMUNICATIONS EASTERN KENTUCKY, INC.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
DATED
NOVEMBER 17, 1995
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. "Accounts Receivable" . . . . . . . . . . . . . . . . . . . 1
1.2. "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. "Closing" . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. "Closing Date" . . . . . . . . . . . . . . . . . . . . . . . 1
1.6. "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. "Compensation Arrangement" . . . . . . . . . . . . . . . . . 2
1.8. "Consents" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9. "Contracts" . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10. "Employee Plan" . . . . . . . . . . . . . . . . . . . . . . 2
1.11. "Equivalent Billing Unit" . . . . . . . . . . . . . . . . . 2
1.12. "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13. "FAA" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14. "FCC" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15. "FCC Consent" . . . . . . . . . . . . . . . . . . . . . . . 3
1.16. "Franchises" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17. "Franchising Authorities" . . . . . . . . . . . . . . . . . 3
1.18. "Material Adverse Effect" . . . . . . . . . . . . . . . . . 3
1.19. "Multiemployer Plan" . . . . . . . . . . . . . . . . . . . . 3
1.20. "Permitted Encumbrances" . . . . . . . . . . . . . . . . . . 3
1.21. "Personal Property" . . . . . . . . . . . . . . . . . . . . 4
1.22. "Real Property" . . . . . . . . . . . . . . . . . . . . . . 4
1.23. List of Additional Definitions . . . . . . . . . . . . . . . 4
2. SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . 5
2.1. Agreement to Sell and Purchase . . . . . . . . . . . . . . . 5
2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 7
2.5. Adjustments and Prorations . . . . . . . . . . . . . . . . . 7
2.6. Assumption of Liabilities and Obligations . . . . . . . . . 9
2.7. Allocation of Purchase Price . . . . . . . . . . . . . . . . 9
3. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . 9
3.1. Organization, Standing and Authority . . . . . . . . . . . . 9
3.2. Authorization and Binding Obligation . . . . . . . . . . . . 10
3.3. Absence of Conflicting Agreements . . . . . . . . . . . . . 10
3.4. Franchises . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5. Real Property . . . . . . . . . . . . . . . . . . . . . . . 11
3.6. Personal Property . . . . . . . . . . . . . . . . . . . . . 11
3.7. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE> 3
Page
----
3.9. Complete Systems . . . . . . . . . . . . . . . . . . . . . . 12
3.10. Information on Systems . . . . . . . . . . . . . . . . . . . 12
3.11. Financial Statements . . . . . . . . . . . . . . . . . . . . 12
3.12. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 13
3.13. Labor Relations . . . . . . . . . . . . . . . . . . . . . . 14
3.14. Taxes, Returns and Reports . . . . . . . . . . . . . . . . . 14
3.15. Claims and Legal Actions . . . . . . . . . . . . . . . . . . 14
3.16. Environmental Matters . . . . . . . . . . . . . . . . . . . 14
3.17. Compliance with Laws . . . . . . . . . . . . . . . . . . . . 15
3.18. Conduct of Business in Ordinary Course . . . . . . . . . . . 15
3.19. FCC and Copyright Compliance . . . . . . . . . . . . . . . . 16
3.20. Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . 17
4.1. Organization, Standing and Authority . . . . . . . . . . . . 17
4.2. Authorization and Binding Obligation . . . . . . . . . . . . 17
4.3. Absence of Conflicting Agreements . . . . . . . . . . . . . 17
4.4. Claims and Legal Actions . . . . . . . . . . . . . . . . . . 18
4.5. Qualification . . . . . . . . . . . . . . . . . . . . . . . 18
4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 18
4.7. Adequate Financing . . . . . . . . . . . . . . . . . . . . . 18
4.8. Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . 19
5.1. Conduct of the Business of the Systems . . . . . . . . . . . 19
5.2. Access to Information . . . . . . . . . . . . . . . . . . . 20
5.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4. Notice of Subsequent Events . . . . . . . . . . . . . . . . 20
5.5. Delivery of Financial Information . . . . . . . . . . . . . 20
5.6. Additional Financial Information . . . . . . . . . . . . . . 21
5.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 22
5.8. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.9. Premerger Notification . . . . . . . . . . . . . . . . . . . 22
5.10. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.11. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 23
5.12. Taxes, Fees and Expenses . . . . . . . . . . . . . . . . . . 23
5.13. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . 24
5.15. Employee Benefit Matters . . . . . . . . . . . . . . . . . . 25
5.16. Bonds, Letters of Credit, Etc. . . . . . . . . . . . . . . . 26
5.17. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . 27
- ii -
<PAGE> 4
Page
----
5.18. Title Insurance . . . . . . . . . . . . . . . . . . . . . . 27
5.19. Financing; Consents; Actions . . . . . . . . . . . . . . . . 27
5.20. Reimbursement for Capital Expenditures . . . . . . . . . . . 27
5.21. Additional Rate Information . . . . . . . . . . . . . . . . 27
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLERS TO CLOSE . 28
6.1. Conditions Precedent to Obligations of Buyer to Close . . . 28
6.2. Conditions Precedent to Obligations of Sellers to Close . . 29
7. CLOSING AND CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . 29
7.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2. Deliveries by Sellers . . . . . . . . . . . . . . . . . . . 30
7.3. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . 30
8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1. Method of Termination . . . . . . . . . . . . . . . . . . . 31
8.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION . . . 33
9.1. Representations and Warranties . . . . . . . . . . . . . . . 33
9.2. Indemnification by Sellers . . . . . . . . . . . . . . . . . 33
9.3. Indemnification by Buyer . . . . . . . . . . . . . . . . . . 34
9.4. Procedure for Indemnification . . . . . . . . . . . . . . . 34
9.5. Limitation on Indemnification; Exclusive Remedy . . . . . . 35
10. DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 36
10.3. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.2. Benefit and Binding Effect . . . . . . . . . . . . . . . . . 38
11.3. Bulk Transfer . . . . . . . . . . . . . . . . . . . . . . . 38
11.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 38
11.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.6. Gender and Number . . . . . . . . . . . . . . . . . . . . . 38
11.7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 38
11.8. Further Assurances . . . . . . . . . . . . . . . . . . . . . 38
- iii -
<PAGE> 5
Page
----
11.9. Waiver of Compliance; Consents . . . . . . . . . . . . . . . 38
11.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . 39
11.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 39
11.12. No Third Party Beneficiaries . . . . . . . . . . . . . . . . 39
11.15. Definition of Knowledge . . . . . . . . . . . . . . . . . . 39
- iv -
<PAGE> 6
LIST OF EXHIBITS AND SCHEDULES
Exhibit A List of Communities
Exhibit B Form of Deposit Escrow Agreement
Exhibit C Form of Franchise Transfer Consent
Exhibit D-1 Form of Opinion of Counsel for Sellers
Exhibit D-2 Form of Opinion of FCC Counsel for Sellers
Exhibit E Form of Opinion of Counsel for Buyer
Schedule 2.2 Excluded Assets
Schedule 2.6 Assumed Liabilities
Schedule 3.1 Foreign Qualifications
Schedule 3.4 Franchises
Schedule 3.5 Real Property
Schedule 3.6 Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Consents
Schedule 3.10 Information on Systems
Schedule 3.11 Financial Statements
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Labor Relations
Schedule 3.14 Taxes
Schedule 3.15 Claims and Legal Actions
Schedule 3.16 Environmental Matters
Schedule 3.18 Conduct of Business in Ordinary Course
Schedule 3.19 FCC and Copyright Matters
Schedule 4.3 Buyer's Consents
Schedule 4.6 Balance Sheet
Schedule 5.1 Conduct of the Systems
- v -
<PAGE> 7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated November 17, 1995, by and among
FrontierVision Operating Partners, L.P., a Delaware limited partnership
("BUYER"), and Cox Communications Ohio, Inc., an Ohio corporation, Times
Mirror Cable Television of Defiance, Inc., an Ohio corporation, Chillicothe
Cablevision, Inc., an Ohio corporation, and Cox Communications Eastern
Kentucky, Inc., a Kentucky corporation (each individually, a "SELLER" and
collectively, the "SELLERS").
R E C I T A L S:
1. Sellers own and operate two cable television systems referred to as
the Ashland system and the Defiance system serving the communities listed on
Exhibit A (collectively, the "SYSTEMS").
2. Sellers desire to sell, and Buyer wishes to buy, all of Sellers'
assets used in the operation of the Systems and the cable television business
related thereto for the price and on the terms and conditions hereinafter set
forth.
A G R E E M E N T S:
In consideration of the above recitals and the covenants and agreements
contained herein, Sellers, jointly and severally, and Buyer agree as follows:
1. DEFINED TERMS
The following terms shall have the following meanings in this Agreement:
1.1. "ACCOUNTS RECEIVABLE" means the rights of Sellers to payment for
services billed by Sellers (including, without limitation, those billed to
subscribers of the Systems and those for services and advertising time
provided by Sellers) and unpaid prior to the Closing Date.
1.2. "AGREEMENT" means this Asset Purchase Agreement.
1.3. "ASSETS" means all the tangible and intangible assets, real,
personal and mixed, comprising, or that are otherwise used in connection with
the conduct of the business or operations of, the Systems, including, without
limitation, those specified in detail in Section 2.1.
1.4. "CLOSING" means the consummation of the transaction contemplated
by this Agreement in accordance with the provisions of Section 7.
1.5. "CLOSING DATE" means the date of the Closing specified in
Section 7.
<PAGE> 8
1.6. "CODE" shall mean 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.
1.7. "COMPENSATION ARRANGEMENT" shall mean any plan or compensation
arrangement other than an Employee Plan or a Multiemployer Plan, whether
written or unwritten, which provides to employees or former employees of any
Seller or any entity related to any Seller (under the terms of Sections
414(b), (c), (m) or (o) of the Code) with respect to the Systems any
compensation or other benefits, whether deferred or not, in excess of base
salary or wages and excluding overtime pay, including, but not limited to, any
bonus or incentive plan, stock rights plan, deferred compensation arrangement,
stock purchase plan, severance pay plan and any other perquisites and employee
fringe benefit plan.
1.8. "CONSENTS" means all of the consents, permits or approvals of
government authorities and other third parties necessary to transfer the
Assets to Buyer or otherwise to consummate lawfully the transaction
contemplated hereby.
1.9. "CONTRACTS" means all pole attachment and conduit agreements,
personal property leases, subscription agreements with customers for cable
services provided by the Systems, maintenance agreements, retransmission
consent agreements and other agreements, written or oral (including any
amendments and other modifications thereto) to which any Seller is a party and
that relate to the Assets or the business or operations of the Systems (other
than the Franchises, programming agreements and any other contracts that are
Excluded Assets), that are either (i) in effect on the date hereof (other than
those that expire by their terms and are not renewed prior to Closing); or
(ii) entered into by any Seller in the ordinary course of business of the
Systems and as permitted by this Agreement between the date hereof and the
Closing Date.
1.10. "EMPLOYEE PLAN" shall mean 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 (other than a Multiemployer
Plan) to which any Seller or any entity related to any Seller (under the terms
of Sections 414(b), (c), (m) or (o) of the Code) contributes or which any
Seller or any entity related to any Seller (under the terms of Sections
414(b), (c), (m) or (o) of the Code) sponsors, maintains or otherwise is
bound.
1.11. "EQUIVALENT BILLING UNIT" shall mean an active customer for basic
cable service either in a single household or in a multi-unit dwelling
(including a hotel unit); provided, however, that the number of customers in a
multi-unit dwelling that obtains service on a "bulk-rate" basis shall be
determined by dividing the gross bulk-rate revenue for non-premium services
attributable to such multi-unit dwelling by the basic subscription rate for
individual households subscribing to the same level of service as is provided
to such multi-unit dwelling. For purposes of this definition, an "active
customer" shall mean any person at any given time that is paying for and
receiving any level of cable television service from the Systems who has an
account that is not more than 61 days past due (except for amounts which are
past due pending the resolution of a bona fide dispute or past due
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amounts of $10 or less, provided such account is otherwise current). For
purposes of this definition, the number of days past due of a customer account
shall be determined from the first day of the period for which the applicable
billing for services for that period is made.
1.12. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder, as in effect from time to
time.
1.13. "FAA" means the Federal Aviation Administration.
1.14. "FCC" means the Federal Communications Commission.
1.15. "FCC CONSENT" means the FCC Order dated September 14, 1995 and the
Proposed Resolution referenced therein and attached thereto.
1.16. "FRANCHISES" means all municipal, county, state and federal
franchises, franchise applications (if any), domestic satellite, business
radio and other licenses, earth station registrations, and all authorizations
and permits relating to the Systems granted to any of the Sellers by any
governmental instrumentality, including all amendments thereto and
modifications thereof.
1.17. "FRANCHISING AUTHORITIES" means all governmental authorities which
have issued municipal or county cable franchises relating to the operation of
the Systems or before which are pending any franchise applications filed by
any of the Sellers relating to the operation of the Systems.
1.18. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the
operations, assets or financial condition of one or both Systems, each taken
as a whole.
1.19. "MULTIEMPLOYER PLAN" means a plan, as defined in ERISA
Section 3(37) or 4001(a)(3), to which any Seller or any trade or business
which would be considered a single employer with any Seller under
Section 4001(b)(1) of ERISA contributes or is required to contribute.
1.20. "PERMITTED ENCUMBRANCES" shall mean any of the following liens or
encumbrances: (i) landlord's liens and liens for current taxes, assessments
and governmental charges not yet due or being contested in good faith by
appropriate proceedings; (ii) statutory liens or other encumbrances (excluding
liens securing indebtedness) that are minor or technical defects in title that
do not materially affect the value, marketability or utility of the Assets as
presently utilized; (iii) such liens, liabilities or encumbrances as are
Assumed Liabilities; (iv) leased interests in property owned by others and
leased interests in property leased to others; (v) restrictions set forth in,
or rights granted to Franchising Authorities as set forth in, the Franchises
or applicable laws relating thereto; and (vi) zoning, building or similar
restrictions, easements, rights-of-way, reservations of rights, conditions or
other restrictions or encumbrances relating to or affecting the Real Property,
that do not materially interfere with the use of such Real Property in the
operation of the Systems as presently conducted.
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1.21. "PERSONAL PROPERTY" means all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, supplies and other tangible and intangible personal
property, including, without limitation, the Franchises, the Contracts and the
Accounts Receivable, that are owned or leased by Sellers and used, useful or
held for use as of the date hereof in the conduct of the business or
operations of the Systems, plus such additions thereto and deletions therefrom
arising in the ordinary course of business and as permitted by this Agreement
between the date hereof and the Closing Date.
1.22. "REAL PROPERTY" means all of the buildings and other improvements
thereon, leasehold interests in real estate, easements, licenses, rights to
access, rights-of-way and other real property interests that are (i) leased by
any of the Sellers and used as of the date hereof in the business or
operations of the Systems; or (ii) owned by any of the Sellers and used as of
the date hereof in the business or operations of the Systems, plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and permitted by this Agreement between the date hereof and the
Closing Date.
1.23. List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section hereof
in which such term is defined:
Term Section
---- -------
AAA 10.1
AAA Rules 10.1
Accounting Firm 2.5.5
Additional Financial Statements 5.6
Assumed Liabilities 2.6
Assumption Agreements 7.3.2
Balance Sheet 4.6.1
Base Price 2.4
Buyer Preamble
Buyer's 401(k) Plan 5.15.6
Cable Act 3.4
Claimant 9.4.1
Copyright Act 3.19.2
Cox 401(k) Plan 5.15.6
Deductible 9.5.1
Deposit 2.3
Deposit Escrow Agreement 2.3
Environmental Law 3.16
Eastern Kentucky Plan 3.12.5
Equity Offering 4.7
Escrow Agent 2.3
Excluded Assets 2.2
Expiring Franchise 3.4
Financial Statements 3.11
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Financing 5.l9
Hazardous Substance 3.16
HSR Act 5.5
Indemnifying Party 9.4.1
IRS 3.12.5
Liquidated Damages Amount 8.2.3
Losses 9.2
PBGC 3.12.5
Post-Closing Certificate 2.5.5
Registration Statement 5.6
Response Period 2.5.5
SEC 5.6
Sellers Preamble
Signals 3.19.1
Systems Recitals
Tax Returns 3.14
Taxes 3.14
2. SALE AND PURCHASE OF ASSETS
2.1. Agreement to Sell and Purchase. Subject to the terms and
conditions set forth in this Agreement, Sellers hereby agree to sell, transfer
and deliver to Buyer on the Closing Date, and Buyer agrees to purchase from
Sellers on the Closing Date, all of the Assets, including, without limitation,
those described below, free and clear of any claims, liabilities, security
interests, mortgages, liens, pledges, conditions, conditional sales
agreements, charges or other liens or encumbrances of any nature whatsoever,
except for Permitted Encumbrances:
2.1.1. The Personal Property;
2.1.2. The Real Property;
2.1.3. The Franchises;
2.1.4. The Contracts;
2.1.5. The Accounts Receivable;
2.1.6. All of Sellers' proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints and schematics, including filings with
the Franchising Authorities and the FCC relating to the Systems;
2.1.7. All choses in action of any of the Sellers relating to the
Systems;
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2.1.8. Subject to Section 2.2.2, all books and records relating
to the business or operations of the Systems, including executed copies of the
Contracts and all correspondence and memoranda relating thereto, customer
records and all records required by the Franchising Authorities to be kept,
subject to the right of Sellers to have such books and records made available
to Sellers for a reasonable period, not to exceed five years from the Closing
Date; and
2.1.9. The goodwill and going concern value generated by Sellers
with respect to the Systems, if any.
2.2. Excluded Assets. The Assets shall exclude the following assets
(the "EXCLUDED ASSETS"):
2.2.1. Sellers' cash on hand as of the Closing Date and all other
cash in any of Sellers' bank or savings accounts, including, without
limitation, customer advance payments and deposits; any and all bonds, surety
instruments, insurance policies and all rights and claims thereunder, letters
of credit or other similar items and any cash surrender value in regard
thereto, and any stocks, bonds, certificates of deposit and similar
investments;
2.2.2. Any books and records that Sellers are required by law to
retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the Systems other than those described in
Section 2.1.8, subject to the right of Buyer to have access to and to copy for
a reasonable period, not to exceed five years from the Closing Date, and
Sellers' corporate minute books and other books and records related to
internal corporate matters and financial relationships with Sellers' lenders
and affiliates;
2.2.3. Any claims, rights and interest in and to any refunds of
federal, state or local franchise, income or other taxes or fees of any nature
whatsoever for periods prior to the Closing Date including, without
limitation, fees paid to the U.S. Copyright Office or any choses in action
owned by Sellers relating to such refunds;
2.2.4. All programming agreements and master retransmission
consent agreements (i.e., retransmission consent agreements granting consent
to any of the Systems and one or more cable television systems owned by
Sellers or affiliates of Sellers other than the Systems) of Sellers including
those relating to or benefitting the Systems;
2.2.5. All trademarks, trade names, service marks, service names,
logos and similar proprietary rights of Sellers whether or not used in the
business of the Systems;
2.2.6. Any Employee Plan, Compensation Arrangement or
Multiemployer Plan;
2.2.7. All rights to receive fees or services from any affiliate
of Sellers;
2.2.8. Any and all assets and rights of Sellers unrelated to the
Systems; and
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2.2.9. The assets listed on SCHEDULE 2.2.
2.3. Deposit. Upon execution and delivery of this Agreement by
Sellers and Buyer, Buyer shall deliver to Wachovia Bank of Georgia, N.A.,
Atlanta, Georgia ("ESCROW AGENT") the sum of $7,000,000 (the "DEPOSIT"), to be
held and applied pursuant to the terms of that certain Deposit Escrow
Agreement, substantially in the form attached hereto as Exhibit B (the
"Deposit Escrow Agreement"), to be executed concurrently herewith by Buyer,
Sellers and Escrow Agent. The provisions of the Deposit Escrow Agreement
shall set forth the conditions under which the Deposit, together with interest
thereon, shall be delivered to Sellers or Buyer. Upon the Closing, the amount
of the Deposit, together with interest thereon, shall be credited against the
purchase price.
2.4. Purchase Price. The purchase price for the Assets shall be One
Hundred Thirty-Six Million Dollars ($136,000,000) (the "BASE PRICE"), which
amount shall be adjusted as provided in Section 2.5 below and be paid by Buyer
to Sellers at Closing by wire transfer of immediately available funds to such
bank or banks designated by Sellers.
2.5. Adjustments and Prorations.
2.5.1. All expenses and other liabilities arising from the
Systems up until midnight on the day prior to the Closing Date, including
franchise fees, pole and other rental charges payable with respect to cable
television service, utility charges, real and personal property taxes and
assessments levied against the Assets, salesperson advances, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Assets
hereunder), and similar prepaid and deferred items, shall be prorated between
Buyer and Sellers in accordance with the principle that Sellers shall be
responsible for all expenses, costs and liabilities allocable to the conduct
of the business or operations of the Systems for the period prior to the
Closing Date, and Buyer shall be responsible for all expenses, costs and
obligations allocable to the conduct of the business or operations of the
Systems on the Closing Date and for the period thereafter.
2.5.2. The Base Price shall be adjusted at Closing as follows:
(i) by increasing the Base Price by an amount equal to (A) 100% of the face
amount of all Accounts Receivable that are outstanding 30 days or less from
the first day of the period to which any outstanding bill relates and (B) 85%
of the face amount of all Accounts Receivable that are outstanding more than
30 but fewer than 61 days from the first day of the period to which any
outstanding bill relates; and (ii) by reducing the Base Price by an amount
equal to (x) any customer advance payments (i.e., customer payments received
by Sellers prior to Closing but relating to service to be provided by Buyer
after Closing) and deposits (including any interest owing thereon), (y) any
other advance payments (i.e., advertising payments received by Sellers prior
to Closing but relating to service to be provided by Buyer after Closing) and
(z) Accounts Receivable relating to services to be performed after the Closing
and the responsibility for which is assumed by Buyer under this Agreement.
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2.5.3. The Base Price shall be reduced by $1,754.84 for each
Equivalent Billing Unit less than 77,500 as of the Closing Date.
2.5.4. Sellers shall prepare and submit to Buyer, not later than
five days prior to the Closing, a written good faith estimate of the amount of
the adjustments to the Base Price in accordance with Sections 2.5.1, 2.5.2,
2.5.3 and 5.15.8. The estimate shall be based upon the books and records of
the Systems, including the number of Equivalent Billing Units and the Accounts
Receivable (including the aging reports) as shown on the latest records of
Sellers kept in the ordinary course of business. The estimate submitted to
Buyer shall be accompanied by (i) a statement setting forth in reasonable
detail the calculation of the estimate and (ii) a certificate signed by a
senior officer of each of Sellers certifying that, after due inquiry by such
officers but without any personal liability to such officers, the estimate was
calculated in good faith in accordance with the provisions of Sections 2.5.1,
2.5.2, 2.5.3 and 5.15.8. Sellers shall also deliver to Buyer such other
information as may be reasonably requested by Buyer to verify the estimated
amount of Accounts Receivable and Equivalent Billing Units.
2.5.5. Within 60 days after the Closing Date, Buyer shall deliver
to Sellers a certificate (the "POST-CLOSING CERTIFICATE"), signed by a senior
officer of Buyer after due inquiry by such officer but without any personal
liability to such officer, providing a compilation of the adjustments and
prorations to be made pursuant to this Section 2.5, including any adjustments
and prorations made at Closing and any corrections thereto, together with a
copy of any working papers relating to such Post-Closing Certificate and such
other supporting evidence as Sellers may reasonably request either prior to or
after delivery thereof. If Sellers shall conclude that the Post-Closing
Certificate does not accurately reflect the adjustments and prorations to be
made to the Base Price in accordance with this Section 2.5, Sellers shall,
within 40 days after their receipt of the Post-Closing Certificate (such 40-
day period being referred to as the "RESPONSE PERIOD"), deliver to Buyer their
written statement of any discrepancies believed to exist. If Sellers fail to
so notify Buyer of any discrepancies, then the calculations set forth in the
Post-Closing Certificate shall be controlling for all purposes hereof. On or
before the fifth day following the earlier to occur of the expiration of the
Response Period and the date Buyer receives Sellers' statement of
discrepancies, Buyer shall pay to Sellers or Sellers shall pay to Buyer, as
the case may be, the amount, if any, owed in accordance with the Post-Closing
Certificate as to which there is no discrepancy. Buyer and Sellers shall use
good faith efforts to jointly resolve the discrepancies within 15 days of
Buyer's receipt of Sellers' written statement of discrepancies, which
resolution, if achieved, shall be binding upon all parties to this Agreement
and not subject to dispute or review. If Buyer and Sellers cannot resolve the
discrepancies to their mutual satisfaction within such 15-day period, Buyer
and Sellers shall retain a mutually acceptable national independent public
accounting firm (the "ACCOUNTING FIRM") that has neither been engaged to
perform or performed any services for Sellers or Buyer or their respective
affiliates during the two years prior to the Closing Date to review the Post-
Closing Certificate together with Sellers' discrepancy statement and any other
relevant documents. The cost of retaining the Accounting Firm shall be borne
equally by Buyer, on the one hand, and Sellers, on the other. The Accounting
Firm shall report its conclusions as to adjustments pursuant to this
Section 2.5 which shall be conclusive on all parties to this Agreement and not
subject to dispute or review. In the event the parties are unable to agree on
which accounting firm to retain, if the
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<PAGE> 15
Accounting Firm shall not be engaged on terms reasonably satisfactory to
Sellers and Buyer within 30 days of Buyer's receipt of Sellers' written
statement of discrepancies or if the Accounting Firm shall fail to render a
decision within 45 days of the date it is retained, then the matter shall be
submitted for arbitration in accordance with Section 10 hereof. Within five
days of receipt of the Accounting Firm or Arbitrators' decision, as the case
may be, with respect to such dispute, if Buyer is determined to owe an amount
to Sellers, Buyer shall pay such amount thereof to Sellers, and if Sellers are
determined to owe an amount to Buyer, Sellers shall pay such amount thereof to
Buyer. All amounts owed by Buyer or Sellers to the other in accordance with
this Section shall be paid in immediately available funds and shall bear
interest at the rate of 10% per annum from the Closing Date until the date
such amounts are paid.
2.6. Assumption of Liabilities and Obligations. As of the Closing
Date, Buyer shall assume and pay, discharge and perform the following
(collectively, the "ASSUMED LIABILITIES"): (i) all the obligations and
liabilities of Sellers under the Franchises and the Contracts insofar as they
relate to the time period on and after the Closing Date, and arise out of
events occurring on or after the Closing Date; (ii) all obligations and
liabilities of Sellers to all customers of the Systems for any advance
payments or deposits, if and to the extent that an adjustment was made to the
Base Price with respect to such customers pursuant to Subsection 2.5.2 above;
(iii) all obligations and liabilities arising out of events occurring on or
after the Closing Date related to Buyer's ownership of the Assets or its
conduct of the business or operations of the Systems on or after the Closing
Date; (iv) obligations under Contracts with respect to the period prior to the
Closing Date for which an adjustment is made as of Closing to the extent of
the adjustment made under this Agreement; and (v) the obligations and
liabilities listed on SCHEDULE 2.6; provided, however, that in no event shall
Buyer be obligated to assume any Contract that should have been disclosed on
SCHEDULE 3.7 but which Sellers failed to disclose thereon unless approved
pursuant to Section 5.1 hereof, or any Contract which, had it been in
existence on the date hereof, would have been required to be disclosed on
SCHEDULE 3.7 unless such Contract is approved pursuant to Section 5.1. All
other obligations and liabilities of Sellers shall remain and be the
obligations and liabilities solely of Sellers, including without limitation
any refund liability relating to the period prior to the Closing. Other than
the Assumed Liabilities, Buyer shall not assume or become liable for, and does
not agree to perform or discharge, any liabilities or obligations of Sellers.
2.7. Allocation of Purchase Price. The purchase price shall be
allocated at Closing among the Assets in such amounts as the parties hereto
shall agree.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as of the date of this Agreement
and as of the Closing Date, as follows:
3.1. Organization, Standing and Authority. Each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and is qualified to conduct business
as a foreign corporation in the jurisdictions indicated on SCHEDULE 3.1 and in
each other jurisdiction in which the property owned, leased or operated by it
requires it to be so
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qualified, except where the failure to so qualify would not have a Material
Adverse Effect. Each Seller has the requisite corporate power and authority
(i) to own, lease and use the Assets as presently owned, leased and used by
such Seller; and (ii) to conduct the business and operations of the applicable
Systems as presently conducted by such Seller. No Seller is a participant in
any joint venture or partnership or similar agreement with any other person or
entity with respect to any part of the Systems' operations or the Assets.
3.2. Authorization and Binding Obligation. Each Seller has the
requisite corporate power and authority to execute and deliver this Agreement
and to carry out and perform all of its other obligations under the terms of
this Agreement. All director, stockholder and other corporate action by each
Seller necessary for the authorization, execution, delivery and performance by
each Seller of this Agreement has been taken and such corporate action has not
been rescinded, repealed or amended. This Agreement has been duly executed
and delivered by each Seller and this Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable against it in
accordance with its terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time
to time in effect affecting the enforcement of creditors' rights generally;
and (ii) as the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
3.3. Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Sellers will not violate the articles of
incorporation or bylaws of any Seller, or subject to obtaining the Consents
listed on SCHEDULE 3.8 and compliance with the HSR Act, (i) violate any law,
judgment, order, ordinance, injunction, decree, rule or regulation of any
court or governmental instrumentality applicable to any Seller with respect to
the Assets; or (ii) conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, accelerate or permit the
acceleration of any performance required by the terms of, any agreement,
instrument, license or permit to which any Seller is a party or may be bound
and by which the Assets or the Systems are affected, excluding from the
foregoing clauses (i) and (ii) such violations, conflicts, terminations,
breaches and defaults, which in the aggregate would not have a Material
Adverse Effect, and such conflicts, terminations, breaches and defaults which
would occur as a result of the specific legal or regulatory status of Buyer.
3.4. Franchises. SCHEDULE 3.4 includes a true and complete list of all
Franchises that are held for use in connection with the operations of the
Systems. No other franchises, franchise applications, licenses,
registrations, authorizations or permits are necessary in connection with the
operation of the Systems in the ordinary course of business. True and
complete copies of such Franchises (together with any and all amendments
thereto) have been delivered to Buyer. To the knowledge of Sellers, each of
the Franchises listed on SCHEDULE 3.4 is in full force and effect in
accordance with its terms. No proceedings are pending or, to Sellers'
knowledge, threatened, to revoke, terminate or cancel any of such Franchises.
Except as listed on SCHEDULE 3.4 and except for any noncompliance or default
that would not have a Material Adverse Effect, Sellers and the operations of
the Systems by Sellers are in compliance with the terms and conditions of such
Franchises and are not in default thereunder. For any franchise that has an
unexpired term of fewer
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than three years from the date hereof ("EXPIRING FRANCHISES"), a timely
request for renewal has been submitted to the appropriate Franchising
Authority pursuant to Section 626 of the Cable Television Policy Act of 1984,
as amended (the Cable Communications Policy Act of 1984, as amended, and Cable
Television Consumer Protection and Competition Act of 1992, as amended,
referred to collectively as the "CABLE ACT"). Sellers (i) have not been
notified by any Franchising Authority, with respect to any such Expiring
Franchise, of a preliminary decision not to renew or of any finding that could
reasonably be expected to serve as a basis for a decision not to renew (other
than in respect of Franchises that have been renewed after receipt of such
notice); and (ii) have no knowledge that such notice is to be received.
3.5. Real Property. SCHEDULE 3.5 contains a list of all Real Property
owned by Sellers and all leases of Real Property to which Sellers are a party
as of the date hereof, but excluding easements, rights of way and similar
interests in real property. As to the Real Property which is designated in
SCHEDULE 3.5 as being owned by Sellers, except as set forth in SCHEDULE 3.5,
Sellers have good and marketable title in fee simple to such premises and all
buildings, improvements and fixtures thereon, free and clear of all claims,
liabilities, security interests, mortgages, pledges, conditions, conditional
sales agreements, charges or other liens or encumbrances of any nature
whatsoever, except for Permitted Encumbrances.
3.6. Personal Property. Sellers or their affiliates have, and Sellers
will have on the Closing Date, good and marketable title to all Personal
Property, and as of the Closing Date none of the Personal Property will be
subject to any claims, liabilities, security interests, mortgages, pledges,
conditions, conditional sales agreements, charges or other liens or
encumbrances of any nature whatsoever, except for Permitted Encumbrances.
3.7. Contracts. SCHEDULE 3.7 lists all Contracts in existence as of
the date hereof except for: (i) subscription agreements with customers for the
cable services provided by the Systems; (ii) oral employment arrangements
terminable at will without penalty or severance obligation;
(iii) miscellaneous service contracts terminable at will without penalty;
(iv) any contracts with a remaining term of 12 months or less as of the
Closing Date, none of which involves payment by Sellers of more than $10,000
per year, or which, in the aggregate, involves payment by Sellers of more than
$50,000 per year or any material nonmonetary obligation; and (v) contracts
with a remaining term of more than 12 months as of the Closing Date, none of
which involves payment by Sellers of more than $5,000 per year, or which, in
the aggregate, involve payment by Sellers of more than $25,000 per year, or
any material nonmonetary obligations. Sellers have delivered to Buyer true
and complete copies of all written Contracts disclosed in SCHEDULE 3.7. To
the knowledge of Sellers, each of the Contracts listed on SCHEDULE 3.7 is in
full force and effect and legally enforceable in accordance with its terms
upon the other parties thereto. SCHEDULE 2.2 also sets forth a list of all
bonds, letters of credit, indemnity agreements and similar instruments, and
the amounts thereof, made or posted by Sellers in favor of Franchising
Authorities and other persons in connection with the Franchises and the
Contracts.
3.8. Consents. Except for the Consents described in SCHEDULE 3.8 and
Consents, which if not obtained would not have a Material Adverse Effect, no
consent, approval, permit or
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authorization of, or declaration to or filing with any governmental or
regulatory authority, or any other third party is required to consummate this
Agreement and the transaction contemplated hereby.
3.9. Complete Systems. Except for the Excluded Assets, the Assets
comprise all of the assets reasonably necessary to conduct the business and
operations of the Systems as presently conducted.
3.10. Information on Systems.
3.10.1. The Systems (i) pass by not fewer than 107,000 dwellings
(as defined below); (ii) as of June 30, 1995, have at least 77,400 Equivalent
Billing Units in the aggregate; and (iii) have the bandwidth capacity set
forth on SCHEDULE 3.10.
3.10.2. As used in this Section 3.10, "dwellings" means a home or
other residential unit that can be legally serviced by the Systems by using no
more than 300 feet of drop cable.
3.10.3. As of June 30, 1995, the rates charged to customers for
each class of service and categories of customers for the Systems are set
forth in SCHEDULE 3.10.
3.10.4. The Systems duly and properly carry and deliver the
channels indicated in SCHEDULE 3.10. Sellers have obtained all required FCC
clearances for the operation of the Systems in all necessary aeronautical
frequency bands.
3.11. Financial Statements.
3.11.1. SCHEDULE 3.11 contains true and complete copies of
(i) unaudited financial statements of the Systems containing balance sheets
and statements of income as at and for the 12 months ended December 31, 1994;
and (ii) unaudited balance sheets and statements of income of the Systems for
the period ended October 31, 1995 (collectively, the "FINANCIAL STATEMENTS").
The Financial Statements are prepared in accordance with generally accepted
accounting principles consistently applied, except for the absence of
footnotes and, with respect to the interim Financial Statements, subject to
normal recurring year-end adjustments, which are not expected to be material
in amount. The Financial Statements are in accordance with the books and
records of the Systems and present fairly in all material respects the
financial condition of the Systems and the results of operations for the
periods ended on the respective dates of the Financial Statements.
3.11.2. Sellers do not have any liability or obligation related to
the Assets or the Systems (whether accrued, absolute, contingent or otherwise)
which is of a nature required to be reflected in financial statements prepared
in accordance with generally accepted accounting principles, consistently
applied (including footnotes thereto), including, without limitation, any
liability that might result from an audit of its tax returns, except for
(i) the liabilities and obligations of Sellers that are disclosed or reserved
against in the Financial Statements, to the extent and in the amounts so
disclosed or reserved against; and (ii) liabilities incurred or accrued in the
ordinary
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course of business since the date of the most recent Financial Statements, and
which do not in the aggregate have a Material Adverse Effect.
3.12. Employee Benefit Plans.
3.12.1. All of Sellers' Employee Plans and Compensation
Arrangements providing benefits to employees of the Systems as of the date of
this Agreement are listed and described in SCHEDULE 3.12, and copies of any
such written Employee Plans and Compensation Arrangements (or related
insurance policies) and any amendments thereto have been made available to
Buyer, along with copies of employee handbooks or similar documents describing
such Employee Plans and Compensation Arrangements that are presently utilized
in connection with the operation of the Systems. Except as disclosed in
SCHEDULE 3.12, there is not now in effect or to become effective after the
date of this Agreement, any new Employee Plan or Compensation Arrangement or
any amendment to an existing Employee Plan or Compensation Arrangement which
will affect the benefits of employees or former employees of the Systems.
3.12.2. Each of Sellers' Employee Plans and Compensation
Arrangements has been administered without material exception in compliance
with its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state
laws.
3.12.3. Except as disclosed in SCHEDULE 3.12, no Seller
contributes to and is required to contribute to any Multiemployer Plan with
respect to its employees at the Systems.
3.12.4. Sellers are not aware of the existence of any governmental
audit or examination of any of Sellers' Employee Plans or Compensation
Arrangements or of any facts that would lead it to believe that any such
audit or examination is pending or threatened. There exists no action, suit
or claim (other than routine claims for benefits) with respect to any such
Employee Plan or Compensation Arrangement pending or, to the knowledge of
Sellers, threatened with respect to any of such Employee Plan or Compensation
Arrangements.
3.12.5. (i) The Times Mirror Cable Television of Eastern
Kentucky, Inc. Pension Plan ("Eastern Kentucky Plan") is a pension plan as
defined in Section 3(3) of ERISA. The Eastern Kentucky Plan and its related
trust are intended to qualify for favorable tax treatment pursuant to
Section 401(a) and Section 501(a) of the Code, respectively. The Eastern
Kentucky Plan does not provide coverage for any persons who are not, or have
not previously been, employees of the System. The Internal Revenue Service
("IRS") has issued a favorable determination letter with respect to the
qualification of the Eastern Kentucky Plan which letter remains in effect and
Sellers are not aware of any facts or circumstances which could reasonably be
expected to result in a determination by the IRS that such favorable
determination letter should be revoked. There have been no prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the Code
with respect to the Eastern Kentucky Plan or any parties in interest or
disqualified persons with respect to such Plan which could subject Buyer to
any liability. No accumulated funding deficiency (within the meaning of
Section 412 of the Code) exists, and, to
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<PAGE> 20
the knowledge of Sellers, no waiver of funding requirements pursuant to
Section 412(d) has been sought or received, with respect to the Eastern
Kentucky Plan.
(ii) With respect to the Eastern Kentucky Plan, to the knowledge
of Sellers, (a) all contributions required to be made have been made and
premiums paid timely to the Pension Benefit Guaranty Corporation ("PBGC");
(b) no reportable event (as defined in Section 4043(b) of ERISA) has occurred;
(c) the actuarial present value of the benefit liabilities (as defined in
Section 4001(A)(16) of ERISA) does not exceed the net assets available to
provide such benefit liabilities; and (d) there are no facts or circumstances
which might reasonably be expected to give rise to any liability to the PBGC
under Title IV of ERISA (other than for premium payments).
3.13. Labor Relations. SCHEDULE 3.13 lists the names, dates of hire and
current annual salaries of all persons employed by Sellers directly and
principally in connection with the operation of the Systems. Except as
disclosed in SCHEDULE 3.13, no Seller is a party to or subject to any
collective bargaining agreements with respect to the Systems. Seller has no
written or oral employment arrangements with any employee of the Systems,
other than (i) oral employment arrangements terminable at will without penalty
or severance obligation; or (ii) those listed in SCHEDULE 3.7.
3.14. Taxes, Returns and Reports. All federal, state and local tax
returns required to be filed by Sellers in connection with the operation of
the Systems with respect to any federal, state or local taxes (the "TAXES")
have been filed. Except as set forth in SCHEDULE 3.14, all Taxes which are
due and payable or disputed in good faith have been properly accrued or paid
or are being contested in good faith by appropriate proceedings. There are no
legal, administrative or tax proceedings pursuant to which Sellers are or
could be made liable for any Taxes, penalties, interest or other charges, the
liability for which could extend to Buyer as transferee of the Assets, and no
event has occurred that could impose on Buyer any transferee liability for any
Taxes, penalties or interest due or to become due from Sellers.
3.15. Claims and Legal Actions. Except as set forth in SCHEDULE 3.15,
and except for any investigations and rule-making proceedings affecting the
cable industry generally, there is (i) no legal action, counterclaim, suit,
arbitration; (ii) to the knowledge of Sellers, any claim or governmental
investigation; or (iii) any other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or pending, or to the knowledge of
Sellers, threatened against or relating to the Assets or the business or
operations of the Systems, other than those which would not have a Material
Adverse Effect.
3.16. Environmental Matters.
3.16.1. To the best of Sellers' actual knowledge without
independent inquiry and except for such matters as would not individually or
in the aggregate have a Material Adverse Effect, (i) the Real Property is free
of all friable asbestos; (ii) there has been no reportable quantity of any
Hazardous Substance on the Real Property, nor has any reportable quantity of
any Hazardous Substance been released, used, treated or disposed in, into, on,
over or under the Real Property
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<PAGE> 21
except, in each case, for such substances which are in such amounts and of the
type typically found in commercial cleaning products or standard office
supplies of businesses similar to Sellers', as to which Sellers are in
compliance with all applicable Environmental Law; (iii) Sellers are in past
and current compliance with, are not in violation of, and have no liability
under, Environmental Law; and (iv) except as set forth on SCHEDULE 3.16, there
are no tanks on or below the surface of the Real Property.
3.16.2. Sellers have not received any written notice from any
governmental authority indicating that the Real Property or any property
adjacent thereto has been or may be placed on any federal or state "Superfund"
or "Superlien" list.
3.16.3. To the best of Sellers' actual knowledge without
independent inquiry and except for such matters as would not individually or
in the aggregate have a Material Adverse Effect, (i) Sellers have no liability
relating to Sellers' ownership or operation of the Systems for any illness or
personal injury to any employee other than such matters for which claims have
been filed under applicable workers' compensation regulations (and to the best
of Sellers' actual knowledge, there is no reasonable basis for any present or
future charge, complaint, action, suit, proceeding, hearing, investigation,
claim or demand (under the common law or pursuant to statute) against Sellers
giving rise to any such liability; and (ii) Sellers have not exposed any
employee to any Hazardous Substance.
3.16.4. As used in this Agreement, the term "HAZARDOUS SUBSTANCES"
includes any substance heretofore or hereafter designated as "hazardous" or
"toxic", including, without limitation, petroleum and petroleum related
substances, or having characteristics identified as "hazardous" or "toxic"
under any Environmental Law. As used hereunder, the term "ENVIRONMENTAL LAW"
shall include (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., (ii) the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., (iii) the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq., (iv) the
Clean Air Act, 42 U.S.C. Section 7401, et seq., (v) Safe Drinking Water Act,
42 U.S.C. Section 300f et seq., (vi) Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., (vii) Rivers and Harbors Act of 1899, 33 U.S.C.
Section 401 et seq., (viii) Endangered Species Act of 1973, 16 U.S.C.
Section 1531 et seq., (ix) Occupational Safety and Health Act of 1970,
29 U.S.C. Section 651 et seq., and (x) the Community Right to Know Act,
42 U.S.C. Section 11001, et seq., all as amended, and all other laws, rules
and regulations of any federal, state or local government (or agency thereof)
concerning release or threatened release of hazardous substances, public
health and safety, or pollution or protection of the environment.
3.17. Compliance with Laws. Sellers have complied and are in compliance
with all federal, state and local laws, rules, regulations and ordinances
applicable to the Systems, except for such noncompliance which would not have
a Material Adverse Effect.
3.18. Conduct of Business in Ordinary Course. Except as set forth on
SCHEDULE 3.18, since October 31, 1995, Sellers have conducted the business and
operations of the Systems only in the ordinary course and have not suffered
any changes, events or conditions other than matters affecting
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<PAGE> 22
the cable television industry generally (including, without limitation,
legislative, regulatory or litigation matters) and matters relating to or
arising from local or national economic conditions (including financial and
capital markets), none of which have a Material Adverse Effect.
3.19. FCC and Copyright Compliance.
3.19.1. Sellers are permitted under all applicable FCC rules,
regulations and orders to distribute the transmissions (whether television,
satellite, radio or otherwise) of video programming or other information that
the Sellers make available to customers of the Systems (the "SIGNALS")
presently being carried to the customers of and by the Systems and to utilize
all carrier frequencies generated by the operations of the Systems, and are
licensed to operate all the facilities required by law to be licensed,
including without limitation, any business radio and any cable television
relay service system, being operated as part of the Systems. Except as
provided in SCHEDULE 3.19, Sellers' operation of the Systems and of any
FCC-licensed or registered facility used in conjunction with Sellers'
operation of the Systems, is in compliance with the FCC's rules and
regulations and the provisions of the Cable Act, except for such noncompliance
which would not have a Material Adverse Effect. All reports required by the
FCC to be filed and fees required to be paid to the FCC for each System for
the most recent reporting or filing period for which such reports or payments
are due: (i) are materially true and correct; and (ii) have been timely
filed. Sellers make available to customers of the Systems and third parties
all equipment and facilities required under any applicable federal, state and
local laws, rules, regulations and ordinances. Sellers are covered by
Sellers' parent company, Cox Communications, Inc.'s, participation in the
industry-wide settlement concerning music licensing fees. Notwithstanding the
foregoing, Sellers make no representation or warranty with respect to the
effect of the cable television industry-wide dispute concerning music
licensing fees.
3.19.2. All statements of account and other documents and
instruments and paid all royalties, supplemental royalties, fees and other
sums for the Systems have been submitted to the U.S. Copyright Office under
the Copyright Act of 1976, as amended (the "COPYRIGHT ACT"), as are required
to obtain, hold and maintain the compulsory license for cable television
systems prescribed in Section 111 of the Copyright Act. The Systems are in
compliance with the Copyright Act and the rules and regulations of the U.S.
Copyright Office, except for such noncompliance which would not have a
Material Adverse Effect and except as to potential copyright liability arising
from the performance, exhibition or carriage of any music on the Systems. To
the knowledge of Sellers, there is no inquiry, claim, action or demand pending
before the U.S. Copyright Office or from any other party which questions the
copyright filings or payments made with respect to the Systems.
3.19.3. 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 and are listed in SCHEDULE 3.4. The towers are being
operated in compliance with applicable FCC and FAA rules, except for such
noncompliance which would not have a Material Adverse Effect.
3.19.4. As of the date of this Agreement and to the actual
knowledge of Sellers without independent inquiry and except as disclosed on
SCHEDULE 3.19: (i) Sellers are currently the
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<PAGE> 23
only person providing or intending to provide wireline or wireless cable
television services or similar video programming or related services within
all or part of the geographic area served by the Systems; and (ii) no person
other than Sellers has been granted a presently valid cable television
franchise or has a pending application for a cable television franchise in any
of the geographic areas presently served by the Systems.
3.20. Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitute or cause a breach of
a representation or warranty of Sellers made in this Agreement (including,
without limitation, the schedules hereto) on the date such representation or
warranty is made shall not constitute a breach of such representation or
warranty if such event or circumstance is cured on or prior to the Closing
Date.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as of the date of this Agreement
and as of the Closing Date, as follows:
4.1. Organization, Standing and Authority. Buyer is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and is, or will be prior to Closing, qualified
to conduct business as a foreign limited partnership in the State of Ohio and
the Commonwealth of Kentucky. Buyer has the requisite partnership power and
authority to execute and deliver this Agreement and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with
by Buyer hereunder.
4.2. Authorization and Binding Obligation. Buyer has the partnership
power and authority to execute and deliver this Agreement and to carry out and
perform all of its other obligations under the terms of this Agreement. All
general, limited and other partnership action by Buyer necessary for the
authorization, execution, delivery and performance by Buyer of this Agreement
has been taken and such partnership action has not been rescinded, repealed or
amended. This Agreement has been duly executed and delivered by Buyer and
this Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable against it in accordance with its terms, except (i) as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally; and (ii) as the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.3. Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Buyer will not violate the Certificate of
Limited Partnership or Limited Partnership Agreement of Buyer, or subject to
compliance with the HSR Act and obtaining any Consents listed on SCHEDULE 3.8,
(i) require the consent, approval, permit or authorization of, or declaration
to or filing with any governmental or regulatory authority, or, except as
described on SCHEDULE 4.3, any other third party; (ii) violate any material
law, judgment, order, ordinance, injunction, decree, rule or regulation of any
court or governmental instrumentality; or (iii) conflict with, constitute
grounds
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<PAGE> 24
for termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of, any material agreement, instrument, license or permit to which Buyer is a
party or by which Buyer may be bound, such that Buyer could not perform
hereunder and acquire or operate the Assets.
4.4. Claims and Legal Actions. Except for any investigations and rule-
making proceedings affecting the cable industry generally, there is (i) no
legal action, counterclaim, suit, arbitration; (ii) to the knowledge of Buyer,
any claim or governmental investigation; or (iii) any other legal,
administrative or tax proceeding, nor any order, decree or judgment, in
progress or pending, or to the knowledge of Buyer, threatened against Buyer or
any of its affiliates which, if adversely determined, would restrain or enjoin
the consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause
any of such transactions to be rescinded.
4.5. Qualification. Buyer knows of no reason why it cannot become the
franchisee pursuant to the Franchises and to its knowledge has the requisite
qualifications to own and operate the Systems in the manner in which they are
currently operated by Sellers.
4.6. Financial Statements.
4.6.1. SCHEDULE 4.6 contains a true and complete copy of an
unaudited balance sheet of Buyer's general partner, Frontier Vision Partners,
L.P., a Delaware limited partnership ("FVP") as of September 30, 1995 (the
"BALANCE SHEET"). The Balance Sheet is prepared in accordance with generally
accepted accounting principles consistently applied, in accordance with the
books and records of FVP and presents fairly in all material respects the
financial condition of FVP as at September 30, 1995.
4.6.2. FVP does not have any liability or obligation (whether
accrued, absolute, contingent or otherwise) which is of a nature required to
be reflected in a balance sheet prepared in accordance with generally accepted
accounting principles, consistently applied (including footnotes thereto),
including without limitation any liability that might result from an audit of
its tax returns, except for (i) the liabilities and obligations of FVP that
are disclosed or reserved against in the Balance Sheet, to the extent and in
the amounts so disclosed or reserved against; and (ii) liabilities incurred or
accrued in the ordinary course of business since the date of the Balance
Sheet, and which do not in the aggregate have a material adverse effect on the
financial condition of FVP taken as a whole.
4.7. Adequate Financing. As of the date hereof, FVP has commitments
for capital investments in FVP in the aggregate amount of $123,354,219, of
which $54,000,187 has been drawn by FVP and the remainder is available to FVP
upon FVP's request (the "EQUITY OFFERING"). On November 9, 1995, Buyer
entered into a Credit Agreement with The Chase Manhattan Bank (National
Association), as administrative agent, J. P. Morgan Securities, Inc., as
syndication agent, and CIBC Inc., as co-agent, providing for a revolving
credit line in the aggregate principal amount up to $130,000,000.
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<PAGE> 25
4.8. Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitute or cause a breach of
a representation or warranty of Buyer made in this Agreement (including,
without limitation, the schedules hereto) on the date such representation or
warranty is made shall not constitute a breach of such representation or
warranty if such event or circumstance is cured on or prior to the Closing
Date.
5. COVENANTS OF THE PARTIES
5.1. Conduct of the Business of the Systems. Except as contemplated by
this Agreement, disclosed on SCHEDULE 5.1 or with the prior written consent of
Buyer (which consent shall not be unreasonably withheld or delayed), between
the date hereof and the Closing Date, Sellers shall operate the Systems in the
ordinary course of business in accordance with past practices and, without
limitation of the foregoing, shall do the following:
5.1.1. Sellers shall use commercially reasonable efforts (i) to
preserve the business of the Systems and Assets intact and to preserve the
goodwill and business of the customers, advertisers, suppliers and others
having business relations with the Systems; and (ii) to retain the services of
the employees of the Systems;
5.1.2. Sellers shall not (i) sell, lease, hypothecate, transfer
or otherwise dispose of any of the Assets, other than dispositions in the
ordinary course of business of assets where suitable replacements have been
made therefor or where such assets are no longer used in the ordinary course
of business; (ii) grant or agree to grant any increase in the rates of
salaries or compensation payable to employees of the Systems (other than as
required by law and regularly scheduled bonuses and increases in the ordinary
course of business or one-time bonuses to induce employees to remain employed
with Sellers through the Closing Date); (iii) provide for any new and material
pension, retirement or other employment benefits for employees of the Systems
or any material increase in any existing benefits (other than as required by
law); or (iv) add, delete or reposition any signal or programming service
currently carried on any System, or implement any retiering or repackaging of
cable television programming offered by the Systems, except as may be required
by applicable law;
5.1.3. Sellers shall pay all material obligations relating to the
Systems as they become due, consistent with past practices;
5.1.4. Sellers shall not take any action that is inconsistent
with its obligations under this Agreement or that could reasonably be expected
to hinder or delay the consummation of the transactions contemplated by this
Agreement;
5.1.5. Sellers shall maintain all of the Assets in reasonable
condition (ordinary wear and tear excepted), consistent with their overall
condition on the date of this Agreement, and shall use, operate and maintain
all of the Assets in a reasonable manner;
5.1.6. Sellers shall maintain inventories at levels consistent
with past practices;
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<PAGE> 26
5.1.7. Sellers shall not enter into any contract or commitment,
except for any contract or commitment entered into in the ordinary course of
business and that involves liabilities under such contract or commitment such
that it would not be required to be disclosed pursuant to Section 3.7 hereof;
5.1.8. Sellers shall not create, assume or permit to exist any
claim, liability, mortgage, lien, pledge, condition, charge or encumbrance
upon the Assets, except for Permitted Encumbrances; and
5.1.9. Sellers shall not change customer rates for any tier of
service or charges for remotes or installation, or change billing, disconnect
or marketing practices, except, however, Sellers shall implement billing
credits and reductions in charges in compliance with the FCC Consent when the
FCC Consent becomes effective and final.
5.2. Access to Information. Sellers shall allow Buyer and its
authorized representatives reasonable access upon reasonable advance notice at
Buyer's expense during normal business hours to the Assets and to all other
properties, equipment, books, records, Contracts and documents relating to the
Systems for the purpose of audit and inspection, and furnish or cause to be
furnished to Buyer or its authorized representatives all information with
respect to the affairs and business of the Systems as Buyer may reasonably
request, it being understood that the rights of Buyer hereunder shall not be
exercised in such a manner as to interfere with the operations of Sellers'
business.
5.3. Insurance. Sellers shall maintain all insurance policies
currently in effect with respect to the Systems until the Closing Date.
5.4. Notice of Subsequent Events. Each party agrees to promptly notify
the other of any circumstance, event or action by it or otherwise (i) that, if
known at the date of this Agreement, would have been required to be disclosed
in or pursuant to this Agreement; or (ii) the existence, occurrence or taking
of which would result in any of its representations and warranties in this
Agreement not being true and correct in all material respects at Closing, and,
with respect to clause (ii), to use its commercially reasonable efforts to
remedy the same.
5.5. Delivery of Financial Information. Sellers shall furnish to Buyer
within 30 days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense for the month
previously ended and such other financial information (including information
on payables and receivables) as Buyer may reasonably request. The income
statements delivered by Sellers to Buyer pursuant to this Section shall be in
accordance with the books and records of the Systems and shall present fairly
in all material respects the results of operations of the Systems for the
year-to-date periods then ended. Promptly after the preparation thereof,
Sellers shall deliver to Buyer copies of any other financial statements,
subscriber counts and other operational data regularly prepared by Sellers for
their internal use; provided that Sellers shall not be required to make and
shall not be deemed to make any representation or warranty concerning any such
information delivered to Buyer (other than the information furnished to Buyer
is a true and complete copy of the information prepared by Sellers for their
internal use).
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<PAGE> 27
5.6. Additional Financial Information.
5.6.1. If requested by Buyer within 30 days after the execution
hereof and required by Securities and Exchange Commission ("SEC") Regulations
S-K and S-X to be included in any registration statement or other offering
document (each, a "REGISTRATION STATEMENT") proposed to be prepared by Buyer
in connection with its financing activities, Sellers agree to prepare, and
cause Sellers' independent accountants to audit (to the extent indicated
below), the following financial statements with respect to the Systems, and to
prepare related management discussions and analyses (collectively, the
"ADDITIONAL FINANCIAL STATEMENTS"), conforming with the requirements specified
in this Section 5.6:
(i) Balance sheets as at December 31, 1993 and 1994,
and income statements and statements of cash flows and changes in equity for
the years ended December 31, 1992, 1993 and 1994, together with the required
footnotes and the auditor's report thereon.
(ii) An unaudited balance sheet, income statement and
statement of cash flows as of and for the quarter ended June 30, 1995,
together with the required footnotes.
(iii) An unaudited balance sheet, income statement and
statement of cash flows as of and for each fiscal quarter subsequent to the
quarter ended June 30, 1995 and ending prior to the Closing Date, together
with the required footnotes.
5.6.2. Sellers shall prepare and cause Sellers' independent
accountants to audit the Additional Financial Statements within 60 days after
Buyer's request therefor.
5.6.3. The Additional Financial Statements shall be prepared from
the books and records of Sellers in accordance with generally accepted
accounting principles, consistently applied, and in the form required by SEC
Regulations S-K and S-X, so as to fairly present the financial condition,
results of operations and cash flows of Sellers for the periods indicated,
and, with respect to the quarterly financial statements required by this
Section 5.6, subject to normal year-end adjustments.
5.6.4. To the extent required by SEC Regulation S-X, the
Additional Financial Statements shall be audited by Sellers' independent
accountants. The cost of any audit or preparation of any of the Additional
Financial Statements shall be paid by Buyer, which shall include fees of
Sellers' independent auditors as well as the reasonable and actual costs of
Sellers' accountants preparing any such Additional Financial Statements.
5.6.5. Sellers agree to provide one or more audit representation
letters as to the information provided by Sellers to its independent
accountants in connection with any audit required under this Section 5.6. The
representation letter will be in such form and make the representations
reasonably required by such independent accountants to enable them to issue an
opinion acceptable to the SEC for purposes of any Registration Statement with
respect to the audit of those Additional Financial Statements required to be
audited by SEC Regulations S-K and S-X and to be included
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<PAGE> 28
in such Registration Statement. Sellers shall use their commercially
reasonable efforts to cause their independent accountants to provide all
consents that are necessary for the inclusion of their opinion and the
Additional Financial Statements in any such Registration Statement.
5.7. Confidentiality. Each party shall keep secret and hold in
confidence for a period of three years following the date hereof, any and all
information relating to the other party that is proprietary to such other
party, other than the following: (i) information that has become generally
available to the public other than as a result of a disclosure by such party;
(ii) information that becomes available to such party or an agent of such
party on a nonconfidential basis from a third party having no obligation of
confidentiality to a party to this Agreement; (iii) information that is
required to be disclosed by applicable law, judicial order or the rules and
regulation of the SEC in connection with the offering and sale of any
securities of such party or affiliates of such party, (iv) information that is
required to be disclosed pursuant to any listing agreement with, or the rules
or regulations of, any securities exchange on which securities of such party
or any such affiliate are listed or traded; and (v) disclosures made by any
party as shall be reasonably necessary in connection with obtaining the
Consents; provided, however, in connection with disclosure of confidential
information under (iii), (iv) and (v) hereof, the disclosing party shall give
the other party hereto timely prior notice of the anticipated disclosure and
the parties shall cooperate in designing reasonable procedural and other
safeguards to preserve, to the maximum extent possible, the confidentiality of
such material.
5.8. Publicity. Neither party hereto will issue any press release or
otherwise make any public statement with respect to this Agreement and the
transactions contemplated hereby without the prior consent of the other,
except as may be required by applicable laws, in which event the party
required by law to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance.
5.9. Premerger Notification. As soon as practicable after the
execution of this Agreement, Buyer and Sellers shall each make any and all
filings which are required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT") with respect to the transactions
contemplated hereby. The parties shall each furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of necessary filings or submissions pursuant
to the provisions of the HSR Act. If the Federal Trade Commission or the
Department of Justice requests additional information from the parties or
imposes any condition upon the transactions contemplated hereby, the parties
will cooperate with each other, the Federal Trade Commission and the
Department of Justice; provided, however, that nothing herein shall compel any
party to comply with any condition imposed upon such party that is materially
adverse to that party's interests as determined by such party in the exercise
of its reasonable business judgment.
5.10. Consents. Following the execution hereof, Sellers shall make such
applications to the Franchising Authorities and other third parties whose
Consents are listed on SCHEDULE 3.8 required for the consummation hereof, and
shall otherwise use their commercially reasonable efforts to obtain the
Consents as expeditiously as possible, but in no event shall Sellers be
required, as a
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<PAGE> 29
condition of obtaining such Consents, to expend any monies on, before or after
the Closing Date (except as may be required to cure any default by Sellers
under any Franchise or Contract and professional fees and expenses incurred in
connection with the efforts to obtain such Consents), or to offer or grant any
accommodations or concessions materially adverse to Sellers. The parties
agree to use commercially reasonable efforts to obtain consents to the
transfer of the cable television franchises in substantially the form attached
hereto as Exhibit C. Sellers shall not agree to any materially adverse change
in any Franchise as a condition to obtaining any authorization, consent, order
or approval necessary for the transfer of such Franchise unless Buyer shall
otherwise consent; provided, however, that Buyer, and not Sellers, shall bear
the cost and expense (other than that incurred in curing any default by
Sellers under any Franchise or Contract) of any conditions imposed by
Franchising Authorities on Franchise transfers to which Buyer has consented.
Buyer shall use its commercially reasonable efforts to promptly assist Sellers
and shall take such prompt and affirmative actions as may reasonably be
necessary in obtaining such Consents and shall cooperate with Sellers in the
preparation, filing and prosecution of such applications as may reasonably be
necessary. Due to the difference in size and operating history between Sellers
and Buyer, Buyer acknowledges that Franchising Authorities and third parties
to Contracts may impose bond, letter of credit, indemnity and insurance
requirements and modify or impose penalty provisions and other similar
provisions to the appropriate Franchise or Contract as a condition to giving
their consent to assignment or transfer thereof. Notwithstanding anything to
the contrary contained in this Section 5.10, Buyer shall be obligated to
accept any such conditions as long as the requirements are reasonable and
customary in the industry for similarly situated cable system operators in
terms of size and financial and operating qualifications. Buyer agrees that it
shall not, without the prior written consent of Sellers (which may be withheld
at Sellers' sole discretion), seek amendments or modifications to existing
Franchises or Contracts prior to the Closing Date. Buyer shall, at Sellers'
request, promptly furnish Sellers with copies of such documents and
information with respect to Buyer, including financial information and
information relating to the cable and other operations of Buyer and any of its
affiliated or related companies, as Sellers may reasonably request in
connection with the obtaining of any of the Consents or as may be reasonably
requested by any person in connection with any Consent. Sellers shall provide
Buyer with copies of all Consents as they are received by Sellers.
5.11. Cooperation. Buyer and Sellers shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under
this Agreement, and Buyer and Sellers shall execute such other documents as
may be necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use diligent efforts to consummate the transaction
contemplated hereby and to fulfill their obligations hereunder.
5.12. Taxes, Fees and Expenses. Buyer, on the one hand, and Sellers, on
the other hand, shall each pay 50% of all sales, use, transfer or purchase
taxes and fees, filing fees, recordation fees and application fees, if any,
arising out of the transactions contemplated herein; provided, however, that
Buyer shall pay all filing fees for the premerger notification under the HSR
Act. Each party shall pay its own expenses incurred in connection with the
authorization, preparation, execution and
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performance of this Agreement, including all fees and expenses of counsel,
accountants, agents and other representatives.
5.13. Brokers. Buyer and each Seller represents and warrants that
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement except that Sellers have
retained Daniels & Associates whose fees shall be paid by Sellers. Buyer
agrees to indemnify and hold harmless Sellers against any fee, commission,
loss or expense arising out of any claim by any broker or finder employed or
alleged to have been employed by it, and Sellers agree to indemnify and hold
harmless Buyer against any fee, commission, loss or expense arising out of any
claim by Daniels & Associates and any other broker or finder employed or
alleged to have been employed by any of them.
5.14. Risk of Loss.
5.14.1. The risk of loss, damage or destruction to the Systems
from fire, theft or other casualty or cause shall be borne by Sellers at all
times up to completion of the Closing. It is expressly understood and agreed
that in the event of any material loss or damage to any material portion of
the Assets from fire, casualty or other cause prior to the Closing, Sellers
shall notify Buyer of same in writing immediately. Such notice shall specify
with particularity the loss or damage incurred, the cause thereof, if known or
reasonably ascertainable, and the insurance coverage related thereto.
5.14.2. Notwithstanding any other provision contained in this
Agreement:
(i) In the event there is damage to the Systems equal
to or greater than $5,000,000 which is not repaired, replaced or restored
prior to the Closing, Buyer, at its sole option upon 10 days' prior written
notice to Sellers: (A) may elect to consummate the Closing and accept the
Assets in their then condition, in which event Sellers shall pay or assign to
Buyer all proceeds of insurance theretofore received or to be received
covering the Assets involved, and the purchase price shall be reduced by an
amount equal to any applicable insurance deductible; or (B) may rescind this
Agreement and declare it of no further force and effect, in which event there
shall be no Closing and this Agreement and all the terms and provisions hereof
shall thereupon be deemed null and void and Buyer shall be entitled to a
return of the Deposit and all interest thereon and the parties shall have no
further liability to each other.
(ii) If the damage sustained is less than $5,000,000,
this Agreement shall remain in full force and effect and the purchase price
shall be reduced by an amount equal to the amount of such damage, and Sellers
shall retain all proceeds of insurance theretofore received or to be received
covering the Assets involved.
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5.15. Employee Benefit Matters.
5.15.1. Buyer shall have no obligation to employ any of Sellers'
employees employed at the Systems. Sellers shall be responsible for and shall
cause to be discharged and satisfied in full all amounts owed to any employee,
including, without limitation, wages, salaries, sick pay, accrued vacation,
employment, incentive, compensation or bonus agreements or other benefits or
payments on account of termination. Buyer, which shall have no obligation to
hire any of Sellers' employees, agrees that it will provide Sellers with
notice of which employees of the Systems Buyer intends to hire at least 60
days before the Closing Date. Except to the extent specifically provided in
this Agreement, Buyer shall not assume or accept any obligation or liability
under any Employee Plan or Compensation Arrangement.
5.15.2. As of the Closing Date, Sellers shall terminate employment
of all employees of Sellers engaged in the operations of the Systems that
Buyer has given notice it intends to hire pursuant to Section 5.15.1 above.
5.15.3. Buyer shall offer health plan coverage, to all of the
full-time employees of the Systems which Buyer elects to hire as of the
Closing Date on terms and conditions generally applicable to all of Buyer's
full-time employees. For purposes of providing such coverage, Buyer shall
waive all preexisting condition limitations for all such employees of the
Systems covered by the Sellers' health care plan as of the Closing Date (other
than preexisting conditions which were excluded by Sellers' health care plan)
and shall provide such health care coverage effective as of the Closing Date
without the application of any eligibility period for coverage. In addition,
Buyer shall credit all employee payments toward deductible and co-payment
obligation limits under Sellers' health care plans for the plan year which
includes the Closing Date as if such payments had been made for similar
purposes under Buyer's health care plans during the plan year which includes
the Closing Date, with respect to employees of the Systems employed by Buyer
as of the Closing Date.
5.15.4. For each employee of the Systems who Buyer hires on the
Closing Date, Buyer shall give past service credit for all crediting purposes
under each of its employee benefit plans that, on or after the Closing Date,
provides coverage to employees of the Systems employed by Buyer as of the
Closing Date to the same extent such employment service was credited for
similar purposes under Sellers' employee benefit plans prior to the Closing
Date.
5.15.5. In accordance with the provisions of Internal Revenue
Service Revenue Procedure 84-77, Buyer shall assume the obligation to make all
Form W-2 income tax report filings for the calendar year in which the Closing
Date occurs, and Sellers shall be relieved from making any such filings with
respect to the employees of the Systems that are employed by Buyer as of the
Closing Date. Sellers shall provide to Buyer all information, including
withholding certificates, as may be reasonably requested by Buyer to
accomplish Buyer's obligations in this Section 5.15.5.
5.15.6. Buyer shall, as soon as practicable after the Closing
Date, establish a defined contribution plan ("BUYER'S 401(k) PLAN") that is
intended to meet the qualification requirements of Section 401(a) of the Code
and that covers the employees of the Systems that Buyer employs on
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and after the Closing Date. Within a reasonable period of time after the
Closing Date, Sellers shall cause to be transferred from the Cox
Communications, Inc. Savings and Investment Plan ("COX 401(k) PLAN") to
Buyer's 401(k) Plan an amount equal to the aggregate account balances held in
the Cox 401(k) Plan as of the date of transfer with respect to all employees
of the Systems that are hired by Buyer as of the Closing Date. Prior to the
date of such transfer, and as preconditions thereto: (i) Buyer shall deliver
to Sellers a copy of the most recently-issued IRS determination letter (or
other proof reasonably satisfactory to counsel for Sellers) that Buyer's
401(k) Plan is qualified under the Code; and (ii) Sellers shall deliver to
Buyer a copy of the most recently-issued IRS determination letter (or other
proof reasonably satisfactory to counsel for Buyer) that the Cox 401(k) Plan
is qualified under the Code. Sellers shall not take any action with respect to
the Cox 401(k) Plan to create a right on behalf of the affected employees to
distribution of plan assets from the Cox 401(k) Plan prior to such transfer.
Subsequent to the transfer of assets to Buyer's 401(k) Plan, neither Sellers
nor the Cox 401(k) Plan shall retain any liability with respect to the
employees on whose behalf the assets were transferred to provide them with
benefits in accordance with the terms of the Cox 401(k) Plan. Sellers and
Buyer agree to cooperate with respect to any government filing, including, but
not limited to, the filing of IRS Form 5310-A, if necessary, to effect the
transfer of assets contemplated by this Section 5.15.6.
5.15.7. Promptly upon Sellers' written request, Buyer shall
reimburse Sellers for the total amount of severance payments that Sellers are
obligated to pay, pursuant to the severance benefits plan disclosed on
SCHEDULE 3.12, to any of the Sellers' employees as to which Buyer notifies
Sellers, pursuant to Section 5.15.1 above, that it intends to hire at Closing,
if Buyer fails to hire any such employees on the Closing Date.
5.15.8. Notwithstanding the provisions of this Agreement regarding
employees in general, including without limitation Sections 5.15.1 and 5.15.2
of this Agreement, Buyer shall offer employment to each member of the
bargaining unit covered by the Collective Bargaining Agreement between Sellers
and the Communications Workers of America. Buyer further agrees to credit
each such employee with all accrued and unused sick leave and vacation leave
as reflected in the records of Sellers; provided, however, that the Base Price
shall be reduced by an amount equal to the aggregate accrued sick and vacation
leave for such employees as reflected in the records of Sellers as of Closing.
5.15.9. As of the Closing Date, Buyer shall become the employer as
defined in the Eastern Kentucky Plan and plan sponsor as defined in Section
3(16)(B) of ERISA, with respect to the Eastern Kentucky Plan. Buyer
acknowledges further that, upon succeeding as plan sponsor of the Eastern
Kentucky Plan in the manner provided in this Section 5.15.9, Sellers shall
have no further obligation or liability with respect to the Eastern Kentucky
Plan.
5.16. Bonds, Letters of Credit, Etc. Buyer shall take all reasonably
necessary steps, and execute and deliver all reasonably necessary documents,
to insure that on the Closing Date Buyer has delivered such bonds, letters of
credit, indemnity agreements and similar instruments in such amounts and in
favor of such franchisors and other persons requiring the same in connection
with the Franchises and the Contracts.
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5.17. Noncompetition. Each Seller covenants and agrees that, unless
Buyer shall otherwise give its prior written consent, for a period of three
years from the Closing Date neither it nor any of its affiliates will own,
manage, operate, control or engage, directly or indirectly, in the business of
operating a wireline video cable television system, multipoint distribution
system, multichannel multipoint distribution system or cable satellite master
antenna television system within the area currently serviced by the Systems.
Notwithstanding the foregoing, nothing herein shall be construed to prohibit
or restrict (i) Sellers or their affiliates from holding an ownership interest
in or participating in the management or operations of, or acting as
distributor for, PrimeStar Partners, L.P., its successors and assigns,
presently offering direct broadcast satellite service nationwide, including
within the area currently served by the Systems; or (ii) the ownership of a
company's securities listed on a national securities exchange or the National
Association of Securities Dealers Automated Quotations System, which (A)
constitutes less than 5% of the outstanding voting stock of such company, (B)
does not constitute control over such company and (C) is held solely for
investment purposes.
5.18. Title Insurance. Sellers shall cooperate with Buyer if Buyer
elects to obtain title insurance policies on any Real Property owned in fee or
leased. Buyer shall have the sole responsibility for obtaining and paying for
such policies. The parties agree that the obtaining of title insurance on any
Real Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby.
5.19. Financing; Consents; Actions. Buyer covenants to use its
reasonable efforts to obtain financing (the "Financing") in an amount which
together with amounts reserved from the Equity Offering is sufficient to pay
the purchase price hereunder. Following the execution hereof, Buyer shall use
its commercially reasonable efforts to obtain the consents listed on SCHEDULE
4.3 as expeditiously as possible. Buyer shall not take any action that is
inconsistent with its obligations under this Agreement or that could
reasonably be expected to hinder or delay the consummation of the transactions
contemplated by this Agreement.
5.20. Reimbursement for Capital Expenditures. In the event Sellers
increase rates charged to customers of the Systems between the date hereof and
Closing with the prior consent of Buyer, Buyer agrees to reimburse Sellers for
reasonable headend capital expenditures incurred by them related to program
service additions that pertain to such rate increases which are approved by
Buyer in advance of the incurrence thereof.
5.21. Additional Rate Information. As soon as reasonably practicable
after the date hereof, Sellers agree to provide to Buyer copies of all rate
schedules and channel line-ups in effect for each System from September 30,
1992, through the date hereof and a current report on the status of all
pending local regulation of basic rates or complaints filed concerning cable
programming service rates in each community, together with all governmental
orders or other documents and correspondence pertinent thereto.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLERS TO CLOSE
6.1. Conditions Precedent to Obligations of Buyer to Close. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions,
all or any of which may be waived, in whole or in part, by Buyer for purposes
of consummating such transactions:
6.1.1. Representations and Warranties. All representations and
warranties of Sellers contained in this Agreement shall be true and complete
in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except for
changes contemplated by this Agreement.
6.1.2. Covenants and Conditions. Sellers shall have in all
material respects performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.1.3. No Injunction, Etc. No action, suit or other proceeding
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or
obtain substantial damages in respect of, or which is related to, or arising
out of, this Agreement or the consummation of the transaction contemplated
hereby which if successful would have a Material Adverse Effect.
6.1.4. Approvals. The waiting period specified under the HSR Act
shall have lapsed or been terminated.
6.1.5. Consents. All Consents required from any Franchising
Authority and each other Consent designated on SCHEDULE 3.8 with an asterisk
"*" as being a material Consent shall have been duly obtained and delivered to
Buyer and shall not have been amended, rescinded or repealed, provided that
this Section 6.1.5 shall not apply to any (i) FCC Consent to any business
radio license which Sellers reasonably expect can be obtained within 120 days
after the Closing and so long as a temporary authorization is available to
Buyer under FCC rules with respect thereto or (ii) any Consent with respect to
any pole attachment or conduit contract, if Buyer has executed a new contract
with the respective pole company or that if such pole company has indicated in
writing that it is willing to execute a new contract with Buyer on terms that
are not financially more burdensome than those contained in the contract with
Sellers to be replaced thereby, or on such other terms and conditions as are
currently reasonable and customary in the industry.
6.1.6. Closing of Financing. The closing and funding of the
Financing shall have occurred or shall occur simultaneously with the Closing.
6.1.7. Deliveries. Sellers shall have made or stand willing and
able to make all the deliveries to Buyer set forth in Section 7.2.
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6.1.8. Material Adverse Change. Between the date of this
Agreement and the Closing Date, there shall have been no material adverse
change in the financial condition of the Systems, taken as a whole, other than
matters affecting the cable television industry generally (including without
limitation legislative, regulatory or litigation matters) and matters relating
to or arising from local or national economic conditions (including financial
and capital markets).
6.2. Conditions Precedent to Obligations of Sellers to Close. The
obligations of Sellers to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions,
all or any of which may be waived, in whole or in part, by Sellers for
purposes of consummating such transactions:
6.2.1. Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent changes are permitted or contemplated pursuant to this Agreement.
6.2.2. Covenants and Conditions. Buyer shall have in all
material respects performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.2.3. No Injunction, Etc. No action, suit or other proceeding
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or
obtain substantial damages in respect of, or which is related to, or arising
out of, this Agreement or the consummation of the transaction contemplated
hereby which if successful would have a material adverse effect on the
financial condition of Sellers or Cox Communications, Inc.
6.2.4. Approvals. The waiting period specified under the HSR Act
shall have lapsed or been terminated.
6.2.5. Consents. All consents listed on SCHEDULE 4.3 shall have
been duly obtained and delivered to Sellers and shall not have been amended,
rescinded or repealed.
6.2.6. Adverse Change. As of the Closing Date, there shall be no
fewer than 75,000 Equivalent Billing Units.
6.2.7. Deliveries. Buyer shall have made or stand willing and
able to make all the deliveries set forth in Section 7.3.
7. CLOSING AND CLOSING DELIVERIES
7.1. Closing. The Closing shall take place at 10:00 a.m. on a date to
be mutually agreed upon, not fewer than five and not more than 15, days after
the conditions set forth in Sections 6.1
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and 6.2 hereof shall have been satisfied, or on such other date as Buyer and
Sellers may mutually agree but in no event will the Closing be held later than
April 30, 1996 (the date upon which the Closing occurs is referred to as the
"CLOSING DATE"). The Closing shall be held at the offices of counsel to
Buyer's senior lender or, if Buyer shall not be consummating the Financing
concurrently with the Closing, at Dow, Lohnes & Albertson, Suite 1600, One
Ravinia Drive, Atlanta, Georgia 30346, or the Closing will be conducted by
mail or at such other place and time as the parties may agree.
7.2. Deliveries by Sellers. Prior to or on the Closing Date, Sellers
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
7.2.1. Transfer Documents. Duly executed warranty bills of sale,
limited or special (but not general) warranty deeds (subject to all matters of
record which constitute Permitted Encumbrances), motor vehicle titles,
assignments and other transfer documents which shall be sufficient to vest
good title to the Assets in the name of Buyer or its permitted assignees, free
and clear of any claims, liabilities, security interests, mortgages, liens,
pledges, conditions, conditional sales agreements, charges or other liens or
encumbrances of any nature whatsoever, except for Permitted Encumbrances.
7.2.2. Consents. The original of each Consent listed on
SCHEDULE 3.8 subject to Section 6.1.5;
7.2.3. Officer's Certificate. A certificate, dated as of the
Closing Date, executed by the President or a Vice President of each Seller,
certifying after due inquiry, but without personal liability: (i) that the
representations and warranties of Sellers contained in this Agreement are true
and complete at and as of the Closing Date as though made on and as of such
time, except for changes contemplated by this Agreement and other than
misrepresentations and breaches of warranties which in the aggregate do not
have a material adverse effect on the financial condition of the Systems taken
as a whole; (ii) that Sellers have, in all material respects, performed and
complied with all material covenants, agreements and conditions required by
this Agreement to be performed or complied with by Sellers prior to or on the
Closing Date;
7.2.4. Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by the Secretary of each Seller, without personal
liability: (i) certifying that the resolutions, as attached to such
certificate, were duly adopted by such Seller's Board of Directors and
stockholders (if required), authorizing and approving the execution of this
Agreement and the consummation of the transaction contemplated hereby and that
such resolutions remain in full force and effect; and (ii) certifying as to
the incumbency of each signatory to this Agreement executed by such Seller;
and
7.2.5. Opinions of Counsel. Opinions of Sellers' counsel dated
as of the Closing Date, substantially in the forms attached hereto as
Exhibit D-1 and Exhibit D-2.
7.3. Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Sellers the following, in form and substance reasonably
satisfactory to Sellers and their counsel:
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7.3.1. Purchase Price. The Purchase Price as provided in Section
2.4 (subject to credit for the Deposit, together with interest thereon);
7.3.2. Consents. The original of each consent listed on
SCHEDULE 4.3.
7.3.3. Assumption Agreements. Appropriate assumption agreements
(the "ASSUMPTION AGREEMENTS") in form reasonably satisfactory to Buyer
pursuant to which Buyer shall assume and undertake to perform Sellers'
obligations under the Franchises and Contracts arising on or after the Closing
Date;
7.3.4. Officer's Certificate. A certificate, dated as of the
Closing Date, executed by the President or a Vice President of Buyer,
certifying after due inquiry, but without personal liability (i) that the
representations and warranties of Buyer contained in this Agreement are true
and complete in all material respects as of the Closing Date as though made on
and as of that date; and (ii) that Buyer has, in all material respects,
performed all of its obligations and complied with all of its material
covenants set forth in this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date;
7.3.5. Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by a senior officer of Buyer, without personal
liability: (i) certifying that the resolutions, as attached to such
certificate, were duly adopted by Buyer, authorizing and approving the
execution of this Agreement and the consummation of the transaction
contemplated hereby and that such resolutions remain in full force and effect;
and (ii) certifying as to the incumbency of each signatory to this Agreement
executed by Buyer; and
7.3.6. Opinion of Counsel. An opinion of Buyer's counsel dated
as of the Closing Date, substantially in the form attached hereto as
Exhibit E.
8. TERMINATION
8.1. Method of Termination. This Agreement constitutes the binding and
irrevocable agreement of the parties to consummate the transactions
contemplated hereby, subject to and in accordance with the terms hereof, the
consideration for which is (i) the covenants, representations, warranties and
agreements set forth in this Agreement; and (ii) the expenditures and
obligations incurred and to be incurred by Buyer on the one hand, and by
Sellers, on the other hand, in respect of this Agreement, and this Agreement
may be terminated or abandoned only as follows:
8.1.1. By the mutual consent of Sellers and Buyer or by Sellers
or Buyer in the event of the notification by the Federal Trade Commission or
the Department of Justice of the intent of either agency to seek to enjoin the
transaction contemplated by this Agreement;
8.1.2. By Buyer after April 30, 1996, if any of the conditions
precedent set forth in Section 6.1 hereof (with the exception of the condition
precedent set forth in Section 6.1.6), to which the obligations of Buyer are
subject, have not been fulfilled or waived, and provided that the failure
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to fulfill such condition is not a result of any untrue representation,
breach of warranty or nonfulfillment of any covenant or agreement by Buyer
contained in this Agreement; or
8.1.3. By Sellers after April 30, 1996, if any of the conditions
precedent set forth in Section 6.2 hereof, to which the obligations of Sellers
are subject, have not been fulfilled or waived, and provided that the failure
to fulfill such condition precedent is not a result of any untrue
representation, breach of warranty or nonfulfillment of any covenant or
agreement by Sellers contained in this Agreement or the failure of the
condition precedent set forth in Section 6.1.6.
8.2. Remedies.
8.2.1. In the event of a termination of this Agreement pursuant
to Section 8.1.1 hereof, each party shall pay the costs and expenses incurred
by it in connection with this Agreement, and no party (or any of its officers,
directors, employees, agents, representatives or stockholders) shall be liable
to any other party for any cost, expense, damage or loss of anticipated
profits hereunder.
8.2.2. In the event the Closing does not occur on or before
April 30, 1996 by reason of the failure of a condition precedent to Buyer's
obligations hereunder as set forth in Section 6.1 hereof (with the exception
of the condition precedent set forth in Section 6.1.6) as a result of any
untrue representation, breach of warranty or nonfulfillment of any covenant or
agreement by Sellers contained in this Agreement, provided that the failure to
fulfill such condition is not a result of any untrue representation, breach
of warranty or nonfulfillment of any covenant or agreement by Buyer contained
in this Agreement, Buyer shall have the right to seek all remedies available
to it as provided hereunder or at law or equity, including the remedy of
specific performance. In the event of any action to enforce this Agreement,
Sellers hereby waive the defense that there is an adequate remedy at law.
8.2.3. In the event of a termination of this Agreement by Sellers
pursuant to Section 8.1.3 hereof as a result (i) of a failure of the condition
precedent set forth in Section 6.1.6 (regardless of whether or not Buyer is in
breach of any representation, warranty, covenant or agreement contained herein
including without limitation Buyer's covenant set forth in Section 5.19
hereof); or (ii) of a failure of any condition precedent to Sellers'
obligations hereunder resulting from any untrue representation, breach of
warranty or nonfulfillment of any covenant or agreement by Buyer contained in
this Agreement, Sellers shall have the right to receive from Buyer the sum of
$13,600,000 (the "Liquidated Damages Amount"). The parties acknowledge and
agree that: (A) Sellers' damages as a result of any such failure to consummate
the transactions contemplated herein at Closing are impossible to determine
precisely; (B) the Liquidated Damages Amount is a reasonable estimate of the
damages suffered by Sellers as a result of a termination pursuant to
clauses (i) or (ii), and is not a penalty; (C) the Liquidated Damages Amount
shall constitute liquidated damages and, absent fraud on the part of Buyer,
Sellers' sole remedy at law and in equity with respect to a termination
pursuant to clauses (i) or (ii), as the case may be; and (D) upon Sellers'
receipt of the Liquidated Damages Amount, this Agreement shall be deemed
canceled and terminated and Sellers and Buyer shall have no further recourse
against each other (or any of their
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respective shareholders, officers, directors, employees or affiliates). Buyer
agrees that upon Sellers' demand for the Liquidated Damages Amount made in
accordance with this Article 8, (Y) Buyer shall deliver written instructions
to the Escrow Agent to pay the Deposit, together with all interest thereon, to
Sellers; and (Z) Buyer shall pay the difference between the Liquidated Damages
Amount and the amount received by Sellers pursuant to clause (Y) above within
five days of Sellers' receipt thereof. If this Agreement is terminated for
any reason other than in a circumstance where Sellers are entitled to receive
the Liquidated Damages Amount as contemplated by this Section 8.2.3, then
Buyer may direct Escrow Agent, subject to the terms of the Deposit Escrow
Agreement, to promptly pay the Deposit and all interest thereon over to Buyer.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
9.1. Representations and Warranties. All representations, warranties,
covenants and agreements contained in this Agreement or in documents or
instruments delivered pursuant hereto shall be deemed continuing
representations, warranties, covenants and agreements, and shall survive the
Closing Date for a period ending on the first anniversary of the Closing Date
unless a longer period of survival is otherwise provided for in this
Agreement; provided, however, that (i) the representations and warranties
regarding title to the Assets contained in Sections 3.5 and 3.6 shall survive
indefinitely and (ii) the representations, warranties and covenants set forth
in Sections 3.16, 3.19, 5.11 and 5.13 shall survive through the expiration of
all statutes of limitation applicable to any claim or right of action pursuant
thereto. The written assertion of any claim by Buyer or Sellers against the
other hereunder with respect to the breach or alleged breach of any
representation or warranty shall extend the period during which such
representation and warranty survives through the date such claim is resolved.
9.2. Indemnification by Sellers. Sellers shall indemnify and hold
Buyer harmless against and with respect to, and shall reimburse Buyer for:
9.2.1. Any and all losses, liabilities, damages and expenses,
including, without limitation, reasonable legal fees and expenses
(collectively, "LOSSES") resulting from any untrue representation, breach of
warranty or nonfulfillment of any covenant by Sellers contained herein;
9.2.2. Any and all obligations of Sellers not assumed by Buyer
pursuant to the terms hereof;
9.2.3. Any and all Losses or damages resulting from Sellers'
operation or ownership of the Systems or Assets prior to the Closing Date,
including, without limitation, any and all liabilities arising under the
Franchises or the Contracts which relate to events occurring prior to the
Closing Date; and
9.2.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
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<PAGE> 40
9.3. Indemnification by Buyer. Buyer shall indemnify and hold Sellers
harmless against and with respect to, and shall reimburse Sellers for:
9.3.1. Any and all Losses resulting from any untrue
representation or breach of warranty or nonfulfillment of any covenant by
Buyer contained herein;
9.3.2. Any and all of the Assumed Liabilities;
9.3.3. Any and all Losses resulting from Buyer's operation or
ownership of the Systems or Assets on and after the Closing Date, including,
without limitation, any and all liabilities arising under the Franchises or
the Contracts which relate to events occurring on or after the Closing Date;
and
9.3.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees
and expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
9.4. Procedure for Indemnification. The procedure for indemnification
shall be as follows:
9.4.1. The party claiming indemnification (the "CLAIMANT") shall
promptly give notice to the party from whom indemnification is claimed (the
"INDEMNIFYING PARTY") of any claim, whether between the parties or brought by
a third party, specifying (i) the factual basis for such claim; and (ii) the
estimated amount of the claim. If the claim relates to an action, suit or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within 10 days after service of process of such action, suit or
proceeding was received by Claimant; provided that failure to give such notice
within such 10-day period shall not bar or otherwise prejudice Claimant's
rights to indemnification with respect to such third-party action, suit or
proceeding unless any defense, claim, counterclaim or cross-claim of the
Indemnifying Party is prejudiced thereby.
9.4.2. Following receipt of notice from the Claimant of a claim,
the Indemnifying Party shall have 30 days to make such investigation of the
claim as the Indemnifying Party deems necessary or desirable. For the
purposes of such investigation, the Claimant agrees to make available to the
Indemnifying Party and/or its authorized representative(s) the information
relied upon by the Claimant to substantiate the claim. If the Claimant and
the Indemnifying Party agree at or prior to the expiration of said 30-day
period (or any mutually agreed upon extension thereof) to the validity and
amount of such claim, the Indemnifying Party shall immediately pay to the
Claimant the full amount of the claim subject to the terms and in accordance
with the procedures set forth herein. If the Claimant and the Indemnifying
Party do not agree within said period (or any mutually agreed upon extension
thereof), the Claimant may seek remedy pursuant to Section 10 below.
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<PAGE> 41
9.4.3. With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party
shall have the right at its own expense, to participate in or assume control
of the defense of such claim; provided that (i) the Indemnifying Party
notifies Claimant of its election to do so within 30 days of the date it
receives notice of such third-party claim; and (ii) the remedy sought by the
third-party claimant is exclusively the payment of money and not any non-
monetary remedies; provided, further that any settlement of a claim in favor
of a third party shall require: (A) the mutual approval of both the
Indemnifying Party and the Claimant if the settlement amount is $350,000 or
less or more than $13,600,000; and (B) the unilateral approval of the
Indemnifying Party if the settlement amount is more than $350,000 and equal to
or less than $13,600,000. Claimant shall cooperate fully with the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not elect to assume control or otherwise participate
in the defense of any third party claim, it shall be bound by the results
obtained by the Claimant with respect to such claim.
9.4.4. If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach
a decision with respect thereto as expeditiously as possible.
9.5. Limitation on Indemnification; Exclusive Remedy.
9.5.1. Sellers shall have no liability under Section 9.2 for
breaches of representations, warranties, covenants and agreements to be
performed prior to the Closing Date unless and until Losses arising therefrom
exceed in the aggregate $350,000 (the "DEDUCTIBLE"), and if Buyer's Losses
exceed the Deductible in the aggregate, Buyer shall be entitled to recover all
of its Losses, including, without limitation, the amount of the Deductible.
9.5.2. Sellers' liability under Section 9.2 for breaches of
representations, warranties, covenants and agreements to be performed prior to
the Closing Date shall be limited to Losses not exceeding in the aggregate
$13,600,000; provided that there shall be no limitation to Sellers' liability
for Losses caused by a breach of the representations and warranties regarding
title to the Assets contained in Sections 3.5 and 3.6.
9.5.3. The amount payable by Sellers to Buyer with respect to
Section 9.2 shall be reduced by the amount of any insurance proceeds received
by Buyer with respect to Losses, and each of the parties hereby agrees to use
reasonable efforts to collect any and all insurance proceeds to which it may
be entitled in respect to any such Losses. Such amount payable shall be
further reduced by the amount of any tax benefit actually realized (including
by refund or by reduction or offset against taxes otherwise payable had the
losses, liabilities or damages not been sustained) by Buyer (or the affiliated
or combined group of which it is a member) by reason of the payment or
incurrence by Buyer of the Losses for which indemnity is sought or the
occurrence of the event giving rise to such Losses. To the extent that
insurance proceeds are received and/or a tax benefit is realized after payment
has been made by Sellers to Buyer, Buyer shall promptly pay an amount
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<PAGE> 42
equal to such proceeds or benefit to Sellers. For purposes of this Section 9
only, in calculating any Losses incurred by Buyer or determining whether or
not any misrepresentation or warranty exists, any material qualifications
contained in the representations and warranties shall be disregarded.
9.5.4. In the absence of fraud, after Closing, the sole and
exclusive remedy of any party for any misrepresentation, any breach of
warranty or nonfulfillment of any covenant set forth in or made pursuant to
this Agreement shall be a claim for indemnification under and pursuant to this
Article 9.
10. DISPUTE RESOLUTION.
10.1. Arbitration. Any controversy, dispute or claim, including, but
not limited to, a claim for specific performance, between Sellers and Buyer
arising out of or in connection with, or relating to, this Agreement or the
transactions contemplated hereby or the breach, termination or validity
hereof, shall be finally settled by arbitration conducted expeditiously in
accordance with the Commercial Arbitration Rules (the "AAA RULES") of the
American Arbitration Association (the "AAA") in effect at the time of the
commencement of the arbitration. The arbitration tribunal shall consist of
three arbitrators. Each party shall appoint one of the first two arbitrators,
and the two arbitrators so appointed shall appoint the third arbitrator, who
shall act as chairman of the tribunal. The party desiring to initiate
arbitration proceedings shall give the other party written notice thereof,
describing the matter in dispute, naming its arbitrator and demanding that the
other party name its arbitrator within 10 days from the date of such
notification. If the other party fails to name its arbitrator within such 10-
day period, or if the two arbitrators do not appoint the third arbitrator
within 15 days after the selection of the second arbitrator, then the AAA
shall, at the request of one of the parties, appoint the second or third
arbitrator, as the case may be. In the case of an arbitration proceeding to
resolve a dispute with respect to the calculation of the adjustments to be
made to the Base Price as contemplated by Section 2.5, a single arbitrator
shall be a national independent public accounting firm that has not performed
any services for Sellers or Buyer during the two years prior to the Closing
Date. The arbitration decision or award shall be reasoned and in writing.
Judgment upon the decision or award rendered by the arbitrators may be entered
and specifically enforced in any court having jurisdiction thereof. The situs
for any such arbitration shall be Washington, D.C. A final award shall be
rendered as soon as reasonably possible and in any event within 120 days of
the filing with AAA of any demand for arbitration. The parties agree that the
arbitrators shall have the right to shorten the length of any notice periods
or other time periods provided in the AAA Rules and to implement Expedited
Procedures under the AAA rules in order to ensure that the arbitration process
is completed within the time frames provided herein. Buyer, on the one hand,
and Sellers, on the other hand, shall each bear 50% of the costs of any such
arbitration, including, without limitation, the fees and expenses of the
arbitrators; provided, however, the arbitrators shall have the right (but not
the obligation) to reapportion Sellers' and Buyer's relative shares of such
costs in accordance with the arbitrators' determination of the relative merits
of the parties' respective claims.
10.2. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
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<PAGE> 43
ON, WITH RESPECT TO OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.3. Survival. The provisions of this Section 10 shall survive any
termination of this Agreement for any reason.
11. MISCELLANEOUS
11.1. Notices. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be (i) in writing;
(ii) delivered by personal delivery, facsimile transmission (to be followed
promptly by written confirmation mailed by certified mail as provided below)
or sent by commercial delivery service or certified mail, return receipt
requested; (iii) deemed to have been given on the date of personal delivery,
the date of transmission and receipt of facsimile transmissions, or the date
set forth in the records of the delivery service or on the return receipt; and
(iv) addressed as follows:
If to Sellers: c/o Cox Communications, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
Attn: John M. Dyer
Facsimile No.: (404) 847-6336
With a copy to: Dow, Lohnes & Albertson
Suite 1600
One Ravinia Drive
Atlanta, Georgia 30346
Attn: Gaylen D. Kemp, Esq.
Facsimile No.: (770) 901-8874
If to Buyer: FrontierVision Operating Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attn: James C. Vaughn
Facsimile No.: (303) 757-6105
With a copy to: Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Attn: Steven O. Meredith
Facsimile No.: (617) 439-4170
or to any such other persons or addresses as the parties may from time to time
designate in a writing delivered in accordance with this Section 10.1.
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<PAGE> 44
11.2. Benefit and Binding Effect. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto;
provided, however, that Buyer may assign this Agreement to its affiliates and
collaterally assign its rights under this Agreement to providers of the
Financing and their successors and assigns without the consent of Sellers;
provided, further, however, that Buyer shall not be released and shall
continue to be liable for its obligations hereunder. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.3. Bulk Transfer. Buyer acknowledges that Sellers have not and will
not file any bulk transfer notice or otherwise complied with applicable bulk
transfer laws.
11.4. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of Georgia, without regard
to the conflicts of law principles of such state.
11.5. Headings. The headings herein are included for ease of reference
only and shall not control or affect the meaning or construction of the
provisions of this Agreement.
11.6. Gender and Number. Words used herein, regardless of the gender
and number specifically used, shall be deemed and construed to include any
other gender, masculine, feminine or neuter, and any other number, singular or
plural, as the context requires.
11.7. Entire Agreement. This Agreement, all schedules and exhibits
hereto, and all documents and certificates to be delivered by the parties
pursuant hereto collectively represent the entire understanding and agreement
between Buyer and Sellers with respect to the subject matter hereof. All
schedules and exhibits attached to this Agreement shall be deemed part of this
Agreement and incorporated herein, where applicable, as if fully set forth
herein. This Agreement supersedes all prior negotiations between Buyer and
Sellers with respect to the transaction contemplated hereby, and all letters
of intent and other writings relating to such negotiations, and cannot be
amended, supplemented or modified except by an agreement in writing which
makes specific reference to this Agreement or an agreement delivered pursuant
hereto, as the case may be, and which is signed by the party against which
enforcement of any such amendment, supplement or modification is sought.
11.8. Further Assurances. Each party covenants that at any time, and
from time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
11.9. Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof, but such waiver
or failure to insist upon strict compliance with such obligation,
representation, warranty,
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<PAGE> 45
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
11.10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law; provided however that the economic and legal substance of the
transactions contemplated by this Agreement is not affected in any manner that
is materially adverse to any party affected by such invalidity or
unenforceability.
11.11. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
11.12. No Third Party Beneficiaries. This Agreement constitutes an
agreement solely among the parties hereto, and, is not intended to and will
not confer any rights, remedies, obligations or liabilities, legal or
equitable on any person (including, without limitation, any of Sellers'
employees) other than the parties hereto and their respective successors or
assigns, or otherwise constitute any person (including, without limitation,
any of Sellers' employees) a third party beneficiary under or by reason of
this Agreement.
11.13. Construction. This Agreement has been negotiated by Buyer and
Sellers 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 drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
11.14. Time of the Essence. Time is of the essence under this
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a
day that is not a business day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding business day.
11.15. Definition of Knowledge. References in this Agreement to "to
the knowledge of Sellers," "to Sellers' knowledge," "of which Sellers have
knowledge" and the like shall mean the actual knowledge of John M. Dyer, Vice
President--Financial Planning and Analysis of Cox Communications, Inc. and
Dave Metz, Vice President--Midwest Region of Cox Communications, Inc.
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<PAGE> 46
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Sellers
as of the date first above written.
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Partners, L.P., its general partner
By: FVP GP, L.P., its general partner
By: FrontierVision, Inc., its general partner
By: /s/ James C. Vaughn
------------------------------------------
Title: PRESIDENT
---------------------------------------
SELLERS:
COX COMMUNICATIONS OHIO, INC.
By: /s/ John M. Dyer
-----------------------------------------------------
John M. Dyer, Vice President
TIMES MIRROR CABLE TELEVISION OF DEFIANCE, INC.
By: /s/ John M. Dyer
-----------------------------------------------------
John M. Dyer, Vice President
CHILLICOTHE CABLEVISION, INC.
By: /s/ John M. Dyer
-----------------------------------------------------
John M. Dyer, Vice President
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<PAGE> 47
COX COMMUNICATIONS EASTERN KENTUCKY, INC.
By: /s/ JOHN M. DYER
-----------------------------------------------------
John M. Dyer, Vice President
GUARANTY
COX COMMUNICATIONS, INC. hereby unconditionally guarantees the full and
timely payment and performance by Sellers of Sellers' obligations set forth in
this Asset Purchase Agreement and in all other agreements and instruments
hereafter executed in connection with the transactions contemplated herein.
The guarantee provided herein is an absolute and continuing guarantee and
shall not be affected by any amendment of the foregoing Asset Purchase
Agreement, or any renewal or extension of the time for performance by Sellers
of any of their obligations thereunder, or any indulgences or waivers with
respect thereto. Cox Communications, Inc. waives any and all defenses and
discharges it may have or otherwise be entitled to as a guarantor or surety
hereunder and further hereby waives presentment for payment or performance,
notice of nonpayment or nonperformance, demand and protest.
COX COMMUNICATIONS, INC.
By: /s/ JIMMY W. HAYES
-----------------------------------------------------
Title: Senior Vice President Finance
--------------------------------------------------
GUARANTY
FRONTIERVISION PARTNERS, L.P. hereby unconditionally guarantees the full
and timely payment and performance by Buyer of Buyer's obligations set forth
in this Asset Purchase Agreement and in all other agreements and instruments
hereafter executed in connection with the transactions contemplated herein.
The guarantee provided herein is an absolute and continuing guarantee and
shall not be affected by any amendment of the foregoing Asset Purchase
Agreement, or any renewal or extension of the time for performance by Buyer of
any of its obligations thereunder, or any indulgences or waivers with respect
thereto. FrontierVision Partners, L.P. waives
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<PAGE> 48
any and all defenses and discharges it may have or otherwise be entitled to as
a guarantor or surety hereunder and further hereby waives presentment for
payment or performance, notice of nonpayment or nonperformance, demand and
protest.
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its general partner.
By: Frontier Vision, Inc., its general partner
By: /s/ James C. Vaughn
---------------------------------------
Title: PRESIDENT
---------------------------------------
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<PAGE> 1
EXHIBIT 10.7
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICABLE INTERNATIONAL MAINE, INC.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
DATED AS OF
FEBRUARY 27, 1996
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 27th
day of February, 1996, by and between AMERICABLE INTERNATIONAL MAINE, INC., a
Maine corporation ("Seller"), and FRONTIERVISION OPERATING PARTNERS, L.P., a
Delaware limited partnership ("Buyer").
R E C I T A L S:
A. Seller is engaged in the business of providing cable
television service to subscribers in and around the geographic areas of St.
Francis, St. John, Allagash, Canton, Addison, Harrington, Columbia Falls,
Trenton, Glenburn, Levant, Denmark and Sebago, in the State of Maine, pursuant
to the Franchises described in Schedule 5.12 hereto.
B. Buyer desires to purchase and Seller desires to sell the
assets of Seller designated in this Agreement used or held for use in
connection with that business, upon the terms and subject to the conditions set
forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
representations, warranties, covenants, promises and agreements contained
herein and intending to be bound legally hereby, the parties agree as follows:
ARTICLE I
1. DEFINITIONS.
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of
Seller representing amounts earned by Seller in connection with its operations
of the Business through the Adjustment Time, except those certain accounts
receivable of Seller described in Schedule 1.1.
"ADJUSTMENT TIME" shall have the meaning set forth in Section
3.2.
"AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person,
with "control" for such purpose meaning the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities or voting
interests, by contract or otherwise.
1
<PAGE> 3
"ASSETS" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description that are owned or leased by Seller and used or held for use in
the Business, including Accounts Receivable, Franchises and other Governmental
Permits, Intangibles, Seller Contracts, Equipment and Real Property and
Seller's records, files and data related to the Business and operations of the
Systems, including maps, plans, diagrams, engineering data, blueprints,
schematics, filings with Governmental Authorities and computer disks and tapes,
technical information and equipment warranties, if any, all books and records
relating to the Business or operations of the Systems, including executed
copies of the Seller Contracts, subject to the right of Seller to copy such
books and records and to have such books and records made available to Seller
for a reasonable period, not to exceed three years from the Closing Date, but
excluding any Excluded Assets and any Assets disposed of by Seller prior to the
Closing Date in compliance with this Agreement.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 4.1.
"BASIC SERVICE" shall mean the lowest level of cable
television service offered by each of the Systems which includes broadcast and
satellite service programming for which a subscriber served by each such System
pays a fixed monthly fee to Seller.
"BASIC SUBSCRIBER RATE" shall mean, with respect to each
System, the applicable standard monthly service fees and charges imposed by
Seller for Basic Service (exclusive of Pay TV and any charges for additional
outlets and installation fees and revenues derived from the rental of
converters, remote control devices and other like charges for equipment), as
set forth on Schedule 5.13(b).
"BASIC SUBSCRIBERS" shall mean, with respect to each System,
the number of single family households (exclusive of "additional outlets" or
"second outlets," as such terms are commonly understood in the cable television
industry, and exclusive of Bulk Subscribers) who (i) subscribe to Basic Service
at the Basic Subscriber Rate; (ii) have paid for at least two months' Basic
Service at the Basic Subscriber Rate, (iii) have no outstanding balance more
than two billing periods past due from the earliest date for which Basic
Service has been provided, (iv) have not requested disconnection for any
reason, and (v) were not solicited by Seller within 90 days prior to the date
of determination of the number of Subscribers by any promotions or by offers of
discounts other than those described on Schedule 5.22.
"BEST OF BUYER'S KNOWLEDGE" shall mean the knowledge of
FrontierVision Operating Partners, L.P.
"BEST OF SELLER'S KNOWLEDGE" shall mean the knowledge of
Americable International Maine, Inc.
"BULK SUBSCRIBERS" shall mean, with respect to each System,
the quotient of (x) the aggregate bulk rate revenues for that System derived
for the calendar month preceding the date of
2
<PAGE> 4
determination from the provision of Basic Service (excluding any revenues in
excess of a single month's charges for any account, any installation or other
non-recurring charge, any charge for equipment and any pass-through charge,
such as those for sales taxes and line-itemized franchise fees) to bulk
accounts that have (i) paid for at least two months' Basic Service; (ii) have
no outstanding balance more than two billing periods past due from the earliest
date for which service has been provided, (iii) have not requested
disconnection for any reason, and (iv) were not solicited by Seller within 90
days prior to the date of determination of the number of Bulk Subscribers by
any promotions or by offers of discounts other than those described on Schedule
5.22, divided by (y) the Basic Subscriber Rate for that System.
"BUSINESS" shall mean the cable television business conducted
by Seller on the date of this Agreement, including the operation of the Systems
pursuant to the Franchises.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Miami, Florida are required or
authorized to be closed.
"CABLE ACT" shall have the meaning set forth in Section
5.11(d).
"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement, as described in Article II.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CLOSING PERIOD" shall mean the three calendar month period
ending on the Closing Date.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMUNICATIONS ACT" shall have the meaning set forth in
Section 5.11(c).
"CONSENTS" shall mean any registration with, consent or
approval of, notice to, or action by any Person, Franchising Authority or other
Governmental Authority required to permit the transfer of the Assets to Buyer
or permit Seller to perform any of its other obligations under this Agreement
or permit Buyer to conduct the Business, including those set forth on Schedule
5.3(a).
"COPYRIGHT ACT" shall mean Title 17 of the United States Code,
as amended, and all rules and regulations thereunder.
"ENCUMBRANCE" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
3
<PAGE> 5
"ENVIRONMENTAL LAW" means the Comprehensive Environmental
Response Compensation and Liability Act of 1980, 42 U.S.C. Section 6601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq.,
the Clean Air Act, 42 U.S.C. Section 7401, et seq., or the Community Right to
Know Act, 42 U.S.C. Section 11001, et seq., all as amended, and any other law,
rule or regulation of any federal, state or local government (or agency
thereof) concerning the release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the environment.
"EQUIPMENT" shall mean all electronic devices, trunk and
distribution coaxial and optical fiber cable, amplifiers, power supplies,
conduit, vaults and pedestals, grounding and pole hardware, subscriber's
devices (including converters, encoders, transformers behind television sets
and fittings), headend hardware (including origination, earth stations,
transmission and distribution system), test equipment, vehicles and other
tangible personal property owned, leased, used or held for use by Seller in
connection with the Business, including the items described on Schedule 5.7.
"ERISA" shall mean the Employment Retirement Income Security
Act of 1974, as amended.
"ESCROW AGENT" shall mean Colorado National Bank, N.A.
"ESCROW AGREEMENT" shall mean the Escrow Agreement among
Seller, Buyer and the Escrow Agent dated the date of this Agreement,
substantially in the form attached as Exhibit A.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
4.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 4.1(b).
"EXHIBITS" shall mean the exhibits prepared and delivered
pursuant to this Agreement.
"FCC" shall have the meaning set forth in Section 5.11(c).
"FINAL ADJUSTMENTS REPORT" shall have the meaning set forth in
Section 3.4(b).
"FRANCHISE" shall have the meaning set forth in Section
5.12(a).
"FRANCHISE AREAS" shall mean those geographic areas in which
Seller provides cable television service pursuant to a Franchise granted by a
Governmental Authority.
"FRANCHISING AUTHORITY" shall have the meaning set forth in
Section 5.12(a).
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"GAAP" shall mean generally accepted accounting principles as
in effect in the United States of America on the date of this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any of the following and
shall include Franchising Authorities: (a) the United States of America; (b)
any state, commonwealth, territory or possession of the United States of
America and any political subdivision thereof (including counties,
municipalities and the like); or (c) any agency, authority or instrumentality
of any of the foregoing, including any court, tribunal, department, bureau,
commission or board.
"GOVERNMENTAL PERMITS" shall mean all Franchises,
authorizations, permits, certificates, licenses, easements, registrations,
leases, variances and similar rights obtained from any Governmental Authority
which authorize, or are required in connection with, the operation of the
Business, including those described on Schedule 5.11(b).
"HAZARDOUS SUBSTANCES" shall mean any substance heretofore
designated as "hazardous" or "toxic", including, without limitation, petroleum
and petroleum related substances, or having characteristics identified as
"hazardous" or "toxic" under any Environmental Law.
"HOMES PASSED" shall mean, with respect to each System, the
total of (a) the number of single family residences capable of being serviced
without further line construction, (b) the number of units in multi-family
residential buildings capable of being serviced without further line
construction and (c) commercial units that are now serviced.
"HSR ACT" shall have the meaning set forth in Section 7.5.
"INDEMNITY ESCROW AGREEMENT" shall mean the Indemnity Escrow
Agreement to be entered into at Closing among Buyer, Seller and Escrow Agent,
substantially in the form attached as Exhibit B.
"INTANGIBLES" shall mean all general intangibles, including
subscriber lists, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use by Seller
in connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"LEGAL REQUIREMENTS" shall mean any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Franchising Authority or other Governmental
Authority, including judicial decisions applying common law or interpreting any
other Legal Requirement.
"PAY TV" shall mean premium programming services selected by
and sold to subscribers of a System for monthly fees in addition to the fee for
Basic Services.
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"PERMITTED ENCUMBRANCES" shall mean the following: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
rights reserved to any Governmental Authority to regulate the affected
property; (c) as to Leased Assets, interests of lessors and Encumbrances
affecting the interests of the lessors; (d) the encumbrances described on
Schedule 5.5; and (e) any Legal Requirements, liens, easements, rights-of-way,
servitudes, permits, leases or restrictions that do not in any material
respect, individually or in the aggregate, affect or impair the value or use of
the affected Asset.
"PERSON" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"PRELIMINARY ADJUSTMENTS REPORT" shall have the meaning set
forth in Section 3.4(a).
"PRIME RATE" shall mean the rate of interest publicly
announced from time to time by The Chase Manhattan Bank, N.A. at its principal
office in New York as its prime rate.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1.
"REAL PROPERTY" shall mean all interests in real property
(including, to the extent applicable, improvements, fixtures, appurtenances and
easements) used or held for use by Seller in connection with the Business,
including the leasehold interests described on Schedule 5.6.
"REGULATORY REQUIREMENT" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act, state securities
laws (including, but not limited to, state "blue sky" laws) and state corporate
laws (including, but not limited to, takeover statutes).
"REQUIRED CONSENTS" shall mean the Consents designated as such
on Schedule 5.3(a) by an asterisk.
"SCHEDULES" shall mean the schedules prepared and delivered
pursuant to this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLER CONTRACTS" shall means all contracts, agreements, and
leases other than those that are Governmental Permits or Franchises to which
Seller is a party and which pertain to the ownership, operation or maintenance
of the Assets or the Business, including those described on Schedule 5.14.
"SUBSCRIBER" shall mean a Basic Subscriber or a Bulk
Subscriber, and "Subscribers" shall mean Basic Subscribers and Bulk Subscribers
collectively.
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"SYSTEM" shall mean each of the cable television reception and
distribution systems of Seller operated in the conduct of the Business,
consisting of one or more headends, subscriber drops and associated electronic
and other equipment, and which is, or is capable of being without modification,
operated as an independent system without interconnections to other systems, as
set forth on Schedule 5.13(b), collectively the "Systems".
"TAKING" shall have the meaning set forth in Section 7.7(b).
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"TAXES" shall mean all taxes, charges, fees, liens, imposts,
duties or other assessments including, without limitation, income, withholding,
excise, employment, property, sales, franchise, use and gross receipt taxes,
imposed by the United States or any state, county, local or foreign government
or any subdivision thereof; such term shall also include any interest,
penalties or additions attributable to such assessments.
"TERMINATION DATE" shall mean July 12, 1996.
"WARN ACT" shall mean the Worker Adjustment and Retaining
Notification Act.
ARTICLE II
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASE AND SALE OF ASSETS. Subject to the satisfaction of
the conditions to each party's obligations hereunder as set forth in Articles
VIII and IX (or, with respect to any condition not satisfied, the waiver
thereof by the party or parties for whose benefit the condition exists), Seller
shall sell, assign, transfer and deliver to Buyer, free and clear of all
Encumbrances of any kind or nature other than Permitted Encumbrances, all of
its rights, title and interest in, and Buyer shall purchase, acquire, accept
and pay for, the Assets.
2.2 TIME AND PLACE OF CLOSING. Subject to the terms and
conditions of this Agreement, the Closing shall take place at 10:00 a.m.
(Eastern Time) on a date specified by notice from Buyer to Seller (but shall
not in any event be prior to the satisfaction or waiver of the conditions to
Closing as set forth in Sections 8.2, 8.7, 9.2 and 9.7), at such place and/or
at such other time as the parties may agree; provided, however, the date
specified in such notice shall not be less than 10 or more than 30 days after
Seller delivers a notice to Buyer that the conditions specified in Sections
8.2, 8.7 and 9.2 have been satisfied or waived (unless the Termination Date
would occur within such 10 day
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period, in which event Buyer shall have the right to designate any date prior
to the Termination Date as the date of Closing). Seller shall deliver a notice
that the conditions of closing specified in said Sections have been satisfied
or waived in accordance with the preceding sentence within 15 days after such
time. At the Closing, the parties shall deliver the documents contemplated to
be delivered in Articles VIII and IX of this Agreement.
ARTICLE III
3. CONSIDERATION.
3.1 CONSIDERATION FOR THE ASSETS; PAYMENT OF PURCHASE
PRICE. (A) The aggregate consideration for the Assets shall consist of (i) an
amount equal to Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000),
subject to proration as set forth in Section 3.2 and adjustment as set forth in
Section 3.3 (the "PURCHASE PRICE") and (ii) the assumption by Buyer of the
Assumed Liabilities. On the Closing Date, Buyer shall pay or cause to be paid
to Seller or Seller's designee the Purchase Price, less (i) the amount paid to
Seller as provided in Section 3.1(b) below, and (ii) the Indemnity Escrow
Deposit, in cash by means of a wire transfer or interbank transfer in
immediately available funds to an account designated by Seller in writing.
(b) Concurrently with the execution and delivery of this
Agreement, Buyer shall deposit the amount of Two Hundred Thirty Seven Thousand
Five Hundred Dollars ($237,500) (the "Escrow Deposit") by means of a wire or
interbank transfer in immediately available funds in an account designated by
the Escrow Agent in writing. The Escrow Deposit shall be held, administered
and distributed for the respective benefits of the parties hereto in accordance
with the terms of this Agreement and the Escrow Agreement to be entered into
concurrently with the execution and delivery of this Agreement. If the
purchase contemplated herein is consummated, at Closing Seller and Buyer shall
direct the Escrow Agent to disburse the Escrow Deposit (together with the
interest and earnings thereon) to Seller, or Seller's designee, in accordance
with the procedures set forth in the Escrow Agreement. If the purchase
contemplated herein is not consummated, Seller and Buyer shall direct the
Escrow Agent to disburse the Escrow Deposit (together with the interest and
earnings thereon) in accordance with Section 10.3 or 10.4, as applicable, in
accordance with the procedures set forth in the Escrow Agreement.
(c) At Closing, Buyer shall deposit the amount of
$100,000 (the "Indemnity Escrow Amount") by means of a wire or interbank
transfer of immediately available funds in an account designated by the Escrow
Agent in writing, to be held, administered and distributed in accordance with
the terms of this Agreement and the Indemnity Escrow Agreement.
3.2 PURCHASE PRICE PRORATIONS. (a) All revenues (other
than Accounts Receivable being purchased by Buyer hereunder) and all expenses
arising from the operation of the Business up until 12.01 a.m. on the Closing
Date (the "ADJUSTMENT TIME"), including, but not limited to, pole rental
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fees, rental or other charges payable in respect of the Seller Contracts
assigned to Buyer at Closing, sales and use taxes payable with respect to cable
television service and equipment which shall not include sales or use taxes
arising out of the consummation of the transaction contemplated hereunder,
power and utility charges, real and personal property taxes and assessments
levied against the Assets, applicable franchise, copyright or other fees, sales
and service charges, and other prepaid and deferred items shall be prorated
between Buyer and Seller as of the Adjustment Time in accordance with GAAP and
the principle that Seller shall receive all revenues (other than Accounts
Receivable being purchased by Buyer hereunder) and shall be responsible for all
expenses, costs and liabilities allocable to the period prior to the Adjustment
Time. All employee-related expenses and benefits through the Closing Date
shall be the sole responsibility of Seller in accordance with the provisions of
Section 7.3.
(b) With respect to any revenue which a party is entitled to
receive pursuant to subsection (a) above but has not or will not receive, a
charge shall be deemed against the other party in the amount of any such
revenue. With respect to any cost or expense which a party is obligated to pay
pursuant to subsection (a) above but has not or will not pay, a charge shall be
deemed against such party in the amount of any such cost or expense. If the
aggregate charges allocated to Seller as set forth in this Section 3.2(b)
exceed the aggregate charges allocated to Buyer as set forth in this Section
3.2(b), the Purchase Price shall be decreased by an amount equal to the
difference between the aggregate charges allocated to Seller and the aggregate
charges allocated to Buyer. If the aggregate charges allocated to Buyer as set
forth in this Section 3.2(b) exceed the aggregate charges allocated to Seller
as set forth in this Section 3.2(b), the Purchase Price shall be increased by
an amount equal to the difference between the aggregate charges allocated to
Buyer and the aggregate charges allocated to Seller.
3.3 PURCHASE PRICE ADJUSTMENTS. (a) The Purchase Price shall be
increased by an amount equal to the aggregate of the following:
(i) 100% of the face amount of all Accounts Receivable which, as of
the Closing Date, are outstanding for a period of not more than 30 days from
the day for which service was first provided, 75% of the face amount of all
Accounts Receivable which, as of the Closing Date, are outstanding for a period
more than 30 days but less than 60 days from the day for which service was
first provided, and 0% of the face amount of all other Accounts Receivable.
(ii) to the extent not included in the prorations to the Purchase
Price as set forth in Section 3.2, the dollar amount of all advance payments
to, or deposits with, third parties relating to the Business, which, as of the
Closing Date, are for the account of Seller or are security for Seller's
performance of its obligations under any agreement relating to the Business or
any Assets, including without limitation, deposits made with lessors and
deposits for utilities. Notwithstanding any other provision in this Agreement
to the contrary, no adjustment shall be made with respect to any such advance
payment or deposit which is included in the Excluded Assets, and any such
advance payments and deposits for which a Purchase Price adjustment is made in
Seller's favor pursuant to
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the preceding sentence shall be included in the Assets transferred to Buyer
pursuant to this Agreement and shall not be an Excluded Asset.
(b) The Purchase Price shall be decreased by an amount
equal to, to the extent not included in the prorations to the Purchase Price as
set forth in Section 3.2, the dollar amount of the remaining balance, as the
Closing Date, of all advance payments to, or monies of third parties on deposit
with, Seller relating to the Business, including advance payments and deposits
by customers served by the business for converters, encoders, decoders, cable
service and related sales.
(c) If Buyer elects to consummate the acquisition
contemplated by this Agreement notwithstanding that (i) Total Systems Revenue
(as determined as described below) is less than $282,000 and/or (ii) the actual
number of Subscribers serviced by all of the Systems is less than 3,153 on the
Closing Date, then, subject to Section 3.3(d) below, the Purchase Price shall
be reduced by the greater of (A) $4,750,000 multiplied by ($282,000 minus Total
Systems Revenue) divided by $282,000) or (B) $1,507 multiplied by (3,153 minus
the actual number of Subscribers on the Closing Date). The adjustment to the
Purchase Price contemplated by the preceding sentence is sometimes referred to
herein as the "Revenue Adjustment."
For purposes of determining the Revenue Adjustment, except as
contemplated by the immediately succeeding sentence, the term "Total Systems
Revenue" shall mean total revenues generated by the Systems on a consolidated
basis for the Closing Period and determined in accordance with GAAP. For
purposes of preparing the Preliminary Adjustments Report (as described below)
and Section 8.6, Total Systems Revenue shall be estimated on the basis of total
revenues generated during the first two months of the Closing Period and, for
the purpose of such estimation, shall be deemed to be that amount which is 150%
of the total revenues generated by the Systems on a consolidated basis during
such first two months of the Closing Period. For purposes of determining the
Revenue Adjustment, the number of Subscribers shall be the sum of the number of
Basic Subscribers on the Closing Date for all Systems plus the number of Bulk
Subscribers on the Closing Date for all Systems.
(d) Notwithstanding Section 3.3(c), except as contemplated in the
following sentence, Seller shall in no event be required to consummate the sale
contemplated by this Agreement if the Revenue Adjustment exceeds $237,500.
Notwithstanding the preceding sentence, if Seller elects not to close pursuant
to the preceding sentence, then Buyer may elect to waive the Revenue Adjustment
to the extent it exceeds $237,500, in which event, pursuant to Section 3.3(c),
the Purchase Price shall be reduced by $237,500 and Seller shall be required to
consummate the sale contemplated by this Agreement in accordance with the
provisions of this Agreement. Nothing in Sections 3.3(c) or (d) shall be
interpreted to affect or limit any other adjustments to the Purchase Price
contemplated by this Agreement.
3.4 PRELIMINARY AND FINAL SETTLEMENTS. Preliminary and final
adjustment to the Purchase Price will be determined as follows:
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(a) At least five (5) Business Days prior to the Closing Date,
Seller will deliver to Buyer a report (the "PRELIMINARY ADJUSTMENTS REPORT"),
prepared in good faith and on a reasonable basis, setting forth in reasonable
detail a pro forma determination as of the Closing Date of the prorations set
forth in Section 3.2 and the adjustments set forth in Section 3.3. The
Preliminary Adjustments Report shall be certified by an authorized
representative of the Seller to be true, complete and correct as of the date it
is delivered. Together with the Preliminary Adjustments Report, Seller shall
deliver to Buyer such supporting documents as Buyer shall reasonably request,
including without limitation copies of Seller's income statement with respect
to the Systems on a consolidated basis for the first two calendar months of the
Closing Period and Seller's balance sheet as at the last day of such two
calendar months, copies of Seller's most recent accounts receivable aging
reports, schedules of liabilities and subscriber lists and copies of any other
written information used in or relied upon in making the proposed prorations
and Purchase Price adjustments and preparing the Preliminary Adjustments
Report. Buyer shall have the right to review, question and dispute in good
faith the prorations and adjustments set forth in the Preliminary Adjustments
Report. If Buyer does raise questions regarding any prorations or adjustments,
Buyer and Seller shall negotiate in good faith to resolve all such questions;
provided that any of the foregoing prorations and adjustments which is not
capable of final calculation or which is not finally resolved between Buyer and
Seller in good faith negotiations by the Closing Date shall be settled after
Closing in the manner set forth below in subsections (b), (c) and (d) of this
Section 3.4.
(b) Within 45 days after the Closing Date, Seller shall deliver to
Buyer, (i) copies of Seller's income statements with respect to the Systems on
a consolidated basis for the Closing Period and Seller's balance sheets with
respect to the Systems on a consolidated basis as at the last day of the
Closing Period, (ii) copies of Seller's schedules of liabilities with respect
to the Systems as at the day immediately preceding the Closing Date, and (iii)
a complete list of all Subscribers as at the Closing Date. Not later than 45
days after Buyer's receipt thereof, Buyer will deliver to Seller a report (the
"Final Adjustments Report") prepared in good faith and on a reasonable basis,
setting forth in reasonable detail a final determination of the prorations set
forth in Section 3.2 and the adjustments set forth in Section 3.3. The Final
Adjustments Report shall make such changes to the Preliminary Adjustments
Report as are necessary to cover those prorations or adjustments which (i) were
estimated or were not calculated as of the Adjustment Time or Closing Date, as
applicable (including Total Systems Revenue) in the Preliminary Adjustments
Report or which were otherwise not finally resolved between Buyer and Seller as
described in subsection (a) of this Section 3.4; or (ii) which otherwise
require adjustment. The Final Adjustments Report shall be certified by an
authorized representative of Buyer to be true, complete and correct as of the
date it is delivered.
Buyer shall provide Seller with reasonable access to all records which
Buyer has in its possession and which are necessary for Buyer to prepare the
Final Adjustments Report.
(c) Within 30 days after receipt of the Final Adjustments Report,
Seller shall review the Final Adjustments Report and notify Buyer whether or
not Seller accepts all or any of the prorations and adjustments set forth on
the Final Adjustments Report. If Seller accepts the Final Adjustments Report
with respect to all prorations and adjustments contained therein, Buyer or
Seller, as
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appropriate, shall, within five (5) Business Days of such acceptance, make the
following payments: (i) if the Purchase Price calculated based on the Final
Adjustments Report is greater than the Purchase Price calculated based on the
Preliminary Adjustments Report, Buyer shall pay such difference to Seller in
cash by wire or interbank transfer in immediately available funds, or (ii) if
the Purchase Price calculated based on the Final Adjustments Report is less
than the Purchase Price calculated based on the Preliminary Adjustments Report,
Seller shall pay such difference to Buyer in cash by wire or interbank transfer
in immediately available funds. In the event any payment required by this
Section 3.4(c) is not made when due, Seller or Buyer, as appropriate, shall
make the payment required by this Section 3.4(c) with interest accruing from
the date such payment was due at the Prime Rate plus 5%.
(d) If Seller in good faith objects to any prorations
and/or adjustments set forth on the Final Adjustments Report, Seller shall give
notice thereof to Buyer within 30 days after receipt of the Final Adjustments
Report, specifying in reasonable detail the nature and extent of such
disagreement and Buyer and Seller shall have a period of 30 days from Buyer's
receipt of such notice in which to resolve such disagreement. If Buyer and
Seller are unable to resolve all disputed matters within such 30 day period,
either the Buyer or Seller may elect to submit the disputed matters to Daniels
& Associates. The determination of all disputed matters pursuant to the
preceding sentence shall be final and binding on the parties and the fees and
expenses of Daniels & Associates, including fees and costs of any independent
certified public accountants retained and hired by Daniels & Associates in this
matter, shall be borne by Seller and Buyer in the proportion to the amount by
which the determination of all matters varies from the positions of Buyer and
Seller on all matters. If no notice of objection is received by Buyer within
30 days after receipt by Seller of the Final Adjustments Report, it shall be
deemed that Seller has accepted the Final Adjustments Report with respect to
all items set forth therein and within three (3) Business Days after the
expiration of such 30 day period Buyer or Seller, as appropriate, shall make
the payments described in Section 3.4(c).
3.5 DISPUTED LIABILITIES. If a proration or adjustment
to the Purchase Price is made in Buyer's favor for any liability assumed by
Buyer but is in good faith being contested by Seller at the Closing Date, and
if Buyer is relieved of this liability, Buyer shall pay to Seller or its
designee in cash (by means of wire or interbank transfer in immediately
available funds) an amount equal to the unpaid portion of this liability within
five (5) Business Days after the date Buyer is relieved of this liability. In
the event any payment required by this Section 3.5 is not made by Buyer when
due, Buyer shall make the payment required by this Section 3.5 with interest
accruing from the date such payment was due at the Prime Rate plus 5%.
3.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be allocated among the classes of assets, as follows: (i) $3,900,000
shall be allocated to fixed assets; (ii) $100,000 shall be allocated to the
Covenant Not-To-Compete contemplated by Section 7.15 of this Agreement; and
(iii) the balance of the Purchase Price (as adjusted per the Agreement) shall
be allocated to intangible assets. After the Closing, Seller and Buyer shall
cooperate in the preparation, execution and filings with the IRS of all
information returns and supplements thereto required to be filed by the parties
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under Section 1060 of the Code relating to the allocation of such
considerations, and Seller and Buyer agree to file Form 8594 (or any substitute
therefor) when required by applicable law.
ARTICLE IV
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 ASSIGNMENT AND ASSUMPTION. (a) At Closing, Buyer will assume
and perform the following liabilities and obligations of Seller (collectively,
the "ASSUMED LIABILITIES"): (A) Seller's obligations to subscribers of the
Business for (i) refunds of subscriber deposits held by Seller as of the
Closing Date in respect of which a Purchase Price adjustment is made in Buyer's
favor under Section 3.3(b), (ii) refunds of subscriber advance payments held
by Seller as of the Closing Date for services to be rendered by the Systems
after the Closing Date, in respect of which a Purchase Price adjustment is made
in Buyer's favor under Section 3.3(b) and (iii) the delivery of cable
television service to customers of the Systems after the Closing Date, (B)
obligations and liabilities in respect of which a Purchase Price adjustment in
Buyer's favor is made under Section 3.2 including, but not limited to, accrued
but unpaid real and personal property taxes related to the Assets which
correspond to a period of time prior to the Adjustment Time and expenses
accrued under Governmental Permits and Seller Contracts which correspond to a
period of time prior to the Adjustment Time; (C) obligations accruing and
relating to periods on or after the Adjustment Time under those Governmental
Permits and Seller Contracts that are assigned to Buyer at Closing; and (D) any
taxes accrued on or after the Adjustment Time in connection with the ownership
of the Assets and the operation of the Business. Notwithstanding the foregoing,
"Assumed Liabilities" shall not include liabilities and obligations (i)
incurred after the date of this Agreement in violation of Seller's covenants
made in this Agreement, (ii) arising other than in the ordinary course of the
Business, and (iii) liabilities under Governmental Permits or Seller Contracts
that are not assigned to Buyer at Closing or for which Buyer does not otherwise
receive the full benefit as of the Closing.
(b) Buyer will not assume or have any
responsibility for any liabilities or obligations of Seller not described in
Section 4.1(a) or any liabilities or obligations which arise out of, result
from or relate to, the Excluded Assets or any obligations, liabilities, claims,
actions, litigation or proceedings relating to the operation of any of the
Systems or otherwise arising out of the actions of Seller prior to the
Adjustment Time (collectively, the "EXCLUDED LIABILITIES").
4.2 EXCLUDED ASSETS. Excluded from the assets which will be
transferred from Seller to Buyer pursuant to this Agreement (collectively, the
"EXCLUDED ASSETS") are all of Seller's right, title and interest in, to and
under the following: (a) all programming agreements relating to the Business;
(b) all insurance policies and rights and claims thereunder (except as
otherwise provided in Section 7.7(a); (c) subject to Section 3.3(a)(ii), all
bonds, letters of credit, surety instruments and other similar items and any
cash surrender value thereunder; (d) all cash, cash equivalents and
securities; (e) all trademarks, trade names, service marks, service names,
logos and similar proprietary rights used in the Business; (f) any contracts,
licenses, authorizations, agreements or commitments which are not assumed by
Buyer pursuant to this Agreement; (g) any asset or properties owned by Seller
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that are not used in the Business; (h) all subscriber deposits and advance
payments held by Seller as of the Closing Date in connection with the operation
of the Business for which a Purchase Price adjustment is made in Buyer's favor
under Section 3.3(b); (i) all claims, rights and interest in and to any refund
for federal, state or local franchise, income or other taxes or fees
(including, without limitation, copyright fees) of any nature relating to the
operation of the Business prior to the Closing Date; (j) the account books of
original entry, general ledgers and financial records used in connection with
the Business, provided that for a period of three years after the Closing Date,
Buyer shall have access to and the right to copy, at its expense, during usual
business hours upon reasonable prior notice to Seller, portions of such books
and records that are relevant to Buyer's ownership and operation of the
Systems; (k) all retransmission consent agreements relating to the Business
other than those, if any, assumed by Buyer on the Closing Date; and (1) those
properties, rights and interests set forth on Schedule 4.2.
ARTICLE V
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
5.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Maine and has all requisite corporate power and authority to own, lease and use
the Assets as they are currently owned, leased and used and to conduct the
Business as it is currently conducted. Seller is duly qualified or licensed to
do business and is in good standing under the laws of each jurisdiction in
which the character of the properties owned, leased or operated by it or the
nature of the activities conducted by it makes such qualification necessary,
except in any such jurisdiction where the failure to be so qualified or
licensed and in good standing would not, individually or in the aggregate, have
a material adverse effect on any System, the Business, the validity, binding
effect or enforceability of this Agreement, the ability of Seller to perform
its obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller.
5.2 AUTHORITY AND VALIDITY. Seller has full corporate power and
authority to execute and deliver this Agreement, the Escrow Agreement and the
Indemnity Escrow Agreement, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of the Seller. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller enforceable in accordance
with its terms
.
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5.3 CONSENTS AND APPROVALS; NO VIOLATION. (a) Except
for (i) the Consents listed on Schedule 5.3(a), and (ii) filings and consents
under the Seller Contracts which, if not made or obtained, would not have a
material adverse effect on any System, the Business, Seller's ability to
perform its obligations under the Agreement or Buyer's ability to conduct the
Business after the Closing in substantially the same manner in which it is
currently conducted by Seller, no consent, waiver, approval or authorization
of, or filing, registration or qualification with, any Person or Governmental
Authority is required to be made or obtained by Seller in connection with the
execution, delivery and performance of this Agreement by Seller.
(b) Except as set forth on Schedule 5.3(b), the
execution, delivery and performance of this Agreement by Seller do not and will
not: (a) violate or conflict with any provision of the Seller's Articles of
Incorporation or By-Laws; (b) violate any Legal Requirements or Regulatory
Requirements; or (c)(i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of Seller under, or (iv)
result in the creation or imposition of any Encumbrance under, any Seller
Contract, franchise or any other instrument evidencing any of the Assets or any
instrument or other agreement to which Seller is a party or by which Seller or
any of its assets is bound or affected, except for purposes of this clause (c)
only, such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications, and accelerations which would not, individually or
in the aggregate, have a material adverse effect on any of the Systems, the
Business, Seller's ability to perform its obligations under this Agreement or
Buyer's ability to conduct the Business after the Closing in substantially the
same manner in which it is currently conducted by the Seller.
5.4 COMPLETE SYSTEM. Except as set forth on Schedule
5.4, the Assets represent all assets, properties, franchises, licenses,
permits, consents, certificates, authorities, operating rights, leases,
contracts (with the exception of programming contracts which Buyer acknowledges
may need to be replaced in order for Buyer to continue to operate the
Business), agreements, commitments and arrangements reasonably necessary for
the conduct of the Business and lawful operation of each of the Systems in the
ordinary course in the same manner as is currently conducted and operated by
Seller.
5.5 TITLE. Except as set forth on Schedule 5.5 and for
the Permitted Encumbrances, Seller has, and on the Closing Date will have, good
and marketable title to the Assets. The Assets on the Closing Date will be
free and clear of all Encumbrances of any kind or nature, other than Permitted
Encumbrances.
5.6 REAL PROPERTY. (a) Seller does not own any interest
in Real Property in connection with the conduct of the Business or operation of
any of the Systems. All of the Assets consisting of interests in Real Property
are described on Schedule 5.6, which description includes, in the case of
leasehold interests, the street address, name of lessor, rental rate, lease
term and Seller's use thereof. Seller does not now occupy or use any parcel of
Real Property in the conduct of the
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Business or operation of any of the Systems which is not now leased by Seller
and disclosed on Schedule 5.6.
(b) Seller has a valid leasehold interest in all Real
Property leased by Seller under written leases or subleases (correct and
complete copies of which have been delivered to Buyer), and Seller has duly
complied with all of the terms and conditions of such leases and has not done
or performed or failed to perform any act which would impair its right to use
the Real Property leased thereunder on the terms of such leases. There is no
existing default by either Seller or the lessor under any such leases.
(c) The Real Property listed on Schedule 5.6 constitutes all
of the Real Property required for the conduct of the Business and operation of
each of the Systems as currently conducted and operated. All Real Property
(including improvements thereon) is in good condition and repair consistent
with its present use, and is available for immediate use in the conduct of the
Business and operation of the Systems. The Real Property and the improvements
thereon do not violate existing building codes or zoning laws.
(d) There are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or parties the right
to use or occupy any portion of the parcels of the Real Property which would
impair Seller's ability to use such Real Property for its intended purpose or
Buyer's ability to use such Real Property after the Closing for its intended
purpose.
(e) Seller has and shall transfer to Buyer all licenses
and/or permits necessary or incidental to use of the Real Property in the
operation of the Systems. Seller is not in violation or default of any such
permit or license in any respect that would have an adverse effect on the
operation of any System or on the ability of Seller to perform any of its
obligations under this Agreement. Seller has not received any written notice,
citation or complaint from governmental or non- governmental parties regarding
any aspect of the use and enjoyment of the Real Property.
(f) There are no pending or, to the Best of Seller's
Knowledge, threatened condemnation proceedings, lawsuits or administrative
actions relating to the Real Property, or other matters affecting adversely the
current use, occupancy or value thereof.
(g) Seller's facilities located on the parcels of Real
Property are supplied with utilities and other services necessary for Seller's
operation of such facilities, including, as applicable, gas, electricity,
water, telephone, sanitary sewer and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules and
regulations and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting the parcels of Real Property.
(h) The parcels of Real Property abut on and/or have
vehicular access to public roads.
(i) All material easements, rights-of-way and other rights
which are necessary in any material respect for Seller's current use of any
Real Property are valid and in full force and effect,
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and, to the Best of Seller's Knowledge, Seller has not received any notice with
respect to the termination or breach of any of those rights.
5.7 TANGIBLE PERSONAL PROPERTY/EQUIPMENT. Schedule 5.7
contains a true and complete list of each material item of Equipment, including
the type and quantity and, with respect to such items which are leased, the
lessor, rental rate and lease term. Seller does not possess or use any item of
personal property that is material or necessary to the operation of any System
which is not now owned or leased by Seller and disclosed on Schedule 5.7. The
Equipment listed on Schedule 5.7 constitutes all of the material items of
personal property used by Seller in or necessary for the conduct of the
Business and operation of each of the Systems as currently conducted and
operated. With allowance for normal repairs, maintenance, wear and
obsolescence, items required to be listed on Schedule 5.7 are in good condition
and repair consistent with their present use and are available for immediate
use in the conduct of the Business and operation of the Systems. Seller has
and shall transfer to Buyer all licenses and /or permits necessary or
incidental to the use of the Equipment in the operation of the Systems. Seller
is not in violation of or default under any such permit or license in any
respect that would have an adverse effect on the operation of any System or on
the ability of Seller to perform any of its obligations under this Agreement.
Seller has not received any written notice, citation or complaint from
governmental or non-governmental parties regarding any aspect of the use and
enjoyment of the Equipment.
5.8 FINANCIAL STATEMENTS. Seller has previously
delivered to Buyer unaudited financial statements for the Systems on a
consolidated basis containing a balance sheet, statement of income, and
statement of cash flows as at and for the fiscal years ended December 31, 1993,
and December 31, 1994 and the nine months ended September 30, 1995
(collectively, the "Financial Statements"). The Financial Statements have been
prepared from the books and records of Seller with respect to the Systems, have
been prepared in accordance with GAAP consistently applied and maintained
throughout the periods indicated, accurately reflect the books, records, and
accounts of the Systems (which books, records and accounts are complete and
correct and will properly and accurately record the transactions and activities
which they purport to record through the Closing Date), and present fairly the
financial condition of the Systems on a consolidated basis as at their
respective dates and results of operations for the periods then ended. None of
the Financial Statements materially understates the true costs and expenses of
conducting the Business or operations of the Systems as currently conducted and
operated by Seller or otherwise inaccurately reflect the operations of the
Systems.
5.9 ABSENCE OF CERTAIN CHANGES. Since September 30,
1995, Seller has operated each System in the ordinary course of business and
there has not been any materially adverse change in the condition (financial or
otherwise), results of operations, assets, liabilities, properties, or
businesses of Seller, whether as a result of any legislative or regulatory
change, revocation of any Franchises or other Governmental Permits, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise, nor has Seller
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undertaken or committed to any business practice which is inconsistent with
past practices and without limiting the foregoing, except as set forth on
Schedule 5.9, Seller has not:
(a) entered into any material transaction or incurred any
material liability or obligation relating to any System that was not entered
into or incurred other than in the ordinary course of business;
(b) sold or transferred any of the assets relating to any
System other than assets disposed of in the ordinary course of business where
suitable replacements, if necessary, have been made therefor;
(c) suffered any material adverse change in the business,
assets, properties or financial condition of any System, including any damage,
destruction, or loss affecting any assets used or useful in the conduct of the
Business or operation of any System;
(d) canceled any debts owed to or claims held by Seller with
respect to any System; or
(e) suffered any material write-down of the value of any
Assets.
5.10 ENVIRONMENTAL MATTERS. (a) Except as set forth on
Schedule 5.10, Seller's use of the Real Property and Assets complies and has
complied in all material respects with all Environmental Laws and Seller has no
liability under any Environmental Law. Seller has not received notice of any
claim or investigation based on Environmental Laws which relates to any Real
Property or any operations conducted by Seller on such Real Property, including
any such notice indicating that the Real Property or any property adjacent
thereto has been or may be placed on any federal or state "Superfund" or
"Superlien" list. The Real Property is free of all asbestos; there has been no
reportable quantity of any Hazardous Substance discovered by Seller, or to the
Best of Seller's Knowledge after due inquiry and investigation, by any other
party, on the Real Property, nor has any reportable quantity of any Hazardous
Substance been released into, on, over or under the Real Property by Seller, or
to the Best of Seller's Knowledge after due inquiry and investigation, by any
other party; no Hazardous Substances have been treated or disposed of on, under
or in the Real Property by Seller, or to the Best of Seller's Knowledge after
due inquiry and investigation, by any other party, except for such substances
which are in such amounts and of the type typically found in commercial
cleaning products or standard office supplies of businesses similar to the
Business, as to which Seller is in compliance with all applicable Environmental
Laws; and there are no tanks on or below the surface of the Real Property.
(b) Seller has no liability relating to the ownership or
operation of the Systems (and there is likely no basis for any present or
future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against Seller giving rise to any such liability) under the
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Occupational Safety and Health Act, as amended, or under any other law, rule or
regulation of any federal, state or local government (or agency thereof)
concerning employee health and safety.
(c) Seller has no liability relating to its ownership or
operation of the Systems (and Seller has not exposed any Person to any
substance or condition that could reasonably be expected to form the basis for
any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand (under the common law or pursuant to statute)
against Seller giving rise to any such liability for any illness or personal
injury to any Person who performs services in connection with the conduct of
the Business.
(d) Seller has provided Buyer with complete and correct
copies of (i) all studies, reports, surveys or other materials in Seller's
possession relating to the presence or alleged presence of Hazardous Substances
at, on or affecting the Real Property, (ii) all notices or other materials in
Seller's possession that were received from any Government Authority having the
power to administer or enforce any Environmental Law relating to current or
past ownership, use or operation of the Real Property or activities at the Real
Property, and (iii) all materials in Seller's possession relating to any
claim, allegation or action by any private third party under any Environmental
Law.
5.11 COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS. (a)
Except as set forth on Schedule 5.11(a), the ownership, leasing and use of the
Assets as they are currently owned, leased and used by Seller and the conduct
of the Business as it is currently conducted by Seller, do not violate any
Legal Requirement or Regulatory Requirement, which violation(s), individually
or in the aggregate reasonably could be expected to have an adverse effect on
the Business. Seller has not received any notice claiming a violation by
Seller or the Business of any Legal Requirement or Regulatory Requirement
applicable to Seller, or the Business as it is currently conducted and, to the
Best of Seller's Knowledge, no basis exists for any Person to claim that such a
violation exists.
(b) Seller holds all Governmental Permits which are
required by any Legal Requirement in connection with the conduct of the
Business and the operation of each of the Systems as currently conducted and
operated by Seller. Each such Governmental Permit (other than the Franchises)
is listed on Schedule 5.11(b). Complete and correct copies of all such
Governmental Permits as currently in effect have been delivered to Buyer. All
such Governmental Permits are currently in full force and effect. There is no
action, proceeding or investigation pending or, to the Best of Seller's
Knowledge, threatened, relating to the termination, suspension or modification
of such Governmental Permits and, to the Best of Seller's Knowledge, Seller is
in compliance in all respects with the terms and conditions of all Governmental
Permits.
(c) The operation of each System has been, and is,
in compliance in all material respects with the Communications Act of 1934, as
amended (as so amended, the "COMMUNICATIONS ACT"), and the rules and
regulations of the Federal Communications Commission (the "FCC") promulgated
thereunder. Each licensed facility is being operated in accordance with the
requirements of the relevant license and the rules and regulations of the FCC.
Each employment unit
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operated by Seller in connection with the conduct of the Business, including
headquarters offices, is currently and, since January 1, 1990, has been in
material compliance with the equal employment opportunity requirements of
Section 554 of the Communications Act and the FCC's implementing rules and
regulations. All reports, applications, financial statements and other
documents required to be filed by Seller with respect to each System have been
filed by Seller.
(d) The operation of each System has been, and is,
in compliance in all material respects with the Cable Television Consumer
Protection and Competition Act of 1992 (the "CABLE ACT"), and the rules and
regulations of the FCC promulgated thereunder.
(e) Seller has delivered to Buyer true, correct and
complete copies of (i) all FCC Forms 393, 1200, 1205, 1210, 1215, 1220 and 1230
(as applicable) that have been prepared with respect to the Systems, (ii) all
material correspondence with any governmental body, subscriber or other
interested party relating to rate regulation generally or specific rates
charged to subscribers of any System, including any complaints filed with the
FCC with respect to any rates charged to subscribers of any such System, and
(iii) any documentation supporting an exemption from the rate regulation
provisions of the Cable Act claimed by Seller with respect to any of the
Systems. Schedule 5.11(e) sets forth (i) a list of all rate complaints filed
pursuant to the Cable Act and received by Seller which have not been deemed
invalid by the FCC, and further sets forth those Governmental Authorities that
have been certified or filed for certification under the Cable Act with respect
to rate regulation and (ii) a list of all letters of inquiry from the FCC
received by Seller since September 1, 1993, with regard to Seller's rates.
5.12 FRANCHISES.
(a) All of the cable television franchises, licenses and
authorizations necessary for Seller to operate each of the Systems lawfully and
in the manner in which it is presently being operated (together with all
amendments and supplements thereto, collectively referred to herein as the
"Franchises") are listed on Schedule 5.12, which sets forth in summary fashion
the name of the Governmental Authority that has issued the Franchise (the
"Franchising Authority"), the area encompassed by the Franchise and the related
System, the dates of grant and expiration of the Franchise and the franchise
fee. Seller has delivered to Buyer true and complete copies of all Franchises.
(b) Each Franchise is, and on the Closing Date will be, in
full force and effect; each Franchise constitutes, and on the Closing Date will
constitute, a valid and binding obligation of the Franchising Authority which
is a party to such Franchise; and each Franchise is, and on the Closing Date
will be, legally enforceable against such Franchising Authority in accordance
with its terms. Seller is the authorized legal holder of each Franchise and is
validly and lawfully operating each System under the applicable Franchises.
Each Franchise shall be assigned to Buyer at closing with the consent and
approval (as necessary per the terms of any given Franchise) of the applicable
Franchising Authority.
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(c) Except as set forth in Schedule 5.12, Seller is not in
violation of or in default under any provision of any Franchise, and Seller is
not in violation of or default in the performance of its respective obligations
under any Franchise. To the Best of Seller's Knowledge, there exists no fact
or circumstance, which with the passage of time or the giving of notice or
both, would constitute a default under any Franchise or permit the Franchising
Authority to cancel or terminate the rights thereunder, except upon expiration
of the full term thereof.
(d) Seller has not made any commitments (oral or written) to
any Franchising Authorities with respect to any of the Systems other than those
contained in the Franchises. To the Best of Seller's Knowledge, no prior owner
of any of the Systems has made any commitment (oral or written) to any
Franchising Authority with respect to any such System other than those
contained in the Franchises.
(e) Seller has filed with the appropriate Franchising
Authorities all appropriate requests for renewal under the Communications Act
within 30 to 36 months prior to the expiration of each Franchise. Seller has
no reason to believe that under existing law, rules and regulations, any of the
Franchises would not be renewed by the granting authority in the ordinary
course.
5.13 SYSTEMS DATA.
(a) Schedule 5.13(a) sets forth, with respect to each System,
as of the most recent practicable date, which date is indicated on such
Schedule, the number of miles of aerial plant and number of miles of
underground plant.
(b) Schedule 5.13(b) sets forth (i) as of the date of the
Agreement, for each System: the communities served by such System; the rated
charged by Seller in connection with such System for every service, level of
service (including the Basic Subscriber Rate), package of service,
installations and outlets or other services, equipment or items for which
Seller has an established charge; and the current channel capacity and
alignment (including all broadcast stations and satellite services carried,
cable channel assignment, frequencies utilized and pilot frequencies), and (ii)
as of September 15, 1995, for each System, the number of Homes Passed and the
number of Basic Subscribers and Bulk Subscribers served by each such System.
The total number of Homes Passed by all of the Systems is, as of September 15,
1995, 5,127. The total number of Subscribers served by all of the Systems is,
as of September 15, 1995, 3,153.
(c) Seller has filed offset notifications for or obtained
appropriate waivers for all aeronautical frequencies in use by each of the
Systems. Seller's use of such aeronautical frequencies is in compliance with
applicable FCC rules, regulations and requirements. Except as set forth on
Schedule 5.13(c), each System is presently carrying the channels specified on
Schedule 5.13(b) and is transmitting and providing reception of video and
associated audio signals on all such channels in compliance with the technical
standards set forth in applicable FCC rules, regulations and requirements.
Schedule 5.13(c) is a true and complete list of such frequencies.
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(d) Except as set forth in Schedule 5.13(d), no Person
(including any Governmental Authority) has any right to acquire any interest in
any System or any Asset (including any right of first refusal or similar
right), other than rights of condemnation or eminent domain afforded by law
with respect to which no proceedings are pending or, to the Best of Seller's
Knowledge, threatened. Except as set forth in Schedule 5.13(d),(i) the Systems
are the only cable television systems presently servicing the Franchise Areas
and (ii) to the Best of Seller's Knowledge, after due inquiry, no other cable
television franchises or other franchises, licenses or authorizations have been
issued and no applications for such franchises, licenses or other
authorizations are pending with respect to providing such services in those
areas.
(e) Other than as set forth in Schedule 5.13(e), Seller has
not received any written requests, notices or demands from the FCC, any
Franchising Authority or any other Governmental Authority, or any other Person,
challenging or questioning the legal rights of Seller to operate any of the
Systems or carry any broadcast signal, or requesting signal carriage pursuant
to the FCC's "must-carry" rules, other than any such request, notice or demand
that has since been resolved through carriage of the signal or by an FCC
decision. Except as set forth on Schedule 5.13(e), all of the broadcast
television signals (excluding superstations) carried by each of the Systems
are carried either pursuant to a must-carry election or pursuant to effective
retransmission consent agreements between the Seller and the broadcast station
licensee authorizing the retransmission of the station's signal, as the case
may be, all of which retransmission consent agreements are listed on Schedule
5.13(e). Except as set forth on Schedule 5.13(e), each such retransmission
consent agreement is in full force and effect and consistent with FCC rules.
Except as set forth on Schedule 5.13(e), Seller is not required to make any
payment or any other financial or non- financial remuneration under any
retransmission consent agreement required to be listed on Schedule 5.13(e).
Seller has delivered to Buyer true and complete copies of each retransmission
consent agreement required to be listed on Schedule 5.13(e). Seller has
complied with the must carry and retransmission consent provisions of the
Communications Act and the FCC rules and regulations promulgated thereunder.
Except as set forth in Schedule 5.13(e), Seller has not received any
notification of any petition or submission that is currently pending before the
FCC to modify any television market or for a waiver of any rules or regulations
of the FCC as they apply to any System.
(f) All royalties, fees, reports, schedules and returns of
any administrative agency of the federal or any state or local government or
any utility relating to each System which are required to be filed and paid
have been filed and paid.
(g) All necessary Federal Aviation Administration ("FAA") and
FCC approvals with respect to each of the Systems' towers have been obtained
and maintained in compliance with the rules, policies and regulations of the
FAA and FCC. Schedule 5.13(g) contains a true and complete list of each of the
Systems' towers and copies of all relevant FAA determinations with respect
thereto.
(h) All of the communities to which Seller provides service
have been registered with the FCC. Schedule 5.13(h) contains a true and
complete list of each such community and its corresponding unit identification
number.
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5.14 SELLER CONTRACTS. Schedule 5.14 lists all Seller
Contracts that are material to the conduct of the Business as it is now
conducted. The Seller Contracts listed on Schedule 5.14 are all of the
agreements (including, without limitation, pole attachment agreements, other
than such leases, easements, rights-of-way, licenses, permits and
authorizations that are disclosed on any other Schedule to this Agreement)
necessary for the conduct of the Business and operation of each System as it is
now being conducted and operated by Seller. All of the Seller Contracts are
validly existing and in full force and effect and are valid, binding and
enforceable against Seller and, to the Best of Seller's Knowledge, against the
other parties thereto, in accordance with their terms. Complete and correct
copies of such Seller Contracts as currently in effect have been delivered to
Buyer. Neither Seller nor, to the Best of Seller's Knowledge, any other party
to any Seller Contract is in any respect in breach of the performance of its
obligations under such Seller Contract. Seller is in compliance with all
requirements of all Governmental Authorities relating to the Seller Contracts.
Except as disclosed on Schedule 5.14, Seller has not been made aware of any
intention by any party to any Seller Contract (i) to terminate such Seller
Contract or amend the terms thereof without the consent of Seller, (ii) to
refuse to renew such Seller Contract upon expiration of its term, or (iii) to
renew such Seller Contract upon expiration only on terms and conditions which
are materially more onerous than those now existing. Except for the need to
obtain the Consents listed on Schedule 5.3(a), Seller has the full legal power
and authority to assign its rights under all Seller Contracts to Buyer in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability or continuation of any such Seller Contract.
5.15 COPYRIGHT COMPLIANCE. Seller has deposited with the
United States Copyright Office all statements of account and other documents
and instruments, and paid all royalties, supplemental royalties, fees and other
sums to the United States Copyright Office, required under the Copyright Act
with respect to the Business and operations of each of the Systems as are
required to obtain, hold and maintain the compulsory copyright license for
cable television systems prescribed in Section 111 of the Copyright Act.
Seller and the Systems are in material compliance with the Copyright Act.
Seller and each of the Systems are entitled to hold and do now hold the
compulsory copyright license described in Section 111 of the Copyright Act,
which compulsory copyright license is in full force and effect and has not been
revoked, cancelled, encumbered or materially adversely affected in any manner.
Seller has made available to Buyer complete and correct copies of all reports
and filings, and all reports and filings for the past three (3) years, made or
filed pursuant to the Copyright Act with respect to the Business. The
carriage, transmission or use of the signals of the Systems has not subjected
and does not subject any of the Systems or Seller to any sanctions or suits or
actions, including, without limitation, suits or actions for copyright
infringement, except those that may be applicable to cable television systems
in the United States generally and to which Seller is not a party. Seller has
not received any notice or inquiry from the United States Copyright Office
concerning its copyright filings, statements of accounts or royalty payments or
any notice from any other Person to the effect that the conduct of the Business
as currently conducted infringes on the rights of any Person. Seller does not
possess any patent, patent right, trademark or copyright used or held for use
primarily in the operation of any of the Systems and is not party to any
license or royalty agreement with respect to any patent, trademark, or
copyright except for licenses respecting
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program material and obligations under Section 111 of the Copyright Act
applicable to cable television systems generally.
5.16 LEGAL PROCEEDINGS. Except as set forth on Schedule
5.16, and except for any judgments, orders, actions, suits, proceedings or
investigations as may affect the cable television industry (national or
regional) generally and to which Seller is not a party, there is no judgment or
order outstanding, or any action, suit, proceedings or investigation by or
before any Governmental Authority or any arbitrator pending, or to the Best of
Seller's Knowledge, threatened, involving or affecting any of the Assets or the
Business, which, if adversely determined, would have a material adverse effect
on the Assets or the Business or would materially impair the ability of Seller
to perform its obligations under this Agreement.
5.17 EMPLOYMENT MATTERS. (a) Seller is not obligated to
maintain or contribute to any employee benefit plan as defined in Section 3(3)
of ERISA.
(b) Seller has complied in all material respects
with all Legal Requirements relating to the employment of labor and those
relating to wages, hours, collective bargaining, unemployment compensation,
worker's compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of taxes
with respect to employees who perform services in connection with the operation
of the Business.
(c) Seller is not a party to any contract with any
labor organization, and Seller has not recognized or agreed to recognize any
union or other collective bargaining unit with respect to employees who perform
services in connection with the operation of the Business. Except as set forth
on Schedule 5.17(c), no union or other collective bargaining unit has been
certified as representing any of the employees engaged in the operation of the
Business, and Seller has not received any request from any party of recognition
as a representative of employees engaged in the operation of the Business for
collective bargaining purposes. Seller is not party to any agreement, oral or
written, express or implied, that would require Buyer to employ any individual
after the Closing Date. No notices to employees of Seller who perform services
in connection with the conduct of the Business are required under the WARN Act
as a result of the transactions contemplated hereby.
(d) Schedule 5.17(d) sets forth a true and complete
list of all individuals who perform services with respect to the operation of
the Business, including name, title and rate of compensation. Except as
provided on Schedule 5.17(d), Seller is not a party to any written employment
contract, agreement, commitment or arrangement with any individual identified
on Schedule 5.17(d).
(e) The employees who perform services with respect
to the operation of the Business do not receive benefits under any bonus,
deferred compensation, pension, profit-sharing, retirement, severance pay,
insurance, stock purchase, stock option, or other fringe benefit plan,
arrangement or practice, or any other employee benefit plan, as defined in
Section 393 of ERISA.
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(f) Seller has not incurred or taken any action, and
to the Best of Seller's Knowledge, no action or event has occurred, that could
cause Seller to incur any material liability (i) under Section 412 of the Code
or Title IV of ERISA with respect to any employer plan that is a
single-employer plan within the meaning of Section 4001(a)(15) of ERISA, (ii)
on account of a partial or complete withdrawal from any employer plan that is a
multiemployer plan, within the meaning of Section 3(37) of ERISA, or on account
of any unpaid contributions to any such multiemployer plan, or (iii) for any
tax or penalty under Section 4975 of the Code or Section 502(i) of ERISA on
account of any prohibited transaction, within the meaning of Section 4975 of
the Code or Section 406 of ERISA, with respect to any employer plan.
5.18 FINDER AND BROKERS. Except for its engagement of
Daniels & Associates to assist Seller in the solicitation of offers to purchase
the Assets, neither Seller nor any person acting on behalf of Seller has
employed any financial advisor, broker or finder or incurred any liability for
any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by this Agreement.
5.19 TAX MATTERS. Except as set forth on Schedule 5.19, (a)
all Tax Returns required to be filed by Seller before the Closing with respect
to the Business or the Assets have been or will be filed on or before the
Closing and (b) all Taxes shown as due or payable before the Closing on such
Tax Returns have been or will be paid when required by law. All such Tax
Returns are correct and complete in all material respects. There are no legal,
administrative or tax proceedings pursuant to which Seller is or could be made
liable for any taxes, penalties, interest or other charges, the liability of
which could extend to Buyer as transferee of the Business, Systems and Assets,
and no event has occurred that could impose on Buyer any transferee liability
for any taxes, penalties or interest due or to become due from Seller. There
are no audits pending nor has Seller extended or waived any statute of
limitation with respect to any tax, which extension or waiver has not expired.
None of the Assets is subject to any lien in favor of the United States or any
other taxing authority. The sale of the Assets to Buyer pursuant to this
Agreement constitutes the sale of all or substantially all of the assets of
Seller.
5.20 INSURANCE AND BONDS. Each System and all of the Assets
are insured against risks in such amounts which Seller believes are usually and
customarily insured against in the cable television industry, subject to
reasonable deductibles, including, without limitation, (i) fire and extended
coverage insurance on all of the Assets in amounts typical for such insurance
in the cable television industry, and on the Business and all of the Systems,
covering property damage and loss of income by fire or other casualty, and (ii)
adequate insurance protection against all liabilities, claims and risks arising
in the ordinary course of business customarily included within a form of
comprehensive liability insurance. Each insurance policy is summarized in
Schedule 5.20. All insurance policies are in full force and effect, and Seller
has not received any notice of cancellation under any of these policies.
Seller currently has, or there exists for the Seller's benefit, in full force
and effect, the performance, surety or other bonds set forth on Schedule 5.20,
which represent all such bonds required under the Franchises or other Seller
Contracts, except where the requirement
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has been waived by the grantor or other party to any such Franchise or Seller
Contract as set forth in Schedule 5.20.
5.21 TRANSACTIONS WITH AFFILIATES. Except as disclosed on Schedule
5.21, Seller has not been involved in any business arrangement or relationship
relating to any of the Systems with any Affiliate of Seller, and no Affiliate
of Seller owns any property or right, tangible or intangible, that is used or
held for use primarily in the operations of any of the Systems.
5.22 MARKETING AND PROMOTIONS. Schedule 5.22 is an accurate
description of the marketing and promotional programs currently in effect for
each of the Systems. Schedule 5.22 also sets forth Seller's policies with
respect to the provision of cable television service by Seller at no cost or at
discounted cost (other than discounts that may be offered or provided pursuant
to marketing and promotional programs). Except as described on Schedule 5.22,
Seller is not providing cable television service at no cost or at discounted
cost other than pursuant to such policies or pursuant to Seller's marketing and
promotional programs that are described on Schedule 5.22.
5.23 FULL DISCLOSURE. No representation or warranty made by Seller in
this Agreement or in any certificate, document, agreement or other instrument
furnished or to be furnished by Seller pursuant hereto contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact that is required to make any statement made herein or therein not
misleading.
5.24 MANAGEMENT AGREEMENT WITH AMERICABLE INTERNATIONAL, INC. Seller
has entered into that certain management agreement with Americable
International, Inc. ("AMI"), a Florida corporation, a copy of which is set
forth on Schedule 5.24. Other than such management agreement Seller and AMI do
not have any other arrangements relating to the operation of the Business and
Systems. Pursuant to the management agreement, AMI provides only the following
services to Seller in connection with the operation of the Business and
Systems: accounting functions, billing services, technical support services,
and other related administrative functions in connection therewith, and other
minor ancillary support services.
ARTICLE VI
6. BUYER'S REPRESENTATION AND WARRANTIES.
Buyer represents and warrants to Seller as follows:
6.1 ORGANIZATION AND QUALIFICATION. Buyer is a limited
partnership duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite partnership power and authority to carry
on its business as currently conducted and to own, lease, use and
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operate its assets. Buyer is duly qualified or licensed to do business and is
in good standing under the laws of each jurisdiction in which the character of
the properties owned, leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except where the failure to
be so qualified or licensed and in good standing would not have a material
adverse effect on the validity, binding effect or enforceability of this
Agreement or the ability of Buyer to perform its obligations under this
Agreement.
6.2 AUTHORITY AND VALIDITY. Buyer has all requisite
partnership power and authority to execute, deliver and perform its obligations
under this Agreement. The execution and delivery by Buyer of, the performance
by Buyer of its obligations under, and the consummation by Buyer of the
transactions contemplated by, this Agreement have been duly authorized by all
requisite partnership action of Buyer and no other partnership proceedings on
the part of Buyer are necessary to authorize the execution and delivery of this
Agreement or the performance of Buyer's obligations hereunder. This Agreement
has been duly and validly executed and delivered by Buyer and constitutes a
valid and binding agreement of Buyer, enforceable in accordance with its terms,
except as the enforceability of this Agreement may be affected by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by
judicial discretion in the enforcement of equitable remedies.
6.3 NO BREACH OR VIOLATION. (a) Except for (i) any
Consents, (ii) filings and consents which, if not made or obtained, would not
have a material adverse effect on Buyer's ability to perform its obligations
under this Agreement, (iii) any applicable Regulatory Requirements, and (iv)
as otherwise disclosed on Schedule 6.3, no consent, waiver, approval or
authorization of, or filing, registration or qualification with, any Person or
Governmental Authority is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this Agreement by
Buyer.
(b) Except as set forth on Schedule 6.3, the
execution, delivery and performance of this Agreement by Buyer do not and will
not: (a) violate or conflict with any provision of Buyer's certificate of
limited partnership or partnership agreement, (b) violate any Legal
Requirement; or (c) (i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage of time or
elections of any Person, (ii) permit or result in the termination, suspension
or modification of, or (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Buyer under any material
contract, agreement, arrangement, commitment or plan to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except such
violations, conflicts, breaches, default, terminations, suspensions,
modifications, and accelerations as would not, individually or in the
aggregate, have a material adverse effect on Buyer's ability to perform its
obligations under this Agreement.
6.4 LITIGATION. (a) There are no claims, actions,
suits, proceedings or investigations pending or, to the Best of Buyer's
Knowledge, threatened, in any court or before any governmental agency or
instrumentality, or before any arbitrator, by or against Buyer or any of its
Affiliates which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated
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by this Agreement or declare unlawful the transactions or events contemplated
by this Agreement or cause any of such transactions to be rescinded.
(b) There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against Buyer or any of
its Affiliates which would materially hinder or delay the consummation of the
transactions contemplated by this Agreement.
6.5 FINDERS AND BROKERS. Buyer has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Seller will in any
way have any liability.
6.6 QUALIFICATION OF BUYER. Buyer knows of no reason why
it would not be legally qualified to be the assignee of the licenses and
permits included in the Assets.
ARTICLE VII
7. ADDITIONAL COVENANTS.
7.1 ACCESS TO PREMISES AND RECORDS. Between the date of
this Agreement and the Closing Date, Seller will give Buyer and its
representatives, at reasonable times and with reasonable prior notice, access
to the books and records of the Business and to the Assets and will furnish to
Buyer and its representatives such information regarding the Business and the
Assets as Buyer may from time to time reasonably request, including without
limitation, copies of all documents and documentation required to be delivered
by Seller to Buyer under this Agreement. Without limiting the foregoing, if
requested by Buyer, between the date of this Agreement and the Closing Date,
Seller will give Buyer and any environmental engineers and consultants acting
on behalf of Buyer, such access to the sites and facilities included in the
Assets as is reasonably required to permit such engineers and consultants to
conduct the physical on-site inspections and prepare the environmental surveys
and assessments with respect to such sites and facilities as Buyer shall
request.
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL
STATEMENTS. Except as to actions to which Buyer has consented to in writing
and except as specifically required by this Agreement Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices, will use its commercially reasonable efforts to
keep available the services of the employees who are involved in the operation
of the Business and to preserve any beneficial business relationships with
customers, suppliers and others having business dealings with Seller relating
to the Business;
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(b) Maintain all of the Assets in good condition
(ordinary wear and tear excepted), consistent with their overall condition on
the date of this Agreement, and shall use, operate and maintain all of the
Assets in a reasonable manner;
(c) Maintain adequate inventories of spare
Equipment consistent with past practices;
(d) Maintain insurance as in effect on the date of
this Agreement;
(e) Keep all of its business books, records and
files in the ordinary course of business in accordance with past practices;
(f) Continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(g) Not sell, transfer or assign any Assets other
than in the ordinary course of business where suitable replacements have been
made therefor;
(h) Not permit any material amendment to, or
cancellation of, any of the Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets) which
affects or is applicable to the Systems or the Business;
(i) Not cause or permit, by any act or failure to
act, any of the Franchises to expire or be revoked, suspended or modified, or
take any action that could reasonably be expected to cause any Franchising
Authority or any other Governmental Authority to institute proceedings for the
suspension, revocation or material adverse modification of any Franchise;
(j) Pay all obligations relating to each of the
Systems as they become due, consistent with past practices, so that all such
obligations shall be current of the Closing Date;
(k) Not enter into any transaction or incur any
liability or obligation that, if entered into or incurred prior to the date of
this Agreement, would be required to be disclosed on Schedule 5.14;
(l) Not implement any retiering or repackaging of
cable television programming offered by any of the Systems;
(m) Maintain levels of marketing and promotion
efforts and expenditures consistent with its past practices as described on
Schedule 5.22;
(n) Comply in all material respects with all
contractual obligations and all laws, rules and regulations applicable or
relating to the ownership and operation of each of the Systems;
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(o) Not cause or permit any increase in the rates of
salaries or compensation payable to employees who perform services in
connection with the conduct of the Business and operation of the Systems (other
than as required by law and regularly scheduled bonuses and increases in the
ordinary course of business disclosed on Schedule 5.17(d));
(p) Not cause or permit the provision for any new
and material pension, retirement or other employment benefits for employees who
perform services in connection with the conduct of the Business and operation
of the Systems or any material increase in any existing benefits (other than as
required by law);
(q) Not take or omit to take, or permit Americable
International, Inc. ("AII") to take or omit to take, any action that would
cause Seller to be in breach of any of its representations or warranties in
this Agreement in any material respect, make any representation or warranty of
Seller contained in this Agreement untrue or incorrect as of the Closing Date
or result in any of the conditions to Closing in this Agreement not being
satisfied; or
(r) Take or permit AII to take any action that is
inconsistent with Seller's obligations under this Agreement or that could
reasonably be expected to hinder or delay the consummation of the transaction
contemplated by this Agreement.
7.3 EMPLOYEE MATTERS. (a) Immediately prior to the
Closing Date, Seller will terminate all employees who perform services in
connection with the conduct of the Business and operation of the Systems
(except for any employees that Seller desires to retain for their remaining
business operations, in respect of which all liabilities shall be the sole
responsibility of Seller), and will pay all compensation due and provide all
benefits required for such employees on or before the Closing Date. Seller
will be responsible for all salaried and hourly pension and retirement
obligations and all salary and hourly health and life insurance obligations
incurred prior to the Closing Date, including payment of all claims to
insurance, payment of all premiums applicable to coverage of such terminated
employees to the Closing Date, assumption of all preexisting claims, including
unfunded pension liabilities. All liabilities relating to any such terminated
employee arising on or before the Closing Date will be the responsibility of
Seller, including those accruing by reason of their termination pursuant to
this Section 7.3(a). All liabilities relating to any benefit plans with
respect to the terminated employees shall be the responsibility of Seller.
Buyer shall have no obligation to offer employment to any of the employees.
Seller shall comply with the provisions of COBRA relating to the continuation
of health benefits to employees as they apply to the transactions contemplated
by this Agreement.
(b) Nothing in this Section 7.3 or elsewhere in this
Agreement is intended to confer upon any employee of the Business or his or her
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any nature or kind whatsoever under or by reason
of this Agreement, or the transactions contemplated hereby, including without
limitation any rights of employment or continued employment. All rights and
obligations created by this Agreement are solely between the parties hereto.
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7.4 CONSENTS. (a) As soon as practicable after the
execution of this Agreement, but in no event later than 30 days after the date
of this Agreement, the parties shall file with the FCC and Seller shall file
with any Franchising Authorities from which consent to the transactions
contemplated by this Agreement must be obtained, an application or applications
requesting consent to such transactions. Seller shall use reasonable efforts
(but shall not be required to make any payment except as may be required to
cure any default by Seller under any Franchise and except for the incidental
costs of preparing and submitting applications and other requests, costs of
responding to reasonable inquiries and ordinary and customary filing fees and
processing charges), and Buyer shall assist Seller in all reasonable respects
(including, without limitation, by attending meetings with the parties who must
provide such consents and by providing the financial data, information as to
operating experience and appropriate insurance and surety bonds reasonably
required in order to obtain such consents), and the parties shall take with due
diligence all reasonable steps necessary to expedite the processing of the
application or applications and to obtain all consents and approvals of
Franchising Authorities required for the transfer to Buyer of all of the
Franchises, without any conditions materially adverse to Buyer. Seller and
Buyer shall furnish each other with any correspondence from or to, and notify
each other of any other communications with, Franchising Authorities that
relate to the obtaining of such consents and approvals, and each party shall
have the right to participate in any hearing or proceedings before Franchising
Authorities with respect to such consents and approvals. Each party shall bear
its own costs and expenses (including the fees and disbursements of its
counsel) in connection with the preparation of the portion of any such
application to be prepared by it and in connection with the processing of that
application. Notwithstanding the foregoing, the Buyer shall have no obligation
to make any payment to any Franchising Authority or to any other party to any
agreement in assisting the Sellers in obtaining any of the consents,
amendments, releases or agreements described in this Section 7.03(a) or to
agree to any materially adverse change in any Franchise or other agreement to
be assigned to the Buyer. Any application to any Franchising Authority or any
other Governmental Authority for any authorization, consent, order, or approval
necessary for the transfer of any Franchise shall be reasonably acceptable to
the Buyer. Seller will not agree to any adverse change in any Franchise as a
condition to obtaining any authorization, consent, order or approval necessary
for the transfer of such Franchise without Buyer's consent which shall not be
unreasonably withheld. If the party from whom such consent is requested
proposes to issue in the name of Buyer a new system agreement in lieu of
consenting to an assignment, Buyer shall agree to accept such proposal so long
as, in Buyer's reasonable business judgment, the terms and conditions of the
new agreement are no less favorable, in any material respect, than those
presently held by Seller.
(b) Seller will use commercially reasonable efforts to obtain, as soon
as practicable and at its expense, all other Consents, in form and substance
reasonably satisfactory to Buyer; 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,
except as may be required to cure any default by Seller under any
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agreement. Buyer will use commercially reasonable efforts to assist Seller in
its efforts to obtain all such Consents. Notwithstanding the foregoing, the
Buyer shall have no obligation to make any payment to any other party to any
agreement in assisting Seller in obtaining any of the consents, amendments,
releases or agreements described in this Section 7.4(b) and Seller will not
agree to any adverse change in any agreement to be assigned to the Buyer.
(c) If, with respect to any lease, commitment or agreement to
be assigned to Buyer (other than a Franchise), a required consent to its
assignment is not obtained and Buyer, in its discretion, waives the requirement
under this Agreement that such consent be obtained and the requirement that
such lease, commitment or agreement be assigned to Buyer at the Closing, Seller
shall keep it in effect and shall use its reasonable efforts to give Buyer the
benefit of it to the same extent as if it had been assigned, and Buyer shall
perform Seller's obligations under the agreement relating to the benefit
obtained by Buyer. Nothing in this Agreement shall be construed as an attempt
to assign any agreement or other instrument that is by its terms nonassignable
without the consent of the other party or as a waiver by Buyer of any
requirement under this Agreement that consent to the assignment of such
agreement be obtained prior to Closing.
7.5 [INTENTIONALLY OMITTED].
7.6 NOTIFICATION OF CERTAIN MATTERS. Each party will
promptly notify the other of any fact, event, circumstances or action the
existence or occurrence of which would cause any of such party's
representations or warranties under this Agreement not to be true in any
material respect.
7.7 RISK OF LOSS; CONDEMNATION. (a) Seller will bear
the risk of any loss or damage to the Assets resulting from fire, theft or
other casualty (except reasonable wear and tear) at all times prior to the
Closing. If any such loss or damage is so substantial as to prevent normal
operation of any material portion of any System, Seller shall promptly notify
Buyer of that fact and shall apply the proceeds of any insurance policy,
judgment or award with respect thereto and take all other commercially
reasonable steps to repair, replace and/or restore such property as soon as
possible after the loss. In the event such loss or damage has not been
restored or replaced by the Closing Date, Buyer may elect by written notice to
Seller either (i) to waive such defect and proceed toward consummation of the
acquisition of the Assets in accordance with this Agreement or (ii) to
terminate this Agreement pursuant to Section 10.1(c)(iv). If Buyer elects to
consummate the acquisition of the Assets notwithstanding such loss or damage
and does so, there will be no adjustment in the Purchase Price on account of
such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
Seller to Buyer or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller. If any such loss or damage to the Assets
occurs that is not so substantial as to prevent normal operation of any
material portion of any System, which is not repaired, replaced or restored
prior to the Closing, then Buyer shall be entitled to any proceeds of insurance
received or receivable by Seller with respect thereto and Seller agrees to pay
such proceeds to Buyer upon receipt thereof.
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(b) If, prior to the Closing, any part of a material
Asset or an interest in a material Asset is taken or condemned as a result of
the exercise of the power of eminent domain, or if a Governmental Authority
having such power informs Seller or Buyer that it intends to condemn all or any
part of a material Asset (such event being referred to, in either case, as a
"Taking"), then Seller shall promptly notify Buyer of such fact and Buyer may
terminate this Agreement pursuant to Section 10.1(c)(v). If Buyer does not
elect to terminate this Agreement, then (a) if the Closing occurs, Buyer shall
have the sole right, in the name of Seller, if Buyer so elects, to negotiate
for, claim, contest and receive all damages with respect to the Taking, (b)
Seller shall be relieved of its obligation to convey to Buyer the Asset or
interests that are the subject of the Taking and (c) at the Closing Seller
shall assign to Buyer all of Seller's rights (including the right to receive
payment of damages) with respect to such Taking and shall pay to Buyer all
damages previously paid to Seller with respect to the Taking. If, prior to the
Closing, any Taking occurs with respect to a non-material Asset, then if the
Closing occurs, the provisions of clauses (a)-(c) of the preceding sentence
shall apply with respect thereto.
7.8 ADVERSE CHANGES. Seller shall promptly notify Buyer
in writing of any materially adverse developments affecting the Assets, any of
the Systems or the Business which become known to Seller, including, without
limitation, (i) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of the Assets, any of the
Systems or the Business, (ii) any notice of violation, forfeiture or complaint
under any Franchise or other Governmental Permit, or (iii) anything which, if
not corrected prior to the Closing Date, would prevent Seller from fulfilling
any condition to Closing described in Article VIII.
7.9 NO SOLICITATION. Seller shall not, and shall cause
its employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business
not to, initiate, solicit or encourage, directly or indirectly, any inquiries
or the making of any proposal with respect to the Assets, the Business, the
Systems, or engage in any negotiations concerning, or provide to any other
Person any information or data relating to the Business, the Systems, the
Assets, or Seller for the purpose of, or have any discussions with, any Person
relating to, or otherwise cooperate in any way with or assist or participate
in, facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other Person to seek or effect a transaction.
7.10 SALES AND TRANSFER TAXES AND FEES. Buyer and Seller
shall each pay one-half of any state or local sales, use, transfer, excise,
documentary or license taxes or fees or any other charge (including filing
fees) imposed by any Governmental Authority as a consequence of the transfer of
any Assets pursuant to this Agreement. Seller shall timely file any sales tax
returns required to be filed with any Governmental Authority as a consequence
of the transfer of any Assets pursuant to this Agreement. Buyer shall
cooperate in the preparation and filing of any submission or application
necessary to obtain any clearance relating to, or if available, exemption from,
any Taxes or fees described in this Section 7.10.
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7.11 COMMERCIALLY REASONABLE EFFORTS. (a) Seller shall use
commercially reasonable efforts to take all steps within its power and will
cooperate with Buyer, to cause to be fulfilled those of the conditions to
Buyer's obligations to consummate the transactions contemplated by this
Agreement that are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be necessary or
appropriate in order to carry out the intent of this Agreement and consummate
the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable efforts to take all steps
within its power and will cooperate with Seller, to cause to be fulfilled those
of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependant upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby; provided,
however, that nothing in this Section 7.11(b) shall require Buyer to undertake
any action which it is permitted not to undertake pursuant to Section 7.4.
7.12 EXPENSES. Buyer and Seller shall each bear its own
expenses incurred in connection with the negotiation and preparation of this
Agreement and in connection with all obligations required to be performed by it
under this Agreement, except where specific expenses have been otherwise
allocated by the provisions of this Agreement. Buyer and Seller shall each pay
one-half of the cost of obtaining the searches of tax, lien and judgment
filings and title reports required to be delivered by Seller pursuant to
Section 8.11. Buyer and Seller shall pay all Escrow Agent fees as set forth in
the Escrow Agreement and Indemnity Escrow Agreement.
7.13 DELIVERY OF FINANCIAL INFORMATION. Seller shall furnish to
Buyer within 20 days after the end of each month ending between the date of
this Agreement and the Closing Date a statement of income and expense for the
month just ended for the Systems on a consolidated basis and such other
financial information (including information on payables and receivables) as
Buyer may reasonably request. The income statements delivered by Seller to
Buyer pursuant to this Section 7.13 shall be prepared from the books and
records of Seller with respect to the Systems in accordance with GAAP
consistently applied, shall accurately reflect the books, records and accounts
of the Systems, shall be complete and correct in all material respects, and
shall present fairly the results of operations of the Systems on a consolidated
basis for the periods then ended. Promptly after the preparation thereof,
Seller shall deliver to Buyer copies of any other financial statements,
subscriber counts and other operational data regularly prepared by Seller for
its internal use.
7.14 ADDITIONAL FINANCIAL INFORMATION.
(a) To the extent requested by Buyer and required by SEC
Regulations S-K and S-X to be included in any registration statement or other
offering document (each, a Registration Statement") proposed to be prepared by
Buyer in connection with its financing of the Purchase Price, Seller agrees, at
Buyer's expense, to prepare or cause Seller's independent accountants to
prepare the following financial statements with respect to the Systems, and
related management discussions and
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analyses (collectively, the "Additional Financial Statements"), conforming with
the requirements specified in this Section 7.14:
(i) Balance sheets as at December 31, 1993 and
1994, and income statements and statements of cash flows and changes in equity
for the years ended December 31, 1992, 1993, and 1994, together with the
required footnotes and the auditor's report thereon.
(ii) A balance sheet, income statement, and
statement of cash flows as of and for the quarter ended September 30, 1995,
together with the required footnotes.
(iii) A balance sheet, income statement, and
statement of cash flows as of and for each fiscal quarter subsequent to the
quarter ended September 30, 1995 and ending prior to the Closing Date, together
with the required footnotes.
(b) Seller shall prepare or cause Seller's
independent accountants to prepare the Additional Financial Statements within
forty-five days after Buyer's request therefor.
(c) The Additional Financial Statements shall be
prepared from the books and records of Seller in accordance with GAAP,
consistently applied, and in the form required by SEC Regulations S-K and S-X,
so as to fairly present the financial condition, results of operations, and
cash flows of Seller for the periods indicated, and, with respect to the
quarterly financial statements required by this Section 7.14, subject to normal
year-end adjustments.
(d) To the extent required by SEC Regulation S-X,
the Additional Financial Statements shall be audited by Seller's independent
accountants. The cost of any audit of any of the Additional Financial
Statements shall be paid by Buyer.
(e) Seller agrees to provide one or more audit
representation letters as to the information provided by Seller to its
independent accountants in connection with any audit required under this
Section 7.14. The representation letter will be in such form and make the
representations reasonably required by such independent accountants to enable
them to issue an opinion acceptable to the SEC for purposes of any Registration
Statement with respect to the audit of those Additional Financial Statements
required to be audited by SEC Regulations S-K and S-X and to be included in
such Registration Statement. Seller will cause its independent accountants to
provide all consents that are necessary for the inclusion of their opinion and
the Additional Financial Statements in any such Registration Statement.
(f) Buyer, to the fullest extent permitted by
law, agrees to indemnify and hold harmless Seller, Seller's Affiliates and each
other director, employee or agent of Seller or Seller's Affiliates (including,
without limitation, Hermanowski (as that term is defined in Section 7.15))
(referred to in this paragraph as a "Seller Party"), from and against any and
all losses, claims, damages or liabilities and reasonable expenses related
thereto (referred to in this paragraph as a "Loss") insofar as such Losses (or
proceedings in respect thereof) arise out of or are based upon any
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untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any Registration Statement, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse such Seller Party for any legal or other
expenses reasonably incurred by such Seller Party in connection with
investigating or defending any such Loss; provided, however, that Buyer will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any such
Registration Statement in reliance upon and in conformity with information
furnished by any Seller Party specifically for use in the preparation thereof.
7.15 COVENANT NOT TO COMPETE.
(a) Each of Seller and Charles C. Hermanowski
("Hermanowski") jointly and severally covenants and agrees that for a period of
five years after the Closing Date, neither Seller, Hermanowski, nor any of
their Affiliates, will, without prior written consent of Buyer, except as
provided in clause (b) of this Section 7.15, directly or indirectly, own,
manage, operate, join, control, or engage or participate in the ownership,
management, operation, or control of, or be connected as a shareholder,
director, officer, agent, partner, joint venturer, or otherwise with, any
business or organization any part of which engages in the business of owning or
operating cable television systems within the State of Maine.
(b) Notwithstanding clause (a) of this Section 7.15,
the ownership of a company's securities listed on national securities exchange
or quoted on the National Association of Securities Dealers Automated Quotation
System, which constitutes less than five percent (5%) of the outstanding voting
stock thereof and does not otherwise constitute control over such company,
shall not be prohibited.
(c) Each of Seller and Hermanowski agrees that if
either Seller or Hermanowski or any Affiliate of either Seller or Hermanowski
engages or threatens to engage in any activity that constitutes a violation of
the provisions of this Section 7.15 Buyer shall have the right and remedy to
have the provisions of this Section 7.15 specifically enforced to the extent
permitted by law by any court having jurisdiction, it being acknowledged and
agreed that any breach of this Section 7.15 would cause immediate irreparable
injury to Buyer and that money damages would not provide an adequate remedy at
law for any breach. Such right and remedy shall be in addition to, and not in
lieu of, any other rights and remedies available to Buyer at law or in equity.
(d) If any of the provisions or covenants contained
in this Section 7.15 are held to be unenforceable in any jurisdiction because
of the duration or scope thereof, the court making such determination shall
have the power to reduce the duration and/or scope of the provision or
covenant, and the provision or covenant in its reduced form shall be
enforceable; provided, however, that the determination of such court shall not
affect the enforceability of this Section 7.15 in any other jurisdiction.
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ARTICLE VIII
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer to consummate the purchase under this
Agreement are subject to the satisfaction at or prior to the Closing of each of
the following conditions, any one or more of which may be waived by Buyer, in
its sole direction.
8.1 GOVERNMENTAL OR LEGAL ACTION. No action, suit or proceeding
shall be pending or threatened by any Governmental Authority and no Legal
Requirement shall have been enacted, promulgated or issued or deemed applicable
to any of the transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation of all or
any portion of the Systems, the Business or the Assets or (b) prevent or make
illegal the consummation of the transactions contemplated by this Agreement.
8.2 FINAL ORDER. The FCC shall have consented, to the extent such
consent is legally required, to the transfer to Buyer of all Governmental
Permits issued by the FCC with respect to the operation of the Systems in all
Franchise Areas, and the time period for filing petitions for reconsideration
of such consents shall have passed.
8.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement which are
qualified by materiality shall be true and correct in all respects as of the
date of this Agreement and as of the Closing Date, with the same effect as
though made on and as of the Closing Date, except insofar as any of such
representations and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all respects on such Closing Date
with respect to such date and period, and the representations and warranties of
Seller contained in this Agreement which are 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, with the same effect as though made on and as of the Closing
Date, except insofar as any of such representations and warranties relate
solely to a particular date or period, in which case they shall be true and
correct in all material respects on such Closing Date with respect to such date
and period, and Seller shall have delivered to Buyer a certificate, executed by
an officer of Seller, dated as of the Closing Date, certifying as to the
foregoing.
8.4 PERFORMANCE OF AGREEMENTS. Seller shall have performed in all
material respects all obligations and agreements and complied or caused to be
complied with all covenants and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date , and
Seller shall have delivered to Buyer a certificate, executed by an officer of
Seller, dated as of the Closing Date, certifying as to the foregoing.
8.5 SECRETARY'S CERTIFICATE. Seller shall have delivered to Buyer
a certificate, executed by the Secretary of the Seller, dated as of the Closing
Date, certifying that the resolutions, as
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attached to such certificate, were duly adopted by Seller's Board of Directors,
authorizing and approving the execution of this Agreement and the consummation
of the transactions contemplated hereby and that such resolutions remain in
full force and effect and have not been amended, modified, revoked or rescinded
since their adoption to and including the Closing Date.
8.6 NO MATERIAL ADVERSE CHANGE. During the period from
the date of this Agreement through and including the Closing Date, there shall
not have occurred any material adverse change in the business, financial
condition or operations of the Business, taken as a whole, other than any
change arising out of matters or affecting the cable television industry
(national or regional) generally, and Seller shall not have sustained any
material loss or damage to the Assets or any of the Systems, whether or not
insured, that materially affects the ability of Seller to conduct the Business
in a manner consistent with past practice. Without limiting the foregoing, (i)
Total Systems Revenue, as calculated pursuant to Section 3.3(c) for purposes of
preparing and as reflected on the Preliminary Adjustments Report, shall be not
less than $282,000 (ii) the total number of Homes Passed by all of the Systems
shall be not less than 5,127, and (iii) the total number of Subscribers
serviced by all of the Systems shall be not less than 3,153.
8.7 CONSENTS. Seller shall have delivered to Buyer
evidence, in form and substance reasonably satisfactory to Buyer, that all the
Required Consents have been obtained or given. Seller shall have also delivered
estoppel certificates of the lessors of leasehold and subleasehold interests
included in the Real Property and estoppel certificates of the Franchising
Authorities in form and substance reasonably satisfactory to Buyer.
8.8 TRANSFER DOCUMENTS. Seller shall have delivered to
Buyer customary bills of sale, deeds, assignments and other instruments of
transfer sufficient to convey good and marketable title to the Assets, free and
clear of all encumbrances other than Permitted Encumbrances in accordance with
the terms of this Agreement.
8.9 OPINIONS OF SELLER'S COUNSEL. Buyer shall have
received the opinion or opinions of Solove and Solove, P.A., counsel for
Seller, dated the Closing Date, substantially in the form of Exhibit C.
8.10 OPINIONS OF SELLER'S FCC COUNSEL. Buyer shall have
received the opinion or opinions of Vorys, Sater, Seymour and Pease, FCC
counsel for the Seller, dated the Closing Date, substantially in the form of
Exhibit D.
8.11 DISCHARGE OF LIENS. Seller shall have secured the
termination of all Encumbrances of any nature on the Assets, other than
Permitted Encumbrances. Seller shall have delivered the results of searches
for tax, lien and judgment filing (including title and UCC searches, as
necessary) in the Secretary of State's records of the State of Maine and in the
records of each county in the State of Maine in which any of the Assets are
located, which searches shall evidence that the Assets are free and clear of
all Encumbrances except for Permitted Encumbrances.
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8.12 ADDITIONAL DOCUMENTS AND ACTS. Seller shall have delivered or
caused to be delivered to Buyer all other documents required to be delivered
pursuant to this Agreement and done or caused to be done all other acts or
things reasonably requested by Buyer to evidence compliance with the conditions
set forth in this Article VIII.
8.13 CERTIFICATES. Seller shall have delivered the certificates
contemplated by this Article VIII and such other certificates of Seller and
others, dated as of the Closing Date, to evidence compliance with the
conditions set forth in this Article VIII, as may be reasonably requested by
Buyer.
8.14 ENVIRONMENTAL SURVEY. Each environmental survey received by
Buyer concerning any of the Real Property included in the Assets shall disclose
no environmental conditions or circumstances that could adversely affect any
Real Property, including the value thereof, or result in liability or costs if
cleaned up or removed from the affected Real Property pursuant to requirements
of applicable Environmental Laws.
ARTICLE IX
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller to consummate the sale under the Agreement
are subject to the satisfaction, at or prior to the Closing Date, of each of
the following conditions, any one or more of which may be waived by Seller in
its sole discretion.
9.1 GOVERNMENTAL OR LEGAL ACTIONS. No action, suit or proceeding
shall be pending or threatened by any Governmental Authority and no Legal
Requirement shall have been enacted, promulgated or issued or deemed applicable
to any of the transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation of all or
any material portion of the Systems, the Business or the Assets or (b) prevent
or make illegal the consummation of the transactions contemplated by this
Agreement.
9.2 FCC CONSENT. The FCC shall have consented, to the extent such
consent is legally required, to the transfer to Buyer of all Governmental
Permits issued by the FCC with respect to the operation of the Systems in all
Franchise Areas.
9.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement which are
qualified by materiality shall be true and correct in all respects as of the
date of this Agreement and as of the Closing Date, with the same effect as
though made on and as of the Closing Date, except insofar as any of such
representations and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all respects on such Closing Date
with respect to such date and period, and the representations and warranties of
Buyer contained in this Agreement which are 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, with the same effect as though made on and as of the Closing
Date, except for such changes permitted or contemplated by the terms of this
Agreement and except insofar as any of such representations and warranties
relate solely to a particular date and period, in which case they shall be true
and correct
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in all material respects on such Closing Date with respect to such date and
period, and Buyer shall have delivered to Seller a certificate, executed by an
officer of FrontierVision Inc. ("FVI"), which is the general partner of the
general partner of the general partner of Buyer, dated as of the Closing Date,
certifying as to the foregoing.
9.4 PERFORMANCE OF AGREEMENTS. Buyer shall have
performed in all material respects all obligations and agreements and complied
or caused to be complied with all covenants and conditions required by this
Agreement to be performed or complied with by Buyer at or prior to the Closing
Date, and Buyer shall have delivered to Seller a certificate, executed by an
officer of FVI, dated as of the Closing Date, certifying as to the foregoing.
9.5 SECRETARY'S CERTIFICATE. Buyer shall have delivered
to Seller a certificate, executed by the Secretary of FVI, dated as of the
Closing Date, certifying that the resolutions, as attached to such certificate,
were duly adopted by the Board of Directors of FVI, authorizing and approving
the execution of this Agreement and the consummation of the transactions
contemplated hereby and that such resolutions remain in full force and effect
and have not been amended, modified, revoked or rescinded since their adoption
to and including the Closing Date.
9.6 OPINIONS OF BUYER'S COUNSEL. Seller shall have
received the opinion or opinions of Dow, Lohnes & Albertson, counsel for the
Buyer, dated the Closing Date, substantially in the form of Exhibit E.
9.7 PAYMENT OF PURCHASE PRICE. Buyer shall have paid to
Seller the Purchase Price as set forth in Section 3.1.
9.8 ASSUMPTION OF LIABILITIES. Buyer shall have
delivered to Seller an agreement, in form and substance reasonably satisfactory
to Seller and its counsel, pursuant to which Buyer shall assume the Assumed
Liabilities to be assumed by Buyer pursuant to Section 4.1.
9.9 ADDITIONAL DOCUMENTS AND ACTS. Buyer shall have
delivered or caused to be delivered to Seller all other documents required to
be delivered pursuant to this Agreement and done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Article IX.
9.10 CERTIFICATES. Buyer shall have delivered or caused
to be delivered the certificates contemplated by this Article IX and such other
certificates of Buyer, FrontierVision Inc., and others, dated as of the Closing
Date, to evidence compliance with the conditions set forth in this Article IX,
as may be reasonably requested by Seller.
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ARTICLE X
10. TERMINATION.
10.1 EVENTS OF TERMINATION. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual written consent of Buyer and Seller;
(b) by Seller, if it is not in default:
(i) if the consummation of the transactions contemplated by
this Agreement by Seller would violate any non-appealable final order, decree
or judgment of any Governmental Authority having competent jurisdiction;
(ii) if any representation or warranty of Buyer made herein is
untrue in any material respect (other than a change permitted or contemplated
by this Agreement) and such breach is not cured within thirty (30) days of
Buyer's receipt of a notice from Seller that such breach exists or has
occurred;
(iii) if Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and such breach
is not cured within 30 days of Buyer's receipt of a notice from Seller that
such default exists or has occurred; or
(iv) if the conditions to Seller's obligations to consummate
the Closing as set forth in Article IX cannot reasonably be satisfied on or
before the Termination Date.
(c) by Buyer, if it is not in default:
(i) if the consummation of the transactions contemplated by
this Agreement by Buyer would violate any non-appealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
(ii) if any representation or warranty of Seller made herein is
untrue in any material respect (other than due to a change permitted or
contemplated by the terms of this Agreement) and such breach is not cured
within thirty (30) days of Seller's receipt of a notice from Buyer that such
breach exists or has occurred;
(iii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and such breach
is not cured within 30 days of Seller's receipt of a notice from Buyer that
such default exists or has occurred;
(iv) pursuant to Section 7.7(a); or
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(v) following a Taking as set forth in the first
sentence of Section 7.7(b).
(d) Unless the Closing shall have theretofore taken
place, by either party after the Termination Date, provided that the
terminating party is not otherwise in default or breach of this Agreement.
10.2 MANNER OF EXERCISE. In the event of the termination
of this Agreement pursuant to Section 10.1, by either Buyer or Seller, notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereunder shall be abandoned
without further action by Buyer or Seller.
10.3 EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 10.1 and prior to the
Closing, all obligations of the parties hereunder shall terminate, except for
the respective obligations of the parties under Section 3.1(b); provided,
however, that no termination of this Agreement shall (a) except as set forth
in Section 10.4, relieve a defaulting or breaching party from any liability to
the other party hereto for or in respect of such default or (b) result in the
rescission of any transaction theretofore consummated hereunder. Upon
termination of this Agreement, except as provided in Section 10.4, Buyer shall
be entitled to the Escrow Deposit together with the interest and earnings
thereon and Buyer and Seller shall instruct the Escrow Agent to pay the Escrow
Deposit and such interest and earnings to Buyer.
10.4 LIQUIDATED DAMAGES. In the event of the termination
of this Agreement by Seller prior to the Closing as a result of the breach by
Buyer of its obligations under this Agreement, and if Seller is not in breach
of any of its obligations under this Agreement, Seller shall receive as
liquidated damages, for the breach by Buyer and as full settlement of any
damages of any nature or kind that Seller may suffer or allege to have suffered
as a result of any such breach by Buyer, and not as a penalty, the Escrow
Deposit (together with all interest earned thereon). In the event Seller is
entitled to receive the Escrow Deposit as liquidated damages as set forth in
this Section 10.4, Buyer shall promptly (but in no event more than five
Business Days after receipt of such notice) take all action required under the
Escrow Agreement to cause the Escrow Deposit (together with all interest earned
thereon) to be released to Seller, and Seller shall be precluded from
exercising any other right or remedy available under this Agreement or
applicable law. Seller and Buyer agree that actual damages would be difficult
to ascertain and that the amount of the payment to be made to Seller pursuant
to this Section 10.4 is a fair and equitable amount to reimburse Seller for
damages sustained due to Buyer's breach of this Agreement.
10.5. ATTORNEY'S FEES. In any action or proceeding brought
by a party to the Agreement to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover all reasonable costs and expenses
incurred, including reasonable attorney's fees, in connection with that action
or proceeding, through and including all appellate proceedings.
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10.6 JURISDICTION AND VENUE. In the event that any action or
proceeding is brought by a party to this Agreement to enforce any provisions
hereof, both the Buyer and Seller each hereby submit to personal jurisdiction
in the appropriate court within the State of Florida and consent to venue of
such action in Dade County, Florida.
ARTICLE XI
11. NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENT.
11.1 NATURE OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Neither
party will be deemed to have made any representation, warranty, covenant or
agreement except as set forth in this Agreement and in the documents and
instruments delivered pursuant to this Agreement. Without limiting the
generality of the foregoing, neither party will be liable or bound in any
manner by any expressed or implied representation, warranty, covenant or
agreement that is made by any employee, agent or other Person representing or
purporting to represent such party.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and Buyer in the Agreement and in the
documents and instruments to be delivered by Seller and Buyer pursuant to this
Agreement shall survive the Closing. Except as the parties may agree in
writing from time to time prior to Closing, (i) any investigations by or on
behalf of any party hereto shall not constitute a waiver as to enforcement of
any representation, warranty, covenant or agreement contained in this
Agreement, and (ii) no notice or information delivered by either party shall
affect the other party's right to rely on any representation, warranty,
covenant or agreement made by such party or relieve such party of any
obligations under this Agreement as the result of a breach of any of its
representations and warranties or failure to perform any of its covenants or
agreements.
11.3 TIME LIMITATIONS. If the Closing occurs, Seller shall have no
liability to Buyer with respect to any representation or warranty or any
covenant, agreement or obligation of Seller to the extent required to be
performed or complied with prior to the Closing Date, unless on or before the
date which is six (6) months after the Closing Date Seller is given notice
asserting a claim with respect thereto and specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. If the closing
occurs, Buyer shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or obligation of Buyer to
the extent required to be performed or complied with prior to the Closing Date,
unless on or before the date which is six (6) months after the Closing Date
Buyer is given notice of a claim with respect thereto and specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller. A claim with respect to any covenants to be performed or complied with
by Buyer or Seller after the Closing Date may be asserted at any time.
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11.4 LIMITATIONS AS TO AMOUNT. (a) If the Closing occurs, Seller
shall have no liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any covenant, agreement
or obligation to the extent required to be performed on or prior to the Closing
Date until the total of all damages with respect to such failure or breach
exceeds $50,000, but then for the entire amount of such damages, including
those not in excess of $50,000.
(b) If the Closing occurs, Buyer shall have no liability (for
indemnification or otherwise) with respect to any failure or breach of any
representation or warranty or any covenant, agreement, or obligation to the
extent required to be performed on or before the Closing Date until the total
of all damages with respect to such failure or breach exceeds $50,000 but then
for the entire amount of such damages, including those not in excess of
$50,000.
ARTICLE XII
12. INDEMNIFICATION.
12.1 RIGHTS TO INDEMNIFICATION. After the Closing, subject to the
limitations set forth in Sections 11.3 and 11.4, Seller agrees to indemnify and
hold harmless Buyer against any loss, liability, claim (including claims of
third parties and of the parties hereto against each other), damage or expense
(including, but not limited to, reasonable attorney's fees and disbursements)
arising from (a) any claim for brokerage or agent's or finder's commissions
or compensation in respect of the transactions contemplated by this Agreement
by any person purporting to act on behalf of Seller, (b) any claim that Buyer
is liable for the Excluded Liabilities, (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Seller under this Agreement or in any instrument or other
agreement delivered pursuant to this Agreement, (d) the operation or ownership
of the Systems prior to the Closing, including any liabilities arising under
the Franchises and other Governmental Permits and Seller Contracts that relate
to events occurring prior to the Closing, or (e) to the extent that Buyer is
entitled to indemnification from Seller pursuant to this Section 12.1 (before
giving effect to the limitations in Sections 11.3 and 11.4) with respect to any
action, suit, proceeding, claim, demand, assessment or judgment, any reasonable
out-of-pocket costs and expenses, including reasonable legal fees and expenses,
incident to such action, suit, proceeding, claim, demand, assessment or
judgment incident to the foregoing or incurred in investigating or attempting
to avoid the same or to oppose the imposition thereof, or in enforcing this
indemnity with respect thereto. After the Closing, subject to the limitations
set forth in Sections 11.3 and 11.4, Buyer agrees to indemnify and hold
harmless Seller against any loss, liability, claim (including, but not limited
to, reasonable attorney's fees and disbursements) arising from (a) any claim
for brokerage or agent's or finder's commissions or compensation in respect of
the transactions contemplated by this Agreement by any Person purporting to act
on behalf of Buyer, (b) the failure to perform the obligations of the Assumed
Liabilities, (c) Buyer's failure or breach of any representation, warranty,
covenant, agreement or obligation made or required to be performed by Buyer
under this Agreement, or (d) the operation
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or ownership of the Systems after the Closing, including any liabilities
arising under the Franchises and other Governmental Permits and Seller
Contracts that were assigned to Buyer at Closing and that relate to events
occurring after the Closing.
12.2 PROCEDURE FOR INDEMNIFICATION. Promptly after
receipt by an indemnified party under Section 12.1 of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement thereof but the failure to
notify the indemnifying parties shall not relieve it of any liability that it
may have to any indemnified party except to the extent the indemnifying party
demonstrates that the defense of such action is prejudiced thereby. In case
any such action shall be brought against an indemnified party and it shall give
notice to the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, to assume the defense thereof with counsel satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party acknowledging its potential liability to the indemnified
party and electing to assume the defense of such action, the indemnifying party
shall not be liable to such indemnified party for any fees of other counsel or
any other expenses, in each case subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable costs of
investigation. If an indemnifying party assumes the defense of such actions,
(a) no compromise or settlement thereof may be effected by the indemnifying
party without the indemnified party's consent unless (i) there is no finding
or admission of any violation of law or any violation of the rights of any
Person and no effect on any other claims that may be made against the
indemnified party, (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party, and (iii) the settlement, compromise
or consent includes as an unconditional term thereof the giving by the claimant
or the plaintiff to the indemnified party of an unconditional release from all
liability in respect of the third party claim, and (b) the indemnified party
shall have no liability with respect to any compromise or settlement thereof
effected without its consent (which shall not be unreasonably withheld). If
notice is given to an indemnifying party of the commencement of any action and
it does not, within ten (10) days after the indemnified party's notice is
given, give notice to the indemnified party acknowledging its potential
liability to the indemnified party and electing to assume the defense of such
action, the indemnifying party shall be bound by any determination made in such
action or any compromise or settlement thereof effected by the indemnified
party. Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that an action may adversely
affect it or its Affiliates other than as a result of monetary damages, such
indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise or settle such action, but the
indemnifying party shall not be bound by any determination of an action
defended or any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld).
12.3 INDEMNITY ESCROW. On the Closing Date, Buyer, Seller,
and the Escrow Agent shall execute the Indemnity Escrow Agreement in accordance
with which, on the Closing Date, pursuant to Section 3.1, Buyer shall deposit
the Indemnity Escrow Amount with the Escrow Agent, which shall be held by the
Escrow Agent in accordance with the terms of the Indemnity Escrow Agreement
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for a period of six (6) months and ten (10) days in order to provide a fund for
the payment of any claims for which Buyer may be entitled to indemnification as
provided in this Article 12. Buyer and Seller acknowledge that if Buyer's
claims for indemnification exceed the amount deposited together with any
earnings thereon, Seller and its successors and assigns shall remain liable for
such excess.
ARTICLE XIII
13. MISCELLANEOUS.
13.1 PARTIES OBLIGATED AND BENEFITTED. This Agreement shall be
binding upon the parties and their respective assigns and successors in
interest and will inure solely to the benefit of the parties and their
respective permitted assigns and successors in interest, and no other Person
will be entitled to any of the benefits conferred by this Agreement. This
Agreement may not be assigned by either party hereto without the prior written
consent of the other party, provided that Buyer may assign its rights under
this Agreement to an Affiliate of Buyer without the prior written consent of
Seller.
13.2 PRESS RELEASES. Except as required by applicable law based on
the advice of independent counsel, neither party shall make any public
announcement, press release or any other filing with any other regulatory
agency with respect to the transactions contemplated by this Agreement, without
the prior written approval of the other party.
13.3 NOTICES. All notices, consents, approvals, demands, requests
and other communications required or desired to be given hereunder must be
given in writing, shall refer to this Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
To Seller:
AMERICABLE INTERNATIONAL MAINE, INC.
5845 Collins Avenue
Unit 405-406
Miami Beach, Florida 33140
Attention: Charles C. Hermanowski
Facsimile No.: (305)-252-9097
46
<PAGE> 48
With Copy to:
SOLOVE & SOLOVE, P.A.
9500 S. Dadeland Blvd., Suite 450
Miami, Florida 33156
Attention: Robert A. Solove, Esq.
Facsimile No.: (305)-670-0599
To Buyer at:
FRONTIERVISION OPERATING PARTNERS, L.P.
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
Attention: James C. Vaughn, President
Facsimile No.: (313) 757-6105
With Copy to:
DOW, LOHNES & ALBERTSON
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
Attention: David D. Wild, Esq.
Facsimile No.: (202) 776-2222
Any notice from a party hereto may be given by such party's
respective attorneys. Any notice or other communications made hereunder shall
be deemed to have been given when received.
13.4 WAIVER. This Agreement or any of its provisions may
not be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
13.5 CAPTIONS. The Article and Section captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
47
<PAGE> 49
13.7 TERMS. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The word "include" and derivatives of that
word are used in this Agreement in an illustrative sense rather than limiting
sense.
13.8 RIGHTS CUMULATIVE. Except as set forth in Section
10.4, all rights and remedies of each of the parties under this Agreement will
be cumulative, and the exercise of one or more rights or remedies will not
preclude the exercise of any other right or remedy available under this
Agreement or applicable law.
13.9 FURTHER ACTIONS. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting party,
such further assignments, certificates, instruments, records, or other
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and exercise
the rights accorded and acquired by it under this Agreement.
13.10 TIME. If the last day permitted for the giving of
any notice or the performance of any act required or permitted under this
Agreement falls on a day which is not a Business Day, the time for the giving
of such notice or the performance of such act will be extended to the next
succeeding Business Day.
13.11 SPECIFIC PERFORMANCE. The parties agree that
irreparable damages would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity.
13.12 SCHEDULES. Any disclosure made on a Schedule to this
Agreement will be deemed included on any other Schedule to which such
disclosure may be pertinent.
13.13 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which will be deemed an original, but both of which
together shall constitute one and the same instrument.
13.14 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
48
<PAGE> 50
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER: AMERICABLE INTERNATIONAL MAINE, INC.
By: /s/ CHARLES C. HERMANOSKI
-------------------------------------------
Title: V.P.
-------------------------------
Attest: /s/ RICK HENSLEY
---------------------------------------
Title: Secretary
-------------------------------
In consideration of the benefits to be received by
Seller pursuant to this Agreement and in connection with the transactions
contemplated hereby, Charles C. Hermanowski agrees to be bound by Section 7.15.
HERMANOWSKI:
/s/ CHARLES C. HERMANOWSKI
------------------------------------------
Charles C. Hermanowski
BUYER: FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Partners, L.P., its general
partner
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general partner
BY: /s/ James C. Vaughn
-------------------------------------------
Title: President & C.E.O.
-------------------------------
Attest: /s/ [illegible]
---------------------------------------
Title: Executive Assistant
-------------------------------
49
<PAGE> 1
EXHIBIT 10.8
ASSET PURCHASE AGREEMENT
DATED: MAY 16, 1996
BETWEEN
TRIAX SOUTHEAST ASSOCIATES, L.P.,
TRIAX SOUTHEAST GENERAL PARTNER, L.P.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
R E C I T A L S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Conveyance of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Purchase Price and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3. Limited Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4. Definition of Basic Subscriber . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Representations, Warranties, Covenants and
Agreements of Seller and General Partner . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.1. Organization, Qualification and
Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.5. Regulatory Licenses and Filings . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.6. Franchises and Other Authorities . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7. Status of the Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.8. Legality of Signals Carried; Compliance
with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.9. Real Property and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.10. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.11. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.12. Employee Agreements and Benefits; Labor
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.14. Easements, Rights-of-Way, Pole Attachment
and Similar Agreements . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
Section 3.15. Bonds, Insurance and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.16. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.17. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.18. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.19. Seller's Accounts and Promotions . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.20. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.21. Continuation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.22. Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.23. Other Financial Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.24. Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4. Representations, Warranties, Covenants and
Agreements of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.1. Organization and Authority of Buyer . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2. Due Authorization by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3. Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.4. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.5. Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.6. Financing Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5. Covenants and Further Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.1. Application for Assignment of Franchises
and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.2. Information; Consultation;
Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.3. Period Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.4. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.5. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.6. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.7. Reliance Upon and Survival of
Representations and Warranties . . . . . . . . . . . . . . . . . . . . 35
Section 5.8. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.10. No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.11. Special Covenants of Seller and
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.12. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 6. Conditions Precedent to the Obligation of
Buyer to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.1. Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 39
Section 6.2. Estoppel Letters; Performance of
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.3. Consents of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.4. Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.5. Opinion of FCC and Copyright Counsel . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.6. No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.7. Expiration of HSR Act Waiting Period . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.8. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7. Conditions Precedent to the Obligation of Seller
and General Partner to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.1. Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 41
Section 7.2. Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.3. Opinion of Counsel for Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.4. Consents of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.5. Expiration of HSR Act Waiting Period . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.6. No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.1. Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.2. Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.3. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.4. Other Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10. Non-competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 13. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 14. Application of Good Faith Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<TABLE>
<S> <C>
Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 17. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<PAGE> 6
LIST OF SCHEDULES AND EXHIBITS
Schedules
0.1 Systems of Seller
1.1(a) Machinery, Equipment, Inventory, Personal Property and Other
Assets; List of Liens, Claims, Restrictions, Encumbrances; and
UCC Search Results
1.1(b) FCC Licenses, FAA Licenses, Copyright Registrations, Other
Permits and Licenses and Governmental Authorizations
1.1(c) Franchise Authorizations and Other Permits, Licenses, Consents
and Certificates
1.1(d) Pole Attachment Agreements, Easements, Rights-of-Way, Permits,
Access Agreements etc.
1.1(f) Leases of Real and Personal Property
1.1(g) Owned Real Property
1.1(h) Other Contracts
1.1(j) Intellectual Property
1.2(e) Excluded Assets
2.1(d) Form of Assumption Agreement
2.4(a) Standard Basic Rate
2.4(b) Basic Subscribers
3.1(b) Certain Ownership Interests
3.3 No Conflicts
3.4(b) Material Adverse Changes
- vi -
<PAGE> 7
3.4(c) Contingent Obligations
3.5(a) Exceptions to Regulatory Compliance
3.5(b) Legal or Governmental Actions and Proceedings
3.6 Compliance; Absence of Defaults
3.7(a) Cable Services and Rates
3.7(b) Channel Capacity; Matters Affecting or Relating to Channels
3.7(c) Exceptions to Compliance; Complaints
3.7(e) Channels, Tiers, Rate Changes, Local Stations, Retransmission
Consents and Other Information with Respect to the Systems
3.7(g) Transfers of Ownership
3.7(h) Activation Dates
3.7(j) Information Regarding Rates and Refunds
3.8(a) Information Regarding Signals Carried
3.8(b) Exceptions regarding Conduct of Business
3.9(c) Exceptions regarding Real Property
3.12 Employees, Employment Agreements, etc.
3.13 ERISA
3.15 Insurance, Bonds and Letters of Credit
3.16 Litigation
3.18 Tax Matters
- vii -
<PAGE> 8
3.19(b) Subscription and Converter Deposit Agreements
3.19(c) Billing and Collection Terms
3.19(d) Concessions; Promotions
3.19(e) Barter/Trade Out Agreements
3.20 Environmental Disclosure Schedule
3.22 Required Notices and Consents
3.23 Other Financial Interests
3.24 Exceptions to Disclosure
5.11(b) Capital Expenditure Budget
7.3 Form of Third Party Consents
7.4 Form of Opinion from Seller's General Counsel
7.5 Form of Opinion from Seller's Special FCC Counsel
7.7 Inventory
8.3 Form of Opinion from Buyer's General Counsel
9 Allocation of Purchase Price
12 Form of Agreement Not to Compete
- viii -
<PAGE> 9
ASSET PURCHASE AGREEMENT AMONG
TRIAX SOUTHEAST ASSOCIATES, L.P.,
TRIAX SOUTHEAST GENERAL PARTNER, L.P.,
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
THIS ASSET PURCHASE AGREEMENT, effective as of the 16th day of May,
1996 is made among TRIAX SOUTHEAST ASSOCIATES, L.P., a Delaware limited
partnership ("Seller"), and TRIAX SOUTHEAST GENERAL PARTNER, L.P., a Delaware
limited partnership and sole general partner of Seller ("General Partner"), and
FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware limited partnership
("Buyer").
R E C I T A L S:
Seller operates community antenna television systems and distributes
audio and video signals by coaxial and/or fiber optic cable in and around the
communities and other geographic areas set forth in Schedule 0.1 (the
"Systems"). Seller owns or leases all of the assets used or necessary in the
operation of the Systems and holds all licenses, authorizations, registrations
and permits from the Federal Communications Commission ("FCC") and Federal
Aviation Administration ("FAA") required for the operation of the Systems (the
"FCC Licenses" and the "FAA Licenses," respectively). Seller also holds such
other governmental and other permits and rights as are necessary or useful to
the operation of the Systems, including rights under pole attachment
agreements, public and private rights-of-way and easements, and head-end
leases.
Buyer desires to acquire the Systems and all the assets used or held
for use in the operation of the Systems (except the Excluded Assets, as defined
herein), including the assignment of the FCC Licenses, the FAA Licenses, the
cable television franchises and other governmental authorizations related to
the operation of the Systems, and the rights of Seller under the lease
agreements, pole attachment agreements, rights-of-way, easements and certain
other agreements set forth herein.
Seller desires to sell, transfer and assign its assets to Buyer,
subject to the approval of the local governments required for the assignment of
the franchises, the consent of the FCC and the FAA, if required for the
assignment of the FCC Licenses and FAA Licenses, respectively, the consent of
certain parties to the assignment of various agreements and the expiration or
early termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
THEREFORE, in consideration of the covenants and agreements and in
reliance on the representations and warranties set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
<PAGE> 10
Section 1. Purchase and Sale of Assets.
Section 1.1. Conveyance of Assets. At the Closing (as
defined in Section 10), Seller will sell, transfer, assign and convey to Buyer,
by instruments of conveyance in the forms acceptable to Buyer, at Seller's
expense (except as otherwise expressly provided herein), good, valid and
marketable title to all of Seller's assets (tangible and intangible, real,
personal and mixed) owned, used or held for use by Seller (the "Transferred
Assets"), except for the "Excluded Assets" (as defined in Section 1.2), free
and clear of all defaults, liens, encumbrances, security interests and pledges,
and all adverse claims, charges, restrictions and title impediments (except
those specified in Schedule 1.1), with such warranties of title and full
substitution and subrogation to all rights and actions of warranty against all
preceding owners to the fullest extent that such warranties are transferable.
The Transferred Assets shall include (not by way of limitation) the following:
(a) All of the tangible assets owned, used or held for
use by Seller in connection with the ownership or operation of the
Systems, including, but not by way of limitation, all physical plant
and equipment, machinery, electronic devices, trunk and distribution
cable, conduit, vaults and pedestals, grounding and pole hardware,
head-end equipment, microwave transmission and reception sites and
related equipment, installed subscribers' devices (including, without
limitation, drop lines, encoders, transformers and terminals for
television sets and fittings), local origination equipment, all
inventories of materials and supplies, and all spare parts, equipment
(including, but not limited to, all testing, receiving, transmission
and related equipment), converters, other signal control devices,
tools, vehicles, real property, personal property and other assets
listed in Schedule 1.1(a); provided, however, that with respect to
vehicles, tools and testing equipment, only those items specifically
listed in Schedule 1.1(a) shall be included as a part of the
Transferred Assets;
(b) The FCC Licenses, FAA Licenses, copyright licenses
and registrations, and all other governmental permits, consents,
licenses, authorizations, registrations and certificates which relate
to the ownership or operation of the Systems, including, but not
limited to, all community antenna relay services, business radio,
earth station and other licenses other than Franchises defined in
Section 1.1(c) (collectively, the "Governmental Authorizations" or the
"Licenses") each of which Seller has listed in Schedule 1.1(b), a true
and correct copy of each of which, including all amendments,
modifications, consents or waivers related thereto, has been delivered
to Buyer by Seller (Seller also having made available to Buyer a copy
of all correspondence relating to any such amendment, modification,
consent or waiver);
(c) The franchises and similar grants of governmental
authority (collectively, the "Franchises") which relate to the
ownership or operation of the Systems, each of which Seller has listed
in Schedule 1.1(c), (including a description of each Franchise which
is not in written form), a true and correct copy of each written form
of which, including all amendments, modifications, consents or waivers
related thereto (including, without limitation, all agreements whereby
Seller or any predecessor agreed to any form of rate regulation, or
any standard of customer service or consumer protection), has been
delivered to Buyer by
<PAGE> 11
Seller (Seller also having made available to Buyer a copy of all
correspondence relating to any such amendment, modification, consent
or waiver);
(d) The pole attachment agreements, easements, public and
private rights-of-way, permits for crossings over or under highways,
railroads or other property, and similar grants of authority which
relate to the ownership or operation of the Systems (collectively, the
"Access Agreements"), each of which Seller has listed in Schedule
1.1(d), (including a description of each Access Agreement which is not
in written form), a true and correct copy of each written form of
which, including all amendments, modifications, consents or waivers
related thereto, has been delivered to Buyer by Seller (Seller also
having made available to Buyer a copy of all correspondence relating
to any such amendment, modification, consent or waiver);
(e) All instruments of title, rights or claims of Seller
under any warranty, business records, customer lists, files, books,
records, maps and engineering data, blue prints, schematics, drawings,
diagrams, surveys, engineering and technical data, annual FCC proof of
performance tests, and all documents and logs relating to the
Transferred Assets or the construction and operation of the Systems,
including, but not limited to, all subscriber complaint files, maps
and other records maintained pursuant to the Franchises or applicable
law;
(f) The leases of real and personal property used in
connection with, or which relate to the ownership or operation of the
Systems (collectively, the "Leases"), each of which Seller has listed
in Schedule 1.1(f), (including a description of each Lease which is
not in written form), and a true and correct copy of each written form
of which, including all amendments, modifications, consents or waivers
related thereto has been delivered to Buyer by Seller (Seller also
having made available to Buyer a copy of all correspondence relating
to any such amendment, modification, consent or waiver);
(g) The real property interests owned or held by Seller
which relate to the ownership or operation of the Systems, each of
which Seller has listed in Schedule 1.1(g), together with a legal
description of all owned real property;
(h) All accounts receivable of Seller derived from the
operation of the Systems existing and uncollected as of the Closing
(the "Closing Accounts Receivable"), customer subscription agreements,
contracts, agreements, commitments and other arrangements of Seller to
provide television signal in connection with the operation of the
Systems (including, but not limited to, agreements with trailer parks,
apartments, condominiums, commercial users and other multiple dwelling
users), all agreements to broadcast advertising and all other
<PAGE> 12
contracts applicable to the operation of the Systems, each of which
Seller has listed in Schedule 1.1(h), (including a description of each
such agreement which is not in written form), and a true and correct
copy of each written form of which has been delivered to Buyer by
Seller;
(i) All subscriber deposits (including converter
deposits) and amounts collected by Seller for services, materials or
equipment to be supplied from and after the Closing Date or which is
refundable by Seller; and
(j) All of the patents, trademarks, service marks, trade
names and copyrights (and all applications therefor), and rights to
receive payments with respect thereto, owned or used by Seller in
connection with the operation of the Systems, each of which Seller has
listed in Schedule 1.1(j), and a true and correct copy of each written
form of which has been delivered to Buyer by Seller.
Except as otherwise provided in this Section 1.1, the general language of sale,
transfer, assignment and conveyance of assets to Buyer contained in this
Section 1.1 shall be controlling regardless of whether individual assets are
described in this Section 1.1 or on any of the attached Schedules, all such
assets to be transferred and conveyed to Buyer at Closing subject to the terms
and conditions in this Agreement.
Section 1.2. Excluded Assets. Notwithstanding anything
herein, the following assets (the "Excluded Assets") are excluded from the
Transferred Assets:
(a) Seller's cash on hand, bank deposits, marketable
securities and similar investments on the Closing Date;
(b) Seller's contracts with providers of
satellite-delivered programming (other than retransmission consent
agreements);
(c) Seller's books, records and other agreements and
documents, in each case to the extent they relate to matters among any
of Seller's partners and/or their affiliates, provided, however, that
Seller shall permit Buyer to have access thereto to the extent and in
the manner contemplated by this Agreement;
(d) The Management Agreement dated July 28, 1992 (the
"Triax Management Agreement"), by and between Seller and Triax
Communications Corporation ("Triax");
(e) All assets listed on Schedule 1.2 which are owned by
Seller and located at the Milton and Buckhannon offices of Triax USA
Associates, L.P.;
(f) All rights to the name "Triax"; and
<PAGE> 13
(g) Those other assets which are listed in Schedule 1.2.
Section 2. Purchase Price and Method of Payment.
Section 2.1. Purchase Price. At Closing, Buyer shall acquire
and accept from Seller and Seller shall transfer and convey to Buyer the
Transferred Assets, and, in consideration therefor, Buyer will:
(a) Pay Seller the sum of Eighty-Five Million Dollars
($85,000,000), in the manner and subject to adjustment as provided in
Section 2.5 (the "Cash Consideration"); and
(b) Assume the Assumed Obligations contemplated by
Section 2.3 pursuant to the form of Assignment and Assumption
Agreement attached as Schedule 2.1(b) (the "Assumption Agreement").
The payments made by Buyer and the obligations of Seller which are
assumed by Buyer are, at times, collectively referred to herein as the
"Purchase Price".
Section 2.2. Method of Payment. The Cash Consideration shall
be paid in the following manner:
(a) Escrow Deposit. Simultaneously with the execution of
this Agreement, Buyer is delivering to Fleet National Bank, (the
"Escrow Agent") the sum of Three Million Dollars ($3,000,000) as a
deposit (the "Escrow Deposit") to secure Buyer's performance
hereunder, and to be held by the Escrow Agent pursuant to the terms of
the Escrow Agreement executed on the date hereof by and among Buyer,
Seller and the Escrow Agent (the "Escrow Agreement").
(b) Closing Payment; Post-Closing Escrow Deposit. At the
Closing, Buyer shall cause to be paid in immediately available funds
by wire transfer to one or more bank accounts designated in writing by
Seller at least three (3) business days prior to the Closing Date a
portion of the Purchase Price equal to Eighty-Two Million Dollars
($82,000,000), plus or minus, as applicable, any other adjustments
made at Closing pursuant to Section 2.5 and the parties shall cause
One Million Dollars ($1,000,000) of the Escrow Deposit to be released
to Seller. The remaining Two Million Dollars ($2,000,000) of the
Escrow Deposit, constituting the balance of the Purchase Price, will
be retained by the Escrow Agent as security for Seller's obligations
to Buyer following the Closing pursuant to the terms of the Escrow
Agreement (the "Post-Closing Escrow"). Pursuant to the Escrow
Agreement, (i) six months following the Closing, $1,000,000 of the
Post-Closing Escrow together with the
<PAGE> 14
earnings thereon, less the amount of any asserted indemnification
claims shall be released from the Post-Closing Escrow and paid to
Seller; and (ii) twelve months following the Closing, the balance of
the Post-Closing Escrow together with the earnings thereon, less the
amount of any then asserted indemnification claims shall be released
from the Post-Closing Escrow and paid to Seller.
(c) Disposition of Escrow Deposit; Liquidated Damages. At
the Closing, the earnings of the Escrow Deposit shall be paid to the
Buyer by wire transfer of immediately available funds. If the Closing
does not occur because of a breach by Buyer of its representations and
warranties hereunder or of the covenants and obligations to be
performed by Buyer hereunder, provided Seller has satisfied its
obligations hereunder, and provided further, that all conditions
precedent to Buyer's obligation to close the transactions contemplated
herein have been satisfied or that no indication exists that such
conditions would not have been timely satisfied had Buyer not so
breached this Agreement, then, pursuant to the Escrow Agreement, the
Escrow Deposit and earnings thereon shall be delivered to Seller as
liquidated damages, which shall be the sole remedy of Seller for such
breach, and Seller shall have no other recourse against Buyer or any
of its affiliates under or in connection with this Agreement or the
transactions contemplated hereby. In any other case, if the Closing
does not occur and this Agreement is terminated, then, pursuant to the
Escrow Agreement, the Escrow Deposit and earnings thereon shall be
delivered to Buyer. All payments by the Escrow Agent shall be made in
accordance with the procedures and provisions set forth in the Escrow
Agreement.
(d) Reserve For Closing Adjustments. Without limiting
Seller's obligations under this Agreement or under applicable law,
from the Closing Date until such time as all adjustments and
prorations shall have been finally determined and paid pursuant to
Section 2.5, Seller shall retain on deposit with a federally insured
financial institution, cash and cash equivalents of not less than One
Million Dollars ($1,000,000), subject to increase as provided in
Section 2.5(e), in excess of the total amount of Seller's other
liabilities from time to time, which amount shall not be subjected to
any lien or encumbrance.
Section 2.3. Limited Assumption of Liabilities. At the
Closing, Seller shall assign and transfer to Buyer, and Buyer shall assume, be
obligated to pay or otherwise satisfy or be responsible for, the obligations
and liabilities (the "Assumed Obligations") arising or accruing on or after the
Closing Date (excluding those obligations arising from events or circumstances
occurring before the Closing Date or arising by reason of a default caused by
virtue of the Closing unless specifically assumed by Buyer in writing at the
Closing) under the Franchises, agreements, Leases and contracts listed in
Schedule 1.1(b), Schedule 1.1(c), Schedule 1.1(d), Schedule 1.1(f) and Schedule
1.1(h), including, but not limited to, the capitalized leases with respect to
vehicles set forth in Schedule 1.1(a). Notwithstanding the foregoing, upon the
agreement of Buyer, if the assignment and transfer of any Assumed Obligation
would cause a breach of or default under the Assumed Obligation, and if the
required consent to its transfer and assignment has not been obtained by
Closing, Seller agrees to continue, at Buyer's expense (other than charges for
personnel or internal
<PAGE> 15
operating administrative or overhead expenses of Seller, General Partner or any
creditor of Seller or General Partner) the Assumed Obligation in effect, and
Buyer shall have and enjoy the benefit of the rights and obligations thereunder
as agent for Seller, in accordance with and subject to Section 2.5(g), until
such time as the consent is obtained. Except as expressly provided in this
Section 2.3, Buyer shall not assume and shall not be obligated to pay, or
otherwise satisfy or be responsible for, any obligation or liability of Seller
or the General Partner, and notwithstanding anything to the contrary herein, in
no event shall Buyer assume, or be deemed to have assumed, any obligation or
liability:
(a) not expressly set forth in the Schedules to this
Agreement and expressly assigned to and assumed by Buyer under this
Agreement and the Assumption Agreement;
(b) entered into by Seller or General Partner in
violation of the terms of this Agreement;
(c) arising out of the breach or default by Seller or any
other prior owner of the Systems (whether arising under any penalty or
liquidated damage provision or otherwise) under (i) any provision of
applicable law, (ii) any Franchise, Governmental Authorization, Access
Agreement, Lease, agreement, contract or otherwise, or (iii) either
the Copyright Act of 1976, as amended, and the rules and regulations
thereunder (collectively, the "Copyright Act"), or the Communications
Act of 1934, as amended, and the rules and regulations thereunder
(collectively, the "Communications Act"), the Communications Act being
deemed to include, but not be limited to, the Cable Communications
Policy Act of 1984, as amended, and the rules and regulations
thereunder (collectively, the "1984 Act") the Cable Television
Consumer Protection and Competition Act of 1992, as amended, and the
rules and regulations thereunder (collectively, the "1992 Act") and
the Telecommunications Act of 1996 and the rules and regulations
thereunder (collectively, the "1996 Act");
(d) not relating to the Systems;
(e) arising under or otherwise relating to the Excluded
Assets;
(f) arising from events or circumstances existing prior
to the Closing Date, except as specifically assumed by Buyer under
this Agreement;
(g) of the General Partner or its affiliates; or
(h) in connection with the litigation and claims
described in Schedule 3.5(b) or Schedule 3.16.
<PAGE> 16
Section 2.4. Intentionally omitted.
Section 2.5. Adjustments and Prorations.
(a) The parties agree to make cash adjustments and
payments between them at Closing to transfer to Buyer any converter and other
subscriber deposits received or held by Seller, and any sums which Seller would
have a present or future legal obligation to refund and to credit Seller for
any prepaid expenses with respect to the Transferred Assets pertaining to
periods subsequent to the Closing. Seller and Buyer further agree to make such
cash adjustments and payments between them at Closing and as soon as
practicable after the Closing Date to reflect the principle that Seller shall
be responsible for all expenses, costs and liabilities allocable to the conduct
of the business or operation of the Systems for the period prior to the Closing
Date and Buyer shall be responsible for all expenses, costs and obligations
allocable to the conduct of the business or operation of the Systems on the
Closing Date and for the period thereafter. Such adjustments shall include,
but shall not be limited to, (i) franchise, copyright, license or other fees;
(ii) pole attachment fees and other rentals and charges payable in respect of
leasehold interests; (iii) property taxes and assessments levied against any
Transferred Assets; (iv) charges for utilities, microwave relay and other
services furnished to or in connection with the business of operating the
Systems, provided that pay television and other programming expenses will be
independently incurred and paid for by Seller and Buyer before and after
Closing, respectively, and will not be subject to adjustment; (v) fees assessed
by the FCC or other governmental authority in connection with the Systems or
the ownership or operation thereof, if any, regardless of the date of such
assessment; and (vi) wages, salaries, commissions, bonuses (based on any
commitment therefor or amount thereof paid for the most recent year), accrued
vacation and other fringe benefits (and related payroll taxes, etc.) of
Seller's employees as of the Closing Date who become employees of Buyer as of
the Closing Date (it being agreed that Seller shall be liable for all forms of
compensation due to Seller's employees who do not so become Buyer's employees).
Seller shall make all payments due to its employees for services rendered by
such employees prior to the Closing Date or otherwise accruing to such
employees as of the Closing Date in accordance with Seller's normal payment
practices but in no event later than thirty (30) days following the Closing
Date or such earlier time as may be required by applicable law. However,
nothing herein shall be deemed to require the pro-rating of any income tax or
similar type of tax.
(b) The Purchase Price shall be adjusted at Closing as
follows: (i) by increasing the Purchase Price by an amount equal to (A) 100% of
the face value of all Closing Accounts Receivable owed by active subscribers
that are outstanding 30 days or less from the date of first billing, (B) 85 %
of the face amount of all Closing Accounts Receivable owed by active
subscribers that are outstanding more than 30 days but less than 61 days from
the date of first billing, and (C) 50% of the face amount of all Closing
Accounts Receivable owed by active subscribers that are outstanding more than
60 days but less than 91 days from the date of first billing; and (ii) by
reducing the Purchase Price by an amount equal to (x) any customer advance
payments (i.e., customer payments received by Seller prior to Closing but
relating to service to be provided by Buyer after the Closing) and deposits
(including any interest owing thereon), (y) any other advance
<PAGE> 17
payments (i.e., advertising payments received by Seller prior to Closing but
relating to service to be provided by Buyer after Closing); and (z) accounts
receivable relating to services to be performed after the Closing Date, and the
responsibility for which is assumed by Buyer under this Agreement. For purposes
of this subsection (b), the determination of whether a subscriber is active
shall be determined on a basis consistent with the past practices of the
Systems, but in no event shall a subscriber be considered active if such
subscriber's service has been terminated or ordered to be terminated by either
the subscriber or Seller.
(c) The Purchase Price shall also be reduced if the
average total monthly operating revenues of Seller, determined in accordance
with generally accepted accounting principles (excluding only those franchise
fees and taxes which are separately itemized on customer bills) is less than
$1,635,000 per month over the two (2) full calendar months immediately prior to
the Closing Date ("Two Month Average Revenue"). If the Two Month Average
Revenue is less than $1,635,000 for the Systems as of the Closing Date, the
Cash Consideration shall be reduced proportionately to an amount equal to the
product of the Cash Consideration and a fraction, the numerator of which shall
be the Two Month Average Revenue and the denominator of which shall be
$1,635,000; provided, however, that if the Cash Consideration is thereby
reduced to less than $83,000,000, either Buyer or Seller may elect to terminate
this Agreement prior to the Closing Date, by written notice to the other
promptly upon the determination thereof, in which case this Agreement shall
terminate upon the giving of such notice, the Escrow Deposit and all interest
earned thereon shall be returned to Buyer and/or paid to Buyer by Seller, and
the parties shall have no further obligation to each other under this Agreement
except as expressly provided herein. Notwithstanding the foregoing, in the
event that the application of the provisions of this subsection (c) would cause
the Cash Consideration to be reduced to less than $83,000,000 and if Buyer is
willing to waive the provisions of this subsection with respect to reductions
below such $83,000,000 amount and to proceed with the Closing based upon such
$83,000,000 amount, then Seller shall not have the option to terminate this
Agreement.
(d) Seller shall prepare and submit to Buyer, not later
than three (3) business days prior to the Closing, a written good faith
estimate of the amount of the adjustments to the Purchase Price in accordance
with this Section 2.5 (the "Estimate"). The Estimate shall be based upon the
books and records of the Systems, including the accounts receivable (including
the aging reports) and revenues as shown on the latest records available to
Seller. The Estimate submitted to Buyer shall be accompanied by (i) a
statement setting forth in reasonable detail the calculation of the estimate
and (ii) a certificate signed by a senior officer of Seller certifying that,
after due inquiry by such officer but without any personal liability to such
officer, the estimate was calculated in good faith in accordance with the
provisions of Section 2.5. Seller shall also deliver to Buyer such other
information as may be reasonably requested by Buyer to verify the Estimate.
<PAGE> 18
(e) Without limiting Buyer's rights under subsection (f)
below, in the event Buyer believes in good faith that the Estimate is or may be
materially inaccurate with respect to the adjustments and prorations to be made
pursuant to this Section 2.5 and if the parties are unable to agree on a
revised Estimate with respect to such adjustments and prorations prior to the
Closing, then the amount of the reserve established pursuant to Section 2.2(d)
shall be increased by the amount in dispute.
(f) Within 21 days after the Closing Date, Seller shall
deliver to Buyer a certificate (the "Post-Closing Certificate"), signed by a
senior officer of Seller, after due inquiry by such officer but without any
personal liability to such officer, providing a compilation of the adjustments
and prorations to be made pursuant to this Section 2.5, together with such
supporting information as Buyer may reasonably request. In the event Seller
fails to deliver to Buyer a Post-Closing Certificate within such 21 day period,
then Buyer may, within 60 days thereafter, prepare a Post-Closing Certificate,
in which case the provisions of this Section 2.5(f) shall be interpreted so as
to reverse the roles of the parties with respect to responses and
discrepancies. If Buyer shall conclude that the Post-Closing Certificate does
not accurately reflect the adjustments and prorations to be made to the
Purchase Price in accordance with this Section 2.5, Buyer shall within 40 days
after the receipt of the Post-Closing Certificate (such 40 day period being
referred to as the "Response Period"), deliver to Seller its written statement
of any discrepancies believed to exist. If Buyer fails to so notify Seller of
any discrepancies, then the calculations set forth in the Post-Closing
Certificate shall be controlling for all purposes hereof. On or before the
fifth business day following the earlier to occur of the expiration of the
Response Period and the date Seller receives Buyer's statement of
discrepancies, Buyer shall pay to Seller or Seller shall pay to Buyer, as the
case may be, the amount, if any, owed in accordance with the Post-Closing
Certificate as to which there is no discrepancy. Buyer and Seller shall use
good faith efforts to jointly resolve the discrepancies within 15 days of
Seller's receipt of Buyer's written statement of discrepancies, which
resolution, if achieved, shall be binding upon all parties to this Agreement
and not subject to dispute or review. If Buyer and Seller cannot resolve the
discrepancies to their mutual satisfaction within such 15 day period, Buyer and
Seller shall retain a mutually acceptable national independent public
accounting firm (the "Accounting Firm") that has neither been engaged to
perform nor has performed any services of Seller or Buyer or their respective
affiliates during the two years prior to the Closing Date to review the
Post-Closing Certificate together with Buyer's discrepancy statement and any
other relevant documents. The cost of retaining the Accounting Firm shall be
borne equally by Buyer and Seller. The Accounting Firm shall report its
conclusions as to adjustments pursuant to this Section 2.5 which shall be
conclusive on all parties to this Agreement and not subject to dispute or
review. In the event the parties are unable to agree on which accounting firm
to retain, if the Accounting Firm shall not be engaged on terms reasonably
satisfactory to Seller and Buyer within 30 days of Seller's receipt of Buyer's
written statement of discrepancies or if the Accounting Firm shall fail to
render a decision within 45 days of the date it is retained, then the matter
shall be submitted for arbitration in accordance with Section 21 hereof.
Within five days of receipt of the Accounting Firm or Arbitrator's decision, as
the case may be, with respect to such dispute, if Buyer is determined to owe an
amount to Seller, Buyer shall pay such amount thereof to Seller, and if Seller
is determined to owe an amount to Buyer, Seller shall pay such amount thereof
to Buyer. All amounts owed by Buyer or Seller to the other in accordance
<PAGE> 19
with this Section shall be paid in immediately available funds and shall bear
interest at a rate equal to the prime rate publicly announced by Fleet National
Bank from time to time, with any changes in such rate to be effective as of the
date such change is announced (the "Floating Prime Rate") from the Closing Date
until the date such amounts are due, and thereafter shall bear interest at a
rate of 15% per annum until payment in full. Unless expressly agreed in
writing by Buyer, no payments by Seller pursuant to this Section 2.5 may be
made from the Post-Closing Escrow.
(g) The parties acknowledge that their intent and
agreement is for Seller to transfer the Systems to Buyer at Closing in an
orderly manner without interruption in service, and that certain required
consents to the transfer to Buyer of Seller's rights under certain of the pole
attachment agreements, Leases and certain other contracts and agreements
relating to the operation of the Systems may not have been obtained on the
Closing Date, or that such rights may not be transferred at the Closing for
other reasons, provided, however, that Buyer shall have no obligation to close
the transactions contemplated hereby in the absence of such consents and the
transfer of such rights. If said transfer is not completed on the Closing
Date, Seller agrees to maintain such Leases, contracts and agreements and,
should Buyer so request, any insurance policies and performance bonds related
to any non-transferred Franchises, in full force and effect for the benefit of
Buyer (with any casualty insurance policies naming Buyer and Buyer's lenders as
loss payees and any liability insurance policies so maintained naming Buyer,
Buyer's lenders, Seller and such other parties as are required to be so named
as additional insureds) until such transfer is completed but not to exceed
fifteen (15) months following the Closing Date (the "Interim Period"). During
the Interim Period Seller shall continue to assist Buyer in obtaining such
consents. Seller also agrees to permit Buyer, at Buyer's option, to utilize
the benefits of such Leases, contracts, agreements, insurance policies and
performance bonds in order to continue to operate the Systems. Buyer agrees
that all expenses incurred by Seller in complying with the foregoing during the
Interim Period (other than charges for personnel or internal operating,
administrative or overhead expenses of Seller, General Partner or any creditor
of Seller or General Partner, or under the Triax Management Agreement) shall be
reimbursed to Seller by Buyer on a monthly basis, within twenty (20) days after
receipt by Buyer of Seller's reasonably detailed and itemized statement
therefor for each calendar month during the Interim Period.
Section 2.6 Allocation of the Purchase Price. The Purchase
Price shall be allocated among the Transferred Assets at or prior to the
Closing as the parties hereto shall agree. Each of the parties hereto
covenants and agrees (i) to report the federal income tax consequences of the
sale and acquisition of the Transferred Assets in a manner consistent with the
foregoing, (ii) to execute and file any forms required by Section 1060 of the
Internal Revenue Code of 1986, as amended; and (c) not to take any position
inconsistent therewith upon examination of any such tax return, or in any
refund claim, litigation or otherwise.
<PAGE> 20
Section 3. Representations, Warranties, Covenants and Agreements of
Seller and General Partner.
Seller and General Partner, jointly and severally, represent,
warrant, covenant and agree, as of the date hereof and on the Closing Date
(except where another period of time is expressly mentioned), that:
Section 3.1. Organization, Qualification and Authority.
(a) Seller is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to transact business, and is in good
standing, in the States of Colorado, Kentucky, Maryland, North
Carolina, Ohio, Pennsylvania, Virginia and West Virginia;
(b) General Partner is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to transact business, and is
in good standing, in the States of Colorado, Kentucky, Maryland, North
Carolina, Ohio, Pennsylvania, Virginia and West Virginia. General
Partner is the sole general partner of Seller, and all of the equity
ownership of Seller and General Partner is set forth in Schedule
3.1(b);
(c) The character and location of the properties, assets,
licenses and rights used in the operation of the Systems and the
nature of the Systems as operated by Seller do not require Seller to
qualify to transact business in any jurisdiction other than the states
set forth in Section 3.1(a); and
(d) Seller has full partnership power, capacity and
authority to own and lease the properties and assets used in the
operation of the Systems, to carry on the business of the Systems as
presently conducted, and to operate the Systems as heretofore operated
by Seller.
Section 3.2. Due Authorization. The execution and delivery
of this Agreement, the Escrow Agreement, the Assumption Agreement and any and
all other documents executed in connection herewith (collectively, the
"Agreements") and the performance of the transactions contemplated hereby have
been duly authorized and approved by all necessary partnership action of Seller
and General Partner, respectively, and by appropriate resolutions duly adopted,
and all other actions required to be taken by law, by the general partners of
Seller and General Partner, respectively. Seller and General Partner each has
full partnership power, respectively, to enter into and to perform the
Agreements to which it is a party and the transactions contemplated thereby.
Subsequent to the adoption thereof, such resolutions shall not be altered,
amended or revoked in any respect. Each Agreement to which Seller or General
Partner is a party constitutes a valid and binding agreement of Seller and
General Partner, as the case may be, and each is enforceable against Seller and
General Partner, as the case may be, in accordance with its terms (except as
such enforceability
<PAGE> 21
may be limited by bankruptcy, insolvency or similar laws, or by general
principles of equity relating to the availability of equitable remedies).
Section 3.3. No Conflicts. Except as set forth in Schedule
3.3, neither the execution and delivery of any Agreement by Seller and General
Partner nor the consummation by them of the transactions contemplated by them
herein, nor the compliance by them with the terms, conditions and provisions
hereof, conflict with or will conflict with the respective partnership
agreements of Seller and General Partner or, in any material respect, conflict
with or will result in the creation or imposition of any lien, charge or
encumbrance upon any of the Transferred Assets pursuant to the terms of any
Lease, Access Agreement or other indenture, mortgage, deed of trust, covenant,
instrument, contract or agreement to which Seller or General Partner is a party
or by which Seller, General Partner, the Transferred Assets or the Systems is
bound; any Franchise or Governmental Authorization; the Communications Act; the
Copyright Act; the rules, regulations or policies of the FCC, the FAA or United
States Copyright Office; or any applicable federal, state or local law; nor
result in a material breach or violation of or default under any of the same
(whether immediate or subject to the passage of time or giving of notice), nor
cause the suspension, revocation, impairment, forfeiture, nonrenewal or
termination of any Governmental Authorization or Franchise, or any other
license, permit, franchise, certificate, registration, consent or
authorization, which would have a material adverse effect on the Systems and
the Transferred Assets as a whole.
<PAGE> 22
Section 3.4. Financial Statements
(a) The books of account and financial records of Seller
are current and have been maintained by Seller in the ordinary course
of business. Seller has prepared its financial statements in
accordance with generally accepted accounting principles applied on a
basis consistent from period to period. Seller has delivered to
Buyer: (i) audited financial statements (including opening and year
end balance sheets and an income and expense statement for the fiscal
periods ended December 31, 1995, 1994 and 1993, certified by Arthur
Andersen, LLP, Seller's certified public accountants (collectively,
the "Historical Financial Statements"); (ii) a copy of Seller's
federal income tax returns, tax examination reports and statements of
deficiencies, if any, for 1995 and 1994; (iii) monthly reports of all
accounts receivable (including an aging thereof in month end
increments) ("Receivable Reports") for each monthly period following
December 31, 1995; and (iv) monthly managers' subscriber summary
reports ("Subscriber Reports") which include the Systems, separately
listing total subscribers, for each monthly period following December
31, 1995. Seller also has delivered to Buyer consistently prepared
monthly financial statements for each of the months since the end of
Seller's last fiscal year ("Operating Reports") which reflect all
billings for basic and premium services and other sources of revenues,
by category, for the interim period between December 31, 1995 and the
end of the month preceding the date of this Agreement.
(b) Since December 31, 1995 and except for matters
affecting the cable industry as a whole or as set forth in Schedule
3.4(b), there has been no material adverse change in the assets,
liabilities, revenues or earnings of the Systems or otherwise in the
business or condition, financial or otherwise, of the Systems, nor any
change that would materially adversely affect the ability of the
Systems to carry on their business as previously conducted. Except
for matters affecting the cable television industry as a whole, to the
knowledge of Seller and General Partner and without notice to the
contrary, no fact or condition exists or is contemplated or threatened
that might cause a material adverse change in the assets or business
of the Systems. Except as set forth in Schedule 3.4(b), there are no
communities or franchising authorities which have elected to
reregulate Seller's rates. Seller will notify Buyer promptly after
Seller becomes aware of the election by any community or franchising
authority to reregulate Seller's rates.
(c) Except as set forth in Schedule 3.4(c), Seller has no
outstanding claims, contingent obligations (whether as a guarantor,
indemnitor, surety, accommodation party or otherwise), liability for
taxes or forward or long-term commitments or obligations, and, to the
knowledge of Seller and without notice to the contrary, there are no
potential unasserted claims with respect to Seller, General Partner,
the Systems or the Transferred Assets; to the knowledge of Seller and
General Partner and without notice to the contrary, no party or person
has threatened to assert any of such items against Seller, General
Partner, the Systems or the Transferred Assets except as set forth in
the financial statements provided under Section 3.4(a) or as set forth
in the Schedules to this Agreement.
<PAGE> 23
Section 3.5. Regulatory Licenses and Filings.
(a) Except as set forth in Schedule 3.5(a): (i) Seller
has timely filed all notices and all Statements of Account for the
last three (3) years, and has made all required royalty payments under
Section 111 of the Copyright Act so as to qualify for the compulsory
license for the carriage of radio and television stations, and has
completed and filed all other registrations and filings required to be
filed with the FCC and FAA, except for those registrations and filings
the absence of which would not have a material adverse affect on any
System or the Transferred Assets as a whole, copies of which have been
delivered to Buyer by Seller, and paid all amounts due in connection
with such filings or arising as a result of the information shown
thereon; (ii) all Statements of Account in connection with the
operation of the Systems during the last three (3) years have been
completed in material compliance with Section 111 of the Copyright
Act; (iii) all royalty payments required to be made under Section 111
of the Copyright Act in connection with the operation of the Systems
during the last three (3) years were remitted to the Copyright Office
and were computed and reported in accordance with the regulations
adopted pursuant to Section 111 of the Copyright Act; and (iv) the
statements, representations, warranties and calculations contained in
and amounts paid under each of such notices, filings and registrations
are true and correct and consistent with applicable federal
regulations, in all material respects.
(b) Except for those matters affecting the cable industry
generally and as set forth in Schedule 3.5(b), there is no legal
action or proceeding pending, or to the knowledge of Seller or General
Partner, there is no investigation pending, or to the knowledge of
Seller or General Partner, and without notice to the contrary,
threatened in writing (or basis existing therefor) for the purpose of
modifying, revoking, terminating, suspending, canceling or reforming
any of the Governmental Authorizations, the FCC Licenses, the FAA
Licenses, any Franchise, the compulsory copyright license under
Section 111 of the Copyright Act, or any of Seller's other
certificates, or which would have any other material adverse effect
upon, or cause disruption to, any System or the consummation of the
transactions contemplated hereby.
(c) Within thirty (30) days after Closing, Seller shall
deliver to Buyer a certificate signed by Seller setting forth Seller's
gross receipts calculated in a manner which is consistent in all
material respects with the regulations of the Copyright Office adopted
under Section 111 of the Copyright Act derived from the retransmission
of any television or radio broadcast signals during the portion of the
applicable six-month reporting period that includes the Closing Date.
In addition, Seller shall pay to Buyer the Copyright fees attributable
to the operation of the Systems to the Closing Date, based on the
Copyright fees reflected in Buyer's Statement of Account covering the
reporting period in which the Closing occurs.
<PAGE> 24
Section 3.6. Franchises and Other Authorities.
(a) Except as set forth in Schedule 3.6, Seller is
franchised or otherwise authorized by law to operate the Systems in
and around the communities and other geographic areas set forth in
Schedule 0.1. Seller owns or leases all of the assets used or
necessary in the operation of the Systems and holds all FCC Licenses
and FAA Licenses required for the operation of the Systems other than
Licenses, the absence of which would not have a material adverse
affect on any System or the Transferred Assets as a whole. Seller
also holds such other governmental and other permits and rights as are
necessary or useful to the operation of the Systems, including rights
under the Access Agreements, other than rights the absence of which
would not have a material adverse affect on any System or the
Transferred Assets as a whole. Schedule 1.1(c) includes a true and
correct list of all Franchises used or useful in connection with the
operation of the Systems. Schedule 1.1(b) includes a true and correct
list of all Governmental Authorizations used or useful in connection
with the operation of the Systems. Except as set forth in Schedule
3.6, no other Franchises or material Governmental Authorizations are
necessary in connection with the conduct and operation of the Systems
in the ordinary course of business. Except as set forth in Schedule
3.6, Seller has, is in material compliance with (without waiver or
other forbearance of compliance), and subject to Section 11 of this
Agreement, will convey to Buyer at Closing, all Franchises and
Governmental Authorizations, including, but not limited to, all
permits (including environmental permits), licenses, consents,
certificates, registrations and other authorities and rights required
by any statute, ordinance, regulation or other legal authority
relating or applicable to the Systems or the Transferred Assets,
and/or the ownership or operation thereof (the Franchises,
Governmental Authorizations and all of the foregoing being
collectively referred to herein as the "Authorities"). A list of the
current level of payments made under each of such Franchises is set
forth in Schedule 1.1(c); and
(b) Except as set forth in Schedule 3.6, Seller has not
caused, suffered or permitted any default, dispute or noncompliance to
occur or exist with respect to any Authority that would have a
material adverse effect on the Systems and the Transferred Assets as a
whole. To the knowledge of Seller and General Partner, and without
notice to the contrary, no ground or basis exists, whether or not
subject to the giving of notice or passage of time, for cancellation,
termination, suspension, restriction or limitation upon the rights
granted by any such Authority the occurrence of which would have a
material adverse effect on the Systems and the Transferred Assets as a
whole. Except as set forth in Schedule 3.6, all Authorities are in
full force and effect.
(c) For any Franchise that has an unexpired term of fewer
than three (3) years from the date hereof (the "Expiring Franchise"),
a timely request for renewal has been submitted to the appropriate
governmental authority pursuant to Section 626 of the Communications
Act of 1934, as amended. Except as set forth in Schedule 3.6, Seller
(i) has not been notified in writing by any governmental authority
with respect to any such Expiring
<PAGE> 25
Franchise, of a preliminary decision not to renew or of any finding
that could reasonably be expected to serve as a basis for a decision
not to renew; and (ii) has no knowledge that such notice is to be
received.
Section 3.7. Status of the Systems.
(a) Schedule 3.7(a) sets forth as to the Systems: (i)
each type of cable television service offered by Seller; (ii) the
number of subscribers for each such service; (iii) the rates charged
for each service as of a date within ten (10) days of the date of
execution of this Agreement; and (iv) the subscribers who receive
services at a rate below the Standard Basic Rate, the amount charged
to such subscribers for such services and the term of the commitment
to provide any such services at less than the Standard Basic Rate.
Except as set forth in Schedule 3.7(a), the Systems have the ability,
without additional capital expenditures, to deliver both a basic and
expanded basic service sold and supplied separately to subscribers.
The basic service is composed of not more than the number of channels
specifically identified in Schedule 3.7(a) as those channels presently
constituting Seller's basic service package. Seller has delivered to
Buyer strand maps covering the areas comprising the Systems if Seller
has such maps. Except as set forth in Schedule 3.7(a), to Seller's
knowledge and without notice to the contrary no other person or entity
has a franchise or is otherwise licensed to offer or provide, or does
offer or provide, cable television services in any franchise territory
of Seller, and to Seller's and General Partner's knowledge no person
or entity has made application to any franchising authority to provide
cable television services in any franchise territory of Seller.
(b) Schedule 3.7(b) sets forth: (i) the channel capacity
of each of the Systems to carry video/aural signals which are the
equivalent of television signals (excluding FM channels), each of
which delivers the number of channels set forth therein without
additional capital expenditures; and (ii) the separate identity of
such channels which have been activated and which have not been
activated.
(c) Except as set forth in Schedule 3.7(c), each of the
Systems and all of the channels carried thereon, without additional
capital expenditures, is capable of delivering not less than
thirty-six (36) channels and complies, in all material respects, with
all applicable FCC technical regulations, including the regulations
contained at 47 C.F.R. Part 76 and, to the extent applicable, Part 78
thereof, and with all applicable technical standards contained in the
Authorities. Each of the Systems is delivering a picture of good
quality to all subscribers utilizing only the Transferred Assets. Each
of the Systems is currently maintained. There are no obligations or
liabilities to subscribers of the Systems except (i) with respect to
deposits made by such subscribers which will be transferred to Buyer
at the Closing, (ii) the obligation
<PAGE> 26
to supply services to subscribers in the ordinary course of business,
and (iii) as disclosed herein or in the Schedules attached hereto.
Except as set forth in Schedule 3.7(c), there are no written
complaints of subscribers of which Seller or General Partner has
knowledge or notice that have not been resolved or will not be
resolved in the ordinary course of business without unusual expense.
Since December 31, 1995, Seller has continued to provide a level of
customer service substantially comparable to that previously provided
to subscribers of the Systems. Except as set forth in Schedule
3.7(c), the customer service level provided by Seller complies in all
material respects with the standards established by the customer
service regulations adopted by the FCC which became effective on July
1, 1993, if applicable, and, if applicable, all other customer service
standards established by the grantors of the Franchises. Except as
set forth in Schedule 3.7(c), Seller has received no written notice
that any franchising authority will seek to impose the customer
service levels established by such FCC regulations.
(d) All debts to contractors, subcontractors, materialmen
and other persons supplying services or property with respect to the
construction or maintenance of the Systems have been paid in full or
are included in Seller's accounts payable, and all accounts payable
with respect to the construction, maintenance or operation of the
Systems have been paid or are current in accordance with their terms
and will be paid by Seller in accordance with such terms. No lien,
claim, charge or encumbrance upon the Transferred Assets or the
Systems exists or shall arise against the Transferred Assets, the
Systems or Buyer as a result of the failure of Seller to make any such
payment.
(e) Seller and General Partner have included in Schedule
3.7(e):
(i) a list of the channels presently constituting
Seller's "basic" television package, any "expanded basic"
package and each of Seller's tiers of pay and premium channels
on a tier-by-tier basis, and a description of all changes in
channels carried in Seller's "basic" television package, any
expanded basic package and its tiers of pay and premium
channels, including all changes in rates with respect thereto,
since January 1, 1992;
(ii) a list of all local commercial television
and radio broadcast stations presently carried on the Systems,
together with the channel on which each such station was
carried on the Systems on (A) January 1, 1992 and (B) July 19,
1985. Except as set forth in Schedule 3.7(e), neither Seller
nor General Partner has received any notice from any local
commercial television or radio broadcast station presently
carried on the Systems that such station desires to be carried
on any channel other than the channel on which such station
presently is carried;
(iii) a list of all local non-commercial
television and radio broadcast stations presently carried on
the Systems, together with the channel on which each such
station was carried on the Systems on July 19, 1985;
<PAGE> 27
(iv) a list of all local commercial television and
radio broadcast stations whose area of dominant influence
extends to all, or any portion of, the geographic areas
presently served by the Systems or to which Seller is entitled
to extend services under the Authorities; and
(v) a list of each commercial and non-commercial
television broadcast station which Seller and/or its
predecessors notified, and each such station which Seller
and/or its predecessors was legally entitled to notify, on or
prior to May 3, 1993, that such station did not legally
qualify for mandatory carriage under the FCC's "must carry"
rules due to signal level, copyright or other legal
exemptions, and specifying for each such station the legal
reason why such station was not entitled to mandatory
carriage.
(f) None of the grantors of the Authorities is entitled
to be grandfathered to establish rates under 47 U.S.C. Section 543(j)
or the regulations thereunder.
(g) Except as set forth on Schedule 3.4(b), no grantor of
any of the Authorities has applied to the FCC for certification under
47 U.S.C. Section 543 and the regulations thereunder or has indicated
in writing an intention to make such application, and no person has
filed a Form 329 or other complaint with the FCC thereunder.
(h) Except as set forth in Schedule 3.7(h), the rates
charged for services delivered by Seller with respect to the Systems
are in compliance in all material respects with federal, state and
local regulation and no basis exists, for any rollback of rates for
"basic" service, or any rollback or refund of rates for any cable
programming services tiers, as defined by the FCC with respect to any
of the Systems.
Section 3.8. Legality of Signals Carried; Compliance with
Applicable Laws.
(a) Schedule 3.8(a) lists all television and radio stations
and other programming or signals carried by each of the Systems,
separately setting forth and listing all: (i) commercial and
non-commercial television and radio broadcast stations and (ii)
satellite delivered programming carried by each System. As to each
such television and radio broadcast station, Schedule 3.8(a) also
indicates whether its signal is of local or distant origin under the
Communications Act. Except as listed in Schedule 3.8(a), to Seller's
and General Partner's knowledge, timely notice was given to each
commercial and non-commercial station carried by the Systems, and to
each such station which was entitled to notice, under the FCC's
mandatory broadcast station carriage rules contained in and adopted
under the 1992 Act.
<PAGE> 28
Schedule 3.8(a) also indicates, as to each broadcast station that is
entitled to carriage on the Systems under FCC rules whether the
station has elected mandatory carriage or retransmission consent. As
to each such station which requested retransmission consent, the
status of any negotiations therefor is set forth in Schedule 3.8(a).
Each retransmission agreement which has been entered into by Seller or
any predecessor with respect to the Systems is listed in Schedule
3.8(a). A copy of each retransmission agreement entered into by
Seller or any predecessor with respect to the Systems, and of all
written notices and correspondence sent or received in connection with
such mandatory carriage and retransmission consent matters has been
made available to Buyer, and Seller and General Partner have included
in Schedule 3.8(a) a description of each such retransmission agreement
which is not written. No notices or demands have otherwise been
received by Seller, General Partner or any predecessor with respect to
the Systems challenging the right of any of the Systems to carry any
television or radio broadcast channel or other programming, or
asserting an obligation of any of the Systems to carry any television
or radio broadcast channel or other programming not carried by the
Systems. Except as set forth in Schedule 3.8(a), the Systems are
operated in compliance in all material respects with all FCC and FAA
regulations and rules. The Systems are in compliance in all material
respects with all FCC and FAA regulations relating to tower lighting
and marking requirements and aeronautical frequency signal leakage
requirements, including the Cumulative Leakage Index specifications
("CLI") of the FCC. All Systems using restrictive frequencies
(108-137 MHz and 225-245 MHz) comply with CLI requirements in all
material respects.
(b) Except as set forth in Schedule 3.8(b), Seller has
conducted the business of the Systems, including the ownership and use
of the Transferred Assets, in accordance with, and Seller, the Systems
and the Transferred Assets are in material compliance with, the
requirements of the Authorities, the Communications Act, the Copyright
Act and all other applicable federal, state and local laws,
ordinances, rules and regulations, including, but not limited to, all
laws, ordinances, rules and regulations relating to the installation,
maintenance or operation of cable television systems, building
construction, use or occupancy, zoning, the environment, and the
treatment, handling, use, existence or disposal of pollutants,
contaminants or hazardous, toxic or regulated substances or wastes.
Neither Seller nor General Partner has received any notice of
noncompliance, or any waiver or postponement of or stay from full and
immediate compliance with, and neither Seller nor the Transferred
Assets is the subject of any pending, or, to the knowledge of Seller
or General Partner and without notice to the contrary, a potential
subject, of any claims, charges or fines under, any of the Authorities
or under any such laws, rules or regulations, nor has Seller or
General Partner received any notice calling attention to the need for
any work, repairs, construction, alterations or installation on or in
connection with the Transferred Assets or the Systems.
(c) Neither Seller, General Partner nor, to the knowledge of
Seller or General Partner, their respective officers, owners,
employees or agents has made any illegal or questionable payments
(such as bribes, kickbacks, campaign contributions, etc.) which could
adversely affect the Systems, the Transferred Assets or Buyer.
<PAGE> 29
Section 3.9. Real Property and Leases.
(a) All real property (including, without limitation, all
interests in any rights to real property), and in each case a general
description thereof and the use made thereof, which is owned by Seller
is set forth in Schedule 1.1(g) (the "Owned Real Property").
(b) A description of real property (including street
address, legal description, owner, and use) leased by Seller and the
use made thereof are set forth in Schedule 1.1(f) (the "Real Estate
Leases").
(c) Seller has (and will convey to Buyer at the Closing)
marketable, fee simple title to the Owned Real Property and valid and
binding leasehold interests with respect to the Leased Real Property.
Except as set forth in Schedule 3.9(c), Seller is in peaceable
possession of the Owned Real Property and Leased Real Property. The
Owned Real Property and Seller's interest in the Leased Real Property
are free and clear of all liens, security interests, pledges and
encumbrances, other than as set forth on Schedule 1.1(a), which liens,
security interests, pledges and encumbrances will be discharged and
released on or prior to the Closing Date, and are free and clear of
all defaults, adverse claims, title impediments, encroachments,
boundary disputes, covenants, restrictions, rights of way and title
objections that would conflict with Buyer's use of said property in
the manner heretofore used by Seller. With respect to each Real
Estate Lease: (i) the Lease is valid, binding and enforceable against
Seller and all other parties thereto in accordance with its terms, and
each Lease is in full force and effect; (ii) all accrued and payable
rents have been paid; (iii) there is no default in any material
respect of Seller, nor to Seller's or General Partner's knowledge of
any other party thereunder, and there is no waiver, indulgence or
postponement of any obligations thereunder; and (iv) to Seller's and
General Partner's knowledge and without notice to the contrary, no
event that with the giving of notice, the lapse of time, the happening
of any further event or otherwise would become a default, has occurred
under any such Lease. The Owned Real Property and the Leased Real
Property comprise all real property interests necessary to conduct the
business and operations of the Systems as now conducted by Seller.
(d) Seller has delivered to Buyer all surveys of and title
commitments and title policies with respect to, the Owned Real
Property and the Leased Real Property which are in the possession or
control of Seller. The Owned Real Property and the Leased Real
Property and Seller's use of the same, (i) comply in all material
respects with all applicable federal, state and local laws, ordinances
and regulations; and (ii) meet, and will as of the Closing Date meet,
the requirements, standards, rules and regulations of the FCC and the
Licenses in all
<PAGE> 30
material respects. The Owned Real Property and the Leased Real
Property (and all improvements thereon) is in usable condition and
repair consistent with its present use.
(e) Seller has access to all Owned Real Property and
Leased Real Property pursuant to valid easements included as part of
the Transferred Assets or pursuant to public rights of way, except for
easements or rights of way the absence of which would not have a
material adverse effect on the Systems and the Transferred Assets. No
condemnation proceedings are pending or to the knowledge of Seller or
General Partner, threatened with respect to any of the Owned Real
Property or Leased Real Property, nor has any such property been
condemned.
Section 3.10. Personal Property. Seller has (and will convey
to Buyer at the Closing): (a) good, valid and marketable title to all of the
Transferred Assets, including all tangible and intangible assets, machinery,
equipment and other tangible personal property owned by Seller, other than the
Excluded Assets ("Seller's Personal Property") used or useful in the business
and operation of the Systems, including, without limitation, the personal
property listed in Schedule 1.1(a), the Governmental Authorizations, the
Franchises and the Access Agreements, and (b) valid and binding leasehold
interests with respect to the Leased Personal Property (as hereinafter
defined), in each case free and clear of all liens, security interests, pledges
and encumbrances, other than as set forth on Schedule 1.1(a), which liens,
security interests, pledges and encumbrances will be discharged and released on
or prior to the Closing Date, and free and clear from any other interest,
adverse claim, covenant or restriction that would conflict with Buyer's use
thereof in the manner heretofore used by Seller. All personal property leased
by Seller is identified in Schedule 1.1(f) (the "Leased Personal Property");
and with respect to each such Lease: (i) the Lease is valid, binding and
enforceable against Seller and any other parties thereto in accordance with its
terms and such Lease is in full force and effect; (ii) all accrued and payable
rents have been paid; (iii) there is no default in any material respect by
Seller thereunder nor to Seller's or General Partner's knowledge, of any other
party thereunder, and there is no waiver, indulgence or postponement of any
obligations thereunder; and (iv) to Seller's and General Partner's knowledge
and without notice to the contrary, no event that with the giving of notice,
the lapse of time, the happening of any further event or otherwise would become
a default, has occurred under any such Lease. All of Seller's Personal
Property and Leased Personal Property, and Sellers use of the same, (i) comply
in all material respects with all applicable ordinances and regulations and
building and other laws, and (ii) meet, and will as of the Closing Date meet,
the requirements standards, rules and regulations of the FCC and of the
Licenses in all material respects. Seller's Personal Property and the Leased
Personal Property comprises all material items of personal property used in the
business and operations of the Systems as now conducted by Seller and each item
is available for immediate use in the business and operations of the Systems.
All transmitting and studio equipment for the Systems are operating in
accordance with and within the parameters established by the FCC and the
Licenses in all material respects and with all applicable federal, state and
local laws, ordinances, rules and regulations in all material respects.
<PAGE> 31
Section 3.11. Contracts. The Leases, Access Agreements, and
other contracts and agreements listed in the Schedules to this Agreement
constitute all of the contracts which are used, held for use or are required to
conduct, or which relate to the ownership and operation of, the business of the
Systems as heretofore conducted by Seller (except oral subscriber contracts and
miscellaneous service or other contracts or agreements, none of which is
material and each of which is terminable without penalty at will). Except as
set forth in the Schedules hereto, each of such contracts and agreements is in
full force and effect and current as to the performance thereof by Seller, and
to Seller's and General Partner's knowledge (and without notice to the
contrary) by the other party(ies) thereto, in accordance with its terms,
without waiver, indulgence or postponement of any of the obligations
thereunder; and to the knowledge of Seller and General Partner and without
notice to the contrary, no event has occurred which constitutes, or with the
giving of notice, passage of time or otherwise will constitute, a material
default thereunder. All documents, records, files and agreements of Seller
relating to the operations or assets of Seller, including all copies thereof
shall be delivered to Buyer at the Closing, except for the Excluded Assets.
Except as provided in Schedule 1.1(a), all representations, warranties and
agreements in connection with Seller's acquisition or the construction of the
Systems or any Transferred Assets, including, but not limited to, any covenant
not to compete, as and to the extent the same remain in effect, will be
transferred to Buyer at the Closing, or will be held and enforced by Seller for
the benefit of Buyer subsequent to the Closing, in the manner set forth in
Section 2.5 hereof.
Section 3.12. Employee Agreements and Benefits; Labor
Matters. The employees of, and independent contractors employed by, Seller
whose work regards the operation of the Systems are listed in Schedule 3.12.
Schedule 3.12 also lists the date of employment, age, current compensation
level, date of last increase in compensation and prior compensation level of
each of such persons and describes all compensation plans or arrangements,
profit sharing, equity option or purchase plans, and other agreements or
arrangements under which employees of Seller or their dependents receive, or
are entitled to receive in the future, compensation or benefits. Seller has
delivered to Buyer a true and correct copy of all employment handbooks and
written materials stating employment policies of Seller. Seller also has
included in Schedule 3.12 a description of all non-written employment policies.
Except as set forth in Schedule 3.12, Seller is not a party to or bound by any
written or unwritten employment, non-competition or consulting agreement or
understanding which is not terminable at will without penalty. Seller is not a
party to any collective bargaining agreement and is not the subject of any
complaint or proceeding before the National Labor Relations Board or similar
regulatory body. Seller and General Partner are not aware of any activities of
any labor union or other party which is currently seeking to represent or
organize the employees of Seller, and Seller has not made any agreement with or
commitment to or conducted negotiations with any labor union or employee
association with respect to any future agreement. There is neither pending nor
(to the knowledge of Seller and General Partner and without notice to the
contrary) threatened any labor dispute, strike or work stoppage or slowdown
which affects or may affect Seller, the
<PAGE> 32
Transferred Assets or the Systems. Except as set forth in Schedule 3.12,
Seller has complied in all material respects with the relevant provisions of
the Communications Act, Subpart E of Part 76 of the FCC's rules and regulations
and all other federal, state and local laws and related rules and regulations
and agreements relating to employment generally and all aspects thereof,
including hiring, firing, discipline, leave, wages, hours, employee safety and
conditions of employment. Seller has no liability for any arrears in wages,
salaries or overtime pay (other than for Seller's current pay period) or for
any vacation, time off or pay in lieu of vacation or time off (other than for
normal accruals) or for any other payments or penalties for failure to comply
with any statute, law, rule or regulation or agreement. No proceedings before
any court, governmental agency, or arbitrator relating to such matters,
including, but not limited to, unfair labor practice claims, are pending or (to
the knowledge of Seller and General Partner and without notice to the contrary)
threatened involving Seller. Seller agrees that Buyer shall have no obligation
to hire any employee or agent of Seller in connection with the transactions
contemplated hereby.
Section 3.13. ERISA (a) Other than as set forth in Schedule
3.13, Seller does not provide, contribute to or maintain for the benefit of
employees of the Systems any employee benefit plan (hereinafter referred to as
a "Plan"), as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations thereunder
("ERISA"), any Plan which is a "Group Health Plan" (as defined in Section
4980B(g)(2) of the Code), or any Plan which is an "Employee Welfare Benefit
Plan" (as defined in Section 3(1) of ERISA), nor has Seller provided to such
employees any benefit which is a "Disqualified Benefit" (as defined in Section
4976(b) of the Code) for which an excise tax would be imposed. For purposes of
this Section 3.13, Seller shall include all trades or businesses (whether or
not incorporated) which are a member of a group of which Seller or General
Partner is a member and which are under common control within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder (hereinafter the "Code").
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in: (i) a
complete or partial withdrawal from any Plan, (ii) any funding deficiency or
lien under ERISA, (iii) any payment obligation (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any person, or
(iv) the assessment of any amounts, including interest and penalties, or
incurrence of any costs or expenses (including additional taxes, payment of any
funding deficiency, expenses of compliance or any related accounting or legal
fees and costs) attributable to the existence of any Plan.
Section 3.14. Easements, Rights-of-Way, Pole Attachment and Similar
Agreements. Seller possesses, is in material compliance with and will convey to
Buyer, all Access Agreements, rights of access to property (including, but not
limited to, rights of access to all trailer parks, hotels, motels, apartments,
condominiums and other multiple dwelling units served by the Systems and the
Transferred Assets), permits and authorizations used by Seller or necessary for
the installation, operation, maintenance, repair or replacement of all cables,
lines, towers, equipment and other facilities which relate to the ownership or
operation of the Systems and the Transferred Assets. A list of each pole
attachment agreement and the number of poles to which Seller has attached cable
under
<PAGE> 33
each of such agreements is set forth in Schedule 1.1(d). Except as set forth
in Schedule 1.1(d), Seller has not made, and is not required to make, any
deposits under any of such agreements in order to secure Seller's performance
thereunder. Except as set forth in Schedule 1.(d), neither Seller nor General
Partner has received notice of any noncompliance or additional make-ready or
other requirements under any of such written or unwritten Access Agreements,
rights of access, permits or authorizations. Seller agrees to maintain each of
such Access Agreements, rights of access, permits and authorizations in full
force and effect at all times through the Closing Date, and thereafter as and
to the extent provided in Section 2.5(g).
Section 3.15. Bonds, Insurance and Letters of Credit. Each
insurance policy, each performance bond and each letter of credit required to
be maintained, or which is maintained covering the property comprising the
Systems and Transferred Assets, and/or the operation of the Systems, is set
forth in Schedule 3.15, and a copy of each such policy, letter of credit or
bond has been delivered to Buyer by Seller. Each of such policies, letters of
credit and bonds is current and in full force and effect. Neither Seller nor
General Partner has received any notice of default under or intended
cancellation or nonrenewal of any such policies, letter of credit or bonds.
Seller has not failed to give any notice or present any claim under any
insurance policy or bond in a due and timely manner, nor has Seller made a
claim under any insurance policy or bond or requested the insurer to defend
Seller under a duty to defend provision, which coverage the insurer denied.
There are no pending or threatened requests to make a draw under any such
letter of credit. During the past three (3) years, no application for any
insurance, letter of credit or bond with respect to the Transferred Assets or
the Systems has been denied for any reason. Seller will continue to maintain
in effect through the Closing Date, and for such periods thereafter as may be
required under Section 2.5 hereof, those bonds, letters of credit and insurance
policies in connection with the Transferred Assets and/or the operation of the
Systems. During such periods, Seller will not take any action or refrain from
taking any action if the taking of such action or failure to take such action,
respectively, adversely affects the insurability of the Transferred Assets or
the Systems.
Section 3.16. Litigation. Except as set forth in Schedule
3.5(b) or Schedule 3.16, none of Seller, General Partner or the Transferred
Assets is a party to, subject to or bound by any judgment, order, injunction or
decree of any court, administrative agency, arbitration proceeding or other
governmental authority that may restrict or interfere with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, the operation of the Systems or the ownership or use of the Transferred
Assets by Buyer subsequent to the Closing. Seller is not a party to, nor to
the knowledge of Seller or General Partner and without notice to the contrary
is Seller threatened with, any investigation by any governmental agency or any
legal action or other proceeding before any court, arbitrator or mediator,
administrative or regulatory agency which might adversely affect the
properties, business or condition (financial or otherwise) of the Systems or
the transactions contemplated hereby, and neither Seller nor General Partner
knows or has
<PAGE> 34
notice of any basis for any such action or proceeding. If Seller or General
Partner receives notice of any such action, proceeding or investigation, Seller
shall promptly give notice thereof to Buyer.
Section 3.17. Intellectual Property. Except as set forth in
Schedule 1.1(j), Seller is not the owner, user or licensee of any patent,
trademark, service mark, trade name or copyright (or application therefor), nor
are any of such items used in connection with the Systems. To Seller's
knowledge and without notice to the contrary, Seller has not, nor has the use
of any such item in connection with the Systems, infringed upon or conflicted
with any patent, trademark, service mark, trade name or copyright of others,
and neither Seller nor General Partner has received any notice of any such
claimed infringement or conflict. During the past five (5) years, Seller has
not existed under or used any name other than as set forth in Schedule 1.1(j).
Section 3.18. Payment of Taxes. Within the time and in the
manner prescribed by law, except as otherwise set forth in Schedule 3.18,
Seller has (a) filed all federal, state and local tax returns required to be
filed, and (b) fully paid all federal, state and local taxes, charges and
assessments of every kind that are due and payable, including, without
limitation, all payroll, sales, use, copyright, license, franchise, property
and income taxes, charges and assessments. Except as set forth in Schedule 3.18
hereto, no audit or investigation of the tax treatment of any of Seller's
returns or reports is in progress, pending or, to the knowledge of Seller or
General Partner without notice to the contrary, threatened, and to Seller's and
General Partner's knowledge, there exists no ground or basis for the assertion
or assessment of any additional taxes against Seller, the Systems or the
Transferred Assets. No waiver or consent to the extension of any statute of
limitations has been given and is in effect with respect to the assessment of
any taxes against Seller, the Systems or the Transferred Assets. Any transfer
taxes, including any sales tax, resulting from the transactions contemplated
hereby shall be the responsibility of and be paid by Seller. Seller (i) has
paid all taxes, charges and assessments which previously have accrued with
respect to the Transferred Assets, the Systems or the operation thereof, and
(ii) has accrued on its books all taxes, charges and assessments accruing on
the Transferred Assets, the Systems or the operation thereof which are not
presently payable and will pay the same when due and in any event prior to the
time when any penalty or interest arises for the nonpayment thereof, or when
the nonpayment thereof will result in or constitute a lien, charge, security
interest, encumbrance or adverse claim upon or against the Transferred Assets,
the Systems or Buyer.
Section 3.19. Seller's Accounts and Promotions.
(a) Seller bills its subscribers for cable television
services monthly and is current in its billings. Such bills are due
and payable upon receipt.
(b) Except as set forth in Schedule 3.19(b), Seller does
not enter into any written subscription or converter deposit
agreements.
(c) Seller's other billing and collection terms and
practices are set forth in Schedule 3.19(c).
<PAGE> 35
(d) Since January 1, 1996, Seller has not given any
concession, price discount, free service, free installation or
promotional allowance, except as set forth in Schedule 3.19(d).
(e) Except as set forth in Schedule 3.19(e), Seller has no
obligation to provide advertising time or other concessions under any
barter or trade-out arrangement.
Section 3.20. Environmental Compliance.
(a) All parcels of Owned Real Property and Leased Real
Property and Seller's existing and prior uses and activities thereon,
including, but not limited to, the use, maintenance and operation of each of
the parcels of Owned Real Property and Leased Real Property and all activities
of Seller in conduct of business related thereto, comply and have at all such
times complied in all material respects with all Environmental Requirements (as
such term is hereinafter defined).
(b) Seller has conducted its operations and activities
upon such Owned Real Property and Leased Real Property in compliance in all
material respects with all applicable Environmental Requirements in any way
involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous Materials
(as such term is hereinafter defined).
(c) No Hazardous Material is currently, or to Seller's
knowledge, has been located in, on, under or about any of the Owned Real
Property or Leased Real Property in a manner which violates any Environmental
Requirement in any material respect or which requires cleanup or corrective
action of any kind under any Environmental Requirement.
(d) No notice of violation, lien, complaint, suit, order
or other notice or communication concerning any alleged violation of any
Environmental Requirement ("Environmental Notice") in, on, under or about any
of the Owned Real Property has been received by Seller, nor has Seller received
any such Environmental Notice with respect to Seller's use of the Leased Real
Property, in either case, which has not been fully satisfied and complied with
in a timely fashion. To Seller's knowledge, there has not been any
Environmental Notice with respect to any of the Owned Real Property or Leased
Real Property received by any prior owner or occupant of any of the Owned Real
Property or Leased Real Property which has not been fully satisfied and
complied with in a timely fashion.
<PAGE> 36
(e) Seller has all permits and licenses required under
any Environmental Requirement to be issued to it by any governmental authority
on account of any or all of its activities on any of the Owned Real Property
and Leased Real Property and is in material compliance with the terms and
conditions of such permits and licenses. To the best of Seller's knowledge, no
change in the facts or circumstances reported or assumed in the application for
or granting of such permits or licenses exist, and such permits and licenses
are in full force and effect.
(f) To Seller's knowledge, no portion of any of the Owned
Real Property or any portion of the Leased Real Property used by Seller, has
been listed, designated or identified in the National Priorities List (NPL) or
the CERCLA information system (CERCLIS), both as published by the United States
Environmental Protection Agency, or any similar list of sites published by any
Federal, state or local authority proposed for or requiring cleanup, or
remedial or corrective action under any Environmental Requirement.
(g) As used herein "Environmental Requirements" shall
mean all applicable statutes, regulations, rules, ordinances, codes, licenses,
permits, orders, approvals, plans and authorizations of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States, states and political subdivisions thereof and all applicable
judicial, administrative and regulatory decrees, judgments and orders relating
to the protection of human health or the environment.
(h) As used herein "Hazardous Materials" shall mean any
flammable explosives, radioactive materials, hazardous waste, toxic substances
or related materials, including, without limitation, friable asbestos,
polychlorinated biphenyls and any substance defined as or included in the
definition of (a) any "hazardous waste" as defined by the Resource Conservation
and Recovery Act of 1976, as amended from time to time, and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1989,
as amended ("CERCLA"), and regulations promulgated thereunder; (c) any "toxic
substance" as defined by the Toxic Substance Control Act, as amended from time
to time, and the regulations promulgated thereunder; (d) any petroleum product;
and (e) any other substance, pollutant, contaminant, chemical or industrial
toxic or hazardous substance or waste, including, without limitation, hazardous
materials, within the meaning of any other applicable federal, state or local
law, regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended or hereafter amended.
(i) Neither Seller nor General Partner has any knowledge
or information of the existence of any violations of any Environmental
Requirements affecting any other property which would materially adversely
affect any Owned Real Property or Leased Real Property.
<PAGE> 37
(j) Exceptions, if any, to the foregoing representations
are set forth in Schedule 3.20.
(k) As used in this Section 3.20, the term "knowledge"
shall mean the actual knowledge of those individuals listed on Schedule
3.20(k).
Section 3.21. Continuation of Business. Seller has continued
the operations of the Systems in accordance with Seller's past practices and,
except as set forth in Schedule 7.7, has maintained inventories of supplies and
equipment in connection with the operation of the Systems and provided services
to subscribers in accordance with Seller's past practices. Seller has
continued to perform routine and required maintenance on, and replaced when
necessary and otherwise in accordance with Seller's past practices, all
machinery, equipment, devices, cable, tools, vehicles and other items of
personal property owned or used by Seller.
Section 3.22. Approvals and Consents. Seller and General
Partner have included in Schedule 3.22 a complete list and description of the
relationship of all persons (including, but not limited to, governmental
authorities and agencies, creditors, and each party to any other instrument or
agreement to which Seller or General Partner is a party or by which Seller,
General Partner or the Transferred Assets is bound or who is affected by the
assignment of any rights to be transferred or obligations to be assumed
hereunder) who are entitled to notice of, or whose consent is required for, the
execution of this Agreement or the consummation of the transactions
contemplated hereby by Seller in order to accomplish the assignment or transfer
of any property, instruments or documents contemplated herein or to preclude
any cancellation, suspension, termination or reformation of any instrument,
agreement or right.
Section 3.23. Other Financial Interests. Except as set forth
in Schedule 3.23, neither Seller nor General Partner has any direct or indirect
financial interest in any video programmer, or any competitor, supplier,
customer, lessor or lessee of Seller.
Section 3.24. Complete Disclosure. All properties and rights
used or held for use in connection with the ownership and operation of the
Systems and the Transferred Assets or for the performance of the contracts and
agreements set forth on the Schedules hereto (other than the "Excluded Assets")
are listed and described on the Schedules. Except as set forth in Schedule
3.24, no condition, restriction or reservation exists which would prevent Buyer
from utilizing or owning the Systems or the Transferred Assets in all respects
or from enforcing Seller's rights under the Assumed Obligations, or any part
thereof, to the full extent that Seller could do if the sale and transfer
contemplated hereby did not take place. There are no facts known to Seller or
General Partner and not hereby disclosed to Buyer, including (without
limitation) any known proposed or actual increase in fees or charges under any
Authority, Lease, Access Agreement, or any other contract or agreement,
<PAGE> 38
which adversely affects the Systems or the operation or financial condition
thereof or any of Seller's rights or ability to enter into and consummate the
transactions contemplated by this Agreement or comply with the terms and
conditions hereof. No information, representation, warranty, covenant or
agreement of Seller or the General Partner in this Agreement or any Schedule
hereto or given in any certificate, memorandum, instrument or document or
otherwise furnished by or on behalf of Seller or General Partner in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
Section 3.25. Other. Seller has delivered to Buyer true and
correct copies of all documents, leases, agreements, contracts, licenses,
permits and certificates referred to in Section 1.1 as having been so
delivered.
Section 4. Representations, Warranties, Covenants and Agreements of
Buyer.
Buyer represents, warrants, covenants and agrees as of the
date hereof and on the Closing Date (except where another period of time is
expressly mentioned) that:
Section 4.1. Organization and Authority of Buyer. Buyer is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware and as of the Closing Buyer will be duly
qualified to transact business and be in good standing in the States of
Kentucky, Maryland, North Carolina, Ohio, Pennsylvania, Virginia and West
Virginia. Buyer has full partnership power, capacity and authority to enter
into this Agreement, to consummate the transactions contemplated herein and to
own and operate its properties, including the Transferred Assets, and to carry
on the business of the Systems subsequent to the Closing.
Section 4.2. Due Authorization by Buyer. The execution and
delivery of the Agreements and the performance of the transactions contemplated
therein have been duly authorized and approved by all necessary partnership
actions of Buyer and by appropriate resolutions duly adopted and all other
actions required to be taken by Buyer's partners. Buyer has full partnership
power, to enter into and to perform the Agreements and the transactions
contemplated thereby. Each Agreement constitutes a valid and binding agreement
of Buyer and is enforceable against it in accordance with its terms (except as
such enforceability may be limited by bankruptcy, insolvency or similar laws or
by general principles of equity relating to the availability of equitable
remedies).
Section 4.3. Restrictive Documents. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein by Buyer will not conflict or be inconsistent with or
result in the termination of or result in any breach of or constitute a default
under the terms of the limited partnership agreement of Buyer or, in any
material respect, with any indenture, mortgage, deed of trust, covenant,
agreement or other instrument to which Buyer is a party or by which any of its
respective property is subject; the Communications Act; the rules, regulations
or policies of the FCC, the FAA or United States Copyright Office; or any
applicable federal, state or local law, nor cause the suspension, revocation,
impairment, forfeiture, nonrenewal or termination
<PAGE> 39
of any license, permit, franchise, certificate, consent or authorization to
which Buyer is a party or is subject.
Section 4.4. Litigation. Buyer is not a party or subject to,
or bound by any judgment, order, injunction or decree of any court,
administrative agency, arbitration proceeding or other governmental authority
that may restrict or interfere with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.5. Complete Disclosure. No information,
representation, warranty, covenant or agreement of Buyer in this Agreement or
given in any certificate, memorandum, instrument or document or otherwise
furnished or to be furnished by or on behalf of Buyer in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein not misleading.
Section 5. Covenants and Further Agreements.
Section 5.1. Application for Assignment of Franchises and
Licenses.
(a) Promptly upon execution of this Agreement, Seller and
Buyer agree to join in and file and to take such other actions as are
necessary, on forms provided by Buyer or otherwise satisfactory to
Buyer and its lenders, to obtain, at Seller's expense (excluding
Buyer's attorneys' fees, personnel costs and travel expenses), the
approval of applications or requests for approval or consent: (i)
with each local government, the consent of which is necessary to the
assignment of the Franchises and for the operation of the Systems by
Buyer on and after the Closing, (ii) with the FCC and the FAA for the
assignment of the FCC Licenses and the FAA Licenses, if any, and (iii)
with every other authority, person or party with respect to any
license, permit, copyright, contract, lease or agreement to which
Seller is a party and/or which affects the transfer or operation of
the Transferred Assets and the Systems. Should any franchising
authority require as a condition to its consenting to the transfer of
any Franchise, any modification to or upgrading of any System or the
addition of any equipment, or the amendment, modification or
replacement of any Franchise, Buyer shall have the option but shall
not be required to agree to the same. Buyer agrees to provide to any
authority, person or party such information as may be reasonably
requested to determine whether to grant approval or consent to the
transactions contemplated by this Agreement.
(b) If applicable, Buyer and Seller, as soon as
practicable following the execution and delivery of this Agreement,
shall file the required notification with the Federal Trade Commission
and the Antitrust Division of the Department of Justice pursuant to
the HSR Act.
<PAGE> 40
Buyer and Seller shall comply fully with all applicable notification,
reporting and other requirements of the HSR Act, and any similar
requirements of any other jurisdiction. All actions required by Buyer
and Seller pursuant to this Section 5.1(b) shall be at their own
respective expenses, except that Buyer and Seller shall each pay
one-half of the filing fee with respect to such HSR filing.
Section 5.2. Information; Consultation; Confidentiality.
(a) Seller will give Buyer (at Buyer's own expense)
access to and permit Buyer and its authorized representatives to
review the Transferred Assets and the Systems, the books and records
related thereto, and such other information as shall be reasonably
requested by Buyer, including, but not limited to, access to all
books, records and other information as Buyer may request for the
purpose of providing the FCC, state cable commissions, the grantors of
the Franchises or the Authorities and others with such information
concerning rates and the operations of the Systems, as Buyer, the FCC,
state cable commissions, the grantors of the Franchises or Authorities
and others may request and/or require, such information and records to
include information as to original cost of services for the purpose of
justifying rates. Seller and General Partner have been and will
hereafter continue to be reasonably available through the Closing Date
and for a reasonable period of time thereafter not to exceed fifteen
(15) months from the Closing Date, at no charge or cost to Buyer, for
consultation with representatives of Buyer with respect to the
operation, management and business of the Systems. Seller and General
Partner have preserved in confidence, and from and after the date
hereof will continue to preserve in confidence, all of their and the
Systems' confidential information and trade and business secrets. No
party hereto will make or authorize any public announcement or
disclosure relating to the transactions contemplated by this Agreement
without first consulting with the other parties hereto, except for
disclosures necessary, useful or appropriate in order to satisfy the
conditions to closing.
(b) If this Agreement terminates without a closing, Buyer
agrees to return to Seller all written information in Buyer's
possession which was furnished to Buyer, including copies thereof and
all other materials and tangible media, relating to the Systems or
Seller, and Buyer will preserve in confidence, and from the date of
this Agreement, to the Closing Date, or indefinitely hereafter if this
Agreement terminates without a closing, Buyer agrees to not disclose
any confidential information or trade or business secret of Seller to
any third party, except to Buyer's legal, accounting and other
advisors, to Buyer's employees and agents, and as otherwise necessary,
useful or appropriate in order to satisfy the conditions of closing.
Section 5.3. Conduct of the Business of the Systems. Seller
and General Partner covenant and agree that:
<PAGE> 41
(a) between the date hereof and the Closing Date, Seller shall
operate the Systems in the ordinary course of business in accordance
with past practice and , without limitation of the foregoing, Seller
will:
(i) Accounts Payable. Pay, when due, all its
accounts payable and other debts relating to Seller, the Systems and
the Transferred Assets, other than amounts being contested in good
faith and for which appropriate reserves have been maintained;
(ii) Compliance with Law. Operate the Systems in
accordance with the Licenses and materially comply with all federal,
state and local laws, rules and regulations applicable to it,
including the rules and regulations of the FCC;
(iii) Consents. Take such action as may be
reasonably necessary to obtain the required consents of third parties
to the transactions contemplated herein, including, without
limitation, consents to the assignment of the Franchises, the FCC
Licenses and the Leased Real Property;
(iv) FCC Filings. Provide to Buyer concurrently
with the filing thereof, copies of all reports to and other filings
with the FCC relating to the Systems;
(v) Licenses. Provide to Buyer, promptly upon
receipt thereof by Seller, a copy of (i) any notice from the FCC or
any other governmental authority of the revocation, suspension, or
limitation of the rights under, or of any proceeding for the
revocation, suspension, or limitation of the rights under (or any
written notice to the effect that such authority may in the future, as
the result of failure to comply with laws or regulations or for any
other reason, revoke, suspend or limit the rights under) any FCC
License, or any other material license or permit held by Seller
respecting any System, and (ii) copies of all protests, complaints,
challenges or other documents filed with the FCC by third parties
concerning any System and, promptly upon the filing or making thereof,
copies of Seller's responses to such filings;
(vi) Litigation. Notify Buyer in writing
immediately upon learning of the institution or written threat of any
action against Seller involving any System in any court, or any action
against Seller before the FCC or any other governmental agency, and
notify Buyer in writing promptly upon receipt of any administrative or
court order relating to the Transferred Assets or the Systems;
(vii) Taxes. Pay or cause to be paid or provided
for when due all income, property, use, franchise, excise, social
security, withholding, worker's
<PAGE> 42
compensation and unemployment insurance taxes and all other
taxes of or relating to Seller, the Transferred Assets and the
employees required to be paid to city, county, state, Federal and other
governmental units up to the Closing Date, other than amounts being
contested in good faith and for which appropriate reserves have been
maintained; and
(viii) Contracts. If requested by Buyer, with
respect to any contract, Access Agreement, Lease or other agreement
assumed by Buyer hereunder which can be terminated or not renewed by
Seller in compliance with the terms thereof, notify the other parties
to such contract that Seller elects to terminate (or, if applicable,
elects not to renew) such contract; and
(b) between the date hereof and the Closing Date, Seller will
not, without Buyer's prior written consent:
(i) Transfer. Sell, assign, transfer or convey
any of the Transferred Assets or any portion of the Systems
other than in the ordinary course of business;
(ii) Encumbrances. Subject any of the Transferred
Assets or the Systems to any security interest, lien,
restriction, pledge, charge, adverse claim or encumbrance not
set forth in the Schedules hereto as of the date of execution
of this Agreement;
(iii) Maintenance. Fail to: (A) keep the
Transferred Assets, the Systems or the physical plant
constituting a part thereof in a current state of repair and
operating efficiency; (B) subject to Section 7.7 of this
Agreement, maintain the level of inventories and supplies of
the Systems in accordance with Seller's past practice or
otherwise necessary to the operation of the Systems as
heretofore conducted by Seller; or (C) maintain any insurance
policies, bond or letter of credit affecting the Transferred
Assets or the Systems in effect;
(iv) Books and Records. Fail to currently
maintain the books and records relating to Seller's financial
condition, the Transferred Assets or the operation of the
Systems, including, but not limited to, books and records
relating to subscriber orders, disconnections or complaints;
(v) Promotions. Grant any promotion (whether
consisting of free or reduced charge for installation or
service or otherwise);
(vi) Retransmission Consents. Enter into any
agreement with respect to the retransmission of signals of
commercial stations other than in accordance with the
provisions of this Agreement;
<PAGE> 43
(vii) Subscriber Rates. Except as set forth in
Schedule 5.3(b), make any changes to customer rates for any
tier of service or changes for remotes or installation, or
change billing, disconnect or marketing practices;
(viii) Employees. Hire, fire, release or transfer
any of the employees listed on Schedule 5.12. Seller will
promptly notify Buyer upon Seller's knowledge of the
resignation or contemplated resignation of any employee listed
on Schedule 5.12;
(ix) Corporate Governance. Amend, modify, change or
alter its certificate of limited partnership or limited
partnership agreement in any way which would adversely affect
its corporate power or authority to enter into any perform
this Agreement or which would otherwise adversely affect its
performance of this Agreement and the transactions
contemplated hereby; and
(x) Other. Otherwise deal with the Transferred
Assets or the Systems or conduct and manage the Transferred
Assets or the Systems in a manner which, when judged in
relationship to Seller's past dealings and operations, is
extraordinary or outside the usual and ordinary course of
routine operation, or could reasonably be expected to
materially adversely affect the value of the Systems and the
Transferred Assets as a whole, including, but not limited to,
any modifications in Seller's marketing efforts, subscriber
services, subscriber relations programs and installations.
Seller will use its best and good faith efforts to preserve
the goodwill of suppliers, subscribers and others having
business relations with the Systems. Seller shall not make,
enter into, modify, amend or allow to lapse or become
impaired, or waive any default or breach under, any contract,
agreement, commitment or other obligation affecting the
Systems, the Transferred Assets or any right or obligation to
be assigned to or assumed by Buyer, except agreements which
are cancelable within ninety (90) days, without penalty, or
under which the commitment of Seller does not exceed $10,000
individually or $50,000 in the aggregate.
Section 5.4. Notice of Subsequent Events. Each Party agrees
to promptly notify the other of any circumstance, event or action by it or
otherwise (i) that, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement; or (ii) the
existence, occurrence or taking of which would result in any of its
representation and warranties in this Agreement not being true and correct in
all material respects at Closing, and, with respect to clause (ii), to use its
commercially reasonable efforts to remedy the same.
Section 5.5. Delivery of Financial Information. Seller shall
deliver to Buyer: (i) as soon as they are available, but in no event later
than thirty (30) days after the end of each month
<PAGE> 44
subsequent to the date of such latest monthly financial statement through the
end of the month preceding the Closing Date, consistently prepared monthly
financial statements; (ii) within fifteen (15) days after the end of each month
a Master Monthly Report prepared on a basis consistent with past practice and
showing monthly revenues and subscriber information for the Systems; and (iii)
such other financial and operating information regarding the Systems and the
Transferred Assets as Buyer reasonably requests. Such financial statements
have been and will be prepared on a basis consistent from period to period.
Except as set forth in the Schedules hereto, each of such financial statements,
Historical Financial Statements, Receivable Reports, Subscriber Reports and
such other reports provided to Buyer is and will be true, correct and complete
in all material respects with respect to the subject matter contained therein,
and fairly presents, and will fairly present, the results of operation of
Seller or the Systems, as applicable, and related information, for the periods
covered thereby, and does not and will not omit to state or reflect any
material fact required to be stated or reflected therein or necessary to make
the statements therein not misleading, subject, however, to normal year end
audit adjustments with respect to unaudited information, which adjustments are
not material individually or in the aggregate.
Section 5.6. Additional Financial Information. (a) If
requested by Buyer after the execution hereof, Seller agrees to prepare, and
cause Seller's independent accountants to audit (to the extent indicated
below), at Buyer's expense, the following financial statements with respect to
the Systems, and to prepare related management discussions and analyses
(collectively, the "Additional Financial Statements"), conforming with the
requirements specified in this Section 5.6:
(i) Balance Sheets and income statements and
statements of cash flows and changes in equity for the years
ended December 31, 1992, 1993, 1994, and 1995, together with
the required footnotes and the auditor's report thereon.
(ii) An unaudited balance sheet and income statement
and statement of cash flows for such interim period ending
during 1996 as Buyer may request, together with the required
footnotes.
(b) If necessary in order to enable Buyer to comply with the
requirements of SEC Regulation S-K or S-X, Seller shall prepare and cause
Seller's independent accountants to audit at Buyer's expense the Additional
Financial Statements within 60 days after Buyer's request therefor.
(c) The Additional Financial Statements shall be prepared
from the books and records of Seller in accordance with generally accepted
accounting principles, consistently applied, and in the form required by
Securities and Exchange Commission ("SEC") Regulations S-K and S-X, so as to
fairly present the financial condition, results of operations and cash flows of
Seller for the periods indicated, and with respect to quarterly financial
statements required by this Section 5.6, subject to normal year-end
adjustments.
(d) Seller agrees to provide one or more audit representation
letters as to the information provided by Seller to its independent accountants
in connection with any audit required
<PAGE> 45
under this Section 5.6. The representation letter will be in such form and
make the representations reasonably required by such independent accountants to
enable them to issue an opinion acceptable to the SEC for purposes of any
Registration Statement with respect to the audit of those Additional Financial
Statements required to be audited by SEC Regulations S-K and S-X and to be
included in such Registration Statement. Seller shall use its commercially
reasonable efforts to cause its independent accountants to provide all consents
that are necessary for the inclusion of their opinion and the Additional
Financial Statements in any such Registration Statement.
Section 5.7. Consents. Following the execution hereof,
Seller and Buyer shall make such applications to obtain all necessary
approvals, consents, waivers and authorizations from all appropriate
governmental authorities, bodies, agencies and persons to the transfer or
assignment to Buyer of all rights and obligations contemplated by this
Agreement. Seller and Buyer shall use their commercially reasonable efforts to
obtain the consents as expeditiously as possible and to cause all other
conditions to Closing to be fulfilled. If, despite the use of the parties'
commercially reasonable efforts to obtain third party consents, one or more of
such consents is not obtained and Buyer elects to proceed with the Closing,
Seller shall not be deemed to have breached this Agreement by reason of failing
to obtain such consents. In addition, Seller and Buyer shall cooperate with
one another to obtain the retransmission consents contemplated in Section 7.10.
Seller shall cure any default of Seller's under any Franchise, Access
Agreement, Lease or other contract or agreement being assumed by Buyer
hereunder which, in any case, is material to any System and asserted by any
third party and of which one or more of those individuals listed on Schedule
3.20(k) has knowledge prior to the Closing and shall take all actions
necessary, and incur all costs associated with, maintaining all such
Franchises, and those Access Agreements and Leases and other contracts which
are material to any System and in full force and effect, including, without
limitation, renewing any such Franchise, Access Agreement, Lease or other
contract prior to its expiration. Seller shall not agree to any materially
adverse change in any Franchise as a condition to obtaining any authorization,
consent, order or approval necessary for the transfer of such Franchise unless
Buyer shall otherwise consent. Seller shall provide Buyer with copies of all
consents as they are received by Seller.
Section 5.8. Cooperation. After the Closing Date, Buyer
shall provide Seller and Seller's representatives with reasonable access to the
books of account and other records of the Systems and Transferred Assets which
are reasonably required or requested by Seller for the preparation of income
tax returns and other proper purposes applicable to periods prior to the
Closing Date, including, without limitation any determination of amounts to be
paid by one party hereto to another. Seller will provide Buyer and Buyer's
representatives with reasonable access to any records or documents pertaining
to the Systems and the Transferred Assets which are retained by Seller and not
delivered to Buyer, and if such documents are retained by someone other than
Seller, Seller will cause such person(s) to provide Buyer and Buyer's
representatives with access thereto.
<PAGE> 46
Section 5.9. Expenses. Seller and General Partner agree to
indemnify Buyer and hold Buyer harmless against any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees, suffered or
incurred by reason of, or arising out of: (i) any law pertaining to bulk sales
or transfers of assets or affecting the rights of creditors of Seller (as to
which Buyer agrees to waive compliance in consideration of the indemnification
agreement of Seller and General Partner hereunder) or the effectiveness of the
sale or transfer of assets as against creditors of Seller; (ii) any sales, use,
transfer, documentary, vehicle title transfer, excise or license tax, fee or
charge applicable to any of the Transferred Assets, to any part of the Systems
or to the transactions consummated hereunder; and (iii) any appraisal rights or
other liability owing to any partner of Seller or General Partner. All other
expenses incurred in connection with the negotiation, preparation, execution
and performance of this Agreement shall be paid by the party incurring such
expenses, unless expressly provided otherwise hereunder.
Section 5.10. Brokerage. Seller and General Partner
represent to Buyer that neither Seller nor General Partner has utilized any
unaffiliated brokerage firm or finder in connection with this transaction,
except for Veronis, Suhler & Associates, Inc., whose fees will be paid by
Seller and/or General Partner. Buyer represents to Seller that it has not
utilized any brokerage firm or finder with respect to this transaction. Buyer
agrees to indemnify Seller and hold Seller harmless against any claim of any
person for a broker's or finder's fee or similar compensation relating to this
Agreement or the transactions contemplated hereby, based on an asserted
agreement with Buyer; and Seller and General Partner, jointly and severally,
agree to indemnify Buyer and hold Buyer harmless against any such claim based
on an asserted agreement with Seller or General Partner.
Section 5.11. Special Covenants of Seller and General
Partner..
(a) Seller and General Partner acknowledge that Buyer
utilizes a billing vendor other than the vendor currently utilized by
Seller and General Partner in connection with the billing and
collection of subscriber payments with respect to the Systems. Seller
and General Partner, at Buyer's sole cost and expense, shall use their
best efforts to undertake the following actions:
(i) to cooperate with Buyer, prior to and following
the Closing Date, with respect to the transfer of all of the
Systems' billing functions to Buyer's current billing vendor;
and
(ii) to continue to perform or cause to be performed
for Buyer all of the Systems' billing and collection services
in the same manner as presently conducted for a period of 180
days following the Closing, or until such time as all of the
Systems' billing functions have been transferred to Buyer's
billing vendor; provided, however, that Buyer shall reimburse
Seller for the cost of providing such billing and collection
services.
<PAGE> 47
(b) Seller and General Partner, at their sole cost and
expense, agree to undertake the following action, which shall be
completed to Buyer's satisfaction prior to Closing:
(i) Seller and General Partner shall be current, as
of the month end proceeding the Closing Date, with the 1996 monthly capital
expenditure budget set forth in Schedule 5.11(b).
Section 5.12. Employees. The parties acknowledge that Seller
is serviced, in large part, by the employees of affiliates of Triax. Schedule
5.12 sets forth a list of employees presently servicing the Systems who will be
available, at Buyer's option, for employment by Buyer following the Closing
Date. Buyer shall deliver notice to Seller within thirty (30) days of the
Closing Date indicating which of the listed employees will be offered
employment by Buyer. Seller shall not be obligated to make any of its, or its
affiliates, management, administrative or customer service employees available
to Buyer.
Section 5.13. Reliance Upon and Survival of Representations
and Warranties. Notwithstanding any investigation at any time conducted by any
of the parties hereto, each party may rely on the representations and
warranties of the other party or parties set forth herein or in any Schedule
hereto or other instrument or document delivered in connection herewith. The
representations and warranties of the parties shall survive the Closing,
notwithstanding any investigation made, or information obtained, by the other
party hereto, subject, however, to the terms of Section 6 with respect to time
periods for asserting claims with respect thereto; provided, however, the
provisions of Section 5.2(b) shall survive the termination of this Agreement
under Section 16.
Section 5.14. No Negotiation. Unless this Agreement is
terminated, Seller and General Partner agree not to negotiate or otherwise
discuss the sale of the Systems or any interest therein, any possible sale or
other transfer of any ownership interest in Seller or General Partner, or the
transactions contemplated hereby, with any party other than Buyer other than as
may be required, useful or advantageous to obtain any consent or approval
contemplated by this Agreement or otherwise to facilitate consummation of the
transactions contemplated by this Agreement.
Section 5.15. Access to Information. Seller will give to
Buyer and its counsel, accountants, engineers and other authorized
representatives reasonable access to the Transferred Assets and to all books
and records relating thereto, and will furnish or cause to be furnished to
Buyer and its authorized representatives all information relating to the
Transferred Assets that they reasonably request (including any financial
reports and operations reports produced with respect to the Systems).
<PAGE> 48
Section 5.16. Further Assurances.
(a) Subject to Section 5.1, Seller and Buyer agree to use
their good faith best efforts to obtain all necessary approvals,
consents, waivers and authorizations from all appropriate governmental
authorities, bodies, agencies and persons to the transfer or
assignment to Buyer of all rights and obligations contemplated by this
Agreement. Seller will deliver to Buyer all surveys currently in
Seller's possession of Owned Real Property which is used by Seller as
a headend, tower or antenna site.
(b) Each party agrees to execute and deliver or cause to be
executed and delivered at all reasonable times and places such
additional instruments and documents as any other party hereto may
reasonably request or which are required for the purpose of carrying
out this Agreement.
(c) General Partner agrees to take such actions with respect
to Seller, and otherwise to take and perform all actions and execute
such documents and instruments, as are necessary or reasonably
requested by Buyer in order to cause Seller to perform its obligations
under this Agreement or otherwise to effect the transactions
contemplated hereby.
Section 6. Indemnification.
(a) Seller and General Partner, jointly and severally,
agree to indemnify and defend Buyer and its partners, employees,
officers, equity holders, and any of its affiliates ("Buyer
Affiliates") against and hold same harmless from any loss, claim,
damage, liability or expense (including reasonable attorneys' fees):
(i) incurred or sustained by any Buyer Affiliate on account of any and
all liabilities of Seller or General Partner, except (A) the Assumed
Obligations (but subject to the terms of Section 2.3 hereof) and (B)
all liabilities and obligations arising or accruing after the Closing
Date with respect to the ownership or operation of the Systems or the
Transferred Assets which are expressly assumed by Buyer under the
Assumption Agreement; (ii) incurred or sustained by Buyer on account
of any misrepresentation or breach of any representation, warranty,
covenant or agreement of Seller or General Partner included in this
Agreement or in any Schedule or other instrument or document delivered
pursuant hereto; (iii) resulting from, arising out of or in any way
connected with any third-party claim or any injury to or death of any
person or physical damage to property of any kind, wherever located
and by whomever owned, arising out of or in any way connected with the
ownership, lease, operation or use of the Systems or the Transferred
Assets prior to the Closing Date; (iv) incurred or sustained by Buyer
with respect to obligations of Seller other than Assumed Obligations;
and (v) arising under Sections 5.9 and 5.10 for which Seller and
General Partner are liable thereunder. With respect to any claim by a
third party as to which Buyer is entitled to indemnification
hereunder, Seller and General Partner shall have the right at their
own expense to participate in or assume control of the defense of the
claim, provided that, (i) Seller and General Partner unconditionally
agree in writing to indemnify Buyer in full irrespective of the
indemnity limitations set forth below
<PAGE> 49
in Section 6.(c); and (ii) Seller and General Partner provide Buyer
with satisfactory evidence of the ability to fulfill such indemnity
obligations. In such event, Buyer shall cooperate fully with Seller
and General Partner in their negotiations and settlement process,
provided, the effect thereof does not adversely affect Buyer's rights
or liabilities, and Seller and General Partner give Buyer notice of
any intended settlement and the terms thereof, prior to agreeing
thereto.
(b) Provided that the Closing shall have occurred, Buyer
agrees to indemnify and defend Seller and General Partner against and
hold Seller and its partners, employees, officers, equity holders and
affiliates (the "Seller Affiliates") harmless from and against any
loss, claim, damage, liability or expense (including reasonable
attorneys' fees): (i) incurred or sustained by Seller or General
Partner after the Closing Date: (A) under the Assumed Obligations (but
subject to the terms and provisions of Section 2.3); or (B) arising
out of the ownership or operation of the Systems or the Transferred
Assets after the Closing Date; (ii) incurred or sustained by Seller or
General Partner on account of any misrepresentation or breach of any
representation, warranty, covenant or agreement of Buyer included in
this Agreement or in any Schedule or other document delivered by Buyer
pursuant hereto; and (iii) arising under Sections 5.9 and 5.10 for
which Buyer is liable thereunder. With respect to any claim by a third
party as to which Seller or General Partner is entitled to
indemnification hereunder, Buyer shall have the right at its own
expense to participate in or assume control of the defense of the
claim, provided that, (i) Buyer unconditionally agrees in writing to
indemnify Seller and General Partner in full irrespective of the
indemnity limitations set forth below in Section 6(c); and (ii) Buyer
provides Seller and General Partner with satisfactory evidence of the
ability to fulfill its indemnity obligations. In such event, Seller
and General Partner shall cooperate fully with Buyer in its
negotiations and settlement process, provided, the effect thereof does
not adversely affect Seller's and/or General Partner's rights or
liabilities, and Buyer gives Seller and General Partner notice of any
intended settlement and the terms thereof, prior to agreeing thereto.
(c) No party shall be entitled to indemnification
hereunder unless and until the total amount of all of its claims for
indemnification exceeds Two Hundred Fifty Thousand Dollars ($250,000),
and in no event shall the aggregate amount for which any party is
liable hereunder exceed Two Million Dollars ($2,000,000). Once the
amount of such claim exceeds $250,000, the claimant shall be entitled
to be indemnified in full for such $250,000 amount plus all amounts in
excess thereof, subject to the $2,000,000 limit set forth above, and
shall be indemnified (subject to the limit above) for all claims
thereafter. Notwithstanding the foregoing, the $250,000 threshold and
the $2,000,000 limit set forth above and the time limitations set
forth in subsection (d) below, shall not apply to (i) any adjustments
to the Purchase Price; (ii) the failure of any party to pay or perform
those of its obligations which
<PAGE> 50
have not been assumed by the party seeking indemnification, (iii) in
the event this Agreement is terminated by either party prior to the
Closing, any breach of this Agreement; (iv) Seller's breach of its
representations or warranties with respect to matters of title and
liens; or (v) any obligations under Sections 5.9 or 5.10.
(d) No claim shall be asserted by any party to this
Agreement seeking indemnification, damages or other relief under, or
with respect to misrepresentations, with respect to breaches of
warranty or with respect to breaches of covenants occurring prior to
the Closing which could have been brought under, Section 6(a) or
Section 6(b) beyond the one (1) year anniversary of the Closing Date
except that (i) Seller's and General Partner's obligations to
indemnify under Section 6(a)(ii) shall continue and remain in effect
with respect to matters covered by Sections 3.13, 3.16 and 3.18 and
with respect to matters of title, liens and correctness of copies of
agreements and documents, for the statute of limitations with respect
to the matters described therein, including any extensions thereof,
and (ii) Buyer's obligations to indemnify under Section 6(b)(ii) shall
continue and remain in effect with respect to matters covered by
Section 4.4 for the statute of limitations with respect to the matters
therein, including any extensions thereof. Notwithstanding anything
herein to the contrary, any action for fraud, for equitable relief
(whether affirmative or negative), or arising under Section 6(a)(i),
(iii) - (v) or Section 6(b)(i) or (iii), may be brought at any time
without regard to such one (1) year date, subject to any applicable
monetary limitations set forth in Sections 6(c).
(e) Any party seeking indemnification hereunder or
receiving notice of a claim that might be the subject of
indemnification hereunder, shall give prompt written notice to the
party(ies) from whom indemnification is sought, of any claim or
occurrence giving rise to such right of indemnification, setting forth
in reasonable detail the basis of such right and, if known, the amount
thereof.
(f) Any amounts owed under this Section 6, which are not
paid within thirty (30) days following demand therefor, shall bear
interest from the date demand for payment thereof is made until
payment in full is received at three (3) percentage points in excess
of the Floating Prime Rate.
(g) Notwithstanding any provision contained herein to the
contrary, neither Seller nor General Partner shall be deemed to have
violated their representations or warranties by virtue of any
subscriber claiming ownership of his or her home wiring to the extent
permitted by the 1992 Act.
Section 7. Conditions Precedent to the Obligation of Buyer to Close.
The obligation of Buyer to consummate the transactions herein
contemplated is subject to the satisfaction at or before the Closing of the
following conditions:
<PAGE> 51
Section 7.1. Truth of Representations and Warranties. The
representations and warranties of Seller and General Partner included in this
Agreement and in each Schedule or other instrument or document delivered
hereunder shall be true and correct on and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of such date (except for representations and warranties which by their terms
relate to a specific date, which shall remain true and correct as of such
date). Buyer shall have received a certificate to the foregoing effect dated
the Closing Date signed by Seller and General Partner, together with evidence
satisfactory to Buyer that all security interests in and liens, pledges and
encumbrances upon the Transferred Assets have been satisfied, terminated and
released. Buyer, in its sole discretion, shall have the right to waive
compliance with the representations and warranties of Seller and General
Partner.
Section 7.2. Estoppel Letters; Performance of Agreements.
(a) Buyer shall have received estoppel letters and
Uniform Commercial Code Termination Statements, in form and substance
satisfactory to Buyer and its lenders and their respective counsel,
from each lender to Seller or lienholder affecting any of the
Transferred Assets ("Creditors"), setting forth all amounts owed and
accruing as interest or other charges with respect thereto (on a daily
basis) and the amount each Creditor will accept in payment thereof,
and stating that upon payment thereof the Creditor will, and does
thereby, release and forever discharge Buyer, the Systems and the
Transferred Assets from any lien, claim, security interest, charge or
encumbrance, held, claimed or capable of being asserted by the
Creditor.
(b) Each payment, delivery or other action required of
Seller or General Partner under this Agreement, and each agreement of
Seller or General Partner to be performed at or before the Closing
under the terms hereof or as contemplated herein shall have been duly
performed. Buyer shall have received a certificate to this effect
dated the Closing Date and signed by Seller and General Partner.
Section 7.3. Consents of Third Parties. Seller shall have
obtained and delivered to Buyer on the forms set forth in Schedule 7.3 or such
other forms as are reasonably satisfactory to Buyer and its lenders and their
respective counsel, all consents of, and issued all notifications to, third
parties (in sufficient time in advance so that any necessary notice period
shall have been met), that are required for the assignment of the Transferred
Assets to Buyer contemplated hereby, that are required for the consummation of
the transactions contemplated herein, or that are required in order to prevent
a breach of, a default under, or a termination of any agreement to which Seller
or General Partner is a party or to which any of their respective property is
subject, or that is otherwise required for the transfer of the Systems or the
Transferred Assets to Buyer, or the ownership and operation of
<PAGE> 52
the Systems and the Transferred Assets by Buyer. Notwithstanding the
foregoing, with respect to Schedule 7.3, Buyer agrees that (i) the provisions
of Sections 3(a) and 3(c) of each of the forms thereof are not required to be
included in any such consents provided that Seller shall have used reasonable
efforts to attempt to have such provisions so included, and (ii) the provisions
of Section 3(b) thereof are not required to be included in all such consents
provided that such provisions are included in consents pertaining to those
Franchises covering at least 95% of all Basic Subscribers as of the Closing and
provided further that Seller shall have used reasonable efforts to attempt to
have such provisions so included in all third party consents hereunder.
Section 7.4. Opinion of Seller's Counsel. Seller shall
provide to Buyer and Buyer's lenders the favorable opinion, dated the Closing
Date, of Gallop, Johnson & Neuman, L.C., counsel to Seller, or other counsel
satisfactory to Buyer, substantially in the form set forth in and covering the
matters covered by Schedule 7.4.
Section 7.5. Opinion of FCC and Copyright Counsel. Seller
shall provide to Buyer and Buyer's lenders the favorable opinion, dated the
Closing Date, of Dow, Lohnes & Albertson, FCC and copyright counsel, or other
FCC and copyright counsel satisfactory to Buyer and its lenders, in
substantially the form set forth in and covering the matters covered by
Schedule 7.5.
Section 7.6. No Adverse Change. There shall have been no
material adverse change in, loss or damage to, or diminution in value of, the
Transferred Assets, the Systems or the business of Seller. If such material
adverse change is the result of damage to or destruction of the Transferred
Assets, or any portion thereof, then (i) Buyer may terminate this Agreement, in
which event the Escrow Deposit, and all interest earned thereon, shall be
returned to Buyer, or (ii) if Buyer and Seller mutually agree in writing upon
adjustments to the Cash Consideration, payment of insurance proceeds,
limitations on the representations of Seller and General Partner, and all other
matters with respect to such material adverse change, then Buyer and Seller
shall proceed to consummate the transactions contemplated herein.
Section 7.7. Inventory. Seller shall have established and
shall deliver to Buyer on the Closing Date Inventory as set forth in Schedule
7.7.
Section 7.8 Environmental Report. Buyer shall have received,
at Buyer's expense, a Phase I environmental site assessment (the "Environmental
Report") of the Owned Real Property performed by a nationally recognized
environmental firm reasonably satisfactory to Buyer. The Environmental Reports
shall show no environmental condition on or affecting such Owned Real Property
that (i) could reasonably be expected to impair the use or value of such Owned
Real Property for the continued operation of the Systems as operated by Seller
on the Closing Date or subject Buyer to any liability for fines, penalties, or
cleanup or response costs if Buyer consummates this Agreement, or (ii) would
cause a reasonable purchaser to perform further investigation or testing before
proceeding with the transfer of the Owned Real Property. Notwithstanding the
foregoing, this condition to closing shall not be applicable (a) with respect
to any Owned Real Property as to which Buyer shall not have ordered an
Environmental Report at least sixty (60) days prior to the Closing
<PAGE> 53
Date, (b) if all adverse environmental conditions shall have been remediated
and cured at Seller's cost prior to the Closing, or (c) if the subject parcel
of Owned Real Property is retained by Seller and replaced prior to Closing, at
Seller's cost, with another parcel of property of substantially equivalent
utility, which replacement property shall be fully equipped and operational as
of the Closing.
Section 7.9 Title Commitment. Provided that Buyer shall have
ordered such commitments at least sixty (60) days prior to the Closing Date,
Buyer shall have received, at Buyer's expense, a written commitment to issue
owner's and lessee's policies of title insurance, naming Buyer as the insured,
written by a responsible title insurance company authorized to write title
insurance with respect to real estate in the states where the Owned Real
Property and Leased Real Property is located, which policies shall guarantee
such title to be in the condition called for by this Agreement, and shall show
no rights of occupancy or use by third parties, no gaps in the chain of title
and no violations of any applicable zoning or other ordinance, statute, rule or
regulation.
Section 7.10 Retransmission Extensions. With respect to
those broadcast television stations, the signals of which are presently
retransmitted on one or more of the Systems and whose retransmission consent
expires on or before January 31, 1997, Buyer shall have obtained the written
consent of each such station to continue to retransmit such signal for a period
of not less than one year from the date such consent to continued
retransmission is given, in each case on terms which are substantially similar
to those presently applicable to the Systems or upon such other terms as are
reasonably acceptable to Buyer.
Section 7.11 Uncured Defaults. There shall exist no uncured
default under any Franchise, Access Agreement, Lease or other contract being
assumed by Buyer which individually or in the aggregate could be reasonably
expected to affect the value of the Systems by more than $250,000 or involve
payments or expenditures in excess of $250,000.
Section 8. Conditions Precedent to the Obligation of Seller and
General Partner to Close.
The obligation of Seller and General Partner to consummate the
transactions herein contemplated is subject to the satisfaction at or before
the Closing of the following conditions:
Section 8.1. Truth of Representations and Warranties. The
representations and warranties of Buyer included in this Agreement and in any
Schedule or other instrument or document delivered by Buyer hereunder shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date
(except for representations and warranties which by their terms relate to a
specific date, which shall remain true and correct as of such date). Seller
shall have received a certificate to this effect dated the Closing Date and
signed by Buyer.
<PAGE> 54
Section 8.2. Performance of Agreements. Each payment,
delivery or other action required of Buyer under this Agreement, and each
agreement of Buyer to be performed at or before the Closing under the terms
hereof or as contemplated herein shall have been duly performed. Seller shall
have received a certificate to this effect dated the Closing Date and signed by
Buyer.
Section 8.3 Opinion of Buyer's Counsel. Buyer shall provide
to Seller and General Partner the favorable opinion, dated the Closing Date, of
Edwards & Angell, counsel to Buyer, substantially in the form set forth in and
covering the matters covered by Schedule 8.3.
Section 9. Conditions Precedent to Each Party's Obligations.
The respective obligations of Buyer and the Seller to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or prior to the Closing, of each of the following conditions:
(a) The aggregate number of Basic Subscribers in those
Franchise Areas that are Transferable Franchise Areas shall be at
least 90% of the aggregate number of Basic Subscribers in all
Franchise Areas.
(b) There shall not be in effect an injunction or restraining
order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transaction contemplated by
this Agreement and no action or proceeding brought by any governmental
authority shall be pending that may result in a judgment, decree, or
order that would prevent or make unlawful the consummation of the
transactions under this Agreement.
(c) All applicable waiting periods under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
Section 10. The Closing.
Section 10.1. Time and Place. The closing of the
transactions contemplated hereunder (the "Closing") shall be held at the
offices of Triax Communications Corporation, 100 Fillmore Street, Suite 600,
Denver, Colorado 80206 (or, if Buyer so elects, at the office of counsel to
Buyer's senior lenders) at 10:00 a.m. on a date specified by Buyer upon at
least 10 days prior written notice to Seller, which date is not earlier than
the date the condition set forth in Section 9(a) shall have been satisfied and
not later than thirty (30) days after the date the aggregate number of Basic
Subscribers in those Franchise Areas that are Transferable Franchise Areas
shall be at least 97.5% of the aggregate number of Basic Subscribers in all
Franchise Areas, but in no event earlier than October 1, 1996 (unless Buyer
shall have agreed in writing to waive any purchase price adjustment under
Section 2.5(c)) and in no event later than October 30, 1996 (the "Closing
Date").
Section 10.2. Deliveries by Seller. At the Closing, Seller
shall execute and deliver to Buyer:
<PAGE> 55
(a) Transfer Documents. Such bills of sale, deeds,
assignments, consents and other instruments of conveyance and transfer
as may, in the opinion of counsel for Buyer, be required or
appropriate in order to effectively vest in Buyer title to, and
physical possession of, all of the assets and rights being acquired by
Buyer hereunder as contemplated by this Agreement;
(b) Officer's Certificates. Certificates, each dated as
of the Closing Date, executed by a senior officer of each of Seller
and General Partner, respectively, certifying (i) that the
representations and warranties of Seller and General Partner included
in this Agreement and in each Schedule or other instrument or document
delivered hereunder shall be true and correct on and as of the Closing
Date, with the same effect as though such representations and
warranties had been made on and as of such date (except for
representations and warranties which by their terms relate to a
specific date, which shall remain true and correct as of such date);
and (ii) that all security interests in and liens, pledges and
encumbrances upon the Transferred Assets have been satisfied,
terminated and released.
(c) Secretary's Certificates. Certificates, each dated
as of the Closing Date, executed by a senior officer of each of Seller
and General Partner, respectively, certifying (i) that the
resolutions, as attached to such certificate, were duly adopted by
Seller and General Partner, or each of their respective corporate
general partner(s), authorizing and approving the execution and
deliver of the Seller Agreements and the consummation of the
transactions contemplated hereby and that such resolutions remain in
full force and effect; and (iii) as to the incumbency of each
signatory to the Seller Agreements executed by Seller and General
Partner.
(d) Opinions of Counsel. Opinions of Seller's and
General Partner's general counsel and FCC counsel, substantially in
the forms as Schedules 7.4 and 7.5, respectively.
(e) Transferred Assets. Possession of the Transferred
Assets; and
(f) Other. Such other certificates, instruments and
documents as Buyer or its counsel may reasonably request, including
(without limitation) releases or terminations of financing statements
filed under the Uniform Commercial Code or otherwise recorded under
the laws of any state and any other release or termination of lien and
encumbrance requested, for the purpose of closing the transactions
contemplated by this Agreement.
Section 10.3. Deliveries by Buyer. At the Closing, Buyer
shall pay or cause to be paid or execute and deliver to or on behalf of Seller:
<PAGE> 56
(a) Payment. The Cash Consideration, as adjusted
pursuant to Section 2.5, less the Post-Closing Escrow and the Retained
Franchise Escrow Amount, if any.
(b) Assumption Agreements. The Assumption Agreement; and
(c) Officer's Certificate. Certificate, dated as of the
Closing Date, executed by a senior officer of Buyer, certifying that
the representations and warranties of Buyer included in this Agreement
or other instrument or document delivered hereunder shall be true and
correct on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of such
date (except for representations and warranties which by their terms
relate to a specific date, which shall remain true and correct as of
such date).
(d) Secretary's Certificate. Certificate, dated as of
the Closing Date, executed by a senior officer of each of Buyer,
certifying (i) that the resolutions, as attached to such certificate,
were duly adopted by Buyer's corporate general partner(s), authorizing
and approving the execution and deliver of the Buyer Agreements and
the consummation of the transactions contemplated hereby and that such
resolutions remain in full force and effect; and (iii) as to the
incumbency of each signatory to the Buyer Agreements executed by
Buyer.
(e) Opinion of Counsel. Opinion of Buyer's general
counsel, substantially in the form as Schedule 8.3.
(f) Other. Such other certificates, instruments and
documents as Seller or its counsel may reasonably request for the
purpose of closing the transactions contemplated by this Agreement.
Section 11. Subsequent Closings. If, on the date specified for
the Closing pursuant to Section 10.1, any Franchise Area is not a Transferable
Franchise Area (the "Non-Transferable Franchise Area"), then, notwithstanding
any other provision of this Agreement, the following provisions shall apply:
(a) At the Closing, Seller shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Seller, all Transferred
Assets, except only for any Franchise which relates to a Non-Transferable
Franchise Area (each such Franchise, a "Retained Franchise") and all of the
other Transferred Assets which are used exclusively in the operation of the
Franchise Areas serviced pursuant to such Retained Franchises (the "Retained
Assets"). From and after the Closing, Seller shall retain the Retained
Franchises and the Retained Assets, and, subject to the terms and conditions in
this Section 11, Seller shall sell and assign to Buyer, and the Buyer shall
purchase and acquire from Seller, the Retained Franchises and the Retained
Assets in accordance with the terms of this Section 11.
<PAGE> 57
(b) At the Closing:
(i) The amount payable by Buyer to the Sellers
pursuant to Section 2.2 shall be reduced by an amount that Buyer is
required to deposit in escrow pursuant to Section 11(b)(iii).
(ii) All conveyance documents, certificates and
other documents contemplated by this Agreement to be delivered at the
Closing shall be in the form and substance provided for in this
Agreement with such modifications as are necessary or appropriate to
reflect the provisions of this Section 11.
(iii) Buyer shall deliver to one of Buyer's senior
lenders, as escrow agent or to another mutually acceptable escrow
agent (the "Retained Franchise Escrow Agent"), by wire transfer of
federal reserve funds, (aa) $2,125,000 if the aggregate number of
Basic Subscribers in those Franchise Areas that are Transferable
Franchise Areas shall be less than or equal to 97.5% of the aggregate
number of Basic Subscribers in all Franchise Areas (such computation
being hereinafter referred to as the "Transferable Subscriber
Percentage"), or (bb) otherwise, an amount equal to that portion of
the Cash Consideration allocable to the Retained Franchises and the
Retained Assets, which amount shall be the product of the number of
Basic Subscribers in the Franchise Areas serviced under such Retained
Franchises multiplied by $1,553.00 (the "Full Per Subscriber Amount")
(such number of Basic Subscribers to be determined based on the
information in Schedule 3.7(a)). The amount delivered to the Retained
Franchise Escrow Agent, (the "Retained Franchise Escrow Amount") shall
be held in an escrow account (the "Retained Franchise Escrow Account")
pursuant to the terms of an escrow agreement on terms mutually
satisfactory to Buyer and Seller (the "Retained Franchise Escrow
Agreement"), with any revisions thereto that are reasonably requested
by Buyer's senior lenders to grant them a perfected security interest
in the Retained Franchise Escrow Amount (subject to the rights of
Seller under this Agreement). All interest earned on the Retained
Franchise Escrow Amount shall be disbursed to Seller as provided in
this Section 11.
(iv) Buyer and Seller shall enter into a mutually
acceptable management agreement (the "Management Agreement") pursuant
to which Buyer shall manage the Systems serviced by the Retained
Franchises. The Management Agreement shall provide that Buyer will be
entitled to receive and retain all revenues, and will be responsible
for all costs and expenses, attributable to the operations of the
Retained Franchises and the Retained Assets, the intent of the parties
being that Buyer will enjoy the economic rewards and bear the economic
risks resulting from the operation of the Retained Systems and the
Retained Assets during the term of the Management Agreement.
<PAGE> 58
(c) After the Closing, Buyer and Seller shall cooperate in
obtaining any authorizations, consents, orders, or approvals of any
municipal authority necessary to cause any Franchise Area that was not
a Transferable Franchise Area on the Closing Date to become a
Transferable Franchise Area, and the agreements and obligations of
Buyer and Seller under the other provisions of this Agreement shall be
fully applicable in seeking such authorizations, consents, orders, or
approvals after the Closing. Seller shall give to Buyer written
notice of the receipt of any authorizations, consents, orders, or
approvals of any municipal authority necessary to cause any Franchise
Area that was not a Transferable Franchise Area on the Closing Date to
become a Transferable Franchise Area.
(d) If any Franchise Area that was not a Transferable
Franchise Area on the Closing Date becomes a Transferable Franchise
Area within fifteen (15) months after the Closing Date, then, a
closing shall be held on a date to be agreed to between Buyer and
Seller (or, if Buyer and Seller fail to agree, on the first business
day that is at least ten days after such Franchise Area becomes a
Transferable Franchise Area), in accordance with the following:
(i) At such closing, the Seller shall sell and
assign to Buyer, and Buyer shall purchase and acquire
from Seller, those Retained Franchises that cover
Franchise Areas that have become Transferable
Franchise Areas by such closing date and all Retained
Assets relating thereto, as evidenced by bills of
sale and assignment and assumption agreements in form
and substance substantially identical to those
delivered by the parties at the Closing;
(ii) The closing conditions of Buyer and Seller
in Sections 7, 8 and 9 shall apply to such closing
insofar as such conditions relate to the Retained
Franchises and Retained Assets described in paragraph
(i) above; provided however, that the provisions of
Sections 7.1, 7.4, 7.5, 7.6, 7.7, 7.10, 8.1, 8.3,
9(a) and 9(c) shall not apply with respect to such
closing;
(iii) At such closing, Buyer and Seller
shall make to one another mutually acceptable
representations and warranties with respect to the
Retained Franchises and the Retained Assets and the
transactions contemplated herein;
(iv) At such closing, Buyer and Seller shall
execute and deliver conveyance documents,
certifications and other documents (other than
opinions of counsel) corresponding to those delivered
at the Closing with such modifications as are
necessary or appropriate to reflect the provisions of
this Section 11 and to relate to the Retained
Franchises and Retained Assets being purchased by
Buyer at such closing;
<PAGE> 59
(v) Upon such closing, the Management Agreement
shall be terminated with respect to the Franchise
Areas covered by the Retained Franchises that are
transferred at such closing; and
(vi) At such closing, to the extent the
Transferable Subscriber Percentage is less than or
equal to 97.5%, then no disbursement shall be made
from the Retained Franchise Escrow Account. To the
extent the Transferable Subscriber Percentage then
exceeds 97.5%, Buyer and Seller shall direct the
Retained Franchise Escrow Agent to disburse to Seller
the Full Per Subscriber Amount times the number of
Basic Subscribers (in excess of such 97.5% threshold)
in the Franchise Areas covered by the Retained
Franchises described in paragraph (i) above (as
determined pursuant to Schedule 3.7(a)), together
with all interest then earned under and credited to
the Retained Franchise Escrow Account.
(e) If any Franchise Areas do not become Transferable
Franchise Areas within fifteen (15) months after the Closing Date, then a
closing shall be held on the first business day that is fifteen (15) months
after the Closing Date, in accordance with the following:
(i) At such closing, Seller shall sell and
assign to Buyer, and Buyer shall purchase and acquire
from Seller, all Retained Franchises and Retained
Assets pertaining to Franchise Areas that shall not
have become Transferable Franchise Areas, as
evidenced by bills of sale and assignment and
assumption agreements in form and substance
substantially identical to those delivered by the
parties at the Closing;
(ii) The closing conditions of Buyer and Seller
in Sections 7, 8 and 9 shall apply to such closing
insofar as such conditions relate to the Retained
Franchises and Retained Assets described in paragraph
(i) above, except that Buyer shall be deemed to have
waived the condition that any authorization, consent,
order or approval of any municipal authority
necessary for the transfer of such Retained Franchise
shall have been obtained and shall be final; and
provided however, that the provisions of Sections
7.1, 7.4, 7.5, 7.6, 7.7, 7.10, 8.1, 8.3, 9(a) and
9(c) shall not apply with respect to such closing;
(iii) At such closing, Buyer and Seller shall make
to one another mutually acceptable representations
and warranties with respect to the
<PAGE> 60
Retained Franchises and the Retained Assets and the
transactions contemplated herein;
(iv) At such closing, Buyer and Seller shall
execute and deliver conveyance documents,
certificates and other documents (other than opinions
of counsel) corresponding to those delivered at the
Closing with such modifications as are necessary or
appropriate to reflect the provisions of this Section
11 and to relate to the Retained Franchises and
Retained Assets being purchased by Buyer at such
closing;
(v) Upon such closing, the Management Agreement
shall be terminated; and
(vi) At such closing, Buyer and Seller shall
direct the Retained Franchise Escrow Agent to
disburse the Retained Franchise Escrow Amount (to the
extent not previously disbursed) as follows: (A) the
Retained Franchise Escrow Agent shall disburse to
Buyer the product of twenty-five percent (25%) of the
Full Per Subscriber Amount times the number of Basic
Subscribers in such non transferable Franchise Areas
(as determined pursuant to Schedule 3.7(a)); and (B)
the Retained Franchise Escrow Agent shall disburse to
Seller all other amounts remaining in the Retained
Franchise Escrow Account.
(f) With respect to any claim by Buyer for indemnification
pursuant to Section 6 relating to any Non-Transferable Franchise Area, the time
limitations pertaining to the assertion of claims shall be measured from the
original Closing Date, and such limit shall remain subject to the exceptions
set forth in Section 6(d). Subject to such time limitations, any such claims
may be asserted at any time after the original Closing Date and shall be valued
and treated in all respects as if the Retained Assets had been transferred to
Buyer.
(g) Buyer and the Seller shall negotiate in good faith any
other changes to this Agreement necessary or appropriate to effectuate the
intent of this Section 11.
(h) For purposes of this Agreement, the following terms
shall have the following meanings ascribed to them:
(1) "Basic Subscriber" means accounts in a single
household or commercial facility, which are using basic cable
television services provided by Seller and: (i) are paying no less
than the standard rate per month set forth in Schedule 2.4(a) (the
"Standard Basic Rate") for such service, and are not more than 60 days
or more past due, calculated from the first applicable billing date
(which Seller and General Partner represent and warrant to be the
first or the fifteenth day of each month), and are not entitled to any
discount, rebate or other form of price concession or reduction with
respect to cable services (other than for bona fide overpayments made
by any such subscriber); (ii) have made payment to Seller for Seller's
full cable television installation fee (other than for installation
discounts granted in accordance with this Agreement); and (iii) (A)
who have paid to Seller at least one full monthly payment
<PAGE> 61
for basic cable television services in accordance with Seller's
regular monthly billing cycle at or above the Standard Basic Rate or
(B) who purchase cable services from Buyer and make full payment
therefor, within 60 days after Buyer's first billing date following
the Closing.
Seller represents and warrants that a list of all of Seller's
Basic Subscribers and other subscribers who do not constitute Basic
Subscribers who are separately identified as such, as of a date not
earlier than April 30, 1996 is set forth in Schedule 2.4(b), including
the special accounts and Bulk Subscriber accounts under the agreements
separately identified as such in Schedule 2.4(b) under which Seller
has agreed to provide cable television services to trailer parks,
condominiums, motels, apartments and other multiple dwelling and
commercial users on a single billing bulk basis or other discounted
basis (collectively, "Bulk Subscribers"), which list shall be updated
by Seller so that it is current as of the end of the business day
preceding the Closing Date.
(2) "Franchise Area" means any of the geographic areas in
which Seller is authorized to provide cable television service
pursuant to a Franchise granted by a municipal authority or provides
cable television service in any geographic area in which a Franchise
granted by a municipal authority is not required pursuant to
applicable law;
(3) "Transferable Franchise Area" means any Franchise
Area with respect to which (i) any authorization, consent, order or
approval of any municipal authority necessary for the assignment of
the Franchise for such Franchise Area in connection with the
consummation of the transactions contemplated by this Agreement shall
have been obtained and shall be effective, without any condition or
qualification materially adverse to Buyer or Seller or that would have
a materially adverse effect on such Franchise Area, or (ii) no
authorization, consent, order or approval of any municipal authority
is necessary for the assignment of the Franchise for such Franchise
Area in connection with the consummation of the transactions
contemplated by this Agreement, or (iii) no Franchise is required for
the provision of cable television service in the Franchise Area
Section 12. Non-competition.
<PAGE> 62
In consideration of the allocation of $100,000 out of the
Purchase Price (the "Non-Competition Payment"), which it is hereby agreed is
fair and adequate compensation therefor, Seller and General Partner each
agrees, and for no additional consideration Seller and General Partner and each
of their affiliates whose signatures appear on the signature pages of this
Agreement agree to agree in writing with Buyer at Closing (in the form of
Agreement Not to Compete set forth in Schedule 12), effective on and after the
Closing Date and for the five (5) year period following the Closing Date, not
to engage, directly or indirectly, either personally, or as an owner, employee,
partner, associate, officer, manager, agent, advisor, consultant or otherwise
in any business which is competitive with the business of Buyer within any
franchised or other operating territory of the Systems. For the purposes
hereof, a business will be deemed competitive with the business of Buyer if it
involves the development, construction, sale, lease, rental or operation of any
cable television system, satellite master antenna television system,
multi-point distribution system, low power television system, direct broadcast
satellite system, or "open video" systems as such terms are generally defined
and used in the communications industry.
Section 13. Notices.
Any notice or other communication required or permitted
hereunder shall be sufficiently given if in writing and sent by certified or
registered mail, postage prepaid, or by next business day courier service (such
as Federal Express) or telecopy, addressed as follows:
(a) If to Seller or General Partner addressed to:
c/o Triax Communications Corporation
100 Fillmore Street, Suite 600
Denver, Colorado 80206
Attention: Jay R. Busch, President
Telecopy #: 303-333-1110
With a copy to:
Alan G. Johnson, Esq.
Gallop, Johnson & Neuman, L.C.
16th Floor
101 South Hanley Road
St. Louis, Missouri 63105
Telecopy #: 314-862-1219
<PAGE> 63
(b) If to Buyer, addressed to:
FrontierVision Operating Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210-3925
Attention: James C. Vaughn
Telecopy #: (303) 757-6105
With a copy to:
Stephen O. Meredith, Esq.
Edwards & Angell
101 Federal Street
Boston, MA 02110
Telecopy # (617) 439-4170
or to such other address(es) as Seller or Buyer shall give notice to the other
by like means. Any such notice or communication shall be deemed to have been
given as of the date and time so mailed, delivered to the courier or
telecopied.
Section 14. Parties in Interest.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their successors, assigns, heirs and legal
representatives, each of which shall be entitled to rely upon and to receive
the benefit of, both directly as a third party beneficiary thereof and by
collateral assignment, the representations, warranties and agreements of Seller
and General Partner under this Agreement as fully as if it was a party to this
Agreement.
Section 15. Entire Agreement.
(a) The Schedules hereto are hereby incorporated in and
form an integral part of this Agreement. For purposes of preparing
the Schedules, any item disclosed on one particular Schedule shall be
deemed to have been disclosed on all other Schedules where disclosure
of such item is required.
(b) All understandings and agreements between the parties
relating to the subject matter hereof are merged into this Agreement,
which fully and completely expresses their agreement and supersedes
any prior agreement or understanding relating to the subject matter
<PAGE> 64
hereof, including, without limitation, any letter of intent and
related correspondence among the parties.
Section 16. Termination. (a) This Agreement may be
terminated at any time by:
(i) the mutual written consent of the parties hereto;
(ii) either Buyer or Seller if the Closing Date does
not occur on or before October 30, 1996;
(iii) Buyer, if any of the conditions set forth in
Sections 7 or 9 shall not have been either fulfilled or waived by Buyer on or
before the Closing Date, or if Seller shall have breached any of its
representations, warranties or obligations hereunder in any material respect,
and such breach shall not have been cured in all material respects or waived
prior to the earlier of the Closing Date and thirty (30) days after the Buyer
has given notice to Seller of such breach; or
(iv) Seller, if any of the conditions set forth in
Sections 8 or 9 shall not have been either fulfilled or waived by Seller on or
before the Closing Date, or if Buyer shall have breached any of its
representations, warranties or obligations hereunder in any material respect,
and such breach shall not have been cured in all material respects or waived
prior to the earlier of the Closing Date and thirty (30) days after Seller has
given notice to Buyer of such breach.
(b) In the event of the termination of this Agreement by Buyer
or Seller pursuant to this Section 16, written notice thereof shall promptly be
given to the other party and, except as otherwise provided herein, the
transactions contemplated by this Agreement shall be terminated, without
further action by any party. Nothing in this Section 16 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or to impair the rights of Buyer to compel
specific performance of Seller of its obligations under this Agreement.
(c) Notwithstanding the foregoing, no party may terminate this
Agreement if such party is then in default hereunder.
Section 17. Governing Law.
This Agreement and the agreements and instruments contemplated
hereby shall be governed by and construed in accordance with the law of the
State of Colorado, without regard to the conflict of law provisions thereof.
Section 18. Counterparts. This Agreement may be executed in
several counterparts, all of which taken together shall constitute one
instrument.
<PAGE> 65
Section 19. Descriptive Headings. The descriptive headings
of the several sections of this Agreement are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 20. Vaughn Noncompete. Seller and the General
Partner, on behalf of themselves and their affiliates, hereby agree that
neither the execution, delivery and performance of this Agreement and the
transactions contemplated hereby by Buyer nor Buyer's ownership or operation of
the Systems following the Closing shall be construed to violate the Employment
Agreement dated January 1, 1994, the letter agreement dated April 7, 1995 or
the Agreement dated September 29, 1995, in each case as the same may be amended
from time to time, between James C. Vaughn and Triax Communications
Corporation, it being agreed that any such violation which would result
therefrom is hereby waived.
Section 21. Arbitration. Any controversy, dispute or claim,
including, but not limited to, a claim for specific performance, between Seller
and Buyer arising out of or in connection with, or relating to, this Agreement
or the transactions contemplated hereby or the breach, termination or validity
hereof, shall be finally settled by arbitration conducted expeditiously in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") in effect at the time of the commencement of arbitration.
The arbitration tribunal shall consist of three arbitrators. Each party shall
appoint one of the first two arbitrators, and the two arbitrators so appointed
shall appoint the third arbitrator, who shall act as chairman of the tribunal.
The party desiring to initiate arbitration proceedings shall give the other
party written notice thereof, describing the matter in dispute, naming its
arbitrator and demanding that the other party name its arbitrator within 10
days from the date of such notification. If the other party fails to name its
arbitrator within such 10 day period, or if the two arbitrators do not appoint
the third arbitrator within 15 days after the selection of the second
arbitrator, then the AAA shall, at the request of one of the parties, appoint
the second or third arbitrator, as the case may be. In the case of an
arbitration proceeding to resolve a dispute with respect to the calculation of
the adjustments to be made to the Purchase Price as contemplated by Section
2.5, a single arbitrator shall be a national independent public accounting firm
that has not performed any services for Seller, Buyer or General Partner during
the two years prior to the Closing Date. Any arbitration decision shall be
reasoned and in writing and any judgment upon the decision or award rendered by
the arbitrators may be entered and specifically enforced in any court having
jurisdiction thereof. The situs of any arbitration shall be Denver, Colorado.
A final award shall be rendered as soon as reasonably possible and in any event
within 90 days of the filing with AAA of any demand for arbitration.
<PAGE> 66
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
SELLER:
TRIAX SOUTHEAST ASSOCIATES, L.P.
By: TRIAX SOUTHEAST GENERAL PARTNER, L.P.,
its General Partner
By: TRIAX SOUTHEAST ASSOCIATES, INC.,
its General Partner
By: /s/ JAY R. BUSCH
-------------------------------------
Jay R. Busch, President
GENERAL PARTNER:
TRIAX SOUTHEAST GENERAL PARTNER, L.P.
By: TRIAX SOUTHEAST ASSOCIATES, INC.
its General Partner
By: /s/ JAY R. BUSCH
---------------------------------
Jay R. Busch, President
<PAGE> 67
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FRONTIERVISION PARTNERS, L.P., its
General Partner
By: FVP GP, L.P., its General Partner
By: FRONTIERVISION INC., its General Partner
By: /s/ JAMES C. VAUGHN
-------------------------------------
James C. Vaughn, President
The undersigned hereby agree to be bound solely by the provisions of
Sections 12 and 20 of the foregoing Agreement to the same extent and the on the
same basis as Seller is bound thereby.
/s/ JAY R. BUSCH
--------------------------------------
Jay R. Busch
/s/ JAMES DESORRENTO
--------------------------------------
James DeSorrento
TRIAX COMMUNICATIONS CORPORATION
By:/s/ JAY R. BUSCH
-----------------------------------
Jay R. Busch, President
<PAGE> 1
EXHIBIT 10.9
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (the "Agreement") is entered
into on this 21st day of June, 1996 by and between Helicon Partners I, LP, a
Delaware limited partnership, or its permitted assigns, with an address at 630
Palisade Avenue, Englewood Cliffs, New Jersey 07632, (the "Buyer"), and
FrontierVision Operating Partners, L.P., a Delaware limited partnership with an
address at 1777 South Harrison Street, Suite P-200, Denver, Colorado 80210 (the
"Seller").
WITNESSETH:
WHEREAS, Seller owns and operates a cable television system
serving, among other areas, Chatsworth, Eton and Murray County, Georgia and
adjacent areas (the "System" and the related business, the "Business"); and
WHEREAS, Buyer, in reliance upon the representations,
warranties and covenants being made by Seller herein, wishes to acquire from
Seller, and Seller desires to sell to Buyer, all of Seller's assets, subject to
certain stated exclusions and liabilities, which constitute a part of or are
necessary or desirable in the operation of Seller's Business and the Systems,
for the price and on the terms and subject to the conditions set forth in this
Agreement.
AGREEMENTS:
In consideration of the premises and of the mutual agreements
hereinafter set forth, the parties, intending to be legally bound thereby, do
hereby covenant and agree as follows:
1. SALE AND PURCHASE OF THE ASSETS
Subject to the terms and conditions set forth in this Agreement, at
the Closing (as defined in Section 4), Seller shall sell, assign, transfer,
deliver and convey to Buyer and
1
<PAGE> 2
Buyer shall purchase and acquire from Seller all of the assets and property of
every kind and character (other than those items expressly excluded by Section
1.8), real, personal or mixed, tangible and intangible, owned or held by Seller
and used by Seller in connection with the conduct of the Business and
operations of the System, and all rights with respect thereto (the "Assets"),
free and clear of any mortgages, deeds of trust, pledges, charges, security
interests, claims, liabilities, liens, or encumbrances of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise (collectively, the "Encumbrances") except for Permitted Encumbrances,
including, without limitation:
1.1 Tangible Personal Property. All items of tangible
personal property owned or held by Seller and used by Seller in connection with
the conduct of the Business and operations of the System ("Tangible Personal
Property"), including, without limitation, towers, satellite dishes, antennae,
downleads and other equipment associated with receiving and distributing
signals at the Systems' headend (origination, signal processing and
transmission) site, all electronic equipment, amplifiers and associated
equipment, trunk line cable, distribution cable, spare parts, mobile radio
equipment, subscriber converters, drops and other subscriber devices, the
motor vehicles listed on Schedule 5.7, and the local origination and other
equipment, test equipment, inventory, furniture, supplies, fixtures and
leasehold improvements listed on Schedule 5.7.
1.2 Franchises and Governmental Permits. All
authorizations, or renewals thereof, issued by Governmental Authorities (as
defined in Section 5.4) empowered by federal, state or local law to issue such
authorizations, whether such authorizations are designated as franchises,
permits, licenses, resolutions, contracts, certificates, agreements or
otherwise, which authorize and are required in connection with the
construction, operation or maintenance of the System as currently operated
(collectively, the "Franchises"), including those listed on Schedule 5.1920.
1.3 Assumed Contracts. All Assumed Contracts, where (a)
"Contracts" means all contracts, leases, non-governmental licenses and other
agreements (excluding all programming agreements), including without
limitation, pole attachment agreements, personal property leases,
retransmission consent agreements and agreements to provide cable service, to
which Seller is a party or which are binding upon Seller and which relate
solely to or affect solely the Assets or the Business or the operations of the
System, and (i) that are in effect on the date of this Agreement or (ii) that
are entered into by Seller between the date of this Agreement and the Closing
Date and which relate solely to or affect solely the Assets or the Business or
the operations of the System, and (b) "Assumed Contracts" means all Contracts
(i) that are listed on Schedule 5.8 or are in effect on the date of this
Agreement and are not required by Section 5.8 to be listed on Schedule 5.8 or
(ii) that are entered into by Seller between the date of this Agreement and the
Closing
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Date in compliance with Section 8.2.
1.4 Real Property Interests. All interests of Seller in
the Real Property, including fee estates, leaseholds and subleaseholds,
purchase options, licenses, easements, rights to access and rights of way (the
"Real Property Interests"), including, without limitation, the Real Property
Interests described in Schedule 5.13, where "Real Property" means all real
property, and all buildings and other improvements thereon, used exclusively in
connection with the Business or operations of the System.
1.5 Books and Records. All strand and "as built" maps,
plans, diagrams, files, forms, subscriber lists, billing service reports,
billing computer master tapes, employee files and books and records relating to
the Business and operation of the System other than Seller's corporate and
financial books and records and other than Seller's tax returns.
1.6 Accounts Receivable and Other Assets. All Accounts
Receivble (as defined in Section 3.2.3) and all choses in action of Seller
relating to the System.
1.7 Intangible Assets. All intangible assets of Seller
that relate to the Business and operations of the System.
1.8 Excluded Assets. The Assets shall exclude the
following assets:
(a) Seller's cash on hand as of the Closing Date
and all other cash in any of Seller's bank or savings accounts; any and all
insurance policies, letters of credit, or other similar items and any cash
surrender value in regard thereto; and any stocks, bonds, certificates of
deposit and similar investments;
(b) All Contracts that are not Assumed Contracts;
(c) Any books and records which Seller is required
by law to retain, subject to the right of Buyer to have reasonable access and
to copy for a period of three years from the Closing Date, and Seller's
partnership minute books and other books and records relating to internal
partnership matters (including tax returns);
(d) Any (i) "Employee Plan" which is defined as
any pension, retirement, profit-sharing, deferred compensation, vacation,
severance, bonus, incentive, medical, vision, dental, disability, life
insurance or other employee benefit plan as defined in Section 3(3) of the
Employment Retirement Income Security Act of 1974 ("ERISA") to
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which Seller or any entity related to Seller (under the terms of Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended and
the regulations thereunder, or any susequent legislative enactment thereof (the
"Code") contributes or which Seller or any entity related to Seller (under the
terms of Section 414(b), (c), (m) or (o) of the Code) sponsors or maintains, or
by which Seller or any such entity is otherwise bound, (ii) "Compenation
Arrangement" which is defined as any plan or compensation arrangement other
than an Employment Plan, whether written or unwritten, which provides to
employees, former employees, officers, independent contractors, directors,
partners or shareholders of Seller (under the terms of Section 414(b), (c), (m)
or (o) of the Code) any compensation or other benefits, whether deferred or
not, including any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other perquisites and employee fringe benefit plan, and (iii) any
employment or collective bargaining agreements; and
(e) Any assets of Seller that do not relate solely
to or are not used solely or held for use solely in connection with the
Business or operation of the System;
(f) All right, title and interest in or to names,
logos or symbols or any variant thereof employing the name "FrontierVision";
and
(g) The assets of Seller set forth on Schedule
1.8 hereof.
2. LIABILITIES
2.1 Assumption of Liabilities. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge and perform all obligations
and liabilities relating to the System and accruing with respect to the Assets
insofar as they relate to the time on and after the Closing Date, and arise out
of events related to Buyer's ownership of the Assets or its operation of the
System on or after the Closing Date, including all obligations and liabilities
of Seller under the Assumed Contracts and Franchises and all obligations and
liabilities of Seller in respect of which an adjustment to the Purchase Price
is made in Buyer's favor pursuant to Section 3.2.1 or Section 3.2.4 of this
Agreement. Buyer shall not be responsible for any obligations and liabilities
of Seller not assumed By Buyer pursuant to this Agreement, including without
limitation, any claims asserted against the Assets, Business or System relating
to any event, status, act or omission occurring prior to the Closing Date
except to the extent a Purchase Price adjustment is made in Buyer's favor in
respect thereof.
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2.2 Specific Liabilities Not Assumed. Without limiting
the generality of Section 2.1 above:
2.2.1 Buyer shall not assume and Seller shall retain and be
responsible for any and all claims, litigation and proceedings relating to any
event, status, act or omission occurring prior to the Closing Date except to
the extent a Purchase Price adjustment is made in Buyer's favor in respect
thereof.
2.2.2 Buyer shall not assume any employee benefit plan of
Seller. Seller shall be responsible for all liabilities and obligations under
all employee benefit plans in which employees (or former employees or
beneficiaries thereof) of Seller have participated, including any liability for
failure to comply with the requirements of ERISA.
2.2.3 Buyer shall not assume, or agree to perform, pay
or discharge, liabilities for any federal, state, local or foreign tax, levy or
similar charge imposed upon Seller or the Assets, Business and relating to
periods prior to the Closing Date (including, without limitation, real estate
taxes) except as expressly assumed by Buyer hereunder.
2.2.4 Buyer shall not assume and Seller shall retain and be
responsible for any and all obligations with respect to the Excluded Assets.
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3. PURCHASE PRICE
3.1 Amount of the Purchase Price; Payment. The aggregate
consideration for the sale and transfer by Seller to Buyer of the Assets and
the covenant of Seller not to compete shall equal the sum of Eight Million Six
Hundred Twenty Five Thousand Dollars ($8,625,000), subject to adjustment as set
forth in Section 3.2 (the "Purchase Price"). On the Closing Date, Buyer shall
pay or cause to be paid to Seller or Seller's designee the Purchase Price, less
(i) the amount paid to Seller as provided in Section 3.1.1 below, and (ii) the
Post-Closing Escrow Deposit, in cash by means of a wire or interbank transfer
in immediately available funds pursuant to wire instructions which shall be
delivered by Seller to Buyer at least two business days prior to the Closing
Date.
3.1.1 Simultaneously with the execution of this Agreement,
Buyer shall advance the sum of $250,000 (the "Deposit") to Seller by depositing
with Colorado National Bank, N.A. (the "Escrow Agent") cash in the amount of
the Deposit by means of a wire or interbank transfer in immediately available
funds in an account designated by Escrow Agent in writing at least two business
days prior to the date of execution of this Agreement. The Deposit and all
funds and documents related thereto from time to time on deposit with the
Escrow Agent shall be held and disbursed in accordance with the terms of an
Escrow Agreement to be entered into concurrently with the execution and
delivery of this Agreement. At the Closing, Seller and Buyer shall direct the
Escrow Agent to disburse (i) the Deposit to Seller, or Seller's designee, and
(ii) the interest earned on the Deposit to Buyer, in accordance with the
procedures set forth in the Escrow Agreement. If the purchase herein is not
consummated, Seller and Buyer shall direct the Escrow Agent to disburse the
Deposit (together with all interest and earnings thereon) in accordance with
Section 13 of this Agreement, in accordance with the procedures set forth in
the Escrow Agreement.
3.1.2 At Closing, Buyer shall deposit the amount of
$250,000 (the "Post-Closing Escrow Deposit") by means of a wire or interbank
transfer of immediately available funds in an account designated by the Escrow
Agent in writing, to be held and disbursed in accordance with the terms of the
Post-Closing Escrow Agreement and this Agreement.
3.2 Adjustments to the Purchase Price. The Purchase
Price shall be adjusted as follows:
3.2.1 Proration of Expenses. The Purchase Price shall be
increased or
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decreased as required to effectuate the following proration of expenses. All
expenses arising from the operation of the System, including business and
license fees, pole rental fees, utility charges, real and personal property
taxes and assessments levied against the Assets, property and equipment
rentals, applicable franchise, copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Assets under
this Agreement), prepaid deposits (to the extent such prepaid deposits are
assigned to Buyer at Closing), commissions and similar prepaid and deferred
items, shall be prorated between Buyer and Seller in accordance with the
principle that Seller shall be responsible for all expenses, costs and
liabilities allocable to the period prior to the Closing Date, and Buyer shall
be responsible for all expenses, costs and obligations allocable to the period
on and after the Closing Date. Notwithstanding the preceding sentence, there
shall be no adjustment for, and Seller shall remain solely liable with respect
to, any Contracts not included in the Assumed Contracts, wages, payroll taxes,
vacation pay and fringe benefits of Seller's employees, regardless of whether
they become employees of Buyer, and any other obligatiion or liability not
being assumed by Buyer pursuant to this Agreement.
3.2.2 Adjustment for Shortfall in EBU Subscribers and Pay
Unit Subscribers. The Purchase Price shall be decreased by the dollar amount
equal to $1,363.76212.23 times the number by which the actual number of EBU
Subscribers on the Closing Date is less than 5,692. The Purchase Price shall
also be decreased by the dollar amount equal to $316.63633.26 times the number
by which the actual number of Pay Unit Subscribers on the Closing Date is less
than 2,724.
3.2.3 Adjustment for Accounts Receivable. The
Purchase Price shall be increased by the dollar amount equal to 100% of the
face amount of all Accounts Receivable which, as of the Closing Date, are
outstanding for a period of not more than 3045 days from the day for which
service was first provided, 85% of the face amount of all Accounts Receivable
which, as of the Closing Date, are outstanding for a period of not more than 60
days from the day on which service was first provided and 0% of the face amount
of all other Accounts Receivable. For purposes of this Agreement, "Accounts
Receivable" shall mean all accounts receivable of Seller representing amounts
earned by Seller in connection with its conduct of the Business and operations
of the System through 12:01 a.m. on the Closing Date.
3.2.4 Other Purchase Price Adjustments. To the extent
not included in the prorations to the Purchase Price set forth in Section
3.2.1, the Purchase Price shall be decreased by the dollar amount equal to the
sum of (i) amounts theretofore paid to Seller for (y) converter deposits, if
any, and (z) prepaid subscriber fees (which shall be determined from a list
furnished prior to the Closing and certified by Seller to be true and complete
as of the date delivered).
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3.2.5 The adjustments to the Purchase Price described in
Section 3.2.1 through 3.2.4 shall be made at the Closing to the extent such
adjustments can be determined or estimated as of the Closing. Those items that
are subject to adjustment but are not capable of actual determination or
estimation as of the Closing shall be determined by Buyer, with the assistance
of Seller, as promptly as practicable after the Closing Date, but in no event
later than 90 days following the Closing Date. Buyer's determination shall be
made in accordance with generally accepted accounting principles applied on a
basis consistent with prior periods. Seller and Seller's representatives
(including, at Seller's option, Seller's accountants) shall have the right to
participate in the preparation of and to review such determination. If Seller
fails to agree with the determination made by Buyer, Seller shall give written
notice thereof within 30 days of receipt of Buyer's written determination,
specifying in reasonable detail the nature and extent of such disagreement, and
Buyer and Seller shall attempt to resolve such disagreement. If the parties
are unable to resolve such disagreement within fifteen (15) days after Buyer's
receipt of Seller's notice, either party may elect to require the matter to be
submitted to an independent accounting firm who shall be knowledgeable and
experienced in the operation of cable television systems and who shall be
reasonably acceptable to Buyer and Seller. Each party shall bear the fees and
expenses of its own independent accountants, if any, and the fees and expenses
of any firm selected to resolve any disagreement between the parties shall be
shared equally by Buyer and Seller. Within five business days following a
final determination (whether as a result of Seller's failing to give prompt
written notice of its disagreement with Buyer's determination, a resolution by
Buyer and Seller of any such disagreement, or a determination by a firm
selected to resolve any disagreement between the parties), Buyer shall pay to
Seller the amount of any underpayment, or Seller shall pay to Buyer or instruct
the Escrow Agent to refund to Buyer out of the Post-Closing Escrow Funds
referred to in Section 14.6 the amount of any overpayment, as the case may be.
3.3 Allocation of Purchase Price. The Purchase Price
shall be allocated among the Assets and the covenant not-to-compete in
accordance with an appraisal to be conducted by an appraisal firm selected and
retained by Seller, at Seller's expense, with experience in the valuation and
appraisal of cable television system assets, with the final allocation to be
mutually agreed upon by Buyer and Seller, provided that $100,000.00 of the
Purchase Price shall be allocated to the covenant not-to-compete contemplated
by Section 8.5.
4. THE CLOSING AND THE CLOSING DATE
Unless this Agreement shall have been terminated in accordance
with its terms, the closing of the transactions provided for herein (the
"Closing") shall take place
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at the offices of Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W.,
Suite 800, Washington, D.C. 20036, counsel for Seller, at 10:00 a.m. on such
date (the"Closing Date") which is at least twelve (12) business days after such
date on which Buyer has received written notice from Seller that the conditions
to closing set forth in Sections 9.5, 9.8 and 10.5 of this Agreement shall have
been satisfied or waived by the party for whose benefit the closing condition
was imposed, but in no event prior to July 10, 1996, or on such other date as
the parties may mutually agree in writing.
. Seller agrees to consider any requests by Buyer for
reasonable adjournments of the Closing Date, provided, however, no such
adjournment shall extend past -------------, 1996.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, as follows:
5.1 Organization, Good Standing and Power. Seller is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is duly qualified to conduct business as
a foreign limited partnership in the State of Georgia. Seller has all
requisite partnership power and authority to own, operate and lease all of the
Assets and to own and operate the Business and the System as currently operated
and as contemplated to be operated by Seller. Seller is not a participant in
any joint venture or partnership with any other person or entity with respect
to any part of the System's operations or the Assets.
5.2 Authority. The execution, delivery and performance
by Seller of this Agreement and the other agreements contemplated hereby to
which Seller is a party have been duly and validly authorized by all necessary
partnership actions on the part of Seller and its partners. This Agreement is
a valid and binding agreement of Seller, enforceable against it in accordance
with its terms except as the enforceability of this Agreement and the other
agreements contemplated hereby may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies. The other agreements contemplated
hereby to be executed by Seller, upon execution, will be binding upon and
enforceable against Seller in accordance with their respective terms except as
the enforceability of this Agreement and the other agreements contemplated
hereby may be affected by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally and by judicial discretion in the enforcement of
equitable remedies.
5.3 No Violation. Subject to obtaining the consents,
permits or approvals of Governmental Authorities and other third parties
necessary to transfer the Assets to
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Buyer or otherwise to consummate the transactions contemplated by this
Agreement (the "Consents") or as otherwise discloseddisclosed on Schedule 5.3,
the execution, delivery and performance by Seller of this Agreement and the
other agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby:
5.3.1 Will not conflict with or cause a breach or default
under any of the terms and provisions of the Franchises or any contract,
agreement, lease, license or other instrument to which Seller is a party or by
which Seller is bound or by which any of the Assets may be affected;
5.3.2 Will not result in a violation of Seller's partnership
agreement, any judgment, decree, order or award of any court, governmental body
or arbitrator, or any applicable law, ordinance, rule or regulation;
5.3.3 Will not result in the creation of any Encumbrance
on any of the Assets; and
5.3.4 Will not permit the acceleration, termination or
cancellation of the Contracts, Franchises or other agreements or instruments
included in the Assets being assigned to Buyer.
5.4 Compliance with Laws.
Except as disclosed on Schedule 5.4, to Seller's
knowledge:
5.4.1 Seller is not in violation of any existing
requirements of the Franchises or of any, federal, state or local law, rule or
order of the United States of America or any state, commonwealth, territory or
possession of the United States of America or any political subdivision thereof
(including counties, municipalities and the like) or any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board having jurisdiction over Seller (each a
"Governmental Authority"), including the rules and regulations of the Federal
Communications Commission (the "FCC") and the Federal Aviation Administration
(the "FAA"), which are applicable to the conduct of the Business, and the
ownership and operation of the System (excluding, in each case, violations
which do not or would not have a material adverse effect on the operations of
the System taken as a whole or on Seller'sthe ability to perform any of its
obligations under this Agreement (a "Material Adverse Effect")).
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5.4.2 Seller has received no written notice that it lacks
any authorization required for the installation, maintenance or replacement of
subscriber drops, distribution lines and trunk cable included in the Assets.
5.4.3 Seller has not received any written notices from any
Governmental Authority: (A) asserting or investigating any alleged failure of
Seller to comply with any applicable law, ordinance, franchise, regulation,
building or zoning rule or requirement of any Governmental Authority with
respect to its ownership and operation of the System or asserting that Seller
has not made all copyright filings required to be filed by Seller pursuant to
Section 111 of the Copyright Act of 1976, as amended (the "Copyright Act") with
respect to its ownership and operation of the System; (B) asserting that the
Franchises or any Assumed Contract may be terminated or revoked or that any
Material Contract is in jeopardy of being terminated or revoked; or (C)
asserting that Seller has not paid in full all franchise fees, pole attachment
fees and copyright royalty fees pursuant to Sectioin 111 of the Copyright Act
due and payable and required to be paid by Seller through the date hereof with
respect to its ownership and operation of the System.
5.4.4 Seller has delivered or made available to Buyer true
and correct copies of all of its filings made with and material correspondence
to, from, and with respect to, all Governmental Authorities, including the
counties or communities that issued the Franchises, the FCC, the FAA and the
Copyright office and all such filings and material correspondence in Seller's
possession relating to the System.
5.4.5 Seller has not violated any law, ordinance, rule or
regulation in respect of any Franchise, in the conduct of the Business or in
connection with the ownership and operation of the System, and Seller is not
aware of any such violation by any of its predecessors (excluding in each case,
violations which do not or would not have a Material Adverse Effect). For
purposes of this Agreement, "C4 Agreement" means the Asset Purchase Agreement
dated October 27, 1995, as amended, between Seller and C4 Media Cable
Southeast, Limited Partneship and County Cable Company, L.P.
[5.5 Intentionally Deleted]
5.6 Absence of Adverse Changes.
5.6.1 Except as set forth on Schedule 5.6, since February
1, 1996:
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(A) There has not been any occurrance that has
had a Material Adverse Effect; and
(B) Seller has conducted the Business and
operated the System in the ordinary course
of business.
5.6.2 Except as set forth on Schedule 5.6, since February
1, 1996, Seller has not:
(A) Suffered any damage, destruction or loss,
whether or not covered by insurance,
affecting the Assets other than any such
damage, destruction or loss as did not or
would not have a Material Adverse Effect;
(B) Made or agreed to make any sale, lease,
transfer or other disposition by Seller of
any Assets nor any mortgage or pledge on, or
the imposition of any Encumbrance other than
Permitted Encumbrances on, any of the Assets;
(C) Made or granted any general wage or salary
increase to its employees other than in the
ordinary course of business;
(D) Made any increase in any employee benefit or
other benefits listed on Schedule 5.11 other
than in the ordinary course of business;
(E) Entered into any employment or consulting
agreement or other agreement for personal
services unless in the ordinary course of
business;
(F) Incurred or become subject to, or agreed to
incur and become subject to, any obligation
or liability, except in the ordinary course
of business;
(G) Acquired, or agreed to acquire or sold, or
agreed to sell, any material assets or
property relating to the Business and
operation of the System;
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(H) Waived any rights of substantial value held by
or cancelled or compromised any debt owed to
Seller with respect to the System, except in
the ordinary course of business;
(I) Made any adverse modifications or changes to,
or terminated or failed to renew or extend,
any Franchise or Assumed Contract, except in
the ordinary course of business;
(J) Entered into any lease agreement relating to
the Business and operation of the System other
than in the ordinary course of business;
(K) Changed any subscriber service rates with
respect to the System or added or deleted any
programming service with respect to the System
such that the channels carried differ from
those shown on Schedule 5.22; or
(L) Changed in any material respect any of its
subscriber policies or subscriber billing
procedures with respect to the System.
5.7 Tangible Personal Property. Schedule 5.7 contains a
true and complete list of all material items of Tangible Personal Property.
Seller has good title to each item of Tangible Personal Property indicated on
Schedule 5.7 as being owned by Seller, and each such owned item of Tangible
Personal Property is owned free and clear of any Encumbrances other than the
Encumbrances disclosed on Schedule 5.25A and the Permitted E ncumbrances.
5.8 Leases, Contracts and Agreements; Consents.
5.8.1 Schedule 5.8 contains a true and complete list of all
Contracts in effect on the date of this Agreement other than agreements with
subscribers. True and correct copies of the written Contracts listed on
Schedule 5.8 have been delivered or made
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available to Buyer. All of the Assumed Contracts are in full force and effect,
and to Seller's knowledge are legal, valid and binding obligations of the other
party or parties thereto enforceable against them in accordance with their
respective terms. Seller has performed in all material respects all of its
obligations under the Assumed Contracts. Seller is not in material
default under any of the Assumed Contracts, and no condition, event or act has
occurred that, with notice or lapse of time or both, would give rise to any
material default on the part of Seller under any Assumed Contract.
5.8.2 Seller does not lease any motor vehicles in the
operation of its Business except those described on Schedule 5.8.
5.8.3 Except for the need to obtain the Consents described
on Schedule 5.3 or as set forth on Schedule 5.8, the Assumed Contracts are
assignable and transferable to Buyer, and any such assignment or transfer will
not affect the validity, enforceability or continuation of any such Assumed
Contract.
5.8.4 Except as set forth on Schedule 5.8, Seller is not
party to or bound by any consulting or management agreement that affects the
Seller's Business, the Assets or the System.
5.9 Use of Name; Location of Office. Since its
organization on July 14, 1995, Seller has not used any corporate name other
than its current name and since February 1, 1996, the System has been owned and
operated by Seller only under that name. Since its organization on July 14,
1995, Seller's principal executive offices have been located at its address set
forth above, and since February 1, 1996, all records and accounts relating to
the Business and the operation of the System have been maintained at the
principal executive office or at the System office at the following address:
1008 N. Third Avenue, Chatsworth, Georgia 30705.
5.10 Employment Agreements. Seller is not a party to any
collective bargaining agreements with any union or except as discussed on
Schedule 5.8 to any employment or consulting agreements (written or oral) with
any of its employees or any person who performs services exclusively in
connection with the operation of the System. Seller is not a party to any
other employment arrangements with any of its employees who performs services
exclusively in connection with the operation of the System that are not
terminable at will at the election of Seller. There are no actual or, to the
best of Seller's knowledge, threatened strikes, work stopages or unresolved
labor grievances and, to the
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best knowledge of Seller, there are no attempts by unions to organize Seller's
employees who perform services exclusively in connection with the operation of
the System. There are no existing or threatened claims known to Seller made by
any of Seller's employees who perform services exclusively in connection with
the operation of the System against it or its insurance companies arising out
of or related to their employment with the System including, without
limitation, job-related accidents or illnesses.
5.11 Employees. Schedule 5.11 contains a true and
complete list setting forth the name of each person employed by Seller who
performs services exclusively in connection with the operation of the System
and, with respect to each such person, such person's length of employment, and
annual rate of, or the method of determining his or her, compensation,
including bonus, incentive, contingent and future compensation arrangements, if
any., the date and amount of each such person's most recent compensation
adjustment and Seller has delivered to Buyer a description of any fringe
benefits, including, without limitation, vacation and sick leave, vehicle use
arrangements and bonus or other arrangements.
5.12 Insurance and Surety Agreements.
5.12.1 Schedule 5.12 lists the insurance policies of
Seller that insure the Systems and the Assets. Schedule 5.12 contains a true
and complete list of: (A) all bonds, indemnity agreements and other agreements
of suretyship made for or held by Seller or otherwise in force and relating to
the Business, System or the Assets, including a brief description of the
character of the bond or agreement, the name of the surety or indemnifying
party, the amount of the bond, indemnity or suretyship and the name of the
bondholder or indemnified party, and the bond or agreement number and
limitation thereof; and (B) the dates and amounts of deposits with respect to
the bonding or surety arrangements that relate to the System. True and correct
copies of all such policies, bonds and agreements, and all endorsements thereon
or amendments thereto, have been delivered to or made available to Buyer.
Seller has not been refused any insurance with respect to the Business, the
Assets or the System for which it has applied.
5.12.2 Seller has not been advised by any of its insurance
carriers of an intention to reduce the coverage of, terminate (or not renew)
or, due to any increased risk, increase the premium of any insurance policies
with respect to the Business, the Assets or the System. Seller has not failed
to comply with any of the material conditions contained in any such policies
that would have a Material Adverse Effect.
5.13 Real Estate.
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5.13.1 Schedule 5.13 contains a complete and accurate
description of all Real Property and the nature of all Real Property Interests.
None of the Real Property Interests are fee estates. All earth stations,
headends, microwave and other towers, guy anchors, and buildings and other
improvements included in the Assets are located entirely on the Real Property
listed in Schedule 5.13.
5.13.2 Seller has not received any written notice of any
condemnation or rezoning proceeding, or property tax increase, with reference
to any of the Real Property.
5.13.3 To the Seller's knowledge, Seller is and has been in
material compliance with all applicable federal, state and local statutes,
regulations and ordinances and with all applicable decrees, orders and
contractual obligations relating to pollution, the discharge of, or exposure
to, materials in the environment or workplace ("Environmental Laws") ; to
Seller's knowledge, there is no suit, claim, action or proceeding, pending or
threatened, before any Governmental Authority in which the Seller has been or,
with respect to threatened proceedings, may be, named as a defendant (x) for
alleged noncompliance (including by any predecessor), with any Environmental
Laws, or (y) relating to the release, threatened release or exposure to any
material occurring at or on any Real Property sites owned, leased or operated
by the Seller.
Except as disclosed in Schedule 5.13 hereto, to Seller's knowledge no Hazardous
Substances, as hereinafter defined, have been or are located on or about any
Real Property in quantities that violate any Environmental Law in any material
respect, and to Seller's knowledge, based solely on the representations of the
sellers under the C4 Agreement, such Real Property has not been previously used
for the manufacture, transportation, treatment, storage or disposal of
Hazardous Substances. Except as described in Schedule 5.13 hereto, to Seller's
knowledge no surface impoundments or underground storage tanks are located in,
on or about such Real Property. For purposes of this Agreement, "C4 Agreement"
means the Asset Purchase Agreement dated October 27, 1995, as amended, between
Seller and C4 Media Cable Southeast, Limited Partneship and County Cable
Company, L.P.
For purposes of this Agreement, "Hazardous Substance" means any pollutant,
contaminant, hazardous or toxic substance, material, constituent or waste or
any pollutant that is labelled or regulated as such terms are defined in any
Environmental Law or that is labelled or regulated as such by any Governmental
Authority and includes asbestos and asbestos-containing materials and any
material or substance that is designated as a "hazardous substance" pursuant to
Section 307 of the Federal Water Pollution Control Act, 33 U.S.C. Section 1251,
et seq. (33 U.S.C. Section 1317); (ii) defined as a
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"hazardous waste" pursuant to Section 1004 of the Federal Solid Waste Disposal
Act, (42 U.S.C. Section 6902); (iii) defined as a "hazardous substance"
pursuant to Section 101 of CERCLA; or (iv) is so designated or defined under
any other applicable requirements of law.
5.14 Litigation.
5.14.1 Except for proceedings generally affecting the cable
television industry or as otherwise set forth on Schedule 5.14, as of the date
of this Agreement, there are no actions, suits, proceedings or investigations
pending, or, to the best of Seller's knowledge, threatened against or affecting
Seller with respect to the System, the Business, the Assets, or the System, at
law or in equity, before or by any Governmental Authority and Seller has no
knowledge of facts which exist which are reasonably likely to give rise to such
an action, suit, proceeding or investigation. As of the date of this Agreement,
nNeither Seller, nor the System is operating under or is subject to, or is in
default under or with respect to, any judgment, order, writ, injunction or
decree of any Governmental Authority with respect to the System.
5.14.2 Except as described on Schedule 5.14, there are no
proceedings pending (other than proceedings affecting the cable television
industry in general),, Seller is not negotiating with and has not received a
written demand from nor are there pending negotiations or demands, by a
Governmental Authority, or by a broadcasting station, telephone company, public
utility, pole landlord or lessor, to terminate or adversely change the terms
and conditions of Seller's rights relating to the System with respect to: (A)
pole attachment rights or rents; (B) subscriber rates or tariffs; (C) the
rearrangement or removal of cable, amplifiers, towers or other such rights);
(D) carriage of signals currently carried or not carried on the System; or (E)
the right to operate the System pursuant to the Franchises.
5.14.3 Seller does not have any liability, contingent or
otherwise, with respect to services performed or equipment used by, or actions
of, employees who perform services exclusively in conection with the operation
of the System, other than such liabilities as are incurred in the ordinary
course of the Business or are otherwise disclosed in the Agreement or Schedules
or would not be binding on Buyer as transferee of the Assets. Seller is not
contemplating the institution of any suit, claim, action, arbitration or
administrative or other proceeding relating to the System.
5.15 Tax Returns and Payments. Except where the failure
to file, pay,
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collect, withhold or remit any fees, assessments or taxes does not result in a
lien on the Assets or in the imposition of transferee or other liability on
Buyer for the payment of fees, assessments or taxes, Seller has filed all tax
returns and reports required to be filed by Seller exclusively in connection
with its ownership or operation of the System or Assets and has paid all
income, franchise, property, sales, employment, withholding and other taxes,
assessments, fees and other governmental charges shown as due on such returns
and reports. Seller is not delinquent in the payment of any such taxes,
assessments, fees and charges and has not requested any extension of time
within which to file any tax return or report that has not since been filed and
no deficiency has been asserted or assessed and not satisfied. Seller is not a
party to any action or proceeding by any Governmental Authority for the
assessment or collection of any such taxes, assessments, fees or charges and to
Seller's knowledge no claim for assessment or collection has been asserted
against Seller.
5.16 Disclosure. The representations and warranties of
Seller contained in this Agreement or in any other document, certificate or
written statement furnished or to be furnished to Buyer by Seller in connection
herewith do not contain any untrue statement of a material fact or omit or will
omit to state a material fact necessary in order to make the statements
contained herein and therein complete and not misleading as of the dates they
were made in light of the circumstances in which they were made.
5.17 Subscribers.
5.17.1 Schedule 5.17 sets forth, in each case as of the
date indicated on Schedule 5.17, (a) the number of EBU Subscribers, (b) the
number of Pay Unit Subscribers, (c) a true and correct list of each cable
package and service being offered to subscribers and (d) the charge for each
such package and service. Schedule 5.17 also lists all complexes of multiple
dwelling units served by the System as of the date indicated on Schedule 5.17
(including the name and address of each such complex and the number of dwelling
units in each such complex) and contains a copy of the subscriber billing
report with respect to each such bulk account.
5.17.2 For purposes of Section 5.17.1:
(a) "EBU Subscriber" means, at any date, the sum of (1) the aggregate
number of non-bulk account subscribers who (A) are subscribing to basic cable
television service, (B) are current (exclusive of Seller's customary late fee
and service credits the sum of which is not in excess of $5.00) in payment
within 60 days of the rendering of any invoice, (C) are paying the full
applicable rate (as listed in Schedule 5.17) for such service, and (D)
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with respect to subscribers who have been subscribers for less than 30 days,
have made at least one monthly payment for basic cable television service at
the full applicable rate (as listed in Schedule 5.17) for such service, plus
(2) the quotient of (A) the aggregate bulk rate revenues for the calendar month
preceding the date of determination from the provision of basic cable
television service for such month to bulk accounts that (i) are subscribing to
basic cable television service, (ii) are current in payment within 60 days of
the rendering of any invoice, and (iii) have paid for at least one month's
basic cable television service divided by (B) the standard monthly basic rate
of $20.80; and
(b) "Pay Unit Subscribers" means, at any date, the aggregate number
of subscriptions to (1) HBO, (2) Showtime, (3) The Movie Channel and/or (4) The
Disney Channel by subscribers who (A) are current in payment within 60 days of
the rendering of any invoice and (B) are required to pay the full applicable
regular retail rate (as listed in Schedule 5.17) (except for pre-existing
discounts) for each foregoing channel or combination of channels, as the case
may be.
5.17.3 Seller has delivered to Buyer true and complete
copies of the monthly subscriber billing reports prepared by it and/or its
computer billing service, J.D. Partnership, Ltd. and Phoenix System, Inc. dba
Touchtone Systems ________, (the "Billing Agent") since February 1, 1996. The
data contained in such reports, including the categories of subscribers,
services, rates, and disconnect histories are accurate in all material
respects.
5.18 System Plant. The System possesses one headend to
serve its subscribers. The System is built and operational at 330 mHz and has
a 42__ channel capacity of which 39 channels are used.
5.19 Franchises.
5.19.1 Schedule 5.19 lists all Franchises. To Seller's
knowledge, no portion of the System is operated outside the areas specified in
such Franchises. Seller has delivered to Buyer true and correct copies of all
amendments to any of the Franchises. Schedule 5.20 also states the date of
inception, renewal and termination of each such Franchise. All requests for
renewal of a Franchise as provided for under the Communications Policy Cable
Act of 1984, as amended, have been filed within 30 to 36 months prior to the
expiration of such Franchise and all reports required to be filed by Seller in
connection with its ownership or operation of the System or Assets with any
Governmental Authorities who issued a Franchise (a "Franchising Authority") or
the FCC are true and correct and have been duly filed. Except as set forth in
Schedule 5.19, none
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of the Franchises grant to any Governmental Authority any right of first
refusal or right to purchase the Assets.
5.19.2 Each Franchise is in full force and effect and, to
Seller's knowledge, constitutes a valid and binding obligation of the
Franchising Authority which is a party to such Franchise and is legally
enforceable againsnt such Franchising Authority in accordance with its terms.
5.19.3 Except as described on Schedule 5.19, Seller has not
received any written notice of modification, termination, default or dispute
from any Franchising Authority.
5.20 No Overbuilding.
To Seller's knowledge, except as set forth on Schedule 5.20
hereof, as of the date of this Agreement, (i) no franchise covering any portion
of any area authorized to be served under any of the Franchises, whether or
not any such area is currently being serviced by Seller, has been awarded to
any person, firm, corporation or entity other than Seller; (ii) no such award
has been applied for or is currently being considered by any Governmental
Authority; (iii) there are no other cable television systems operating in any
such area, whether or not any such area is currently being serviced by Seller,
and Seller knows of no plan to construct any such system or to offer any such
service.
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5.21 Legality of Signals Carried and Compliance with
Regulations and Licenses.
5.21.1 Schedule 5.21 contains a true and complete list of
all stations or signals carried by the System, the channel on which all
broadcast and non-broadcast programming is carried, describes whether each
station or signal is acquired by satellite earth station or off-air reception
or is locally originated, identifies the stations or signals by level of
service, (basic, tier, premium pay, etc.) and describes the classification of
each station or signal for copyright purposes. Except as set forth on Schedule
5.21, Seller (i) is authorized to carry all stations or signals which it is
currently carrying on the System and to utilize all frequencies which it is
currently using on the System, (ii) has not received any notice or demand from
the FCC, the United States Copyright Office (the "Copyright Office") any other
Governmental Authority, any licensed television station or any other person,
company or station challenging the right of Seller to carry or not to carry any
signal on the System, (iii) has given all notices required to be given by
Seller in connection with its ownership or operation of the System under, and
complied in all material respects with the Copyright Act and regulations
promulgated pursuant thereto in order to qualify for the compulsory license for
all FM and television stations currently carried by the System, (iv) has, to
the extent required, filed with the Copyright Office complete and accurate
Statements of Account required to be filed by Seller and has fully paid the
copyright fees required to be paid by Seller in connection with its ownership
or operation of the System. All broadcast signals listed in Seller's Statement
of Account, if any, qualify for the compulsory license. Seller has made
available to Buyer all contracts relating to local origination programming.
5.21.2 Seller has complied in all material respects with the
Copyright Act, the Communications Act of 1934, as amended, the Cable Television
Consumer Protection and Competition Act of 1992 and all rules, regulations and
orders of the Copyright Office and FCC promulgated pursuant to the foregoing
and all federal, state and local statutes and laws applicable to the reception,
retransmission, origination, reproduction, marketing and performance of
television programming and music.
5.22 Interest of Management. Except as set forth on
Schedule 5.22, no partner, stockholder, employee, officer or director of Seller
or "affiliate" of any of the foregoing (as such term is defined under federal
securities laws) has any interest in the Business or any of the Assets (except
for indirect interests by reason of such person's direct or indirect equity
interest in Seller), or has any stock or other enterprise, firm, corporation,
trust partnership, joint venture or any other entity that is a supplier to
Seller with respect to the System or that is in the cable television business
in any county or
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municipality abutting the counties or municipalities serviced by Seller. For
purposes of this Section 5.22 ownership of not more than 5% of the common or
preferred stock of any publicly held company the stock of which is listed on
any recognized stock exchange or regularly traded over-the-counter shall not be
deemed an ownership interest.
5.23 Books and Records. The books and records included in
the Assets and prepared by Seller have been maintained in accordance with good
business practices.
5.24 Pole Attachments. All appropriate approvals for all
pole attachments of existing plant have been obtained and all "make ready"
charges have been paid in full. Seller is in material compliance with all pole
attachment agreements included in the Assets, no unauthorized pole attachments
exist for which there would be back billing fee charges and/or penalties in an
amount greater than $2,5,000 in the aggregate, and, to Seller's knowledge,
Seller is in full compliance with the appllicable rules and regulations of The
National Electric Safety Code. Seller has not received and is not aware of any
requests from any utility for an audit of facilities or to modify poles, pole
fixtures or the placement of System plant. Seller is not aware of any road
relocation or other event that would require movement of cable in the System
except occasional movements of not more than 10 poles (in the aggregate) not
requiring individually, or in the aggregate, any significant expenditure or
interruption in service to subscribers.
5.25 Title. Seller has no subsidiaries. Seller has
good title to all the Assets, free and clear of all Encumbrances except for the
Encumbrances disclosed on Schedule 5.25A and the Permitted Encumbrances.
"Permitted Encumbrances" mean any of the following: (i) liens for taxes,
assessments and governmental charges not yet due and payable; (ii) rights
reserved to any Governmental Authority to regulate the affected asset; (iii) in
the case of leasehold Real Property Interests, the rights of any lessor and any
lien encumbering any lessor's interest in such property; (iv) easements,
rights-of-way, restrictions, encroachments and nonmonetary encumbrances
incurred in the ordinary course of business that, in the aggregate, do not
render the Assets subject thereto unusable for the purpose intended or
materially interfere with the ordinary use of the Assets in the ordinary course
of business; and (v) the liens and other encumbrances described in Schedule
5.25B.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
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6.1 Organization, Good Standing and Power. Buyer is a
limited partnership duly organized, validly existing and in good standing under
the laws of the state of Delaware and will, on the Closing Date, be qualified
to transact business as a foreign limited partnership under the laws of the
State of Georgia. Buyer has all necessary power to purchase and own the
Assets and to assume the liabilities and obligations of Seller that Buyer has
expressly agreed to assume hereunder. Buyer has all requisite power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by Buyer hereunder and thereunder.
6.2 Authority. The execution, delivery and performance
of this Agreement by Buyer have been duly and validly authorized by all
necessary actions on the part of Buyer and its partners. This Agreement has
been duly executed and delivered by Buyer, and this Agreement constitutes, and
when delivered the documents contemplated hereby will constitute the legal,
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with their terms except as the enforceability of this Agreement and the
documents contemplated hereby may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies.
6.3 Absence of Conflicting Agreements. Subject to
obtaining the Consents, the execution, delivery and performance by Buyer of
this Agreement and the documents contemplated hereby (with or without the
giving of notice, the lapse of time, or both): (a) do not require the consent
of any third party; (b) will not conflict with, result in a breach of, or
constitute a default under, any law (including without limitation, the
Communications Act of 1934, as amended), judgment, order, injunction, decree,
rule, regulation, or ruling of any court or governmental instrumentality; and
(d) will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of any performance required by the terms of, any agreement, instrument,
license, or permit to which Buyer is a party or by which Buyer may be bound,
that may impair Buyer's ability to acquire or operate the Assets.
6.4 Claims and Legal Actions. Except for proceedings
generally affecting the cable television industry, there is no claim, legal
action, counterclaim, suit, arbitration, governmental investigation or other
legal, administrative or tax proceeding, nor any order, decree or judgment, in
progress or pending, or to the knowledge of Buyer threatened, against or
relating to Buyer which may impair Buyer's ability to aquire or operate the
Assets, nor does Buyer know or have reason to be aware of any basis for the
same.
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6.5 Adequate Assignee. Buyer has sufficient technical
and business experience, management and financial resources to meet its
obligations hereunder (including without limitation it obligation to pay the
Purchase Price to Seller on the Closing Date).
6.6 Buyer's Due Diligence. Buyer is a sophisticated
operator of cable television systems. Buyer has independently conducted such
inspections, tests, audits and analyses of the System, the Assets and Seller's
books and records pertaining thereto as Buyer deems necessary or prudent. As
of the date of this Agreement, Buyer is not aware of any fact or circumstance
which renders any of Seller's representations and warranties contained in this
Agreement (including the Schedules hereto) false or inaccurate, except such
facts or circumstances, if any, which have been disclosed by Buyer in writing
to Seller prior to the date hereof. This representation shall not diminish or
obviate any of the obligations of Seller under this Agreement.
6.7 Disclosure. No representation or warranty made by
Buyer in this Agreement or in any certificate, document, or other instrument
furnished to or to be furnished by Buyer pursuant hereto contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact that is required to make any statement made herein or therein
not misleading.
7. MUTUAL AGREEMENTS AND COVENANTS
7.1 Fees and Expenses. Seller and Buyer shall each pay
one-half of any FCC filing fees, state or local sales or transfer taxes other
than bulk sales taxes, and other governmental charges arising in connection
with the conveyance of the Assets by Seller to Buyer pursuant to this
Agreement. Seller and Buyer shall each pay one-half of all Escrow Agent fees.
Except as otherwise provided in this Agreement, Buyer and Seller shall each
pay its own costs or expenses relating to the negotiation, execution and
delivery of this Agreement and the consummation of all transactions
contemplated hereby, including all fees and expenses of counsel, accountants,
agents and representatives.
7.2 Brokerage. Each party represents and warrants to the
other that, to its knowledge, no person has any claim for a brokerage or
finder's fee, commission or similar compensation in connection with the
negotiation, execution or consummation of this Agreement and the transactions
referred to therein except for Daniels & Associates, (the "Broker"). Seller
will be responsible for any brokerage commission or fee due to such Broker.
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7.3 Confidentiality; Public Announcements. Except for
such disclosure to attorneys, accountants, bankers and investors as may be
necessary for the consummation of the transaction contemplated by this
Agreement, and except as and to the extent required by law, each party will
keep confidential any confidential information obtained from the other party in
conection with the transactions contemplated by this Agreement. If this
Agreement is terminated, each party will return to the other party all
documents, information and other materials obtained by such party from the
other party in connection with the transactions contemplated by this Agreement.
Subject to their respective disclosure obligations under applicable law and
regulations, neither party shall make or shall authorize any other person to
make any public announcement relating to any aspect of the transactions
described herein without having first consulted with the other party concerning
the requirement for, and timing and content of, such public announcement and
having received its prior consent thereto.
7.4 Further Assurances and Cooperation. Each of Seller
and Buyer agrees to provide, make available, execute and deliver, at their own
cost and expense, all such other documents that the other party may reasonably
request from time to time after the Closing in order to effectuate the
transactions described herein. Following Closing, Seller agrees to provide
financial or other information that may reasonably be requested by Buyer in
connection with the foregoing, including providing reasonable access to
Seller's financial books and records relating to the Assets that are not
included in the Assets. Following Closing, Buyer agrees to provide Seller
access to the financial books and records included in the Assets as may
reasonably be requested by Seller.
7.5 Filings with the FCC and Franchising Authorities.
As soon as practicable, but in no event later than 10 days after the date of
this Agreement,the parties shall file with the FCC and any Franchising
Authorities from which consent to the transactiions contemplated by this
Agreement must be obtained as providied in this Agreement, all required
applications requesting consent to such transactions. Buyer shall assist
Seller in all reasonable respects (including, without limitation, by attending
meeting with the parties who must provide such consents and by providing the
financial data, information as to operating experience, appropriate insurance
and surety bonds reasonably required in order to obtain such consents), and the
parties shall take with due diligence all reasonable steps necessary to
expedite the processing of the application or applications and to secure such
consent or approval. Seller and Buyer shall furnish each other with any
correspondence from or to, and notify each other of any other communications
with, the FCC or Franchising Authorities that relate to the obtaining of such
consents and approvals, and each party shall have the right to participate in
any hearings or proceedings before the FCC or Franchising Authorities with
respect to such consents and approvals. Each party shall bear its own costs
and expenses (including the fees and disbursements of its counsel) in
connection with the preparation of the portion
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of any application to be prepared by it and in connection with the processing
of that application.
7.6 Other Consents. Seller shall use reasonable
efforts (but shall not be required to undertake extraordinary or unreasonable
measures to obtain such consents and approvals, including without limitation,
the initiation or prosecution of legal proceedings, or to make any payment
except for the incidental costs of preparing and submitting applications and
other requests, costs of responding to reasonable inquiries and ordinary and
customary filing fees and processing charges), and Buyer shall assist Seller in
all reasonable respects (including, without limitation, by attending meetings
with the parties who must provide such consents and by providing the financial
data, information as to operating experience, appropriate insurance and surety
bonds reasonably required in order to obtain such consents), to obtain all
consents and approvals of third parties required for the transfer to Buyer of
any of the Assets. If the party from whom such consent is reequired proposes
to issue in the name of Buyer a new agreement in lieu of consenting to an
assignment, Buyer shall agree to accept such proposal so long as the terms and
conditions of the new agreement are no less favorable, in any material respect,
than those previously held by Seller.
7.7 Other Negotiations. From the date of this
Agreement until the earlier of the Closing or the termination of this Agreement
in accordance with its terms, (a) Seller shall not offer the Assets or the
System (or any material part thereof) to, or discuss the transactions desribed
in this Agreement with, any broker (other than the Broker) or prospective
purchaser, (b) neither party shall solicit any offer from any other person or
entity for any transaction involving such party or any of its subsidiaries that
would preclude or in any way interfere with the consummation of the
transactions contemplated by this Agreement, nor shall either party initiate or
enter into any negotiations or provide confidential information with respect to
any such transaction without the consent of the other party, and (c) neither
party shall authorize any representative, agent, officer, director or principal
stockholder to take, and each party shall use its best efforts to prevent any
such person or entity from taking any of the actions prohibited in this
paragraph. Nothing contained in this Section 7.7 shall prohibit Buyer or
Seller from responding to any unsolicited proposal or inquiry by advising the
person or entity making such proposal or inquiry of the terms of this Section
7.7.
7.8 Bulk Sales Law. Buyer hereby waives compliance by
Seller with the provisions of any bulk sales law in any jurisdiction, if
applicable to the transfer of the Assets. Any loss, liability, obligation, or
cost suffered by Seller or Buyer as the result of the failure of Seller or
Buyer to comply with the provisions of any bulk sales law applicable to the
transfer of the Assets as contemplated by this Agreement shall be borne
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by Seller.
7.9 No Inconsistent Action. Neither Buyer nor Seller
shall take any action that is inconsistent with its obligations under this
Agreement or that could hinder or delay the consummation of the transaction
contemplated by this Agreement.
8. COVENANTS OF SELLER
From and after the date hereof, Seller hereby covenants and
agrees with Buyer as follows:
8.1 Access to Information. Seller agrees, upon
reasonable advance notice, to permit Buyer and its authorized representatives
to have, after the date hereof, reasonable access during normal business hours
to the employees of the System, to the premises and to all the books and
records of Seller (including the records of Seller's regularly engaged
accountants relating to the System for the purpose of audit and inspection);
and Seller will, upon reasonable advance notice, furnish Buyer with such
financial, engineering, marketing and operating data, reports and other
information with respect to the Assets, the Business and the System as are in
Seller's possession, as Buyer shall from time to time reasonably request.
Seller agrees to deliver or make available to Buyer true and correct copies of
all such items as Buyer may from time to time request.
8.2 Continuance of Business Relations. Seller agrees
that, between the date of this Agreement and the Closing Date, Seller shall
operate the System in the ordinary course of business and in compliance with
the other covenants in this Section 8.2, except as otherwise required or
contemplated by this Agreement, and Seller shall:
8.2.1 Maintain its real and personal property in the same
condition and repair (ordinary wear and tear excepted) as at the date hereof
and maintain existing insurance bonds and surety arrangements;
8.2.2 Maintain inventory at current levels;
8.2.3 Maintain the existing insurance policies (or
comparable replacement policies) on the System and the Assets;
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8.2.4 Not dispose of any single asset with an original cost
in excess of $1,000, or assets the aggregate original cost of which exceeded
$2,000;
8.2.5 Use its reasonable best efforts to preserve the
Business intact, to keep available the services of its current employees who
perform services exclusively in connection with the operation of the System, to
preserve the current relationships with and to maintain the goodwill enjoyed
with the subscribers and others having business relations with the System;
8.2.6 Promptly give Buyer notice of any change in
circumstances that has resulted in a Material Adverse Effect ("Material Adverse
Change");
8.2.7 Comply in all material respects with all applicable
federal, state and local laws, ordinances, rules and regulations applicable or
relating to its ownereship or ooperation of the System, all AssumedMaterial
Contracts, the Franchises Documents, and comply with FCC and FA,A regulations
and the copyright laws;
8.2.8 Not mortgage, pledge, transfer, assign nor grant a
security interest in any of the Assets or permit to exist any statutory
lien other than in respect of monies which are not then due and owing other
than Permitted Encumbrances and other Encumbrances which shall be removed at or
prior to Closing;
8.2.9 Not change any subscriber service rates or add or
delete any programming service without the prior written consent of Buyer
except to the extent required by law or contract;
8.2.10 Not build any additional plant nor implement any
unusual marketing program provided, however that Seller may contact subscribers
and potential subscribers in the normal course of business consistent with its
past practice and use marketing plans in the normal course of business;
8.2.11 Not enter into any employment agreements or Contracts
other than in the ordinary course of business without the prior written consent
of Buyer;
8.2.12 Not make any change in its employee benefits or
benefit plans
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or in the amount of the wages and salaries paid to its employees other than in
the ordinary course of business without the prior written consent of Buyer;
8.2.13 Maintain its books and records in a manner consistent
with its past practices; and as promptly as possible after the end of each
month and each quarter following the date hereof, deliver to Buyer monthly and
quarterly unaudited balance sheets and statements of incomebilling reports,
statements of income and subscriber information with respect to the System;
8.2.14 Not do any act or fail to do any act which results in
the expiration, revocation, suspension or adverse modification of any of the
Franchises, or fail to prosecute with due diligence any applications to any
Governmental Authority filed by Seller in connection with the operation of the
System;
8.2.15 Not waive any material right relating to the System or
the Assets;
8.2.16 Pay, perform, discharge and settle all of Seller's
liabilities in the ordinary course of business and on a timely basis and shall
deliver the Assets to Buyer at Closing free and clear of the Encumbrances
other than the Permitted Encumbrances.
8.3 Use of Seller's Name. The parties acknowledge that
Seller's name "FrontierVision------------------------" (the "Company Name") is
not part of the Assets being transferred to Buyer hereunder. For a reasonable
period following Closing (not to exceed 90 days), Buyer shall be entitled to
use the trademarks, trade names, service marks, service names, logos and
similar proprietary rights of Seller to the extent incorporated in or on the
Assets transferred to Buyer at Closing. Buyer shall exercise reasonable
efforts to remove all such names, marks, logos and similar proprietary rights
of Seller from such Assets as soon as reasonably practicable following Closing
and in any event prior to the expiration of the 90-day period. From and after
the Closing Date and for a period of four (4) months thereafter, Buyer and its
affiliates shall have a fully paid-up and irrevocable right and license to use
the Company Name in connection with the System and the Business.
8.4 Power of Attorney. At Closing, Seller will grant to
Buyer the limited, irrevocable right, in Seller's name, place and stead, as
Seller's attorney-in-fact, to cash, deposit, endorse or negotiate checks
received on or after
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the Closing Date made out to Seller in payment for cable television and related
services provided by the System.
8.5 Covenant Not to Compete. Seller and Executives
covenants and agrees to deliver or cause to be delivered at Closing a Covenant
Not to Compete executed by Seller in the form annexed hereto as Exhibit A.
8.6 Accounts Receivable. Seller shall promptly remit
to Buyer any payment received by Seller on or after the Closing Date in respect
of any Account Receivable.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer at the Closing are subject to the
satisfaction, or the waiver thereof by Buyer on or prior to the Closing Date,
of the following conditions:
9.1 Accuracy of Representations and Warranties. All
representations and warranties of Seller contained in this Agreement
shall be true and complete in all material respects at and as of the Closing
Date as though made at and as of that time, except (1) changes arising out of
matters of a general economic nature or matters (including, without limitation,
legislation) affecting the cable television industry generally, (2) as a result
of the taking by any person of any action contemplated hereby, or (3) insofar
as any representation or warranty relates to any specified earlier date.
9.2 Performance of Covenants. Seller shall have
performed and complied with in all material respects all covenants and
agreements to be performed and complied by it on or prior to the Closing Date.
9.3 Approvals. All necessary action on the part of
Seller approving this Agreement and the transactions described herein shall
have been taken.
9.4 Documents. Seller shall have furnished Buyer with
all documents, certificates and other instruments required to be furnished to
Buyer and Seller pursuant to the terms hereof. Seller shall also furnish to
Buyer such other and further documents, certificates and instruments as may be
reasonably required by counsel to Buyer to effectively vest good and marketable
title to the Assets and possession thereof in the Buyer, free of Encumbrances
other than Permitted Encumbrances.
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<PAGE> 31
9.5 Consents. All Consents listed on Schedules 5.3 and
5.8 designated to indicate that it will be required as a condition to Buyer's
obligations at Closing ("Required Consents") shall have been received on or
prior to the Closing Date with no material adverse condition to Buyer.
9.6 Subscribers. Seller will be furnishing cable
television service to no fewer than 5,192 EBU Subscribers.
Management Agreements. Any management or similar agreement affecting the
Business, the Assets or the System and any other agreement or arrangement
with an affiliate of Seller affecting the Business, Assets or the System
shall be terminated without any liability to Buyer or Seller, except for
cancellation costs provided for in Section --- hereof, and provided, that
Buyer shall have had prior notice of the same in this Agreement and the
Schedules hereto.
9.7 Leases. Buyer shall have succeeded to Seller's
rights and obligations under the Real Property leases listed on Schedule
5.13[5.7 ?] with no material adverse changes therein.
9.8 Franchisor Consents. All Franchising Authorities
shall have consented, if legally required, to the transfers provided by this
Agreement, it being understood that for purposes of this Section 9.8,
Franchising Authority shall not include the FCC and that Section 9.9 is the
sole closing condition of Buyer with respect to any governmental permits issued
by the FCC that constitute Franchises (as that term is defined in Section 1.2).
9.9 FCC Licenses. On the Closing Date, Buyer shall have
the right to use all earth stations and business radio stations currently
utilized by Seller in connection with the operation of the System, it being
understood and acknowledged that (a) if, on the Closing Date, the consent of
the FCC to the assignment of the FCC license for the business radio station
has not been obtained, then Buyer and Seller shall enter into an agreement to
allow the Buyer to utilize such business radio license pending receipt of such
FCC consent, or, alternatively, Buyer shall obtain an FCC conditional
authorization to use the business radio station pending receipt of such FCC
consent, and (b) in either such case, this condition will have been satisfied.
9.10 Deliveries at Closing. Seller shall have made or
stand willing to make all the deliveries set forth in Section 11.
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9.11 No Lititgation Relating to this Transaction. No
litigation, governmental action or other proceeding shall have been threatened
or commenced with respect to the consummation of the transaction contemplated
hereby or which would impair Buyer's use of affecting any of the Assets.
9.12 No Material Adverse Changes. Since the date of
this Agreement, there shall have been no occurrence which has had a Material
Adverse Effect.
9.13 Delivery of Opinion of Seller's Counsel. The
opinion of Seller's counsel and Seller's special FCC and copright counsel,
respectively, in the form of Exhibits B and G have been delivered to Buyer.
9.14 Termination of Deposit. Seller shall have instructed
the Escrow Agent in writing to transfer the Deposit to the Post-Closing Escrow
and delievered a copy of such instructions to Buyer at Closing.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller at the Closing are subject to the
satisfaction, or the waiver thereof by Seller, on or prior to the Closing Date,
of the following conditions:
10.1 Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement shall be
true and complete in all material respects at and as of the Closing Date as
though made at and as of that time, except (1) changes arising out of matters
of a general economic nature or matters (including, without limitation,
legislation) affecting the cable television industry generally, (2) as a result
of the taking by any person of any action contemplated hereby, or (3) insofar
as any representation or warranty relates to any specified earlier date.
10.2 Deliveries at Closing. Buyer shall have made or
stand willing to make all the deliveries set forth in Section 12.
10.3 Approvals. All necessary action on the part of Buyer
approving this Agreement and the transactions described herein shall have been
taken.
10.4 Performance of Covenants. Buyer shall have performed
and complied in all material respects with all covenants and agreements to be
performed and complied with by it on or prior to the Closing Date.
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10.5 Consents. All Required Consents shall have been
received without the imposition of any condition materially adverse to Buyer.
10.6 FCC Consent. The FCC shall have consented, to the
extent such consent is legally required, to the transfer to Buyer of all FCC
licenses included in the Assets, it being understood and acknowledged that (a)
if, on the Closing Date, the consent of the FCC to the assignment of the FCC
license for the business radio station has not been obtained, then Buyer and
Seller shall enter into an agreement to allow the Buyer to utilize such
business radio station pending receipt of such FCC consent, or, alternatively,
Buyer shall obtain an FCC conditional authorization to use the business radio
station pending receipt of such FCC consent, and (b) in either such case, this
condition will have been satisfied.
11. DELIVERIES TO BUYER ON THE CLOSING DATE
Seller shall deliver or cause to be delivered to Buyer on or before
the Closing Date, the following in form and substance reasonably satisfactory
to Buyer:
11.1 Consents. Evidence of receipt of all Required
Consents.
11.2 Bill of Sale. Bill of Sale in form and substance
reasonably satisfactory to Buyer transferring to Buyer good and marketable
title to all of the Tangible Personal Property included in the Assets, free and
clear of all Encumbrances other than Permitted Encumbrances.
11.3 Assignment and Assumption Agreement. An appropriate
Assignment and Assumption Agreement in form and substance reasonably
satisfactory to Buyer transferring to Buyer the Franchises and all of the
Assumed Contracts, included in the Assets.
11.4 Certificate Confirming Representations and Covenants.
A certificate, dated as of the Closing Date, executed on behalf of Seller by an
officer of FrontierVision Inc., a Delaware corporation, which is the general
partner of the general partner of the general partner of Seller ("FVI"),
certifying that (1) except (A) changes arising out of matters of a general
economic nature or matters (including, without limitation, legislation)
affecting the cable television industry generally, (B) as a result of the
taking by any person of any action contemplated hereby, (C) insofar as any
representation or warranty relates to any specified earlier date or (D) as
disclosed in said certificate, the representations and
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<PAGE> 34
warranties of Seller contained in this Agreement are true and complete in all
material respects at and as of the Closing Date as though made at and as of
that date; and (2) that Seller has in all material respects performed and
complied wih all of its covenants and agreements set forth in this Agreement to
be performed and complied with on or prior to the Closing Date.
11.5 Certificate Confirming Approval of this Agreement.
A certificate, dated as of the Closing Date, executed by the Secretary of FVI
certifying that the resolutions, as attached to such certificate, authorizing
and approving the execution of this Agreement and the consummation of the
transaction contemplated hereby were duly adopted by the Board of Directors of
FVI and that such resolutions remain in full force and effect.
11.6 Opinion of Counsel. An oOpinion, dated the Closing
Date, addressed to Buyer, of Dow, Lohnes and Albertson, counsel for Seller,
substantially in the form of Exhibit B___ attached hereto.
11.7 Covenant Not to Compete. TheA Covenant Nnot to
Ccompete contemplated by Section 8.5substantially in the form of Exhibit C..
11.8 List of Accounts Receivable. A complete and
accurate list of the System's accounts receivable as of a date no more
than five business days prior to the Closing Date, including with respect
thereto, the account number and date of issuance, the name and address of the
acount debtor, the aggregate amount of each such account receivable, and the
balance due on each such account receivable.
11.9 Post-Closing Escrow Agreement. The Post-Closing
Escrow Agreement substantially in the form of Exhibit C.
11.10 Good Standing Certificate. Good Standing Certificate
from the State of Georgia certifying to the good standing of Seller.
12. DELIVERIES TO SELLER ON THE CLOSING DATE
Buyer shall deliver or cause to be delivered to Seller on or before
the Closing Date, the following, in form and substance reasonably satisfactory
to Seller and its
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counsel:
12.1 Purchase Price. The Purchase Price, subject to the
adjustments provided for in Section 3.2.
12.2 Assignment and Assumption Agreement. An appropriate
Assignment and Assumption Agreement in form and substance reasonably
satisfactory to Seller pursuant to which Buyer shall assume and undertake to
perform Seller's obligations as provided in this Agreement.
12.3 Certificate Confirming Representations and
Warranties. Certificate, dated as of the Closing Date, executed by the
President and Treasurer of the corporate general partner of Buyer, certifying
that (1) except (A) changes arising out of matters of a general economic nature
or matters (including, without limitation, legislation) affecting the cable
television industry generally, (B) as a result of the taking by any person of
any action contemplated hereby, (C) insofar as any representation or warranty
relates to any specified earlier date or (D) as disclosed in said certificate,
the representations and warranties of Buyer contained in this Agreement are
true and complete in all material respects at and as of the Closing Date as
though made at and as of that date; and (2) that Buyer has in all material
respects performed and complied with all of its covenants and agreements set
forth in this Agreement to be performed and complied with on or prior to the
Closing Date.
12.4 Certificate Confirming Approval of this Agreement.
Certificate, dated as of the Closing Date, executed on behalf of Buyer by the
President and Secretary of the corporate general partner of Buyer, certifying
that the resolutions, as attached to such certificate, authorizing and
approving the execution of this Agreement and the consummation of the
transaction contemplated hereby were duly adopted by the Board of Directors of
the corporate general partner of Buyer and that such resolutions have not been
amended, rescinded or modified since their date of adoption and remain in full
force and effect.
12.5 Opinion of Counsel of Buyer. An opinion, dated the
Closing Date, addressed to Seller, of counsel for Buyer, substantially in the
form of Exhibit D.
12.6 Covenant Not to Compete. Covenant not to compete
contemplated by Section 8.5 substantially in the form of Exhibit C.
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12.7 Post-Closing Escrow Agreement. The Post-Closing
Escrow Agreement substantially in the form of Exhibit C.
13. TERMINATION
13.1 Mutual Consent. This Agreement may be terminated by
the mutual written consent of Buyer and Seller. Upon such a termination,
neither party shall have any further liability to the other except as provided
in Section 7.3. In the event of a termination pursuant to this Section 13.1,
the Deposit, and all interest earned thereon legally payable, shall be paid
over by the Escrow Agent to Buyer.
13.2 Nonperformance by Seller. Buyer shall have the right
to terminate this Agreement by written notice to Seller, if Buyer is not then
in material breach, if any of the conditions precedent to the obligations of
the Buyer specified in Section 9 have not been fulfilled or waived by Buyer on
the date that would otherwise be the Closing Date. Upon such a termination,
Buyer shall be entitled to all of its rights under law, in equity or hereunder
by reason thereof. In the event of a termination pursuant to this Section
13.2, the Deposit, and all interest earned thereon, shall be paid over by the
Escrow Agent to Buyer.
13.3 Nonperformance by Buyer. Seller shall have the right
to terminate this Agreement by written notice to Buyer, if Seller is not then
in material breach, if any of the conditions precedent to the obligations of
the Seller specified in Section 10 have not been fulfilled or waived by Seller
on the date that would otherwise be the Closing Date. Upon such a termination,
if Buyer is not then in material breach of this Agreement, neither Buyer nor
Seller shall have any further liability to each other with respect to the
purchase and sale of the Assets except as provided in Section 7.3, and if Buyer
is then in material breach of this Agreement, the Deposit, and any interest
thereon, shall be paid over by the Escrow Agent to Seller, which shall be
Seller's exclusive remedy against Buyer with respect to the purchase and sale
of the Assets.
13.4 Failure to Close by October 9, 1996. Either Buyer
or Seller, if not then in material breach of this Agreement, shall have the
right to terminate this Agreement by written notice to the other party if the
Closing shall not have occurred by October 9, 1996. In the event of a
termination pursuant to this Section 13.4, (i) neither party shall have any
further liability to the other party except as provided in Section 7.3 and (ii)
the Deposit, and all interest earned thereon, shall be paid over by the Escrow
Agent to Buyer, unless the Closing shall not have occurred due to any breach by
Buyer, in which event the Deposit, and all interest earned thereon, shall be
paid over by the Escrow Agent to Seller.
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13.4 Failure to Close by-------------,1996. Either Buyer
or Seller, if not in breach, may terminate this Agreement if the Closing shall
not have occurred by --------------, 1996 for any reason. In the event of a
termination pursuant to this Section 13.4, neither Seller nor Buyer shall have
any further liability to each other with respec to the purchase and sale of the
Assets, and the Deposit, and any interest legally payable thereon, shall be
paid over by the Escrow Agent to Buyer, unless the Closing shall not have
occurred due to any breach by Buyer, in which event the Deposit, and any
interest thereon, shall be paid over by the Escrow Agent to Seller.
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14. INDEMNIFICATION
14.1 Indemnification by Seller. Notwithstanding the
Closing, Seller hereby agrees to indemnify and hold harmless Buyer from,
against and in respect of, the following:
14.1.1 Any and all damages, deficiencies, actions,
suits, proceedings, demands, claims, liabilities, obligations, losses,
assessments, judgments, costs and expenses (including reasonable costs and
expenses of investigating any such claims or demands), including reasonable
attorney fees and disbursements incident to any of the foregoing asserted
against or imposed upon or incurred by Buyer, except costs and expenses
incurred by Buyer or on behalf of Bbuyer in asserting any alleged claim against
Seller where it is ultimately determined (including by agreement of Buyer and
Seller) that Buyer is not entitled to indemnification by Seller (collectively
"Buyer Losses") resulting from any breach of any representation or warranty of
Seller or the nonfulfillment of any covenant or agreement on the part of Seller
contained herein or in any Schedule or other document delivered or furnished by
Seller to Buyer pursuant hereto ;
14.1.2 Any and all Buyer Losses arising out of or
relating to: (A) any liability of Seller not expressly assumed by Buyer
pursuant to the terms hereof; and (B) Seller's operation of the System and
ownership of the Assets prior to the Closing Date;
14.1.3 Any and all Buyer Losses resulting from or
arising from any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any person purporting to act on behalf of Seller; and
14.1.4 Any and all Buyer Losses resulting from any events,
facts or circumstances, the occurrence or existence of which entitles
Seller to indemnification under the C4 Agreement.
14.2 Limitations on Seller's Indemnity.
Notwithstanding anything in this Agreement to the contrary, Seller's indemnity
obligations hereunder shall be subject to and limited by each of the
qualifications set forth below:
14.2.1 Seller shall have no liability to Buyer under
Section 14.1 of this Agreement after March 31, 1997the first anniversary of the
Closing Date, except
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with respect to bona fide and valid claims for which notice has been given
prior to March 31, 1997the first anniversary of the Closing Date.
14.2.2 Seller shall have no liability to Buyer under
Section 14.1.1 of this Agreement unless and then only to the extenteffect that
the aggregate amount of Buyer's Losses exceed $2510,000, in which even Buyer
shall be entitled to indemnification to the full extent of such Losses.
14.2.3 Seller's total liability to Buyer in respect
of Seller's indemnification obligations arising out of the transaction
contemplated by this Agreement shall not exceed $500,000.
14.2.4 Seller shall have no liability to Buyer under
Section 14.1.4 of this Agreement except to the extent of the amount recovered
by Seller from C4 Media Cable Southeast, Limited Partnership or County Cable
Company, L.P. under the C4 Agreement in respect of Seller's Related Claim.
14.3 Indemnification by Buyer.
Notwithstanding the Closing, Buyer hereby agrees to indemnify and hold Seller
harmless against and with respect to, and shall reimburse Seller for:
14.3.1 Any and all damages, deficiencies, actions,
suits, proceedings, demands, claims, liabilities, obligations, losses,
assessments, judgments, costs and expenses (including reasonable costs and
expenses of investigating any such claims or demands), including reasonable
attorney fees and disbursements incident to any of the foregoing, asserted
against or imposed upon or incurred by Seller, except costs and expenses
incurred by Seller or on behalf of Seller in asserting any alleged claim
against Buyer where it is ultimately determined (including by agreement of
Buyer and Seller) that Seller is not entitled to indemnification by Buyer
(collectively "Seller Losses")Losses resulting from any breach of any
representation or warranty of Buyer or the nonfulfillment of any covenant or
agreement on the part of Buyer contained herein or in any Schedule or other
document delivered or furnished by Buyer to Seller hereto;
14.3.2 Any and all Seller Losses arising out of or
relating to any obligations of Seller assumed by Buyer pursuant to this
Agreement;
14.3.3 Any and all Seller Losses arising out of or
relating to the operation or ownership of the System by Buyer on and after the
Closing; and
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14.3.4 Any and all Seller Losses resulting from or
arising from any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any person purporting to act on behalf of Buyer.
Notwithstanding anything in this Agreement to the contrary, Buyer
shall have no liability to Seller under Section 14.3 of this Agreement after
the first anniversary of the Closing Date with respect to the breach of any
representation or warranty or nonfulfillment of any pre-closing covenant,
except with respect to bona fide and valid claims for which notice has been
given prior to the first anniversary of the Closing Date.
14.4 Procedure for Indemnification. The procedure for
indemnification shall be as follows:
14.4.1 The party claiming indemnification (the
"Claimant") shall within twenty days of discovery of the facts or circumstances
giving rise to such claim give notice to the party from which indemnification
is claimed (the "Indemnifying Party") of any claim, whether between the parties
or brought by a third party, specifying in reasonable detail the factual basis
for the claim. If the claim relates to an action, suit, or proceeding filed by
a third party against Claimant, such notice shall be given by Claimant within
ten days after written notice of such action, suit or proceeding was given to
Claimant. Failure by any Indemnified Party to give the notice to the
Indemnifying Party specified in this Section 14.4.1 shall not release, waive or
otherwise affect the Indemnifying Party's obligations to indemnify hereunder
except to the extent that the Indemnifying Party can demonstrate actual loss
and prejudice as a result of such failure.
14.4.2 With respect to claims solely between the
parties, following receipt of notice from the Claimant of a claim, the
Indemnifying Party shall have thirty days to make such investigation of the
claim as the Indemnifying Party deems necessary or desirable. For the purposes
of such investigation, the Claimant agrees to make available to the
Indemnifying Party or its authorized representatives the information relied
upon by the Claimant to substantiate the claim. If the Claimant and the
Indemnifying Party agree at or prior to the expiration of the thirty-day period
(or any mutually agreed upon extension thereof) to the validity and amount of
such claim, the Indemnifying Party shall immediately pay to the Claimant the
full amount of the claim. If the Claimant and the Indemnifying Party do not
agree within the thirty-day period (or any mutually agreed upon extension
thereof), the Claimant may seek an appropriate remedy at law.
14.4.3 With respect to any claim by a third party as to
which the
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Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual reasonable
out-of-pocket expenses incurred by the Claimant as the result of a request by
the Indemnifying Party. If the Indemnifying Party elects to assume control of
the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not elect to assume control or otherwise participate in
the defense of any third party claim, it shall be bound by the results obtained
by the Claimant with respect to such claim.
14.4.4 If a claim, whether between the parties or by
a third party, requires immediate action, the parties will make every effort to
reach a decision with respect thereto as expeditiously as possible.
14.4.5 The indemnification rights provided in
Section 14 shall extend to the shareholders, members, directors, officers,
employees, and representatives of any Claimant although for the purpose of the
procedures set forth in this Section 14.4, any indemnification claims by such
parties shall be made by and through the Claimant.
14.5 Attorneys' Fees. In the event of a default by
either Seller or Buyer which results in a lawsuit or other proceeding for any
remedy available under this Agreement, the prevailing party shall be entitled
to reimbursement from the other party of its reasonable legal fees and
expenses.
14.6 Post-Closing Indemnification Escrow. On the
Closing Date, Buyer, Seller and the Escrow Agent shall execute a Post-Closing
Escrow Agreement substantially in the form attached hereto as Exhibit C in
accordance with which, on the Closing Date, pursuant to Section 3.1.2, Buyer
shall deposit the Post-Closing Deposit (the "Post-Closing Escrow Funds") with
the Escrow Agent to secure Seller's indemnification obligations under this
Agreement. All funds and documents on deposit with the Escrow Agent from time
to time pursuant to this Section 14.6 shall be held and disbursed in accordance
with the terms of the Post-Closing Escrow Agreement and the following
provision: any remaining Post-Closing Escrow Funds not then subject to
outstanding indemnification claims of Buyer under this Agreement shall be
released by the Escrow Agent to Seller on the first anniversary of the Closing
Date.
14.7 Exclusive Remedy. After Closing, the remedies
contained in this Section 14 shall be the sole and exclusive remedies of the
parties, and each party hereby waives all other remedies which such party might
otherwise have.
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15. GENERAL
15.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing, shall be personally served or
mailed by certified or registered mail, return receipt requested, or by
reputable overnight receipted service (such as Federal Express or DHL Couriers)
or transmitted by telecopy, shall be deemed to have been given on the date of
receipt, and addressed as follows:
If to Buyer:
Helicon Partners I, L.P.
630 Palisade Avenue
Englewood Cliffs, NJ 07632
Attn: Theodore Baum, Chairman
Telecopier: 201-568-6228
With a copy to:
Helicon Partners I, L.P.
630 Palisade Avenue
Englewood Cliffs, NJ 07632
Attn: Richard A. Hainbach, General Counsel
Telecopier: 201-568-6228
If to Seller:
FrontierVision Operating Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attn: James C. Vaughn, President
Telecopier: 303-757-6105
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With a copy to:
J. Christopher Redding, Esq.
Dow, Lohnes and Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
Telecopier: 202-776-2222
or to such other address or person as the party to receive such notice shall
have last designated by a written notice to the other parties delivered in
accordance with this Section 15.1.
15.2 Survival. The representations and warranties of the
parties hereto contained herein shall survive the Closing, but indemnification
for any breach of a representation or warranty shal l be limited to the extent
provided in Section 14.2 of this Agreement.
15.3 Benefit: Assignment. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Neither Seller nor Buyer may assign this Agreement
without the prior written consent of the other party hereto (which consent
shall not be unreasonably withheld or delayed). Notwithstanding anything to the
contrary contained in this Section 15.3, Buyer may assign its rights and
obligations hereunder to one or more other persons or entities controlled by
Theodore Baum provided such person or entity can make the representations and
warranties made by Buyer herein, such person or entity assumes Buyer's
obligations hereunder and Buyer remains obligated with respect to the Deposit,
and such assignment will not delay the consummation of the transactions
contemplated hereby.in which event (other than for the Deposit) Buyer shall be
relieved of all obligations hereunder.
15.4 Governing Law. This Agreement shall be
governed by and construed according to the laws of the State of Georgia without
regard to its principles of conflicts of laws.
15.5 Headings. The headings of the several Sections and
subsections contained herein are for reference purposes only, and shall not
affect the meaning or interpretation thereof.
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15.6 Entire Agreement; Modification. This Agreement and
the Schedules hereto constitute the entire agreement among the parties and
there are not representations, warranties, covenants or agreements except as
set forth herein and therein and updated as required herein. The Schedules
shall be attached hereto and deemed a part hereof. This Agreement and the
Schedules hereto supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions, written or oral, of the parties
hereto, relating to the transactions contemplated hereby. This Agreement shall
not be amended, modified or supplemented at any time unless by a writing
executed by Buyer and Seller.
15.7 Execution in Counterparts. This Agreement may be
executed in two counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and both of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the date first above written.
Buyer: HELICON PARTNERS I, L.P.
By: BAUM INVESTMENTS, INC.
A Delaware corporation,
General Partner
By: /s/ Theodore Baum
------------------------
Theodore Baum, Chairman
Seller: FRONTIERVISION OPERATING
PARTNERS, L.P.
By: FRONTIERVISION PARTNERS, L.P.,
general partner
44
<PAGE> 45
By: FVP GP, L.P., general partner
By: FrontierVision Inc., general partner
By /s/ James C. Vaughn
------------------------
General Partner James C. Vaughn,
President
45
<PAGE> 1
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT
DATED AS OF JULY 15, 1996
BETWEEN
FRONTIERVISION OPERATING PARTNERS, L.P.
AND
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
-----------------------------
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.03 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.04 Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.05 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.07 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.08 Sales Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.09 Bankruptcy Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
RELATED MATTERS
---------------
2.01 Use of Seller's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.02 Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
3.01 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.04 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.05 Interim Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.06 Seller Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.07 Title to Properties, Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.08 The Sale Assets; Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.10 CATV Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.12 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.14 FCC and Copyright Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.15 Employee Agreements and Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.17 Labor Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.18 EBS's; Rates and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
3.20 Knowledge of Buyer's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.21 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.22 No WARN Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.23 Other CATV Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.24 Insurance and Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.25 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.26 Act of God . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.27 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
4.01 Partnership Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.04 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.05 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.06 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE V
COVENANTS OF SELLER
-------------------
5.01 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.02 Primary Transfer Consents and
Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.03 Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.04 Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.05 Covenant to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.06 Employee Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.07 No-Shop Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.08 Delivery of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.09 Additional Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Financing Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.11 Bankruptcy Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.13 Versailles Headend Parcel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.14 Retransmission Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Carrollton, KY Antenna Tower Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
COVENANTS OF BUYER
------------------
6.01 Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.02 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<TABLE>
<CAPTION>
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6.03 Financing Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.04 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.05 Covenant to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
7.01 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.02 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.03 No Governmental Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.04 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.05 HSR Act Waiting Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.06 Consents Obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.07 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.08 Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.09 Indemnification Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.10 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.11 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.12 Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.13 Holdover Assets Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.14 Order Approving Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
8.01 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.02 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.03 No Governmental Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.04 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.05 HSR Act Waiting Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.06 Consents Obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.07 Assignment Agreement and Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.08 Indemnification Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.09 Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.10 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.11 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.12 Opinions of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.13 Holdover Assets Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.14 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.15 UCC, Tax and Judgment Searches; Releases . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.16 CATV Franchises, FCC Licenses, Contracts,
Business Records, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.17 Order Approving Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IX
CONDUCT OF CATV OPERATIONS
PENDING THE CLOSING
-------------------
</TABLE>
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<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
9.01 Ordinary Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.02 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.03 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.04 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.05 CATV Franchises and FCC Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.06 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.07 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.08 Payment of Tax Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.09 No Rate Increases or
Channel Line-Up Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.10 Capital Expenditures; Winchester Rebuild . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
10.01 Survival of Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.02 Agreement to Indemnify by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.03 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.04 Agreement to Indemnify by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.05 Administrative Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XI
TERMINATION
------------
11.01 Methods of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.02 Procedure upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.03 Topping Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XII
HOLDOVER ASSETS; SUBSEQUENT CLOSINGS
------------------------------------
12.01 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.02 Subsequent Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.03 Final Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.04 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.05 Good Faith Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
13.01 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
13.02 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
13.03 Expenses, Transfer Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
13.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.05 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
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<S> <C> <C>
13.06 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.07 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.08 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.09 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.13 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Heading Exhibit
------- -------
<S> <C>
Assignment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B
Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D
Indemnification Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E
Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F
Form of Franchise Transfer Consent and Other Consents . . . . . . . . . . . . . . . . . . . G
Form of Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H
Opinion of Counsel to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
Opinions of Counsel to Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J
</TABLE>
==============================
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
Schedule Heading
-------- -------
<S> <C>
Schedule 1.01(i) . . . . . . . . Major Marketing Activities for Basic Subscriber Acquisition
Schedule 1.01(ii) . . . . . . . . Budgeted Revenues (1996)
Schedule 1.01(iii) . . . . . . . Excluded Assets
Schedule 3.01 . . . . . . . . Trade Names and Offices
Schedule 3.03 . . . . . . . . Seller Violations/Defaults
Schedule 3.07 . . . . . . . . Title Matters
Schedule 3.08(i) . . . . . . . . Tangible Personal Property
Schedule 3.08(ii) . . . . . . . . Real Property
Schedule 3.08(iii) . . . . . . . The CATV Systems; Bandwidth
Schedule 3.10(i) . . . . . . . . CATV Franchises
Schedule 3.10(ii) . . . . . . . . FCC Licenses
Schedule 3.10(iii) . . . . . . . Contracts
Schedule 3.11 . . . . . . . . Litigation
Schedule 3.12 . . . . . . . . Consents and Approvals
Schedule 3.13 . . . . . . . . Compliance with Law
Schedule 3.14 . . . . . . . . FCC and Copyright Compliance
Schedule 3.15(i) . . . . . . . . Employee Agreements and Plans
Schedule 3.15(ii) . . . . . . . Employee Information
Schedule 3.18 . . . . . . . . EBS's; Rates and Charges
Schedule 3.21 . . . . . . . . Transactions with Affiliates
Schedule 3.23 . . . . . . . . Other CATV Plant
Schedule 3.24 . . . . . . . . Insurance and Bonds
Schedule 5.02 . . . . . . . . Other Consents
Schedule 9.03 . . . . . . . . Certain Changes
</TABLE>
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<PAGE> 9
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of July 15,
1996 between FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware limited
partnership ("Buyer") and AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA,
INC., a Delaware corporation ("Seller"), sets forth the terms and conditions
upon which Seller shall sell and convey to Buyer, and Buyer shall purchase and
acquire from Seller, substantially all of the property, assets, goodwill and
business as a going concern related to the cable television systems owned and
operated by Seller in the Commonwealth of Kentucky and the State of Indiana.
In consideration of the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, Buyer
and Seller hereby covenant and agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.01 Definitions. For all purposes of this Agreement:
"Accounts Receivable" means all amounts
due from or on behalf of any person with respect to any goods or
services (including, without limitation, any CATV programming
services, advertising services, antenna tower space rentals,
etc.) provided by any CATV System to such person prior to the
Adjustment Time.
"Adjustment Time" means 11:59 p.m. (New York City time) on
the calendar day immediately preceding the Closing Date or, in
the event that a Late Transfer shall occur, then 11:59 p.m. (New
York City time) on the Closing Date.
"Act of God" means any storm, flood, hurricane, tornado,
fire, accident, explosion, civil disturbance, labor unrest,
casualty, drought, riot, condemnation, act of public force,
sabotage, war or act of God.
<PAGE> 10
"Actual Revenues" means, at any date, Seller's actual
aggregate revenues from the operation of the CATV Systems, as
determined in accordance with generally accepted accounting
principles, for the period from January 1, 1996 to the last
calendar day of the then most recent calendar month of 1996 that
shall have concluded prior to such date; provided that, for all
purposes of the Pre-Closing Certificate, Actual Revenues shall
be calculated for the period from January 1, 1996 to the last
calendar day of the then most recent calendar month of 1996 that
shall have concluded at least 15 calendar days prior to such
date. In the determination of the foregoing revenues for any
such period, there shall be added thereto any customarily
recurring revenues not realized during any portion of such
period subsequent to the date of this Agreement due to any Act
of God or other unusual, non-recurring circumstance the revenue
effects of which did not extend (or are not reasonably expected
to extend) for more than 60 days.
"Affiliate" has the meaning prescribed by Rule 12b-2 of
the regulations promulgated pursuant to the Securities Exchange
Act.
"Approval Order" means an order of the Bankruptcy Court
(other than the Confirmation Order), approving this Agreement
and authorizing the sale of the Sale Assets to Buyer pursuant to
Section 363 of the Bankruptcy Code, and including a clause
affording Buyer the protection and benefit of Section 363(m) of
the Bankruptcy Code.
"Assignment Agreement" means the assignment agreement
delivered by Seller to Buyer pursuant to Section 8.07 hereof, in
substantially the form of Exhibit A hereto.
"Assumption Agreement" means the instrument of assumption
delivered by Buyer pursuant to Section 1.03(c) hereof, in
substantially the form of Exhibit B hereto.
"Bankruptcy Code" means the United States Bankruptcy Code
as set forth in Title 11 of the United States Code and in effect
on the date of the commencement of the Bankruptcy Proceeding,
together with any amendments thereto that are applicable to the
Bankruptcy Proceeding.
"Bankruptcy Court" means the United States Bankruptcy
Court for the District of Delaware, or any
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<PAGE> 11
other court with jurisdiction over the Bankruptcy Proceeding.
"Bankruptcy Plan" means Seller's Plan of Reorganization to
be filed in the Bankruptcy Proceeding.
"Bankruptcy Proceeding" means (i) the voluntary Chapter 11
case to be commenced by Seller in the Bankruptcy Court or (ii)
any involuntary case commenced against Seller under the
Bankruptcy Code.
"Bankruptcy Walkaway Date" has the meaning set forth in
Section 1.05(b) hereof.
"Basic Subscriber" means any person who is receiving CATV
service from any CATV System and who has rendered payment in
full for at least 30 days of broadcast basic CATV service
(either alone or in combination with any other CATV service)
from that CATV System at that CATV System's standard rate
therefor to a single household subscriber (subject to any
applicable senior citizen or other standard, non-bulk discounts
offered in the ordinary course of Seller's business), provided
that (i) such person is not delinquent in any payment for such
service and (ii) such person was not solicited by Seller within
90 days of the date of determination of the number of Basic
Subscribers by any promotions, or by any discount offers, not
offered in the ordinary course of Seller's business; provided
further that any person who would qualify as a Basic Subscriber
under the foregoing definition, but for the fact that such
person shall have subscribed during November, 1996 pursuant to
Seller's seventh annual "Fall Broadcast TV Campaign" (as
described on Schedule 1.01(i) hereto) and shall have thereunder
rendered a total payment of only $16.00 plus tax to Seller for
CATV service through November 30, 1996, shall nonetheless be
deemed a Basic Subscriber. A person shall be deemed to be
delinquent if any part of such person's account exceeding $5.00
is more than 60 days past due from the first day of the period
for which the CATV services being billed were provided.
"Bill of Sale" means the bill of sale delivered by Seller
pursuant to Section 8.07 hereof, in substantially the form of
Exhibit C hereto.
"Budgeted Revenues" means, at any date, Seller's aggregate
budgeted 1996 monthly revenues as set forth on Schedule 1.01(ii)
hereto for the period from Janu-
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<PAGE> 12
ary 1, 1996 to the last calendar day of the then most recent
calendar month of 1996 that shall have concluded prior to such
date; provided that, for all purposes of the Pre-Closing
Certificate, Budgeted Revenues shall be calculated for the
period from January 1, 1996 to the last calendar day of the then
most recent calendar month of 1996 that shall have concluded at
least 15 calendar days prior to such date.
"Bulk Subscriber" means any commercial establishment
(e.g., any hotel or motel) or multiple dwelling unit
establishment (e.g., any apartment building, college dormitory,
hospital, etc.) served by any CATV System that pays Seller a
bulk rate for such CATV System's broadcast basic CATV service
(either alone or in combination with any other CATV service),
which establishment has rendered payment in full for at least 30
days of such service, provided that such establishment is not
delinquent in any payment for any such service, has not
requested disconnection for any reason and was not solicited by
Seller within 90 days of the date of determination of the number
of Bulk Subscribers by any promotions, or by any discount
offers, not offered in the ordinary course of Seller's business.
An establishment shall be deemed to be delinquent if any part of
such establishment's account exceeding $5.00 is more than 60
days past due from the first day of the period for which the
CATV services being billed were provided, provided that a Slow
Pay Bulk Account shall only be deemed delinquent if any part of
that respective account exceeding $5.00 is more than 90 days
past due from the first day of the period for which the CATV
services being billed were provided.
"Business Day" means any day on which The Chase Manhattan
Bank, N.A. (or any successor bank) is officially open for
business in New York City.
"Buyer" has the meaning set forth in the initial paragraph
of this Agreement.
"Buyer Damages" has the meaning set forth in Section
10.02(a) hereof.
"CATV" means cable television.
"CATV Franchises" means, at any date, the local CATV
franchise instruments (including all amendments and renewals)
issued to or held by Seller for the construction, operation and
maintenance of the CATV Systems as constructed, operated and
maintained at such date.
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<PAGE> 13
"CATV Instruments" means Seller's CATV Franchises,
Contracts and FCC Licenses, collectively.
"CATV Operations" means all of the business and operations
of Seller, as presently conducted by Seller, involving the use
and operation of the Sale Assets.
"CATV Systems" means the CATV systems (each of which
consists of one or more headends, distribution cables,
Subscriber drops and associated electronic and other equipment)
owned and operated by Seller within the Region.
"Closing" means the closing of the transactions
contemplated by this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Closing Date EBS Shortfall" means that number (if any) by
which the Closing Date Target EBS Total exceeds the Closing Date
EBS Total.
"Closing Date EBS Total" means the EBS Total on the
Closing Date.
"Closing Date Revenues Shortfall" means the amount (if
any) by which Seller's Budgeted Revenues at the Closing Date
exceed Seller's Actual Revenues at the Closing Date.
"Closing Date Target EBS Total" means the Target EBS Total
at the Closing Date.
"Closing Date Target EBS Value" means the Target EBS Value
at the Closing Date.
"Communications Act" means the Communications Act of 1934,
including the Cable Television Consumer Protection and
Competition Act of 1992 and the Telecommunications Act of 1996,
each as amended, and including all rules, regulations and
policies thereunder.
"Confirmation Order" means an order of the Bankruptcy
Court in form and substance reasonably acceptable to Buyer and
Buyer's counsel confirming the Bankruptcy Plan and approving the
sale of the Sale Assets to Buyer pursuant to the Bankruptcy Plan
under, inter alia, Sections 105, 365, 1123 and 1129 of the
Bankruptcy Code and otherwise in accordance with the terms of
this Agreement.
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<PAGE> 14
"Contracts" means (i) all of Seller's contracts,
agreements, leases (whether for real property or personalty),
licenses, easements, rights-of-way, rights-of-entry, permits and
other rights, instruments, authorizations and commitments,
whether oral or written (but excluding any of Seller's
programming license agreements, except as hereinafter otherwise
specified), that are principally related to Seller's conduct of
the CATV Operations and which are either (a) listed in Schedule
3.10(iii), (b) not required to be listed on Schedule 3.10(iii)
by the terms of Section 3.10, or (c) entered into after the date
hereof by Seller in compliance with Section 9.04, and (ii) those
programming license agreements of Seller (or of any Affiliate of
Seller) listed in Schedule 3.10(iii) hereof insofar, and only
insofar, as those programming license agreements relate to the
CATV Systems; provided that the term "Contracts" shall not
include or apply to any of Seller's CATV Franchises or FCC
Licenses or any of the Excluded Assets.
"Contract Transfer Consent" means, with respect to any
Contract, any consent (or waiver) that Seller or Buyer is
required by the terms of such Contract to obtain from any
applicable party thereto for Seller's assignment or transfer of
such Contract to Buyer.
"Disclosure Statement" means Seller's Disclosure Statement
in connection with the Bankruptcy Plan to be filed in the
Bankruptcy Proceeding.
"EBS's" means, with respect to any CATV System, (i) the
Basic Subscribers served by that CATV System and (ii) the
equivalent Basic Subscribers represented by the Bulk Subscribers
served by that CATV System, which equivalent Basic Subscribers
shall be calculated by dividing (x) the monthly billings, before
nonrecurring charges or credits, attributable to that System's
Bulk Subscribers for broadcast basic CATV service (either alone
or in combination with any other CATV service) for the calendar
month preceding the date on which such calculation is made, by
(y) the full, non-discounted monthly rate charged by that CATV
System for broadcast basic CATV service.
"EBS Adjustment" means the product of (x) the Closing Date
EBS Shortfall (if any) times (y) the Closing Date Target EBS
Value.
"EBS Total" means, at any date, (i) the aggregate total of
all EBS's served by the CATV Systems at such date less (ii) that
number (if any) by which the total
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<PAGE> 15
number of EBS's for which a disconnection order is pending at
that date exceeds the total number of customers for which an
installation order is pending at that date (provided that such
pending installation was not solicited by Seller within 90 days
of the date of determination of the EBS Total by any promotions,
or by any discount offers, not offered in the ordinary course of
business or in connection with the "Fall Broadcast TV Campaign"
(as described in the definition of "Basic Subscriber")).
"Environmental Law" means all existing federal, state and
local laws, rules, regulations, ordinances, codes, orders or
other requirements of law relating to the environment and the
protection, cleanup, removal, remediation or pollution or other
damage thereof or to public or employee health and safety,
including those relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance into the
environment (including ambient air, surface water, ground water
or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, including, without limitation,
the following laws as the same may be amended from time to time:
(i) Clean Air Act (42 U.S.C. Section 7401, et seq.), (ii) Clean
Water Act (33 U.S.C. Section 1251, et seq.), (iii) Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.),
(iv) Comprehensive Environmental Response Compensation Liability
Act, as amended (42 U.S.C. Section 9601, et seq.) ("CERCLA"),
(v) Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.),
(vi) Toxic Substance Control Act (15 U.S.C. Section 2601, et
seq.), (vii) Rivers and Harbors Act (33 U.S.C. Section 401, et
seq.), (viii) Endangered Species Act (16 U.S.C. Section 1531, et
seq.), and (ix) Occupational Safety and Health Act (29 U.S.C.
Section 651, et seq.).
"Escrow Agent" means Fleet National Bank, or any successor
thereto, in its capacity as the escrow agent under the Escrow
Agreement or the Indemnification Escrow Agreement.
"Escrow Agreement" means the escrow agreement entered into
by and among Buyer, Seller and the Escrow Agent pursuant to
Section 1.03(a) hereof, in substantially the form of Exhibit D
hereto.
"Escrow Amount" means, at any date, the sum of (i) the
Escrow Deposit and (ii) all interest accrued thereon and any and
all other proceeds from the investment thereof.
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<PAGE> 16
"Escrow Deposit" means $5,110,000.00, such sum being three
and one-half percent (3.5%) of the Purchase Price.
"Excluded Assets" means those assets listed in Schedule
1.01(iii) hereto.
"Extended Walkaway Date" has the meaning set forth within
the definition of "Walkaway Date" in this Section 1.01.
"FCC" means the United States Federal Communications
Commission.
"FCC Licenses" means, at any date, all licenses, permits
and authorizations issued to Seller by the FCC in connection
with the CATV Systems at that date.
"FCC License Transfer Consent" means, with respect to any
FCC License, any FCC consent (or waiver) required for Seller's
assignment or transfer thereof to Buyer.
"Final Order" means an order or a judgment which has not
been reversed or stayed and as to which (i) the time to appeal
or to seek review or certiorari has expired pursuant to Rule
8002 of the Federal Rules of Bankruptcy Procedure and no appeal
or petition for review or certiorari is pending and (ii) the
time to seek rehearing pursuant to Rule 8015 of the Federal
Rules of Bankruptcy Procedure has expired and no petition for
rehearing pursuant to such Rule 8015 is pending.
"Franchise Area" means, with respect to any CATV System,
each separate political subdivision (i.e., each city, county or
town) served by that CATV System (i) pursuant to a particular
CATV Franchise or (ii) without requirement of a cable television
franchise. For all purposes of this Agreement, the foregoing
clause (ii) shall be deemed to encompass that portion of Garrard
County served by the Richmond CATV System, that portion of
Washington County served by the Lebanon CATV System, and that
portion of Gallatin County served by the Warsaw CATV System.
"Franchise Transfer Consent" means, with respect to any
CATV Franchise, any consent (or waiver) that Seller or Buyer is
required by general statute, specific ordinance, or the terms of
the respective CATV Franchise to obtain from any applicable
franchising authority for Seller's assignment or transfer of
such CATV Franchise to Buyer.
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<PAGE> 17
"FVI" means FrontierVision Inc., a Delaware corporation
and the general partner of the general partner of the general
partner of Buyer.
"FTC" means the United States Federal Trade Commission.
"Fund" means the Indemnification Fund.
"Hazardous Substances" means any pollutant, contaminant or
chemical, or any industrial, toxic, hazardous or noxious
substance or waste or other material or substance that is
labeled or regulated as such terms are defined in any
Environmental Law or that is labeled or regulated as such by any
governmental authority pursuant to any Environmental Law,
including without limitation (a) any petroleum or petroleum
compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which
pose a hazard or potential hazard to any Real Property or to
persons in or about any Real Property or cause any Real Property
to be in violation of any Environmental Laws, (b) asbestos or
any asbestos-containing material, (c) polychlorinated biphenyls
("PCB's"), as regulated by the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., (d) any materials or substances
designated as "hazardous substances" pursuant to the Clean Water
Act, 33 U.S.C. Section 1251 et seq., or pursuant to Section 307
of the Federal Water Pollution Control Act, 33 U.S.C. Section
1251, et seq. (33 U.S.C. Section 1317), (e) "economic poison",
as defined in the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 135 et seq., (f) "chemical substance",
"new chemical substance" or "hazardous chemical substance or
mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., (g) "hazardous substances" pursuant to the
Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. and (h) "hazardous
waste" pursuant to the Resources Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq._or pursuant to Section 1004 of
the Federal Solid Waste Disposal Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903).
"Holdover Assets" means, with respect to any Holdover
Franchise Area, the tangible Sale Assets located within that
Holdover Franchise Area and the intangible Sale Assets primarily
applicable to the foregoing tangible Sale Assets.
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<PAGE> 18
"Holdover Assets Documentation" means (i) the Holdover
Assets Management Agreement, (ii) the Holdover Assets Escrow
Agreement, and (iii) such additional documentation, if any, as
shall be entered into pursuant to Section 12.01(g) hereof.
"Holdover Assets Escrow Agent" means The Chase Manhattan
Bank (National Association), as escrow agent under the Holdover
Assets Escrow Agreement.
"Holdover Assets Escrow Agreement" means the Holdover
Assets Escrow Agreement to be entered into by Seller, Buyer and
the Holdover Assets Escrow Agent pursuant to Section 12.01(e)
hereof.
"Holdover Assets Escrow Fund" means, at any date, the sum
of the amount delivered by Buyer to the Holdover Assets Escrow
Agent pursuant to Section 12.01(e) hereof on the Closing Date,
and all interest accrued thereon and any and all other proceeds
from the investment thereof, less any and all disbursements made
therefrom pursuant to the Holdover Assets Escrow Agreement.
"Holdover Assets Management Agreement" means the Holdover
Assets Management Agreement to be entered into by Seller and
Buyer pursuant to Section 12.01(f) hereof.
"Holdover Franchise Area" means any Franchise Area for
which a Franchise Transfer Consent is required but has not been
obtained as of the Closing Date.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnification Escrow Agreement" means the escrow
agreement to be entered into by and among Buyer, Seller and the
Escrow Agent pursuant to Section 10.02(d) hereof, in
substantially the form of Exhibit E hereto.
"Indemnification Escrow Deposit" means (i) $8,030,000,
such sum being five and one-half percent (5.5%) of the Purchase
Price, less (ii) 5.5% of the amount (if any) delivered by Buyer
to the Holdover Assets Escrow Agent pursuant to Section 12.01(e)
hereof on the Closing Date.
"Indemnification Fund" means, at any date, the sum of the
Indemnification Escrow Deposit and all interest
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<PAGE> 19
accrued thereon and any and all other proceeds from the
investment thereof, less any and all disbursements made
therefrom pursuant to the Indemnification Escrow Agreement.
"knowledge" as applied to Buyer or Seller means the actual
(i.e., not constructive or imputed) knowledge of any executive
officer of Buyer or any officer or regional manager of Seller,
as the case may be.
"Late Transfer" means any wire transfer(s) of the
immediately available funds referred to in Section 1.03(b)
hereof that shall result in five percent or more of the
aggregate amount of those funds not being received by and
credited to the respective recipient account(s) of Seller and
Seller's designees on the Closing Date.
"Lien" means any mortgage, pledge, lien, security
interest, conditional sales agreement, claim, charge, title
defect, encroachment or other encumbrance of any nature.
"Material Adverse Effect" means any material adverse
effect upon (i) the CATV Operations, the Sale Assets or Seller's
financial condition or results of operations, except insofar as
any such effect is attributable to any events or developments
affecting the CATV industry generally, or (ii) the ability of
Seller to fulfill its obligations under this Agreement, or any
adverse effect upon the validity, performance or enforceability
of Seller's obligations under this Agreement.
"Material CATV Instruments" means, with respect to any
CATV System, each of (i) the respective CATV Franchises
associated with that System, (ii) the respective headend site
leases that are associated with that System, as listed on
Schedule 3.10(iii) hereto, and the respective Indiana and City
of Richmond, KY pole attachment agreements and the Kentucky
tariffs listed or referenced in that Schedule, and (iii) each of
the FCC Licenses associated with that System (other than any FCC
License for any business radio license or TVRO registration, the
FCC License Transfer Consent for which Seller reasonably expects
can be obtained within 90 days after the Closing).
"Non-Compete Agreements" means the non-compete agreements
delivered to Buyer pursuant to Section 8.09 hereof by Seller in
substantially the form of Exhibit F-1 hereto and by Bruce A.
Armstrong and Jerold S. Earl
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<PAGE> 20
in substantially the form of Exhibit F-2 hereto.
"Other Consents" has the meaning set forth in Section
5.02(a) hereof.
"person" means any individual or any corporation, general
partnership, limited partnership, limited liability company,
limited liability partnership, joint venture, association, or
other entity.
"Permitted Liens" has the meaning set forth in Section
3.07 hereof.
"Post-Closing Certificate" has the meaning set forth in
Section 1.04(b)(ii) hereof.
"Pre-Closing Certificate" has the meaning set forth in
Section 1.04(b)(i) hereof.
"Primary Franchise Areas Combination" means any
combination of the Franchise Areas listed on Schedule 3.18
hereto having, in the aggregate, a number of EBS's equal to or
not less than 95% of the May 15, 1996 EBS Total set forth on
Schedule 3.18, where the number of EBS's in any Franchise Area
shall be the number of EBS's set forth next to the name of that
Franchise Area on Schedule 3.18 (regardless of any change in the
number of EBS's in any Franchise Area, or in the foregoing May
15, 1996 EBS Total, between May 15, 1996 and the Closing Date).
"Primary Transfer Consents" means, at any date, (i) such
Franchise Transfer Consents as shall permit Seller to assign or
transfer to Buyer on that date such CATV Franchises as shall (in
the aggregate with those Franchise Areas served by any CATV
System without requirement of a cable television franchise)
represent a Primary Franchise Areas Combination and (ii) as to
each Franchise Area in that Primary Franchise Areas Combination,
such other Transfer Consents as shall permit Seller to assign or
transfer to Buyer on that date all of the tangible Sale Assets
located within that Franchise Area and all of the Material CATV
Instruments primarily applicable to the foregoing tangible Sale
Assets; provided that no consent shall be required as to any
pole attachment agreement or tariff (whether or not such
agreement or tariff is a Material CATV Instrument) if the
respective licensor shall offer to enter into a new pole
attachment agreement with Buyer (or to qualify Buyer under, or
otherwise extend to Buyer the terms of, any applicable tariff)
by means of a consent or qualification in substantially the form
of such
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<PAGE> 21
licensor's current standard form therefor (without regard to
whether such form shall be in substantially the same form as the
respective agreement or qualification of Seller as to such
licensor), the respective licensor's offer thereof to Buyer to
be deemed to constitute a satisfactory consent for purposes
hereof (it being agreed that nothing in this proviso shall be
deemed to limit Seller's covenant under Section 5.02(a) hereof
to use its reasonable efforts to obtain such consents).
"Purchase Price" means one hundred forty six million
dollars ($146,000,000.00), without reference to any adjustment
thereto effected (or to be effected) pursuant to Section 1.04
hereof (or, insofar as may be applicable, Section 1.09 hereof)
or any reduction thereto effected (or to be effected) pursuant
to Section 1.07(b) hereof.
"Real Property" means (i) each parcel of real property
within the Region owned or leased by Seller, and all
appurtenances, improvements and fixtures located thereon and
(ii) that certain parcel of real property referenced as parcel
#6 in Schedule 3.08(ii) (i.e., Seller's Versailles, KY headend
site) and all appurtenances, improvements and fixtures located
thereon.
"Region" means the Commonwealth of Kentucky and the State
of Indiana.
"Revenues Adjustment" means the product of (x) the
Purchase Price times (y) that fraction which has as its
numerator the Closing Date Revenues Shortfall and as its
denominator Seller's Budgeted Revenues.
"Sale Assets" means (A) those programming license
agreements of Seller (or of any Affiliate of Seller) listed in
Schedule 3.10(iii) hereof, insofar and only insofar as those
programming license agreements relate to the CATV Systems, and
(B) all properties, privileges, rights, interests and claims,
real and personal, tangible and intangible, of every type and
description, including goodwill, owned and used or held for use
by Seller in the operation of any CATV System, together with any
additions thereto (and subject to any dispositions therefrom
permitted by this Agreement) between the date of this Agreement
and the Closing Date, including (i) all of Seller's CATV
Franchises, Contracts and FCC Licenses, and all of Seller's
intangibles, including, but not limited to, all claims and
goodwill, if any, of Seller with respect to the CATV Operations;
(ii) all tangible personalty, electronic devices, trunk
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<PAGE> 22
and distribution cable, amplifiers, power supplies, conduit,
vaults and pedestals, grounding and pole hardware, subscriber
devices (including, without limitation, converters, traps,
decoders, switches and fittings), "headend" (origination, signal
processing and transmission) equipment, facilities, vehicles and
other personal property owned and used or held for use by Seller
in the CATV Operations; (iii) all realty, towers, fixtures,
leasehold and other interests in real property owned and used or
held for use by Seller within the Region (including the Real
Property); (iv) all books and records of Seller which are solely
related to the CATV Operations, and (v) all Accounts Receivable;
provided that the Sale Assets shall not include, and Buyer shall
not acquire any interest in, any of the Excluded Assets.
"Schedules" means the Schedules hereto.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Seller" has the meaning set forth in the initial
paragraph of this Agreement.
"Seller Damages" has the meaning set forth in Section
10.04(a) hereof.
"Slow Pay Bulk Accounts" shall mean the respective Bulk
Subscriber accounts represented by (i) the Blue Grass Army Depot
in Richmond, KY, (ii) the Madison State Hospital in Madison, IN,
and (iii) the Howard Johnson motel in Richmond, KY (each of
which three accounts is customarily a slow paying account).
"Subscriber" means each Basic Subscriber and each Bulk
Subscriber.
"Target EBS Total" means, with respect to any date (i)
from September 30, 1996 to and including October 30, 1996, an
EBS Total of 82,800 at such date; (ii) from October 31, 1996 to
and including November 29, 1996, an EBS Total of 83,200 at such
date; (iii) from November 30, 1996 to and including December 30,
1996, an EBS Total of 83,600 at such date; and (iv) from and
after December 31, 1996, an EBS Total of 84,000 at such
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<PAGE> 23
date.
"Target EBS Value" means, at any date, the dollar amount
that results from dividing the Purchase Price by the Target EBS
Total at that date.
"Tax Code" means the Internal Revenue Code of 1986, as amended.
"Transfer Consents" means, with respect to any Franchise
Area, all of the respective Franchise Transfer Consents, FCC
License Transfer Consents and Contract Transfer Consents with
respect to such Franchise Area and the tangible Sale Assets
located therein.
"Walkaway Date" means December 31, 1996; provided that if
the Closing shall not have occurred on or prior to December 10,
1996 either wholly or partially because one or more of the
Primary Transfer Consents has not been obtained as provided
herein, then either Buyer or Seller may, by written notice
delivered to the other party hereto at any date after December
10, 1996 but on or prior to December 31, 1996, extend the
Walkaway Date to April 30, 1997 (the "Extended Walkaway Date"),
in which event the Walkaway Date shall become the Extended
Walkaway Date; and provided further that either Buyer or Seller
may, by written notice delivered to the other party hereto
pursuant to Section 1.05(b) hereof, extend the Walkaway Date (or
the Extended Walkaway Date, as the case may be) to the
Bankruptcy Walkaway Date, in which event the Walkaway Date (or
the Extended Walkaway Date, as the case may be) shall become the
Bankruptcy Walkaway Date; provided, however, that no party then
in material breach or material default of this Agreement shall
be entitled to deliver any notice of an Extended Walkaway Date
or Bankruptcy Walkaway Date hereunder.
The plural of any term defined in the singular, and the singular of any term
defined in the plural, shall have a meaning correlative to such defined term.
1.02. Purchase and Sale of Assets.
(a) Subject to the terms and conditions of this Agreement, at the
Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer, and
Buyer shall purchase, acquire and accept from Seller, all of Seller's right,
title and interest in and to the Sale Assets free and clear of all Liens except
Permitted Liens.
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(b) Buyer acknowledges and agrees that Seller shall not be liable for
or bound in any manner by, and Buyer has not relied upon, any express or
implied, oral or written information, warranty, guaranty, promise, statement,
inducement, representation or opinion (whether of, by or on behalf of Seller or
any officer, employee, agent or representative of Seller, or any other person)
pertaining to any of the CATV Operations, CATV Systems or Sale Assets or any
part thereof (including, without limitation, the physical condition of any of
the CATV Systems or Sale Assets, or the uses which can be made of the same or
the value thereof) or any other matter related to this Agreement, except as is
expressly set forth in this Agreement or in the Exhibits and Schedules hereto
or in any agreement, document, certificate or other instrument executed by
Seller and delivered to Buyer pursuant to this Agreement. Buyer further
acknowledges and agrees that, as to the foregoing, Seller's representations and
warranties are limited to those set forth in this Agreement or in the Exhibits
or Schedules hereto or in any agreement, document, certificate or other
instrument executed by Seller and delivered to Buyer pursuant to this
Agreement. Except as expressly set forth in this Agreement (including, without
limitation, any Exhibit or Schedule hereto), Buyer agrees to accept the Sale
Assets "as is, where is", without any exception or objection in respect of
their condition.
1.03. Consideration. Subject to the terms and conditions of this
Agreement:
(a) Concurrently upon the execution of this Agreement by Buyer and
Seller, Buyer and Seller have entered into the Escrow Agreement with the Escrow
Agent, and Buyer has deposited the Escrow Deposit with the Escrow Agent to
secure Buyer's timely performance and fulfillment of its obligations under this
Agreement.
(b) At the Closing, Buyer shall deliver to Seller (or to such
person(s) as Seller shall designate), by wire transfer(s) of immediately
available funds, the Purchase Price (i) reduced by the amount of the Escrow
Amount delivered to Seller on the Closing Date, pursuant to Section 1.07(b)
hereof, (ii) reduced by the amount of the Indemnification Escrow Deposit
delivered to the Escrow Agent by Buyer on the Closing Date, pursuant to Section
10.02(d) hereof, and (iii) subject to adjustment on and after the Closing Date
pursuant to Section 1.04 hereof.
(c) At the Closing, Buyer shall also deliver to Seller the Assumption
Agreement whereby Buyer shall unconditionally assume those obligations and
liabilities of Seller which are referenced in the Assumption Agreement. It is
understood and agreed by the parties hereto that Seller is to remain solely
responsible for any obligations and liabilities of
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Seller not assumed by Buyer pursuant to the Assumption Agreement.
(d) Buyer and Seller agree that the allocation of the Purchase Price
among the Sale Assets shall be in accordance with an appraisal to be conducted
and delivered to Buyer and Seller within 30 days after the Closing by a
reputable appraisal firm selected and retained by Buyer, at Buyer's expense,
with experience in the valuation and appraisal of cable television system
assets, and such allocation shall be used by both Buyer and Seller for purposes
of the reporting requirements of Section 1060 of the Tax Code, provided that
not less than forty percent of the Purchase Price shall be allocated to the
tangible assets among the Sale Assets and not less than thirty percent of the
Purchase Price shall be allocated to franchise costs. Any adjustments to the
Purchase Price required pursuant to Section 1.04 hereof shall also be allocated
and reported in accordance with such appraisal and said Section 1060. Seller
shall promptly notify Buyer, and Buyer shall promptly notify Seller, of any
adjustment that comes to its attention which is proposed to be made by any
federal, state or local taxing authority with respect to the allocation of the
Purchase Price.
1.04. Adjustment of Purchase Price.
(a) The Purchase Price shall be subject to adjustment, as of the
Adjustment Time, as follows:
(i) an increase in the Purchase Price by an amount equal to the
sum of:
(A) 100% of the face amount of (i) all Subscriber Accounts
Receivable which are 30 days or less (or, as to the Slow Pay
Bulk Accounts, 90 days or less) past due from the day for
which service was first provided and (ii) all advertising
Accounts Receivable which are 60 days or less past due from
the date of the initial invoice therefor; and
(B) 85% of the face amount of (i) all Subscriber Accounts
Receivable which are more than 30 but less than 61 days (or,
as to the Slow Pay Bulk Accounts, more than 90 but less than
121 days) past due from the day for which service was first
provided and (ii) all advertising Accounts Receivable which
are more than 60 but less than 91 days past due from the date
of the initial invoice therefor;
(C) 100% of the face amount of all payments made by or on
account of any miscellaneous accounts receivable, such as home
shopping channel
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commissions, any national CATV programming services (e.g.,
HBO, ESPN, etc.) for coop marketing, and any lessee of space
on any of Seller's antenna towers, insofar as any such
payments are received by Buyer within 90 days after the
Closing Date for any period prior to the Adjustment Time; and
No adjustment to the Purchase Price shall be made on account of (i) any
Subscriber Accounts Receivable which are 61 days or more (or, as to the
Slow Pay Bulk Accounts, 121 days or more) past due from the day for
which service was first provided or (ii) any advertising Accounts
Receivable which are 91 days or more past due from the date of the
initial invoice therefor.
It is specifically understood and agreed that all unpaid amounts
aggregating $5.00 or less in total in respect of customary late charges
imposed by Seller, and any unpaid amount (other than any late charge)
as to which there exists a bona fide dispute, with respect to any
Subscriber's account shall be excluded from that Subscriber's account
for purposes of determining the amount or aging of any Accounts
Receivable under this Section 1.04(a).
(D) all prepaid expenses relating to the ownership or
operation of any of the Sale Assets, which prepaid expenses
shall be prorated between Seller and Buyer as of the
Adjustment Time in accordance with generally accepted
accounting principles and the principle that all costs,
expenses and liabilities attributable to the CATV Operations
for any period prior to the Adjustment Time are for the
account of Seller and all costs, expenses and liabilities
attributable to the CATV Operations for any period from and
after the Adjustment Time are for the account of Buyer, and
shall be deemed to include, without limitation, all prepaid
expenses attributable to the following: real and personal
property taxes and assessments levied against the Sale Assets;
real and personal property rentals; pole rentals; power and
utility charges; applicable franchise, copyright or other
business and license fees, sales and service charges; and
similar items; provided, however, that there shall be no
adjustment for, and Seller shall remain solely liable with
respect to, any Contracts not assigned to and assumed by Buyer
at Closing and any other obligation or liability not being
assumed by Buyer at Closing pursuant to this
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<PAGE> 27
Agreement and the Assumption Agreement, including, without
limitation, any obligation or liability of Seller (or of any
Affiliate of Seller) (x) arising under or related to any
Excluded Asset, (y) for any salaries, wages or other employee
compensation or benefits relating to any employees of Seller
for any period prior to the Adjustment Time or (z) for
employee compensation or benefits for any period at or after
the Adjustment Time relating to any employees of Seller not
retained by Buyer, effective as of the Closing Date; and
(ii) a decrease in the Purchase Price by an amount equal to the sum
of:
(A) all prepayments, credit balances and deposits held by
Seller as of the Adjustment Time;
(B) all accrued and unpaid expenses relating to the ownership
or operation of any of the Sale Assets (which accrued and
unpaid expenses shall be prorated between Seller and Buyer as
of the Adjustment Time in accordance with generally accepted
accounting principles and the principle that all costs,
expenses and liabilities attributable to the CATV Operations
for any period prior to the Adjustment Time are for the
account of Seller and all costs, expenses and liabilities
attributable to the CATV Operations for any period after the
Adjustment Time are for the account of Buyer, and shall be
deemed to include, without limitation, accrued and unpaid
expenses of the kind itemized in Section 1.04(a)(i)(D) above);
(C) all accrued and unpaid salary and vacation of those
employees of Seller retained by Buyer as of the Adjustment
Time; and
(D) (i) in the event of both a Closing Date EBS Shortfall and
a Closing Date Revenues Shortfall, then the greater of the EBS
Adjustment or the Revenues Adjustment; (ii) in the event of a
Closing Date EBS Shortfall but no Closing Date Revenues
Shortfall, then the EBS Adjustment; and (iii) in the event of
a Closing Date Revenues Shortfall but no Closing Date EBS
Shortfall, then the Revenues Adjustment.
(b) For purposes of determining the prorations and adjustments to the
Purchase Price to be made as of the Adjustment Time pursuant to Section 1.04(a)
above, Seller and Buyer shall proceed as follows:
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(i) Seller shall, not less than ten nor more than twenty days prior
to the Closing Date, deliver to Buyer a certificate (the "Pre-Closing
Certificate") which shall set forth Seller's good faith estimate of the
prorations and adjustments to the Purchase Price to be made as of the
Adjustment Time pursuant to Section 1.04(a) above (on the assumption
that no Late Transfer shall occur), and which shall be certified by
Seller to be Seller's good faith estimate thereof as of the date
delivered, together with such documentation as may reasonably support
Seller's estimate set forth therein, and such other documentation and
information as Buyer may reasonably request within three days after its
receipt of such certificate. Not less than five days prior to the
Closing Date, Buyer shall provide Seller with any objections to such
Pre-Closing Certificate in writing. After considering Buyer's
objections, Seller shall make such revisions to such Pre-Closing
Certificate as are mutually acceptable to the parties, and shall
deliver a copy of such revised Pre-Closing Certificate to Buyer not
less than three days prior to the Closing Date, and the Purchase Price
shall be adjusted on the Closing Date in accordance with such revised
Pre-Closing Certificate. Any disagreements that may exist with respect
to the Pre-Closing Certificate, if any, shall be resolved in connection
with the preparation of the Post-Closing Certificate pursuant to this
Section 1.04(b).
(ii) Within 90 days after the Closing Date, Seller shall deliver to
Buyer a certificate (the "Post-Closing Certificate") which shall set
forth Seller's final determination of the prorations and adjustments to
the Purchase Price to be made as of the Adjustment Time pursuant to
Section 1.04(a) above, together with such documentation as may support
Seller's determination thereof and such other documentation relating to
such Post-Closing Certificate as Buyer may reasonably request.
(iii) If Buyer shall in good faith conclude that the Post-Closing
Certificate does not accurately reflect the final prorations and
adjustments to the Purchase Price to be made as of the Adjustment Time
pursuant to Section 1.04(a) above, then Buyer shall, within 30 days
after its receipt of the Post-Closing Certificate, provide to Seller
its written statement of any discrepancies believed in good faith to
exist, together with such documentation as may support Buyer's
determination
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<PAGE> 29
thereof and such other documentation relating to such statement as
Seller may reasonably request.
(iv) Buyer and Seller shall use good faith efforts to resolve any
dispute involving the determination of any adjustments to the Purchase
Price. If Buyer and Seller cannot resolve any dispute to their mutual
satisfaction within 30 days after Seller's receipt of Buyer's
above-specified discrepancy statement, Buyer or Seller may, following
the expiration of such 30-day period, designate the New York City
office of Price Waterhouse LLP (or, if such firm shall decline such
designation for any reason, another nationally known independent public
accounting firm agreed to by Buyer and Seller) to review the
Post-Closing Certificate, Buyer's discrepancy statement and any other
relevant documents and to rule upon the differences between Buyer and
Seller with respect thereto. The cost of retaining such firm shall be
borne one half by Buyer and one half by Seller. Such firm shall report
its conclusions and ruling in writing to Buyer and Seller and such
conclusions and ruling as to any adjustments to be made pursuant to
this Section 1.04 shall be conclusive on all parties to this Agreement
and not subject to further dispute or review.
(v) If as a result of any resolution reached by Buyer and Seller, or
any ruling made by an accounting firm, pursuant to clause (iv) above,
Buyer is finally determined to owe any amount to Seller, or Seller is
finally determined to owe any amount to Buyer, the obligor shall pay
such amount to the other party hereto within three Business Days after
such final determination.
1.05. The Closing.
(a) The Closing shall take place at the offices of Baer Marks & Upham,
LLP at 805 Third Avenue in New York City (or at such other location within the
northeastern United States or Washington, D.C. as Buyer may designate upon at
least five Business Days prior written notice to Seller) at 10:00 a.m. local
time on (i) such date not earlier than September 30, 1996 as Seller shall
designate upon at least 10 Business Days prior written notice to Buyer, which
notice Seller shall not send prior to the later of September 15, 1996 or that
date upon which each of the conditions to the Closing set forth in Sections
7.05, 7.06, 7.14 (if applicable), 8.05, 8.06 and 8.17 (if applicable) hereof
shall have been satisfied or waived in accordance therewith, or (ii) such other
date as the parties may mutually agree
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<PAGE> 30
upon in writing; provided that either party hereto shall have the right to
defer any such Closing Date to a date in no event later than the Walkaway Date
(or the Extended Walkaway Date, as the case may be) in order that (i) such
party may satisfy any of the conditions required to be satisfied by it (and not
waived by the other party hereto) at or prior to the Closing or (ii) to afford
Seller the opportunity to repair, restore or replace any Sale Assets lost,
damaged or destroyed by or as a consequence of any Act of God if, as a
consequence of that Act of God, the Closing Date EBS Shortfall would exceed 250
EBS's; provided, however, that no party then in material breach or material
default of this Agreement shall be entitled to defer the Closing Date as
provided in this paragraph; provided further that Buyer shall not have any
right to defer any Closing Date on account of any anticipated or actual
inability of Buyer to pay to Seller, on such Closing Date, the Purchase Price
as adjusted pursuant to Section 1.04 above; provided further that nothing
herein shall be deemed in any way to waive or limit any of Seller's or Buyer's
respective obligations under Section 5.05 and Section 6.05 hereof; and
provided further that no deferment of the Closing Date under this Section 1.05
shall affect either party's termination rights under Section 11.01 hereof.
(b) Notwithstanding anything in Section 1.05(a) to the contrary,
either Buyer or Seller may (by written notice delivered to the other party
hereto) defer any Closing Date beyond the Walkaway Date (or the Extended
Walkaway Date, as the case may be) to any date (the "Bankruptcy Walkaway Date")
not later than July 31, 1997, provided that the deferring party shall not then
be in material breach or material default of this Agreement and provided
further that such deferring party shall then be effecting such deferral solely
in order that the conditions to the Closing set forth in Sections 7.14 and 8.17
may be satisfied; and in the event of any such deferral, the applicable date
set forth in Sections 11.01(c) and 11.01(e) hereof for purposes of Buyer's and
Seller's right to terminate and abandon this Agreement and the transactions
contemplated herein pursuant to such Sections, respectively, shall be deemed to
be solely the Bankruptcy Walkaway Date.
1.06. Further Assurances. From and after the Closing Date:
(a) Seller shall from time to time, at the request of Buyer and
without further cost or expense to Buyer, execute and deliver or cause to be
executed and delivered such other instruments of conveyance and transfer as
Buyer may reasonably request in order to more effectively convey, transfer and
assign to Buyer the Sale Assets and shall take or cause to be taken such other
actions as Buyer may reasonably request in order to effectuate the intents and
purposes of this Agreement.
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(b) Buyer shall from time to time, at the request of Seller and
without further cost or expense to Seller, execute and deliver or cause to be
executed and delivered such other instruments of assumption and performance as
Seller may reasonably request in order to more effectively evidence Buyer's
assumption of the obligations and liabilities of Seller pursuant to the
Assumption Agreement and shall take or cause to be taken such other actions as
Seller may reasonably request in order to effectuate the intents and purposes
of this Agreement.
1.07. Escrow Agreement. The parties hereto covenant and agree as follows
and acknowledge that pursuant to the terms and conditions of this Agreement and
the Escrow Agreement executed by and among Buyer, Seller and the Escrow Agent:
(a) Buyer has deposited the Escrow Deposit with the Escrow Agent to
secure Buyer's timely performance and fulfillment of its pre-Closing and
Closing obligations under this Agreement.
(b) At the Closing, Buyer and Seller shall cause the Escrow Agent
to pay the Escrow Amount over to Seller, to be applied against the Purchase
Price.
(c) In the event that Buyer shall fail to timely perform and
fulfill in any material respect any pre-Closing or Closing obligation or
condition required of Buyer under this Agreement or shall breach in any
material respect any of its representations or warranties contained herein, and
such failure or breach of Buyer shall not be attributable to any failure of
Seller to timely perform and fulfill in any material respect any pre-Closing or
Closing obligation or condition required of Seller under this Agreement which
obligation or condition Seller was not ready, willing and able to timely
perform and fulfill, and such failure or breach shall continue for a period of
seven Business Days after Buyer's receipt of written notice from Seller
requesting that Buyer remedy such failure or breach (which notice from Seller
shall make specific reference to Seller's rights under this Section 1.07), and
Seller shall have timely performed and fulfilled (or shall have been ready,
willing and able to timely perform and fulfill) in all material respects the
pre-Closing and Closing obligations and conditions required of Seller under
this Agreement and shall not have breached in any material respect any of its
representations or warranties contained herein, then, at any date after the
expiration of such seven Business Day notice period, Seller may, by written
notice to Buyer and the Escrow Agent, terminate this Agreement and Seller may
direct the Escrow Agent, subject in all respects to the terms of the Escrow
Agreement, to promptly pay the Escrow Amount over to or at the direction of
Seller (and Buyer shall cooperate with such directive and not object thereto).
Any such payment to Seller shall be deemed to constitute full liquidated
damages under this Agreement and,
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subject to Seller's receipt thereof, neither party hereto shall be deemed to
have any further recourse against or liability to the other party hereto under
or in connection with this Agreement or any of the transactions contemplated by
this Agreement. Seller and Buyer agree in advance that actual damages would be
difficult to ascertain and that the Escrow Amount is a fair and equitable
amount to reimburse Seller for damages sustained or alleged to have been
sustained due to Buyer's breach of this Agreement. If this Agreement is
terminated for any reason other than as set forth in this paragraph or under
any other provision of this Agreement (exclusive of Section 11.01(d)), Buyer
shall be entitled to the Escrow Amount and Buyer may, by written notice to the
Escrow Agent, direct the Escrow Agent, subject to the terms of the Escrow
Agreement, to promptly pay the Escrow Amount over to or at the direction of
Buyer (and Seller shall cooperate with such directive and not object thereto).
(d) In the event that Seller shall fail to timely perform and fulfill
in any material respect any pre-Closing or Closing obligation or condition
required of Seller under this Agreement or shall breach in any material respect
any of its representations or warranties contained herein, and such failure or
breach of Seller shall not be attributable to any failure of Buyer to timely
perform and fulfill in any material respect any pre-Closing or Closing
obligation or condition required of Buyer under this Agreement which obligation
or condition Buyer was not ready, willing and able to timely perform and
fulfill, and such failure or breach shall continue for a period of seven
Business Days after Seller's receipt of written notice from Buyer requesting
that Seller remedy such failure or breach (which notice from Buyer shall make
specific reference to Buyer's rights under this Section 1.07), and Buyer shall
have timely performed and fulfilled (or shall have been ready, willing and able
to timely perform and fulfill) in all material respects the pre-Closing and
Closing obligations and conditions required of Buyer under this Agreement and
shall not have breached in any material respect any of its representations or
warranties contained herein, then, at any date after the expiration of such
seven Business Day notice period, Buyer may, by written notice to Seller and
the Escrow Agent, terminate this Agreement and Buyer may direct the Escrow
Agent, subject in all respects to the terms of the Escrow Agreement, to
promptly pay the Escrow Amount over to or at the direction of Buyer (and Seller
shall cooperate with such directive and not object thereto). In addition,
Buyer shall have the right to bring an action against Seller and pursue all
remedies which it may have at law or in equity, including the right to specific
performance, and the right to claim direct damages actually incurred by it as a
result of a breach by Seller of this Agreement.
1.08. Sales Procedure. The sale of the Sale Assets pursuant to this
Agreement may, in Seller's sole discretion, be
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effected in accordance with the Bankruptcy Code pursuant to (i) Sections 105,
365, 1123 and 1129 thereof or (ii) Section 363 thereof if accomplished as
provided in Section 5.11(d) of this Agreement, in either event free and clear
of all Liens except Permitted Liens, and Seller agrees to specifically so state
in the Bankruptcy Plan, Disclosure Statement and/or any other applicable
pleadings filed with the Bankruptcy Court seeking authority to sell the Sale
Assets as contemplated by this Agreement.
1.09. Bankruptcy Purchase Price Adjustment.
(a) If the Adjustment Time has not occurred on or before
October 31, 1996 and (1) all of the conditions to the Closing set forth in
Article VII (other than the condition set forth in Section 7.14) have either
been satisfied or waived by Seller (or, with respect to any such conditions set
forth in Sections 7.07 through 7.13, Buyer stands ready, willing and able to
timely perform and fulfill such conditions) and (2) all of the conditions to
the Closing set forth in Article VIII (other than the condition set forth in
Section 8.17) have either been satisfied or waived by Buyer (or, with respect
to such conditions set forth in Sections 8.07 through 8.13, 8.15 and 8.16,
Seller stands ready, willing and able to timely perform and fulfill such
conditions), then the Purchase Price shall be reduced as follows:
(i) if the Adjustment Time occurs during the calendar month
of November 1996, then the Purchase Price shall be reduced by the dollar amount
equal to the result obtained by multiplying $300,000 by a fraction, the
numerator of which is the number of calendar days in November which elapse up
to and including the date on which the Adjustment Time occurs and the
denominator of which is 30;
(ii) if the Adjustment Time occurs during the calendar
month of December 1996, then the Purchase Price shall be reduced by the sum of
$300,000 plus the result obtained by multiplying $400,000 by a fraction, the
numerator of which is the number of calendar days in December which elapse up
to and including the date on which the Adjustment Time occurs and the
denominator of which is 31; and
(iii) if the Adjustment Time occurs after December 31, 1996,
then the Purchase Price shall be reduced by the sum of $700,000 plus, for each
calendar month (or portion thereof) that shall have elapsed after December,
1996 to and including the date on which the Adjustment Time occurs, the result
obtained by multiplying (y) $500,000 divided by the total number of days of
such month times (z) the number of calendar days of such month that shall have
elapsed up to and including the date on which the Adjustment Time occurs.
(b) The parties hereby agree and acknowledge that
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the adjustments to the Purchase Price set forth in this Section 1.09 are in
addition to, and not in lieu of, any other adjustments to the Purchase Price
provided for in this Agreement.
ARTICLE II
RELATED MATTERS
2.01. Use of Seller's Name. Buyer shall have the right for a reasonable
period of time (not to exceed 90 days) following the Closing Date to continue
to use within the Region the "American Cable Entertainment" name, commercial
symbols, and marks currently being used by Seller in connection with the
ongoing business of the CATV Operations in order to facilitate the transition
in the control of the CATV Operations. As promptly as reasonably practical
after the Closing Date, and in any event prior to the expiration of such 90-day
period, Buyer shall discontinue in all respects the use of the "American Cable
Entertainment" name, commercial symbols and marks.
2.02. Access to Books and Records.
(a) Seller agrees that on and after the date hereof, during
normal business hours, it shall permit Buyer and its auditors and attorneys,
through their authorized representatives, to have access to and to examine all
books and records of Seller reasonably related to the CATV Operations.
(b) Buyer agrees that on and after the Closing, during normal
business hours, it shall permit Seller and its auditors and attorneys, through
their authorized representatives, to have access to and to examine all books
and records provided by Seller to Buyer in connection with the transactions
contemplated by this Agreement and reasonably related to events occurring prior
to the Closing.
(c) Each party shall direct its representatives to render any
assistance which the other party may reasonably request in examining or
utilizing records referred to in this Section 2.02. Each party agrees to
preserve all files and records which are subject to this Section 2.02 for a
period of three-and-one-half years after the Closing Date, provided that each
party may destroy or otherwise dispose of any such records during such
three-and-one-half year period after first giving 30 days' notice thereof to
the other party, and within 30 days of receipt of such notice, such other party
may cause to be delivered to it the records intended to be destroyed, at such
other party's expense.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.01. Corporate Organization. Seller is a corporation duly formed and
validly existing under the laws of the State of Delaware and has all requisite
corporate power and authority, including under its Certificate of
Incorporation, to carry on the CATV Operations as they are now being conducted
and to own the Sale Assets. Seller is duly qualified or licensed to do
business as a corporation in each State or Commonwealth to the extent that its
ownership of the Sale Assets or its conduct of the CATV Operations requires
such qualification. Schedule 3.01 sets forth (a) all of the fictitious and
trade names which Seller has used or is currently using in connection with the
CATV Operations and, to Seller's knowledge, all fictitious and trade names used
by any prior owner or operator of any of the CATV Systems in the past five (5)
years in connection with the business of the CATV Systems, and (b) the location
of each office of Seller and, to Seller's knowledge, the location of the chief
executive office of each such prior owner and operator.
3.02. Authorization. Except as set forth in Section 3.25 following
commencement of the Bankruptcy Proceeding, Seller has all requisite corporate
power and authority, including under its Certificate of Incorporation, to enter
into this Agreement and to carry out the transactions contemplated hereby; the
execution, delivery and performance of this Agreement by Seller have been duly
authorized by all necessary corporate action; this Agreement has been duly
executed and delivered by Seller; and this Agreement is a valid and binding
agreement of Seller enforceable in accordance with its terms, except as the
enforceability of this Agreement and the documents contemplated hereby may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
3.03. No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or Bylaws of Seller, or, except
as set forth in Section 3.25 following commencement of the Bankruptcy
Proceeding or as otherwise specified in Schedule 3.03,
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(with or without the giving of notice, the lapse of time, or both) violate, or
be in conflict with, or constitute a default under, or result in or permit the
termination of, or accelerate the performance required by, or cause or permit
the acceleration of the maturity of any debt or obligation pursuant to, any
agreement or commitment to which Seller is a party or by which Seller is bound
or to which any of the Sale Assets is subject, or violate or conflict with any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Seller is a party or by which Seller is
bound or to which any of the Sale Assets is subject, or result in the creation
of any Lien upon the Sale Assets.
3.04. Financial Statements. Seller has delivered to Buyer its audited
financial statements as of December 31, 1994 and 1995 and for the years then
ended, together with an unaudited balance sheet of Seller as of March 31, 1996
and an unaudited statement of operations of Seller for the three months then
ended. Except in the case of those statements ending before year-end, which
are subject to customary year-end adjustments and accruals and are without
footnotes, the financial statements referred to in this Section 3.04 present
fairly, in all material respects, the financial position and results of
operations of Seller as at and for the periods set forth therein, and have been
prepared in accordance with generally accepted accounting principles
consistently applied. None of the financial statements referred to in this
Section 3.04 materially understates the true costs and expenses of Seller.
3.05. Interim Operations. Since the date of the unaudited balance sheet
referred to in Section 3.04 hereof, (i) the CATV Operations have been conducted
in the ordinary and usual course consistent with past practice in all material
respects, (ii) except as otherwise provided in this Agreement, Seller has not
taken any action or entered into or otherwise become a party to any agreement
to take any action which would, if taken prior to the Closing, breach any
covenant contained in Article V or Article IX of this Agreement, (iii) no
Material Adverse Effect has occurred and is continuing, (iv) Seller has not
canceled any debts owed to or claims held by Seller with respect to the CATV
Systems, except in the ordinary course of business, and (v) Seller has not
suffered any material write-down in the value of any of the Sale Assets.
3.06. Seller Subsidiaries. There does not exist, and there has never
existed, any subsidiary entity of Seller.
3.07. Title to Properties, Encumbrances. Seller is the sole and exclusive
legal and equitable owner of and, except as otherwise set forth in Schedules
3.07 or 3.08(ii) hereto, has good (and as to real estate owned by Seller,
marketable and fee simple, and, as to real estate leasehold interests of
Seller,
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marketable) title to the Sale Assets free and clear of all Liens except (a)
such Liens, if any, as are specified in Schedule 3.07, which Liens shall be
released at or prior to Closing (or the release of which shall be fully secured
by Seller at Closing at Seller's sole cost and expense by an escrow reasonably
satisfactory to Buyer); (b) such imperfections of title, easements,
encumbrances or restrictions, if any, as do not materially impair Seller's
present use of the respective Sale Assets subject thereto or the CATV
Operations; (c) materialmen's, mechanics', carriers', workmen's,
warehousemen's, repairmen's or other like liens arising in the ordinary course
of business (or deposits to obtain the release thereof), which liens (or
deposits) shall be released at or prior to Closing (or the release of which
shall be fully secured by Seller at Closing at Seller's sole cost and expense
by an escrow reasonably satisfactory to Buyer); and (d) liens for current taxes
not yet due (those items referenced in the foregoing clauses (a) and (c) which
are fully secured by Seller as hereinabove provided, and those items referenced
in the foregoing clauses (b) and (d), being herein collectively referred to as
"Permitted Liens"). Except as otherwise specified in Schedule 3.07, no person
(including any franchising authority) has an option to purchase, right of first
refusal or other similar right with respect to all or any part of the Sale
Assets.
3.08. The Sale Assets; Condition. (a) The Sale Assets (together with the
Excluded Assets) constitute all property and assets reasonably necessary to
conduct the CATV Operations in the manner presently conducted. Schedule
3.08(i) lists or otherwise describes all of the material items of tangible
personal property included in the Sale Assets (including, with respect to such
property as is leased, the name of the lessor, the rental rate and the lease
term at the date of this Agreement). Schedule 3.08(ii) lists or otherwise
describes all Real Property owned, leased or (with the exception of certain
office space in Stamford, CT occupied by two of Seller's employees) occupied by
Seller (including the location of such Real Property and, in the case of Real
Property leased by Seller, the name of the lessor, the rental rate and the
lease term at the date of this Agreement), all of which Real Property (with the
exception of the foregoing Stamford, CT office space, which office space is not
owned or leased by Seller) is included in the Sale Assets. All of Seller's
CATV Systems are listed on Schedule 3.08(iii) hereto, and each of those CATV
Systems is in generally good working condition for a CATV System of its age
(excepting ordinary wear and tear and ordinary repairs) and is in substantial
compliance with all material FCC technical requirements, including CLI
(Cumulative Leakage Index) requirements, and Seller has filed all reports
required to be filed with the FCC under such requirements and has made true and
correct copies thereof available to Buyer for Buyer's inspection. Each of the
CATV Systems has the respective bandwidth capability set forth for that System
in Schedule 3.08(iii) hereto, and the Winchester
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system will (upon the completion of the current rebuild thereof) have a
bandwidth capability of 750 MHz.
(b) Seller has a valid leasehold interest under written leases in all
of the tangible personal property that is listed on Schedule 3.08(i) as being
leased by Seller. Seller has complied in all material respects with all of the
material terms and conditions of such leases, and there is no existing material
default by Seller or (to Seller's knowledge) the lessor under any such lease.
(c) Seller has delivered to Buyer true and complete copies of all
deeds, leases, subleases and other material instruments pertaining to the Real
Property listed on Schedule 3.08(ii), including true and complete copies of any
and all amendments and other modifications of such instruments. Except as
otherwise disclosed on such Schedule 3.08(ii), Seller has a valid and
enforceable leasehold interest under written leases or subleases in all Real
Property leased or subleased by Seller. Seller has complied in all material
respects with all of the material terms and conditions of such leases and
subleases, and there is no existing material default by Seller or (to Seller's
knowledge) the lessor under any such material lease or sublease. Except for
violations that do not and will not have a material adverse effect on the use
of the Real Property as presently used by Seller, (i) all buildings, towers,
guy wires and anchors, earth receiving dishes and facilities are located
entirely on the Real Property and (ii) the buildings and improvements on the
Real Property that are used by Seller do not violate existing building codes or
zoning laws. Seller's facilities located on the parcels of Real Property
listed on Schedule 3.08(ii) are supplied with utilities and other services
necessary for Seller's operation of such facilities, including, as applicable,
gas, electricity, water, telephone, sanitary sewer and storm sewer. To
Seller's knowledge, the foregoing parcels of Real Property have full legal and
practical access to public roads or streets. To Seller's knowledge, there are
no leases, subleases, licenses, concessions or other agreements, whether
written or oral, granting to any person the right to use or occupy any of the
Real Property which would materially impair the use of the Real Property as
presently used by Seller.
(d) To Seller's knowledge, in its operations of the CATV Systems, it
is not infringing upon any copyrights, trademarks, trade names, service marks,
service names, patents or other such intellectual property rights owned by any
other person or persons.
3.09. Taxes. Seller has filed or caused to be filed when due all United
States federal income tax returns and all other national, state and local tax
returns required to be filed in the United States or elsewhere to reflect the
operations of
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Seller, including with respect to the CATV systems, and all taxes shown on such
returns (which returns are, to Seller's knowledge, true, correct and complete
in all material respects) to be due have been paid.
3.10. CATV Instruments. The CATV Instruments held by Seller and included
in the Sale Assets and listed on the Schedules hereto (unless not required to
be so listed by the terms of this Agreement), together with those CATV
Instruments (if any) listed as Excluded Assets on Schedule 1.01(iii) hereto,
constitute, in the aggregate, all of the material CATV franchise instruments,
contracts, agreements, leases, licenses (including the FCC Licenses), permits
and other rights, instruments, authorizations and commitments reasonably
necessary to conduct the CATV Operations as presently conducted, and Seller is
in material compliance with the material terms and conditions of all such CATV
Instruments. In particular, (a) Seller holds all CATV Franchises necessary for
the construction, operation and maintenance of the CATV Systems as constructed,
operated and maintained at the date hereof, (b) the respective franchise
instruments constituting those CATV Franchises are listed on Schedule 3.10(i)
hereto (which list includes each of the Franchise Areas served pursuant to each
such CATV Franchise, the franchising authority that is a party to each such
CATV Franchise, the grant date (or the commencement date of the current term),
and the current term or expiration date, for each such CATV Franchise), and (c)
Seller is in material compliance with the material terms and conditions of all
such CATV Franchises. Schedule 3.10(ii) hereto lists all of Seller's FCC
Licenses (which list includes a description of each such FCC License, and the
issue and expiration dates thereof and designates which of the FCC Licenses
requires an FCC License Transfer Consent), and Schedule 3.10(iii) hereto lists
all of Seller's Contracts except (a) such of Seller's Basic Subscriber
subscription agreements as have been entered into in the ordinary course of
business and (b) such Contracts as were entered into in the ordinary course of
business and involve post-Closing Date payments or obligations of Seller, Buyer
or the CATV Operations of not more than $10,000 individually and $50,000 in the
aggregate. Except as otherwise disclosed in Schedule 3.10(i) or in Section 3.11
below, there is no governmental proceeding pending (or to Seller's knowledge,
threatened) for the purpose of terminating any CATV Franchise. Nor is there
any governmental proceeding pending (or, to Seller's knowledge, threatened) at
the date of this Agreement, except as otherwise disclosed in Schedule 3.10(i)
or in Section 3.11 below, for the purpose of granting any additional franchise
or other instrument for the construction, operation or maintenance of any CATV
system in any Franchise Area. Schedule 3.08(iii) designates which of the CATV
Franchises requires a Franchise Transfer Consent. Seller has delivered to
Buyer true and complete copies of all of the CATV Instruments, including all
material amendments thereto. Each CATV Instrument is in full force and effect
and constitutes a valid and binding
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obligation of and is legally enforceable against Seller and, to Seller's
knowledge, the other parties thereto. No material violation of or material
default under any CATV Instrument exists. Requests for formal franchise
renewal under the Communications Act have been filed with the appropriate
franchising authorities within 30 to 36 months prior to the expiration of each
CATV Franchise. Seller has not made any commitments (oral or written) to any
franchising authorities or other governmental authorities with respect to the
CATV Systems other than those contained in the CATV Franchises. As of the date
of this Agreement, Seller has not received any notice that any party to any
Material CATV Instrument intends to terminate such Material CATV Instrument or
to amend the terms thereof without the consent of Seller, to refuse to renew
such Material CATV Instrument upon expiration of its term, or to renew such
Material CATV Instrument upon expiration only on terms and conditions that are
materially more onerous than those now existing, and Seller has no knowledge
that any of the Material CATV Instruments would not be renewed by the
respective third party thereto in the ordinary course. Except for the need to
obtain the consents, approvals and authorizations specified in Schedules
3.10(i), 3.10(ii) and 3.10(iii) for the assignment or transfer of the Material
CATV Instruments, and subject to the release of the Liens itemized in Schedule
3.07, Seller has full legal power and authority to assign to Buyer all of
Seller's rights under the Material CATV Instruments in accordance with this
Agreement, and (subject to obtaining the foregoing consents, approvals and
authorizations) such assignment will not affect the validity, enforceability or
continuation of (i) any CATV Franchise in any respect or (ii) any Material CATV
Instrument other than a CATV Franchise in any material respect. Under the laws
of the Commonwealth of Kentucky, Seller is not obligated (and, as at the
Closing Date, Buyer will not be obligated) to have entered into, or to be a
party to, any pole attachment agreement(s) with the respective owner(s) of any
utility poles located within the Commonwealth of Kentucky (other than those
poles owned by the City of Richmond, KY) in order to maintain the CATV Systems'
respective utility pole attachments within such Commonwealth, separate and
apart from Seller's (or Buyer's, as the case may be) compliance with the
applicable pole attachment tariffs on file in such Commonwealth (and such
incidental notification and administrative requirements or procedures as any
such utility pole owner may require in connection therewith).
3.11. Litigation. Except as otherwise disclosed in Schedule 3.11 and
except for matters affecting the CATV industry in general or (to Seller's
knowledge) in the Region, there is no action, suit or proceeding by or before
any court or governmental or other regulatory or administrative agency or
commission pending (or to Seller's knowledge, threatened) with respect to the
CATV Operations, including without limitation, any (i) tax proceeding pursuant
to which Seller is or could be made liable
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for any taxes, penalties, interest or other charges, the liability for which
could extend to Buyer as transferee of the CATV Operations; (ii) condemnation
proceedings, lawsuits or administrative actions relating to the Real Property,
or other matters affecting adversely the current use, occupancy or value
thereof; (iii) infringement proceedings with respect to any trademarks, trade
names, copyrights, patents, patent applications, know-how, methods or
processes owned by any other person or persons; or (iv) controversies, disputes
or proceedings between Seller and any employee of Seller who engages in the
CATV Operations. No claim or investigation based on any Environmental Law
which relates to (i) any Real Property owned by Seller or any operations or
conditions on it or (ii) to Seller's knowledge, any Real Property leased by
Seller or any operations or conditions on it, (x) has been asserted or
conducted in the past or is currently pending against or with respect to
Seller, or, to Seller's knowledge, any other person, or (y) is, to Seller's
knowledge, threatened or contemplated. Neither the Sale Assets nor Seller is
subject to any judgment, order, writ, injunction, award or decree with respect
to the CATV Operations. Seller has not, within the past three years, received
any notice, citation or complaint from any governmental authority or any other
person with respect to any of the foregoing or restricting or terminating (or
purporting to restrict or terminate) any aspect of the material use and
enjoyment of the Sale Assets. Except as otherwise set forth in paragraph 5 of
Schedule 1.01(iii), as of the date of this Agreement Seller has no knowledge of
any existing chose(s) in action.
3.12. Consents and Approvals. Except as otherwise disclosed in Schedules
3.10(i), 3.10(ii), 3.10(iii), 3.11 and 3.12 and subject to the requirements of
the HSR Act and except as set forth in Section 3.25 following commencement of
the Bankruptcy Proceeding, no consent or approval of, or designation,
declaration of filing with, any governmental authority is required by Seller in
connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby. Except as otherwise
disclosed in the preceding sentence or in Schedules 3.03, 3.10(iii) and 3.12,
no material consent, approval or authorization of any other person (i.e., any
person other than a governmental authority) is necessary for the consummation
of the transactions contemplated hereby.
3.13. Compliance with Law. Except as otherwise disclosed in Schedules
3.03 or 3.13, the CATV Operations have been conducted in material compliance
with all applicable material laws, regulations and other requirements of all
governmental authorities having jurisdiction over Seller with respect to the
CATV Operations, and Seller is not in violation of any applicable judgment,
order, writ, injunction, award or decree relating to the Sale Assets or CATV
Systems, and, without limiting the
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foregoing, Seller has not received any notification from any governmental
authority with respect to any such violation or non-compliance, provided that
this Section 3.13 shall not relate to any matter addressed in Sections 3.08,
3.10, 3.14 or 3.15.
3.14. FCC and Copyright Compliance. Except as provided in Schedule 3.14,
Seller is duly authorized under applicable CATV Instruments, the Communications
Act and FCC rules, regulations and orders to distribute the FM signals and
off-air television broadcast signals presently being distributed to the
Subscribers of the CATV Systems and to utilize all carrier frequencies
generated by the CATV Systems, and is licensed or otherwise authorized to
operate all the facilities required by law to be licensed or authorized,
including without limitation any business radio and any cable television relay
service ("CARS") system, being operated as part of the CATV Operations, except
where any such failure of Seller to be so authorized or licensed has not had a
material adverse effect on any CATV System. Except as provided in Schedule
3.14, Seller's conduct of the CATV Operations and of any FCC-licensed facility
used in conjunction with Seller's conduct of the CATV Operations has been, and
is, in material compliance with the Communications Act, and Seller has not
received any formal written notice of any claimed default or violation with
respect to any CATV Operations. Seller has timely filed all required material
reports with the FCC. Except as otherwise disclosed in Schedule 3.14, Seller
has filed, pursuant to Section 111 of the Copyright Act and the rules,
regulations, policies and orders of the United States Copyright Office, all
notices, statements of account, supplements and other documents required to be
filed with the United States Copyright Office with respect to the CATV Systems
for the periods during which such CATV Systems have been operated or owned by
Seller, and Seller has made all payments shown therein to be due. There is no
inquiry, claim, action or demand pending (or, to Seller's knowledge,
threatened) before the United States Copyright Office which questions the
copyright filings or payments made by Seller with respect to the CATV Systems.
3.15. Employee Agreements and Plans. Schedule 3.15(i) contains a true and
complete list of all plans and agreements, including employment agreements (but
excluding any employment, incentive compensation or bonus agreements or other
such arrangements between Seller, on the one hand, and any of Seller's
executive officers or regional management, on the other hand, the provisions of
which agreements or arrangements are confidential and in respect of which Buyer
will have no liability on or after the Closing Date), severance agreements and
indemnification agreements and arrangements, to which Seller is a party at the
date of this Agreement under which Seller provides benefits to current
employees of Seller engaged in the CATV Operations (exclusive of those officers
and employees of Seller located at Seller's corporate office in Stamford, CT),
including but not
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limited to any "employee benefit plan" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Plans"). All of the Plans are written Plans and true and complete copies of
all of the Plans have been delivered or made available to Buyer. Except as
disclosed in Schedule 3.15(i), there are no commitments to amend any of those
Plans. Schedule 3.15(ii) (which, due to the confidential nature of the salary
information set forth therein, is not attached hereto but has been delivered to
Buyer separately and is incorporated herein by reference) lists all employees
of Seller (exclusive of those officers and employees of Seller located at
Seller's corporate office in Stamford, CT), together with each such employee's
respective date of initial employment, present title and work assignment,
present annual salary, and the date and percentage of his or her most recent
salary increase.
3.16. Brokers and Finders. Except for Waller Capital Corporation
("Waller") and the brokerage fee due Waller in connection with the transactions
contemplated by this Agreement (which brokerage fee will be paid by Seller),
Seller has not employed any broker or finder, including any broker or finder
retained pursuant to Section 327 of the Bankruptcy Code, or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
3.17. Labor Unions. Seller is not a party to any collective bargaining
agreement with respect to any of the CATV Operations. To Seller's knowledge,
(i) none of the employees of Seller engaged in the CATV Operations is presently
a member of any labor union related to his or her employment in the CATV
Operations and (ii) no labor union has filed a petition for representation of
any of the employees of Seller with respect to any employee's employment in the
CATV Operations.
3.18. EBS's; Rates and Charges. Schedule 3.18 sets forth, with respect to
each Franchise Area in each CATV System, the number of Basic Subscribers, Bulk
Subscribers and EBS's in such Franchise Area as of May 15, 1996. Schedule 3.18
also lists all of Seller's standard, non-discounted, non-bulk CATV rates and
charges for each Franchise Area in each CATV System at the date of this
Agreement, together with all discounts offered or applied to all such rates and
charges.
3.19. Environmental Matters. The CATV Operations are in material
compliance with all material Environmental Laws, and to Seller's knowledge the
CATV Systems have previously been operated in material compliance with all
material Environmental Laws. Except as could not be reasonably expected to
result in material liability under any Environmental Law, Seller has not
generated, released, stored, used, treated, handled, discharged or disposed of
any Hazardous Substances at, on, under, in or
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about, or in any other manner affecting, any Real Property, transported any
Hazardous Substances to or from any Real Property or discharged any Hazardous
Substances from any Real Property into any body of water, directly or
indirectly or undertaken or caused to be undertaken any other activities
relating to the Real Property, which would support a claim or cause of action
under any Environmental Law, and, to Seller's knowledge, no other present or
previous owner, tenant, occupant or user of any Real Property or any other
person has committed or suffered any of the foregoing. To Seller's knowledge,
no release of Hazardous Substances outside any Real Property has entered or
threatens to enter any such Real Property. To Seller's knowledge, (a) no
underground storage tank is currently located on any Real Property, or has
been removed therefrom, (b) no Real Property has been or is being used as a
gasoline service station or any other facility for storing, pumping, dispensing
or producing gasoline or any other petroleum products or wastes (with the
exception of any prior user's use of the facility that currently serves as
Seller's office in the City of Madison, IN, which facility was apparently used
at one time as an automobile and tire service facility), (c) no building or
other structure on any Real Property contains friable asbestos, and (d) there
are no incinerators or cesspools on the Real Property (with the exception of
that certain incinerator on or adjacent to the Real Property leased by Seller
from the City of Paris, KY) and all waste generated on the Real Property is
discharged into a public sanitary sewer system or otherwise in accordance with
applicable federal, state and local laws, rules and regulations. Seller has
provided to Buyer copies in its possession of (a) all studies, reports or
surveys relating to the presence or alleged presence of Hazardous Substances at
or on any Real Property, (b) all notices or other written materials that were
received from any governmental authority having power to administer or enforce
any Environmental Laws relating to any violations of Environmental Laws in
respect of any Real Property or activities at any Real Property and (c) all
notices of any claim by any private party of any violation under any
Environmental Law with respect to any Real Property.
3.20. Knowledge of Buyer's Representations. Seller has no knowledge that
any representation or warranty of Buyer is untrue in any material respect.
3.21. Transactions with Affiliates. Except as disclosed on Schedule 3.21,
(i) Seller has not been involved in any business arrangement or relationship
relating to the CATV Systems with any Affiliate of Seller and (ii) no Affiliate
of Seller owns any property or right, tangible or intangible, which is used in
the CATV Operations.
3.22. No WARN Obligation. Provided that Buyer shall comply with its
obligations under Section 5.06 hereof, then no
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notices to employees of Seller engaged in the CATV Operations shall be required
under the federal Worker Adjustment and Retraining Notification Act as a result
of the transactions contemplated hereby.
3.23. Other CATV Plant. Except as otherwise disclosed in Schedule 3.23,
as of the date of this Agreement to Seller's knowledge (i) the CATV Systems are
the only cable television systems, multichannel multipoint distribution service
or other multichannel video programming service (other than any direct
broadcast satellite service) providing multichannel video programming service,
or offering to provide multichannel video programming service, to the single
family dwellings being served by the CATV Systems within the Franchise Areas
and (ii) no other CATV franchises or other franchises, licenses or
authorizations have been issued, and no applications for such franchises,
licenses or other authorizations are pending, which would permit any third
person to provide multichannel video programming service (other than any direct
broadcast satellite service) to any such single family dwellings.
3.24. Insurance and Bonds. Schedule 3.24 sets forth a true and complete
list of all insurance policies of Seller that insure any part of the Sale
Assets or the CATV Operations, all of which insurance policies are in full
force and effect. Seller currently has in full force and effect the
performance, surety or other bonds listed on Schedule 3.24, which to Seller's
knowledge represent all such bonds required under the CATV Franchises or
Contracts, except where the requirement has been waived by the grantor or other
party to any such CATV Franchise or Contract as set forth in Schedule 3.24.
3.25. Bankruptcy. In the event of the commencement of the Bankruptcy
Proceeding, the representations and warranties of Seller contained in this
Article III shall be subject to and qualified by the requirements imposed under
the Bankruptcy Code and by the Bankruptcy Court. Nothing contained in this
Section 3.25 shall be deemed to impair, limit or modify Seller's obligations
under this Agreement.
3.26. Act of God. As of the date of this Agreement, no Act of God or any
other circumstance has occurred or arisen that would result in the second
sentence of the definition of "Actual Revenues" being applicable to the
determination of Actual Revenues.
3.27. Representations. No representation or warranty made by Seller in
this Agreement or in any certificate, document, agreement or other instrument
furnished or to be furnished by Seller pursuant hereto contains any untrue
statement of a material fact.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.01. Partnership Formation. Buyer is a limited partnership duly formed
and validly existing under the laws of the State of Delaware and has all
requisite partnership power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns, and Buyer
will be duly qualified or licensed on the Closing Date to do business as a
limited partnership in each State or Commonwealth included in the Region to the
extent that its ownership of the Sale Assets or its conduct of the CATV
Operations on or immediately after the Closing Date will require such
qualification or licensing.
4.02. Authorization. Buyer has all requisite partnership power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all required partnership action, and this Agreement is a valid and binding
agreement of Buyer enforceable in accordance with its terms, except as the
enforceability of this Agreement and the documents contemplated hereby may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
4.03. No Violation. Subject to the applicable requirements imposed under
the Bankruptcy Code and by the Bankruptcy Court following commencement of the
Bankruptcy Proceeding, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provisions of Buyer's Certificate of Limited Partnership or partnership
agreement, or violate, or be in conflict with, or constitute a default under,
or result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to,
any agreement or commitment to which Buyer is a party or by which Buyer is
bound, or violate any statute or law or any judgment, decree, order, regulation
or rule of any court or governmental authority, to which Buyer is bound.
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4.04. Brokers and Finders. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
4.05. Qualification. To Buyer's knowledge, no facts exist which would,
under present federal or state law, or under the present rules, regulations and
policies of the FCC, or under any CATV Instrument, disqualify Buyer from
acquiring any of the Sale Assets. In the event that Buyer becomes aware of any
such facts, it shall promptly notify Seller in writing thereof and use its
reasonable, good faith efforts to prevent any such disqualification.
4.06. Financing. Buyer has the financial capability to consummate the
transactions contemplated by this Agreement, and Buyer understands that under
the terms of this Agreement Buyer's consummation of those transactions is not
in any way contingent upon or otherwise subject to (i) Buyer's consummation of
any financing arrangements or Buyer's obtaining of any financing or (ii) the
availability, grant, provision or extension of any financing to Buyer , it
being understood that Seller's sole remedy for Buyer's breach of this Section
4.06 shall be pursuant to Sections 1.07(c) and 11.01(d) hereof (if available to
Seller in accordance with the terms of said Sections) with the consequent
effects described therein.
ARTICLE V
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
5.01. Full Access. Seller shall afford to Buyer, its counsel,
accountants, investors, lenders, financial advisors, engineers and consultants
and other representatives full access to the plants, offices, warehouses,
properties, books and records of Seller relating to the CATV Operations in
order that Buyer may have the opportunity to inspect the affairs of Seller
relating to the CATV Operations and conduct such other due diligence as Buyer
shall reasonably request, provided that any such inspection shall be conducted
only after reasonable prior notice and then only in such a manner as not to
unreasonably interfere with the operation of the business of Seller. Seller
shall cause its officers and accountants to furnish all available financial and
operating data and other information and copies of documents relating to the
CATV Operations or relating to the Bankruptcy Proceeding as Buyer shall from
time to time reasonably request. Without limiting the foregoing, if requested
by Buyer, Seller shall give Buyer and any
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environmental engineers and consultants acting on behalf of Buyer, such access
to the sites and facilities relating to the CATV Operations as is reasonably
required to permit such engineers and consultants to conduct the physical
on-site inspections and prepare the environmental surveys and assessments with
respect to such sites and facilities as Buyer or its lenders shall reasonably
request. No inspection, review, examination or investigation by Buyer shall
diminish or obviate any of the representations, warranties, covenants or
agreements of Seller under this Agreement or any of Buyer's remedies under this
Agreement, at law or equity or otherwise.
5.02. Primary Transfer Consents and Estoppel Certificates.
(a) Seller shall use its reasonable efforts to obtain at the
earliest practicable date (and in any event prior to Closing), and at its sole
cost and expense, all of the Transfer Consents in the following form and
without any conditions adverse to Buyer: (i) if a Franchise Transfer Consent,
then in substantially the form of Exhibit G-1 hereto or in such other form as
such local franchising authority or person representing same may reasonably
request; (ii) if an FCC License Transfer Consent, then in substantially such
form as is customarily granted by the FCC for the transfer of the respective
FCC License; and (iii) if a Contract Transfer Consent (or other consent listed
on Schedule 5.02 hereto (the "Other Consents")), then in substantially the form
of Exhibit G-2 hereto or in such other form as such consenting party may
reasonably request. Notwithstanding the foregoing, Seller will not agree to
any material adverse change in any CATV Franchise, FCC License or Contract or
any instrument evidencing a Transfer Consent without Buyer's prior written
consent (which consent Buyer shall not unreasonably withhold). Buyer shall
have the right, at its own expense, to participate in any hearings or
proceedings before the FCC, franchising authorities or other governmental
authorities with respect to obtaining the Transfer Consents.
(b) Seller shall use its good faith efforts to provide to Buyer, at
or prior to the Closing, a certificate ("Estoppel Certificate") in
substantially the form of Exhibit H hereto, of the franchising authority for
each CATV Franchise which does not require such authority's consent for
Seller's assignment and transfer thereof to Buyer, to the effect that such CATV
Franchise (A) is valid and in full force and effect, and not in default, (B) to
the extent required by such CATV Franchise, has been approved for assignment to
Buyer, and (C) may be pledged as collateral to any present or future lender to
Buyer to secure indebtedness. Buyer expressly acknowledges and agrees that
Seller's obtaining, and Buyer's receipt, of any such Estoppel Certificate shall
not be a condition to any Closing obligation of Buyer under this Agreement.
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(c) To the extent the approval of the Bankruptcy Court is required
in connection with the assignment and assumption of any CATV Instrument
pursuant to Section 365 and Federal Rule of Bankruptcy Procedure 6006 or any
other applicable Bankruptcy Code sections or rules, Seller shall use its
reasonable efforts to obtain such approval.
5.03. Supplements. From time to time prior to the Closing, Seller shall
notify Buyer of any matter heretofore existing or hereafter occurring which, if
existing or occurring at or prior to the date of this Agreement, would have
been required to be set forth or described in any Schedule, or would otherwise
render any of Seller's representations and warranties under this Agreement
untrue in any material respect, or would otherwise constitute a breach of this
Agreement or would prevent Seller from fulfilling any condition to Closing
described in Article VIII. No such notice made pursuant to this Section 5.03
shall be deemed to cure any breach of any representation, warranty or covenant
made in this Agreement unless Buyer specifically agrees thereto in writing, or
otherwise obviate or impair any rights of Buyer under this Agreement, at law or
equity or otherwise with respect to such breach.
5.04. Antitrust Laws. As soon as practicable, and in any event within 30
days after Seller's execution hereof, Seller shall make any and all filings
which are required under the HSR Act. Seller shall furnish to Buyer such
necessary information and reasonable assistance as Buyer may request in
connection with its preparation of necessary filings or submissions to any
governmental agency, including, without limitation, any filings necessary under
the provisions of the HSR Act. Seller shall supply Buyer with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Seller or its representatives, on the one hand, and
the FTC, the Antitrust Division of the United States Department of Justice or
any other governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement or the transactions
contemplated hereby.
5.05. Covenant to Satisfy Conditions. Seller shall use all reasonable
efforts to insure that each of the conditions set forth in Article VIII hereof
to be satisfied by Seller is satisfied, insofar as such matters are within the
control of Seller, and otherwise cooperate fully with Buyer and its respective
counsel, accountants and other representatives in connection with any actions
required to be taken as part of the parties' respective obligations under this
Agreement.
5.06. Employee Transition.
(a) Not later than thirty (30) days after the date of this
Agreement, Seller shall cause the employees of
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<PAGE> 50
Seller who perform services for the CATV Systems (for purposes of this Section
5.06, the "System Employees") to be notified of the pending sale of the CATV
Systems to Buyer as provided in this Agreement and Seller's intent to
discontinue its operations with respect to the CATV Systems, subject to the
occurrence of Closing. Buyer shall have the right in its sole discretion, but
no obligation (except as hereinbelow otherwise set forth in this Section
5.06(a)), to hire any of the System Employees, provided that Buyer shall
implement its applicable health, medical and other benefits coverage effective
upon Closing with respect to those of Seller's employees to whom Buyer offers
employment and who accept Buyer's offer of employment, so that such employees
do not suffer any lapse of coverage. No later than ten (10) days prior to the
Closing Date, Buyer shall make offers of employment, conditioned upon the
occurrence of the Closing, to such of the System Employees (if any) that Buyer
desires, in its sole discretion, to employ as of the Closing Date; provided,
that for purposes of not causing Seller to violate its representation set forth
in Section 3.22 hereof, Buyer shall not under any circumstances decline or
otherwise fail to offer employment to more than 49 of Seller's employees at
Seller's Richmond, KY location. Promptly after making such offers of
employment (and in any event at least five days prior to the Closing), Buyer
shall provide to Seller a written list of those System Employees to whom Buyer
has made such offers and shall designate on that list which of those employees
have accepted Buyer's offer and which of those employees have rejected Buyer's
offer.
(b) Buyer shall not assume any obligation or liability to or in
connection with any System Employee or other employee or former employee of
Seller or the CATV Systems, and nothing in this Agreement shall be construed as
a commitment or obligation of Buyer to accept, or otherwise continue, the
employment of any of the System Employees or other employees of Seller or the
CATV Systems; provided, that Buyer shall assume all accrued and unpaid salary
and vacation of such of Seller's employees as are retained by Buyer as of the
Adjustment Time in respect of which a Purchase Price adjustment is made in
Buyer's favor pursuant to Section 1.04(a)(ii)(C) hereof. Without limiting the
generality of the foregoing, Seller shall remain solely responsible for any and
all employee-related expenses and benefits, including, without limitation,
those pursuant to COBRA, ERISA, the Tax Code, and any and all federal, state
and local discrimination laws, in respect of any of the System Employees or
other employees or former employees of Seller or the CATV Systems and their
respective beneficiaries and dependants, relating to or arising in connection
with, during the course of or as a result of (i) the employment, or the actual
or constructive termination of employment, of any such employee by such
employee's current employer (including, without limitation, in connection with
the consummation of the transactions contemplated by this Agreement); (ii) the
participation in or accrual of benefits or compensation
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<PAGE> 51
under, or the failure to participate in or to accrue compensation or benefits
under, any "employee benefit plan" within the meaning of Section 3(3) of ERISA,
of such employee's current employer or any of its affiliates; (iii) accrued but
unpaid salaries, wages, bonuses, incentive compensation, vacation or sick pay
or other compensation or payroll items (including, without limitation, deferred
compensation), except as otherwise provided in the proviso set forth at the end
of the first sentence of this Section 5.06(b); and (iv) the provisions of
health continuation coverage for any such employee required by Part 6 of Title
1 of ERISA and Section 4980B of the Tax Code.
(c) This Section 5.06 shall operate exclusively for the benefit of
the parties to this Agreement and not for the benefit of any other person or
entity, including without limitation, any System Employee or other employee or
former employee of Seller or the CATV Systems.
5.07. No-Shop Covenant. From the date of this Agreement until the earlier
of the Closing or the termination of this Agreement in accordance with its
terms, (a) Seller shall not, directly or indirectly, (i) solicit any offer from
any other person for any form of business combination or acquisition or
disposition of all or any of the Sale Assets or the CATV Systems, or initiate
or enter into any negotiations or provide confidential information with respect
to any such business combination or acquisition, (ii) solicit any offer from
any other person for any transaction involving Seller or any Affiliate of
Seller that would preclude or in any way interfere with the consummation of the
transactions contemplated by this Agreement, or initiate or enter into any
negotiations or provide confidential information with respect to any such
transaction, or (iii) authorize any representative, agent, officer, director or
principal stockholder to take any of the actions prohibited in this paragraph,
and (b) Seller shall use all reasonable efforts to prevent any such person or
entity from taking any of the actions prohibited in this paragraph. Nothing
contained in this Section 5.07 shall prohibit Seller from (i) responding to any
unsolicited proposal or inquiry by advising the person or entity making such
proposal or inquiry of the terms of this Section 5.07 or (ii) complying with
any requirement imposed by the Bankruptcy Court.
5.08. Delivery of Financial Information. Seller shall furnish to Buyer
within thirty (30) days after the end of each month ending between the date of
this Agreement and the Closing Date an operating income statement for the month
just ended for the CATV Systems on a combined basis, and such other available
financial information (including information on payables and receivables) as
Buyer may reasonably request. The operating income statements delivered by
Seller to Buyer pursuant to this Section 5.08 shall be prepared from the books
and records of Seller with respect to the CATV Systems, shall accurately
reflect
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the books and records of the CATV Systems, shall be complete and correct in all
material respects, and shall present fairly the operating income of the CATV
Systems on a combined basis for the periods then ended. Promptly after the
distribution or receipt thereof by Seller's corporate office in Stamford, CT,
Seller shall deliver to Buyer copies of any other financial statements,
subscriber counts and other material operational data prepared by Seller in the
ordinary course of business for distribution to its executive officers in
Stamford, CT. Seller shall also provide Buyer on a periodic basis with reports
of capital expenditures made with respect to the CATV Systems.
5.09. Additional Financial Information.
(a) In the event and to the extent requested by Buyer prior to the
30th day after Buyer's receipt of Seller's Post-Closing Certificate and
required by Securities and Exchange Commission ("SEC") Regulations S-K and S-X
to be included in any registration statement or other offering document (each a
"Registration Statement") proposed to be prepared by Buyer or any Affiliate of
Buyer, Seller agrees to prepare or cause Seller's independent accountants to
prepare the following financial statements with respect to the CATV Systems,
and related management discussions and analyses (collectively, the "Additional
Financial Statements"), conforming with the requirements specified in this
Section 5.09:
(i) Balance sheets as at December 31, 1994 and 1995, and income
statements and statements of cash flows and changes in equity for the years
ended December 31, 1993, 1994, and 1995, together with the required footnotes
and the auditor's report thereon.
(ii) A balance sheet, income statement, and statement of cash flows as
of and for the quarter ended March 31, 1996, together with the required
footnotes.
(iii) A balance sheet, income statement, and statement of cash flows
as of and for each fiscal quarter subsequent to the quarter ended March 31,
1996 and ending prior to the Closing Date, together with the required
footnotes.
(b) Seller shall prepare or cause Seller's independent accountants to
prepare the Additional Financial Statements within forty-five days after
Buyer's request therefor.
(c) The Additional Financial Statements shall be prepared from the
books and records of Seller in accordance with generally accepted accounting
principles, consistently applied, and in the form required by SEC Regulations
S-K and S-X, so as to fairly present the financial condition, results of
operations, and cash flows of Seller for the periods indicated, and, with
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<PAGE> 53
respect to the quarterly financial statements required by this Section 5.09,
subject to normal year-end adjustments.
(d) To the extent required by SEC Regulation S-X, the Additional
Financial Statements shall be audited by Seller's independent accountants.
(e) Seller agrees to provide one or more audit representation letters
as to the information provided by Seller to its independent accountants in
connection with any audit required under this Section 5.09. The representation
letter will be in such form and make the representations reasonably required by
such independent accountants to enable them to issue an opinion acceptable to
the SEC for purposes of any Registration Statement with respect to the audit of
those Additional Financial Statements required to be audited by SEC Regulations
S-K and S-X and to be included in such Registration Statement. Seller will
cause its independent accountants to provide all consents that are necessary
for the inclusion of their opinion and the Additional Financial Statements in
any such Registration Statement.
(f) All costs and expenses incurred by Seller (and by Seller's
independent accountants) under this Section 5.09, including all costs and
expenses of preparing the Additional Financial Statements and all audits and
reviews thereof, shall be paid by Buyer within 30 days after receipt of
Seller's (or such independent accountants') monthly invoice therefor.
5.10. Financing Leases. Seller will satisfy at or prior to Closing all
outstanding obligations under capital and financing leases with respect to any
of the Sale Assets (including, without limitation, that certain capital lease
between Seller and NBD Leasing, Inc.) and obtain good title to the Assets
leased by Seller pursuant to those leases (including, in the case of the
foregoing NBD Leasing, Inc. capital lease, Seller's Madison, IN office
telephone system subject thereto) so that those Sale Assets shall be
transferred to Buyer at Closing free of any interest of the lessors and
otherwise in accordance with this Agreement.
5.11. Bankruptcy Proceeding.
(a) In the event of the commencement of the Bankruptcy Proceeding,
the purchase and sale of the Sale Assets pursuant to this Agreement shall be
subject to the prior approval of the Bankruptcy Court.
(b) Prior to Seller's solicitation of any votes or consents in respect
of the Bankruptcy Plan, Seller shall submit the Bankruptcy Plan and Disclosure
Statement (the provisions of which Bankruptcy Plan and Disclosure Statement
regarding the
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sale of the Sale Assets to Buyer shall provide for the sale of the Sale Assets
to Buyer in accordance with the terms and conditions set forth herein) to
Buyer for Buyer's review and approval of the provisions thereof concerning the
sale of the Sale Assets to Buyer, which approval Buyer shall not unreasonably
withhold or delay.
(c) Simultaneously with the filing of the voluntary Chapter 11
petition, or as soon after the commencement of the Bankruptcy Proceeding as is
reasonably practicable, the Seller shall (a) file the Bankruptcy Plan, the
Disclosure Statement and the votes of creditors who were solicited to the
Bankruptcy Plan and (b) use its best efforts to obtain, in advance of the
Confirmation Order, Bankruptcy Court approval of Sections 10.05 and 11.03 of
this Agreement. Upon the commencement of the Bankruptcy Proceeding and until
September 15, 1996, Seller shall use its best efforts to obtain as
expeditiously as possible the entry of the Confirmation Order by the Bankruptcy
Court.
(d) If a Confirmation Order has not been entered by September 15, 1996
and if the Seller in the exercise of its good faith discretion determines that
the sale of the Sale Assets to Buyer can be accomplished more expeditiously by
entry of an Approval Order, the Seller may seek the entry of the Approval Order
by the Bankruptcy Court. The form of Approval Order submitted by Seller shall
be in form and substance reasonably acceptable to Buyer and Buyer's counsel,
whose acceptance shall not be unreasonably withheld or delayed. Unless
otherwise already approved by the Bankruptcy Court, Seller shall use its best
efforts to obtain, in advance of the entry of the Approval Order, Bankruptcy
Court approval of Sections 10.05 and 11.03 of this Agreement.
(e) Seller shall use its diligent efforts to comply with all
requirements imposed by the Bankruptcy Code and the Bankruptcy Court in
connection with the approval of the Bankruptcy Plan and Disclosure Statement
and the entry of the Confirmation Order or Approval Order, as the case may be,
including, without limitation, providing such notice as may be required by the
applicable Federal Rules of Bankruptcy Procedure or order of the Bankruptcy
Court, as the case may be. Seller shall oppose any objections to the issuance
of, requests for reconsideration or review of, or appeals from, the
Confirmation Order, or the Approval Order, as the case may be, which would
affect or impact the sale of the Sale Assets to Buyer in accordance with the
terms hereof.
(f) Seller shall immediately provide Buyer with copies of all
judgments, decisions or orders issued by the Bankruptcy Court after the date
hereof in the Bankruptcy Proceeding and all pleadings or other documents filed
by any party after the date hereof in the Bankruptcy Proceeding which have or
may have
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any effect upon Buyer or this Agreement (or which are reasonably requested by
Buyer), and shall immediately notify Buyer in writing of all material
developments in the Bankruptcy Proceeding.
5.12. Governmental Filings. All information contained in any and all
filings to be made by Seller in connection with the transactions contemplated
hereby under the Tax Code, the HSR Act, the Securities Act or the Securities
Exchange Act shall comply in all material respects with the requirements of
such acts and the rules and regulations promulgated thereunder (it being
understood that Seller shall not be deemed to be in breach of this covenant as
a result of any information provided to Seller by Buyer for inclusion in such
filings).
5.13. Title to Versailles Parcel. Seller shall use its good faith
efforts, at its sole cost and expense, to acquire marketable and fee simple
title to that certain parcel of real property located in Woodford County,
Kentucky (i.e., Seller's Versailles, Kentucky headend site) and identified as
parcel #6 on Schedule 3.08(ii) hereto. If Seller shall be unable to acquire
marketable and fee simple title thereto prior to the Closing, then Seller shall
- - on the Closing Date - deliver to Buyer (a) a quitclaim deed in Buyer's name
with respect to such parcel and (b) a separate indemnity agreement therefor,
under which Seller shall covenant and agree (i) to continue to use its good
faith efforts from and after the Closing Date, at its sole cost and expense, to
obtain marketable and fee simple title thereto in Buyer's name, (ii) to
indemnify Buyer for any and all costs and expenses incurred by Buyer with
respect to such parcel (including any and all costs and expenses incurred by
Buyer for Buyer's vacating same and acquiring, and relocating its Versailles
CATV System headend to, a comparable parcel) on account of Seller's (or
Buyer's, as the case may be) lack of marketable and fee simple title thereto,
which indemnification obligation shall be secured by the Indemnification Fund
(and for which purpose, any claim by Buyer for indemnification under this
Section 5.13 shall be made in accordance with and shall be deemed to have been
made pursuant to Section 10.02 of this Agreement), but which obligation shall
not be subject to the $250,000 basket set forth in Section 10.02(c) of this
Agreement, provided that Seller's foregoing indemnity shall be limited to (and
Seller shall not in any event have any obligation or liability under this
Agreement or such indemnity in excess of) $200,000.00 with respect to any such
costs or expenses, and (iii) to provide to Buyer or an appropriate escrow
agent, as security for such indemnity in the event that Seller shall not have
delivered marketable and fee simple title to such parcel to Buyer prior to the
expiration of the first anniversary of the Closing Date, an additional escrow
amount in the sum of $200,000.00.
5.14 Retransmission Consents. Seller shall use its reasonable efforts to
obtain at the earliest practicable date
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(and in any event prior to the Closing), and at its sole cost and expense, with
respect to each retransmission consent agreement of Seller included in the
Contracts, any consent (or waiver) required for Seller's assignment or
transfer thereof to Buyer; provided, that nothing herein shall be construed to
require Buyer to make any payment, or to assume any obligation, in order to
obtain any such consent (or waiver).
5.15 Carrollton, KY Antenna Tower Permit. Seller shall use its
good faith efforts, at its sole cost and expense, to acquire as soon as
practicable and in any event prior to the Closing all required permits(s) from
the Kentucky Airport Zoning Commission with respect to the Carrollton, KY
antenna tower. If Seller shall be unable to obtain such permit(s) prior to the
Closing, then Seller shall, on the Closing Date, deliver to Buyer a separate
indemnity agreement therefor, under which Seller shall covenant and agree (i)
to cooperate in all reasonable respects with Buyer after the Closing in
connection with obtaining such permit(s) and (ii) to indemnify Buyer for any
and all costs and expenses incurred by Buyer with respect to such permit(s) on
account of Seller's failure to obtain and transfer such permit(s) to Buyer at
the Closing (including without limitation any and all costs and expenses
incurred by Buyer for Buyer's relocating or replacing such antenna tower),
which indemnification obligation shall be secured by the Indemnification Fund
(and for which purpose, any claim by Buyer for indemnification under this
Section 5.15 shall be made in accordance with and shall be deemed to have been
made pursuant to Section 10.02 of this Agreement) but which obligation shall
not be subject to the $250,000 basket set forth in Section 10.02(c) of this
Agreement, provided that Seller's foregoing indemnity shall be limited to (and
Seller shall not in any event have any obligation or liability under this
Agreement or such indemnity in excess of) $200,000.00 with respect to any such
costs or expenses.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
6.01. Antitrust Laws. As soon as practicable, and in any
event within 30 days after Buyer's execution hereof, Buyer shall make any and
all filings which are required under the HSR Act. Buyer shall furnish to Seller
such necessary information and reasonable assistance as Seller may request in
connection with its preparation of necessary filings or submissions to any
governmental agency, including, without limitation, any filings necessary under
the provisions of the HSR Act. Buyer shall supply Seller copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Buyer or its representatives, on the one hand, and
the
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FTC, the Antitrust Division of the United States Department of Justice or any
other governmental agency or authority or members of their respective staffs,
on the other hand, with respect to this Agreement or the transactions
contemplated hereby.
6.02. Cooperation. Whenever requested by Seller, Buyer shall assist and
cooperate with Seller in all reasonable respects in Seller's efforts to obtain
the Transfer Consents, which assistance and cooperation shall include Buyer's
attending meetings with Seller and local franchising authorities within the
Region at Seller's request. Notwithstanding the foregoing, Buyer shall have no
obligation to make any payment to any franchising authority or to any other
party to any agreement in assisting Seller in obtaining any of the Transfer
Consents. Nor shall Buyer be obligated to accept any material adverse change
in any CATV Franchise (or any other CATV Instrument) to be assigned to Buyer
hereunder unless Buyer shall have consented thereto, provided that Buyer shall
not unreasonably withhold its consent thereto.
6.03. Financing Commitments. Buyer acknowledges that it shall be Buyer's
obligation to have funds on hand at the Closing sufficient to enable Buyer to
pay the Purchase Price. Any failure of Buyer to consummate the transactions
contemplated hereby as a consequence of any lack of financing, for any reason,
shall (in the absence of any material breach by Seller) result in a forfeiture
to Seller of the Escrow Amount, which shall constitute full liquidated damages
under this Agreement with the consequent effects described in Section 1.07(c)
of this Agreement.
6.04. Governmental Filings. All information contained in any and all
filings to be made by Buyer in connection with the transactions contemplated
hereby under the Tax Code, the HSR Act, the Securities Act or the Securities
Exchange Act shall comply in all material respects with the requirements of
such acts and the rules and regulations promulgated thereunder (it being
understood that Buyer shall not be deemed to be in breach of this covenant as a
result of any information provided to Buyer by Seller for inclusion in such
filings).
6.05. Covenant to Satisfy Conditions. Buyer shall use all reasonable
efforts to insure that the conditions set forth in Article VII hereof to be
satisfied by Buyer are satisfied, insofar as such matters are within the
control of Buyer and otherwise cooperate fully with Seller and its respective
counsel, accountants and other representatives in connection with any actions
required to be taken as part of the parties' respective obligations under this
Agreement. Notwithstanding the foregoing, Buyer shall have no obligation to
make any payment to any franchising authority or to any other party to any
agreement in assisting Seller in obtaining any of the Transfer Consents. Nor
shall Buyer be obligated to accept any materially adverse change in any
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CATV Franchise (or any other CATV Instrument) to be assigned to Buyer hereunder
unless Buyer shall have consented thereto, provided that Buyer shall not
unreasonably withhold its consent thereto.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement to be
performed at the Closing shall be subject to the satisfaction, at or before the
Closing, of each of the following conditions, unless waived in writing by
Seller:
7.01. Performance. Buyer shall have performed and complied
in all material respects with all material agreements, obligations and
conditions required by this Agreement to be performed or complied with by Buyer
at or prior to the Closing, and Buyer shall have delivered to Seller a
certificate of Buyer duly executed for and on behalf of Buyer by the President
or a Vice President of FVI, dated the Closing Date, to such effect.
7.02. Representations and Warranties True. The
representations and warranties of Buyer contained herein shall be true and
accurate in all material respects on and as of the date of this Agreement and
on and as of the Closing Date as though such representations and warranties
were made on and as of the Closing Date, and Buyer shall have delivered to
Seller a certificate, dated the Closing Date, to such effect.
7.03. No Governmental Proceeding or Litigation. No suit or
action by any governmental body or other person (other than Buyer) or legal or
administrative proceeding shall have been instituted which questions the
validity or legality of the transactions contemplated hereby (which has not
been subsequently dismissed, settled or otherwise terminated); provided that,
in the case of any such proceeding(s) brought by one or more governmental
bodies contesting or questioning the validity or legality of the transfer of
one or more CATV Franchises in respect of which consent is not required as a
condition to the obligations of Buyer pursuant to Section 8.06 hereof, the
condition set forth in this Section 7.03 shall be deemed to have been
satisfied.
7.04. No Injunction. On the Closing Date there shall be no
effective injunction, writ, preliminary restraining order or any other order of
any nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them not be consummated as so
provided or imposing any
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conditions on the consummation of the transactions contemplated hereby which
Seller shall, in its sole discretion, deem unacceptable.
7.05. HSR Act Waiting Periods. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or terminated without objection by the FTC or the United States
Department of Justice.
7.06. Consents Obtained. All of the Primary Transfer Consents shall have
been obtained.
7.07. Purchase Price. Buyer shall have delivered to Seller (or to such
other person or persons as Seller shall designate in writing), by wire transfer
of immediately available funds, the Purchase Price (i) reduced by the amount of
the Escrow Amount delivered to Seller on the Closing Date, pursuant to Section
1.07(b) hereof, (ii) reduced by the amount of the Indemnification Escrow
Deposit delivered to the Escrow Agent by Buyer on the Closing Date, pursuant to
Section 10.02(d) hereof, and (iii) subject to adjustment on and after the
Closing Date pursuant to Section 1.04 (and, if applicable, Section 12.01)
hereof.
7.08. Assumption Agreement. Buyer shall have delivered to Seller the
Assumption Agreement, duly executed by Buyer in substantially the form of
Exhibit B hereto.
7.09. Indemnification Escrow Agreement. Buyer shall have delivered to
Seller the Indemnification Escrow Agreement, duly executed by Buyer and the
Escrow Agent in substantially the form of Exhibit E hereto.
7.10. Good Standing. Buyer shall have delivered to Seller good standing
certificates, dated any date proximate to the Closing Date, issued by the State
of Buyer's incorporation and by the Secretary of the Commonwealth of Kentucky
and the Secretary of the State of Indiana evidencing Buyer's good standing as
of the respective date thereof in each of such Commonwealth and State,
respectively.
7.11. Secretary's Certificate. Buyer shall have delivered to Seller a
certificate of Buyer, executed for and on behalf of Buyer by FVI's Secretary or
other duly authorized officer, certifying that Buyer's Certificate of Limited
Partnership and partnership agreement and the corporate minutes annexed thereto
(which corporate minutes shall evidence FVI's authorization and approval of
Buyer's execution, delivery and performance of this Agreement) are in full
force and effect on the Closing Date and (except as may otherwise be specified
in such certificate) have not been amended or otherwise modified in any
relevant respect on or subsequent to the date thereof.
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7.12. Opinion of Buyer's Counsel. Buyer shall have delivered to Seller an
opinion of Dow, Lohnes & Albertson, counsel to Buyer, dated the Closing Date,
in substantially the form of Exhibit I hereto.
7.13. Holdover Assets Documentation. If required by Article XII, Buyer
shall have executed and delivered to Seller the Holdover Assets Documentation,
dated the Closing Date.
7.14. Order Approving Agreement. In the event that the Bankruptcy
Proceeding shall have commenced and shall not have been dismissed, then (i) the
Bankruptcy Court shall have entered the Confirmation Order or the Approval
Order (provided that such Approval Order shall have been obtained pursuant to
Section 5.11(d)), and (ii) the Confirmation Order or Approval Order, as the
case may be, shall not be stayed.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed at
the Closing shall be subject to the satisfaction, at or before the Closing, of
each of the following conditions, unless waived in writing by Buyer:
8.01. Performance. Seller shall have performed and complied in all
material respects with all material agreements, obligations and conditions
required by this Agreement to be performed or complied with by Seller at or
prior to the Closing, and Seller shall have delivered to Buyer a certificate
duly executed by the President or a Vice President of Seller, dated the Closing
Date, to such effect.
8.02. Representations and Warranties True. The representations and
warranties of Seller contained herein which are qualified as to materiality
shall be true and accurate in all respects on and as of the date of this
Agreement and (except as to changes permitted by this Agreement) on and as of
the Closing Date as though such representations and warranties were made on and
as of the Closing Date, and the representations and warranties of Seller
contained herein which are not so qualified shall be true and accurate in all
material respects on and as of the date of this Agreement and (except as to
changes permitted by this Agreement) on and as of the Closing Date as though
such representations and warranties were made on and as of the Closing Date,
and Seller shall have delivered to Buyer a certificate duly executed by the
President or a Vice President of Seller, dated the Closing Date, to such
effect.
8.03. No Governmental Proceeding or Litigation. No
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suit or action by any governmental body or other person (other than Seller) or
legal or administrative proceeding shall have been instituted which questions
the validity or legality of the transactions contemplated hereby (which has not
been subsequently dismissed, settled or otherwise terminated); provided that,
in the case of any such proceeding(s) brought by one or more governmental
bodies contesting or questioning the validity or legality of the transfer of
one or more CATV Franchises in respect of which consent is not required as a
condition to the obligations of Buyer pursuant to Section 8.06 hereof, the
condition set forth in this Section 8.03 shall be deemed to have been
satisfied.
8.04. No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as so provided or
imposing any conditions on the consummation of the transactions contemplated
hereby which Buyer shall, in its sole discretion, deem unacceptable.
8.05. HSR Act Waiting Periods. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or terminated without objection by the FTC or the United States
Department of Justice.
8.06. Consents Obtained. All of the Primary Transfer Consents shall have
been obtained and delivered to Buyer without the imposition of any condition
that would have a material adverse effect on the terms or conditions of any of
the CATV Franchises, FCC Licenses or Contracts to which any Transfer Consent
relates (except as otherwise accepted by Buyer, or except as Buyer shall
otherwise be obligated to accept, pursuant to Section 5.02(a) or Section 6.05
hereof) shall have been delivered to Buyer; and such of the Estoppel
Certificates as Seller has obtained shall have been delivered to Buyer.
8.07. Assignment Agreement and Bill of Sale. Seller shall have delivered
to Buyer the Assignment Agreement and Bill of Sale, duly executed by Seller in
substantially the form of Exhibits A and C hereto, respectively, together with
such motor vehicle titles, assignments and other transfer documents as shall be
sufficient to vest good (and, as to real estate owned by Seller, marketable and
fee simple, and as to real estate leased by Seller, marketable) title to the
Sale Assets, free and clear of all Liens except Permitted Liens.
8.08. Indemnification Escrow Agreement. Seller shall have delivered to
Buyer the Indemnification Escrow Agreement, duly executed by Seller and the
Escrow Agent in substantially the form of Exhibit E hereto.
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8.09. Non-Compete Agreements. Seller shall have delivered to Buyer the
Non-Compete Agreements, duly executed by Seller in substantially the form of
Exhibit F-1 hereto and by Bruce A. Armstrong and Jerold S. Earl in
substantially the form of Exhibit F-2 hereto, respectively.
8.10. Good Standing. Seller shall have delivered to Buyer good standing
certificates, dated any date proximate to the Closing Date, issued by the
Secretary of the Commonwealth of Kentucky and by the Secretary of State of
Delaware and Indiana, respectively, evidencing Seller's good standing as of the
respective date thereof in such Commonwealth and each of such States.
8.11. Secretary's Certificate. Seller shall have delivered to Buyer a
certificate of the Secretary or any other duly authorized officer of Seller,
certifying that Seller's Certificate of Incorporation, By-Laws and corporate
minutes annexed thereto (which corporate minutes shall evidence Seller's
authorization and approval of Seller's execution, delivery and performance of
this Agreement) are in full force and effect on the Closing Date and (except as
may otherwise be specified in such certificate) have not been amended or
otherwise modified in any relevant respect on or subsequent to the date
thereof.
8.12. Opinions of Seller's Counsel. Seller shall have delivered to Buyer
the following opinions, addressed to Buyer and dated the Closing Date: (i) an
opinion of Baer Marks & Upham, LLP, corporate counsel to Seller, in
substantially the form of Exhibit J-1 hereto, (ii) an opinion of Day L.
Patterson, Senior Vice President and General Counsel of Seller, in
substantially the form of Exhibit J-2 hereto, (iii) an opinion of Cole Raywid &
Braverman, federal communications counsel to Seller, in substantially the form
of Exhibit J-3 hereto, and (iv) an opinion of Wyatt, Tarrant & Combs, special
Kentucky counsel to Seller, in substantially the form of Exhibit J-4 hereto.
8.13. Holdover Assets Documentation. If required by Article XII, Seller
shall have executed and delivered to Buyer the Holdover Assets Documentation,
dated the Closing Date.
8.14. Absence of Material Adverse Change. Since the date of this
Agreement, there shall have been no occurrence which has had a Material Adverse
Effect.
8.15. UCC, Tax and Judgment Searches; Releases. Buyer shall have received
duly executed UCC-3 termination statements, mortgage releases and such other
release and termination instruments as Buyer shall reasonably request to
release any Liens (other than Permitted Liens) from the Sale Assets transferred
to Buyer at Closing.
8.16. CATV Franchises, FCC Licenses, Contracts, Business Records, Etc.
Seller shall have delivered to Buyer (or
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made available for Buyer's inspection) copies (or, if available, originals) of
all CATV Franchises, FCC Licenses, Contracts, blueprints, schematics, working
drawings, plans, projections, engineering records, and all files and records
included in the Sale Assets.
8.17. Order Approving Agreement. In the event that the Bank Proceeding
shall have commenced and shall not have been dismissed, the Bankruptcy Court
shall have (a) entered the Confirmation Order and, unless waived by Buyer in
its sole discretion, the Confirmation Order shall have become a Final Order,
and Seller shall have delivered to Buyer a certified copy thereof, or (b)
entered the Approval Order (provided that such Approval Order shall have been
obtained by Seller pursuant to Section 5.11(d) and shall not be stayed), and
Seller shall have delivered to Buyer a certified copy thereof.
ARTICLE IX
CONDUCT OF CATV OPERATIONS PENDING THE CLOSING
Pending the Closing, and except as otherwise expressly consented to or
approved by Buyer in writing:
9.01. Ordinary Course of Business. Seller shall conduct the CATV
Operations in the ordinary course of business and in substantially the same
manner as heretofore conducted.
9.02. Organization. Seller shall use all reasonable efforts to preserve
its corporate existence and business organization intact, and to preserve for
Buyer its relationships with franchisors, licensors, suppliers, distributors,
employees (subject to the provisions of Section 5.06 hereof), customers and
others having business relations with it.
9.03. Certain Changes. Except as set forth in Schedule 9.03 or as
otherwise contemplated by this Agreement, Seller shall not, with respect to the
CATV Operations, (a) permit or allow any of the Sale Assets to be subjected to
any Lien except for Permitted Liens and such other Liens as are disclosed in
Schedule 3.07 and will be released (or secured by escrow in accordance with
Section 3.07) at or prior to Closing, (b) transfer, convey, sell or otherwise
dispose of any of the Sale Assets, except in the ordinary course of business
where suitable replacements have been made therefor, (c) grant or agree to
grant any general increase in the compensation or benefits of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the compensation or
benefits payable or to become payable to any officer or employee, except
regularly scheduled bonuses and increases in the ordinary course of business
and
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consistent with past practice as provided in Schedule 9.03, (d) provide for any
new and material pension, retirement or other employment benefits for any
officer or employee or any material increase in any existing benefits (other
than as required by law), or (e) hire any new employee other than in the
ordinary course of business.
9.04. Contracts. Without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, Seller will not enter into any
contract, agreement or other commitment which, if entered into or incurred
prior to the date of this Agreement, would be required to be disclosed pursuant
to this Agreement, or modify, terminate, renew, suspend or abrogate any
material Contract in any material respect.
9.05. CATV Franchises and FCC Licenses. Seller shall not cause and shall
use all reasonable efforts to avoid causing, by any act or failure to act, any
of the CATV Franchises or FCC Licenses to expire or to be revoked, suspended or
materially adversely modified, or intentionally cause any franchising authority
or other governmental authority to institute proceedings for the suspension,
revocation or material adverse modification of any of the CATV Franchises or
FCC Licenses.
9.06. Insurance. Seller shall maintain the existing insurance coverage on
the CATV Systems and the Sale Assets in amounts not less than those in effect
on the date hereof.
9.07. Books and Records. Seller shall maintain the books and records
relating to the CATV Systems in accordance with Seller's past practices.
9.08. Payment of Tax Obligations. Seller shall pay or discharge all taxes
and tax obligations, including, without limitation, those for federal, state or
local income, property, unemployment, withholding, sales, transfer, stamp,
documentary, use and other taxes, to the extent due and payable before the
Closing Date (other than taxes arising from the transfer of the Sale Assets
under this Agreement which shall be paid in accordance with the terms of this
Agreement).
9.09. No Rate Increases or Channel Line-Up Changes. Seller shall not
implement any increase or decrease in the rates charged to the customers of any
CATV System or implement any channel line-up changes or implement any retiering
or repackaging of cable television programming offered by any CATV System,
other than as required by any applicable laws or with Buyer's consent (which
consent shall not be unreasonably withheld).
9.10. Capital Expenditures; Winchester Rebuild. Seller shall continue to
make capital expenditures in the ordinary course of business, but shall not be
required to make
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capital expenditures in excess of the amount budgeted by Seller for 1996.
Seller shall also continue to work toward the completion of the Winchester CATV
System rebuild such that it shall be completed prior to Closing or, failing
such completion prior to Closing, shall credit Buyer at the Closing for the
then remaining unpaid balance due under Seller's turnkey construction contract
for that rebuild project.
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ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.01. Survival of Undertakings.
(a) The respective representations and warranties of Buyer and Seller
contained herein shall survive for a period of one year after the Closing Date;
provided that neither Buyer nor Seller shall have any right to file or
otherwise pursue any claim on account of any misrepresentation, or any breach
of any warranty, herein or hereunder except (if the claim shall not have been
otherwise resolved) by the respective claimant's (i) giving the other party
hereto written notice of such claim on or before the first anniversary of the
Closing Date, which notice shall specify (insofar as reasonably practicable)
the basis and amount of such claim, and (ii) commencing a formal proceeding
with respect thereto in a court of law prior to the expiration of the 120-day
period immediately following the first anniversary of the Closing Date. All
representations, warranties and covenants shall be unaffected by (and shall not
be deemed waived by) any investigation, audit, appraisal or inspection at any
time made by or on behalf of any party hereto.
(b) The respective covenants of Buyer and Seller contained herein and
to be performed to any extent on or before the Closing Date shall survive for a
period of one year after the Closing Date; provided that neither Buyer nor
Seller shall have any right to file or otherwise pursue any claim on account of
any breach thereof or default thereunder except (if the claim shall not have
been otherwise resolved) by the respective claimant's (i) giving the other
party hereto written notice of such claim on or before the first anniversary of
the Closing Date, which notice shall specify (insofar as reasonably
practicable) the basis and amount of such claim, and (ii) commencing a formal
proceeding with respect thereto in a court of law prior to the expiration of
the 120-day period immediately following the first anniversary of the Closing
Date.
(c) The respective covenants of Buyer and Seller contained herein and
to be performed to any extent after the Closing Date shall, to such extent,
survive the Closing Date until the earlier of the expiration of (i) the
applicable statute of limitations or (ii) the express period (if any)
referenced in the respective covenant (the earlier of the expiration of (i) and
(ii) hereof being herein referred to as the "applicable period of
survivability"); provided that neither Buyer nor Seller shall have any right to
file or otherwise pursue any claim on account of any breach thereof or default
thereunder except (if the claim shall not have been otherwise resolved) by the
respective claimant's (i) giving the other party hereto written notice of
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such claim prior to the expiration of the applicable period of survivability
thereof, which notice shall specify (insofar as reasonably practicable) the
basis and amount of such claim, and (ii) commencing a formal proceeding with
respect thereto in a court of law within 120 days after the expiration of the
applicable period of survivability thereof.
10.02. Agreement to Indemnify by Seller.
(a) Subject to the conditions and provisions herein set forth, Seller
hereby agrees to indemnify, defend and hold harmless Buyer from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, reasonable costs and expenses, including, without limitation,
interest and penalties, asserted against or imposed upon or incurred by Buyer
resulting from (i) any breach by Seller of (x) any then surviving
representation or warranty of Seller contained in this Agreement (including any
Exhibit or Schedule hereto), or in any agreement, certificate, document or
instrument delivered to Buyer under this Agreement or (y) any then surviving
covenant or agreement of Seller contained in this Agreement (including any
Exhibit or Schedule hereto), or in any agreement, certificate, document or
instrument delivered to Buyer under this Agreement, (ii) any pre-Closing
liabilities of Seller not expressly assumed by Buyer hereunder or under the
Assumption Agreement , including, without limitation, any tax liabilities and
any liabilities arising at any time under any CATV Instrument not assigned to
Buyer at Closing; (iii) any and all obligations or liabilities of Seller
resulting from its operation or ownership of the CATV Systems or the Sale
Assets prior to the Closing, including, without limitation, any tax liabilities
and any liabilities arising under any of the CATV Instruments which relate to
events occurring during Seller's operation or ownership of the CATV Systems or
the Sale Assets prior to the Closing; (iv) any rate refund ordered for periods
prior to the Closing; (v) any claim for brokerage or agent's or finder's
commissions or compensation in respect of the transactions contemplated by this
Agreement by any person purporting to act on behalf of Seller; (vi) the failure
of the parties to comply with the provisions of any bulk sales law applicable
to the transfer of the Sale Assets; and (vii) any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity (all of the foregoing being herein
collectively referred to as "Buyer Damages").
(b) Notwithstanding anything hereinbefore set forth in Section
10.02(a), Buyer shall not be entitled to recover for and agrees not to assert
any claim for any Buyer Damages on account of any material breach of any then
surviving representation or warranty of Seller contained in this Agreement,
(including any Exhibit or Schedule hereto), or in any agreement, certificate,
document or instrument delivered to Buyer under this
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Agreement or any material breach of any then surviving covenant or agreement of
Seller contained in this Agreement (including any Exhibit or Schedule hereto),
or in any agreement, certificate, document or instrument delivered to Buyer
under this Agreement, unless Buyer gives Seller, within the respective period
of survivability set forth in Section 10.01 hereof, written notice in
accordance with Section 10.03 specifying such claim of breach.
(c) Notwithstanding any other provision of this Agreement, Buyer shall
not be entitled to recover any portion of any Buyer Damages in respect of any
claim under clause (i) of Section 10.02(a) for any breach by Seller of any then
surviving representation or warranty or any then surviving covenant or
agreement to be performed by Seller prior to the Closing, unless and until the
aggregate amount of such Damages exceeds $250,000, in which event Buyer shall
be entitled to indemnification to the full extent of such Buyer Damages.
Buyer's right to indemnity for Buyer Damages or otherwise in connection with
the transactions contemplated hereby shall be limited to, and shall be payable
solely from, the Indemnification Fund; provided, that the foregoing limitation
shall not apply to any claim that Buyer may make for the payment of (i) any
taxes payable (or that shall become payable) by Seller under this Agreement,
(ii) any damages incurred by Buyer on account of any material breach by Seller
of (x) its warranty in Section 3.07 hereof with respect to Seller's title to
the Sale Assets or (y) its warranty in Section 3.02 hereof with respect to
Seller's due authorization to enter into this Agreement and to carry out the
transactions contemplated hereby or (iii) any amount owed to Buyer under
Section 1.04(b)(v) hereof. All Buyer Damages shall be computed net of any
insurance proceeds that reduce any Buyer Damages that would otherwise be
sustained (Buyer hereby covenanting to use its good faith efforts to obtain all
such proceeds to which Buyer may be entitled).
(d) To establish the Indemnification Fund for Seller's satisfaction of
certain potential indemnification obligations hereunder, Buyer shall withhold
the Indemnification Escrow Deposit from the Purchase Price and shall deliver
that sum on the Closing Date by wire transfer in immediately available funds to
the Escrow Agent to be held and disposed of in accordance with the terms of
this Agreement and the Indemnification Escrow Agreement and the following
provisions:
(i) on the first Business Day after the earliest of the date on
which (A) Buyer delivers to Seller a written notice of acceptance of
the Post-Closing Certificate, or (B) Buyer delivers to Seller a written
statement of discrepancies with respect to the Post-Closing Certificate
pursuant to Section 1.04(b)(iii), or (C) the 30-day period commencing
on the date Buyer receives the Post-Closing Certificate from Seller
expires without the delivery by Buyer of either such a
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notice of acceptance or statement of discrepancies, (1) Buyer shall be
entitled to receive (and Buyer and Seller shall cause the Escrow Agent
to release to Buyer) that amount, if any, by which (x) the amount of
the Closing Payment (as such term is defined below in this Section
10.02(d)) exceeds (y) Seller's determination of the adjusted Purchase
Price (as set forth in, or if not set forth in then as calculated after
giving effect to the Purchase Price adjustments set forth in, Seller's
Post-Closing Certificate), and (2) Seller shall be entitled to receive
(and Buyer and Seller shall cause the Escrow Agent to release to
Seller) that amount, if any (not to exceed the amount of the Indemnity
Portion (as such term is defined below in this Section 10.02(d)), by
which the sum of (x) Buyer's determination of the adjusted Purchase
Price (as set forth in, or if not set forth in then as calculated after
giving effect to the Purchase Price adjustments set forth in, Buyer's
written objections to the Post-Closing Certificate) in the event that
clause (B) in the first paragraph of this Section 10.02(d)(i) applies,
or, Seller's determination of the adjusted Purchase Price (as set forth
in, or if not set forth in then as calculated after giving effect to
the Purchase Price adjustments set forth in, Seller's Post-Closing
Certificate) in the event that either clause (A) or (C) in the first
paragraph of this Section 10.02(d)(i) applies, plus (y) the Indemnity
Portion exceeds (z) the amount of the Closing Payment;
For purposes of this Section 10.02(d), the term "Closing Payment" means, at any
date, the sum of (a) the amount of the payment made by Buyer to Seller on or
about the Closing Date pursuant to Section 7.07 hereof, plus (b) the amount of
the Escrow Amount delivered to Seller on or about the Closing Date pursuant to
Section 1.07(b) hereof, plus (c) the amount of the Indemnification Escrow
Deposit delivered to the Escrow Agent by Buyer on or about the Closing Date
pursuant to Section 10.02(d) hereof; and the term "Indemnity Portion" means, at
any date, an amount equal to one-eleventh (1/11th) of the Indemnification Fund
(calculated as of the Closing Date), less any and all disbursements of such
1/11th portion of the Indemnification Fund effected on or after the Closing
Date made pursuant to the terms of this Section 10.02(d).
(ii) if any portion of the Indemnity Portion is not disbursed to Buyer
or Seller pursuant to Section 10.02(d)(i) above, then within three
Business Days after any final determination of the adjusted Purchase
Price in accordance with Section 1.04(v), (A) Buyer shall be entitled
to receive (and Buyer and Seller shall direct the Escrow Agent to
release to Buyer) the
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amount, if any, that Seller shall owe to Buyer pursuant to such final
determination, and (B) Seller shall be entitled to receive (and Buyer
and Seller shall direct the Escrow Agent to release to Seller) the
remaining balance, if any, of the Indemnity Portion, after giving
effect to clause (A) of this Section 10.02(d)(ii);
Nothing in Sections 10.02(d)(i) or (ii) above shall be deemed to limit the
scope or effect of Section 1.04(b)(v) hereof, or Buyer's obligation to pay to
Seller the balance of any sum due Seller thereunder or any sum due Seller in
excess of the Indemnity Portion under either Sections 10.02(d)(i) or (ii).
(iii) on the 180th day after the Closing Date (or, if such day is not a
Business Day, then on the first Business Day thereafter), the Escrow
Agent shall release to Seller (and Buyer and Seller shall cause the
Escrow Agent to release to Seller) a sum equal to one-half of the
amount, if any, by which the then remaining balance of the
Indemnification Fund (exclusive of the then remaining balance of the
Indemnity Portion, if any) exceeds the amount of any outstanding
indemnification claims by Buyer under this Agreement; and
(iv) on the first anniversary of the Closing Date (or, if such
anniversary is not a Business Day, then on the first Business Day after
such anniversary), the Escrow Agent shall release to Seller (and Buyer
and Seller shall cause the Escrow Agent to release to Seller) a sum
equal to the amount, if any, by which the remaining balance of the
Indemnification Fund (including the remaining balance in the Indemnity
Portion, if any) exceeds the sum of (x) the amount of any outstanding
indemnification claims by Buyer under this Agreement and (y) any sum
(not to exceed $200,000.00) to be held back as a contingent indemnity
for the Versailles parcel under Section 5.13 hereof.
All interest earned on any portion of the Indemnification Fund shall be
disbursed to the party entitled to such portion of the Indemnification Fund in
accordance with this Section 10.02.
(e) Notwithstanding any other provision of this Agreement, no
Affiliate of Seller and no director, officer, employee or stockholder of Seller
or of any Affiliate of Seller shall have any liability to Buyer as a result of
any breach by Seller of any of Seller's representations, warranties, covenants
or agreements contained herein, and Seller's foregoing indemnity shall be
limited to (and Seller shall not be obligated to indemnify Buyer for any
amounts which, in the aggregate with any amounts paid to Buyer hereunder, would
exceed the amount of) the
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Indemnification Fund, except with respect to the claims described in the
proviso contained in Section 10.02(c).
10.03. Procedure.
(a) In the event of any claim by Buyer under this Article X, Buyer
shall give Seller written notice of said claim promptly (and in any event prior
to the first anniversary of the Closing Date) in accordance with Section 12.04
hereof, and in such notice Buyer shall set forth the basis of its claim for
Buyer Damages and its good faith estimate of the amount thereof.
Notwithstanding the foregoing, but provided that such notice shall have been
given prior to the first anniversary of the Closing Date, the failure to give
such notice promptly shall not affect the rights of Buyer hereunder except to
the extent that Seller shall demonstrate that it suffered actual damages or was
otherwise prejudiced by reason of such failure. If Buyer and Seller agree at or
prior to the expiration of the fifteen-day period following receipt by Seller
of a claim notice (or any mutually agreed upon extension thereof) to the
validity and amount of such claim, Seller shall immediately cause the Escrow
Agent to release to Buyer the full amount of the claim from the Indemnification
Fund (or, if the full amount of the claim shall exceed the Indemnification
Fund, then the then remaining balance of the Indemnification Fund, without
further liability to Seller except as otherwise provided in Section 10.02(e)
hereof). If Buyer and Seller do not agree within the fifteen-day period (or
any mutually agreed upon extension thereof), Buyer may seek appropriate remedy
at law.
(b) In the event that any portion of Buyer's claim for Buyer Damages
shall result from the assertion of liability by any third party (a "Third Party
Claim"), then Seller shall have the right to elect to undertake the defense,
compromise, settlement or payment of such Claim at its own expense, and Seller
shall, within a reasonable time after its receipt of Buyer's notice of any such
Claim, notify Buyer as to whether Seller is exercising such right of election.
If Seller elects to assume control of the defense of any third-party claim,
Buyer shall have the right to participate in the defense of such claim at its
own expense, but Seller shall control such defense. If Seller shall elect not
to undertake such defense, or, within a reasonable time after notice from Buyer
of any such claim for Buyer Damages, shall fail to defend such claim, Buyer
shall have the right to undertake the defense, compromise, settlement or
payment of such claim, by counsel or other representatives of its own choosing,
on behalf of and for the account and risk of Seller, and Seller shall pay to
Buyer, in addition to the other sums required to be paid hereunder, any
reasonable costs and expenses incurred by Buyer in connection with such
defense, compromise, settlement or payment as and when such costs and expenses
are so incurred. Anything in this Section 10.03 to the
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contrary notwithstanding, with respect to any third party claim, (i) Seller
shall not, without Buyer's written consent (which shall not be unreasonably
withheld or delayed), compromise, settle or pay any such claim or consent to
entry of any judgment which does not include as an unconditional term thereof
the giving by the third party claimant or the plaintiff to Buyer of a release
from all liability in respect of such Buyer Damages in form and substance
reasonably satisfactory to Buyer, (ii) in the event that Seller undertakes
defense of any such claim, Seller shall have an obligation to keep Buyer
informed of the status of the defense of such claim and furnish Buyer with all
documents, instruments and information that Buyer shall reasonably request in
connection therewith, and (iii) Seller shall not dispose of, compromise or
settle any claim or action in a manner that is not reasonable under the
circumstances and in good faith.
(c) If a claim, whether between the parties or by a third party,
requires immediate action, Seller will make every effort to reach a decision
with Buyer with respect thereto as expeditiously as possible.
(d) The indemnifications rights provided to Buyer in Article X
shall extend to the shareholders, members, directors, officers, employees, and
representatives of Buyer although for the purpose of the procedures set forth
in this Section 10.03, any indemnification claims by such parties shall be made
by and through Buyer.
10.04. Agreement to Indemnify by Buyer.
(a) Subject to the conditions and provisions herein set forth, after
the Closing, Buyer agrees to indemnify, defend and hold harmless Seller from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, reasonable costs and expenses, including, without
limitation, interest and penalties, asserted against or imposed upon or
incurred by Seller resulting from (i) any material breach by Buyer of any then
surviving representation or warranty, or any then surviving covenant or
agreement, of Buyer contained in this Agreement, or (ii) the ownership or
operation of the CATV Operations on and after the Closing Date (collectively,
"Seller Damages").
(b) Notwithstanding the above, Seller shall not be entitled to recover
for and agrees not to assert any claim for Seller Damages on account of any
cause of action attributable to any of the matters referenced in clauses (i) or
(ii) of Section 10.04(a) unless Seller shall have delivered to Buyer, within
the applicable period of survivability set forth in Section 10.01 hereof,
written notice specifying the basis for such claim and Seller's good faith
estimate of the amount thereof. The procedures set forth in Section 10.03
shall apply to this Section
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10.04, except that Buyer shall have the rights and obligations of Seller, and
Seller shall have the rights and obligations of Buyer, set forth in such
Section.
(c) Notwithstanding any other provision of this
Agreement, no Affiliate of Buyer and no director, officer or employee or owner
of Buyer or of any Affiliate of Buyer shall have any liability to Seller as a
result of Buyer's breach of any representation, warranty, covenant or
agreement contained herein, and Buyer's liability under clause (i) of Section
10.04(a) shall be limited to $8,030,000.
10.05. Administrative Expense. In the event that Buyer shall
have a claim against Seller allowed under Section 11.03 hereof following the
commencement of the Bankruptcy Proceeding, Seller acknowledges and agrees that
such claim shall constitute an administrative expense under Section 503 of the
Bankruptcy Code.
ARTICLE XI
TERMINATION
11.01. Methods of Termination. This Agreement and the
transactions contemplated herein may be terminated and abandoned at any time
prior to, but not after, the occurrence of the Closing, as follows:
(a) By the mutual written consent of Buyer and
Seller;
(b) By Buyer upon written notice to Seller pursuant
to Section 1.07(d) hereof;
(c) By Buyer (if not then in material breach or
material default of this Agreement) on or after the Walkaway Date (or the
Extended Walkaway Date, if applicable, or the Bankruptcy Walkaway Date, if
applicable), upon written notice to Seller;
(d) By Seller upon written notice to Buyer pursuant
to Section 1.07(c) hereof; or
(e) By Seller (if not then in material breach or
material default of this Agreement) on or after the Walkaway Date (or the
Extended Walkaway Date, if applicable, or the Bankruptcy Walkaway Date, if
applicable), upon written notice to Buyer.
(f) By Buyer upon written notice to Seller if (i)
the Bankruptcy Court shall by a Final Order deny entry of the Confirmation
Order or the Approval Order, as the case may be, and
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(ii) no motion seeking an Approval Order, or another Confirmation Order or
Approval Order, shall be filed within 10 days after the denial of the
Confirmation Order or the Approval Order, as the case may be.
(g) By Seller upon written notice to Buyer if the Bankruptcy Court
shall by a Final Order deny entry of a Confirmation Order providing for the
sale of the Sale Assets to Buyer.
(h) By Buyer, upon written notice to Seller, if, prior to any
termination of this Agreement, Seller shall have agreed to sell all or any
material portion of the Sale Assets to any person other than Buyer (or any
affiliate of, or person acting in concert with, Buyer), it being understood
that this provision shall in no way limit Seller's covenants and agreements
under Sections 5.07, 5.11 or 11.03 of this Agreement.
11.02. Procedure upon Termination. In the event of termination of this
Agreement by Buyer or Seller, or both, pursuant to either Section 1.07 or
Section 11.01 hereof, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated and abandoned, without further action by Buyer or Seller. If the
transactions contemplated by this Agreement are terminated and abandoned as
provided herein:
(a) Each party shall redeliver or destroy all documents, work papers
and other material of the other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by either party hereto with
respect to the business of the other party or any of its Affiliates shall be
treated in accordance with Sections 13.07 and 13.08 hereof; and
(c) Neither party hereto shall have any further obligation or
liability to the other party to this Agreement except (i) as stated in
subparagraphs (a) and (b) of this Section 11.02, (ii) as otherwise provided in
Section 1.07 hereof, and (iii) as otherwise provided in Section 11.03 hereof.
(d) Upon termination of this Agreement, except as provided in Section
1.07(c), Buyer shall be entitled to the Escrow Fund and Buyer and Seller shall
instruct the Escrow Agent to pay the Escrow Fund to Buyer.
11.03. Topping Fee. If this Agreement is terminated pursuant to Section
11.01(h) following the commencement of the Bankruptcy Proceeding or the
Bankruptcy Court shall have granted
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a person other than Buyer (or any affiliate of, or person acting in concert
with, Buyer) the right to purchase all or substantially all of the Sale
Assets, and (in either such event) Buyer shall have been ready, able and
willing to consummate the Closing hereunder subject to and upon the fulfillment
of the Closing conditions set forth in Article VIII hereof (other than such of
those Article VIII Closing conditions, if any, as Buyer may have waived, it
being hereby agreed that nothing in this Section 11.03 shall be construed to
require Buyer to have waived any of those Closing conditions), then Seller
shall pay to Buyer, in consideration of the expenses to be incurred by Buyer
in pursuing the transactions contemplated by this Agreement (and as full
liquidated damages hereunder, notwithstanding any of the other terms or
provisions hereof), a fee of $5,000,000 in immediately available funds, which
fee shall be paid by Seller to Buyer upon the closing of the sale of the Sale
Assets to any such third person.
ARTICLE XII
HOLDOVER ASSETS; SUBSEQUENT CLOSING
If on the Closing Date, before giving effect
to this Article XII, there are any Holdover Assets, then, notwithstanding any
other provision of this Agreement, the following provisions shall apply:
12.01. Closing.
(a) At the Closing, Seller shall sell and assign
to Buyer, and Buyer shall purchase and acquire from the Seller, all of the
Sale Assets except for the Holdover Assets. From and after the Closing,
Seller shall retain title to and ownership of the Holdover Assets, and,
subject to the terms and conditions in this Article XII, Seller shall sell and
assign to Buyer, and Buyer shall purchase and acquire from Seller, the Holdover
Assets in accordance with the terms of this Article XII.
(b) The amount payable by Buyer to Seller pursuant
to Section 1.03(b) and 7.07 shall be reduced by the amount that Buyer is
required to deposit in escrow pursuant to Section 12.01(e).
(c) All conveyancing documents, certificates,
opinions, and other documents contemplated by this Agreement to be delivered
at the Closing shall be in the form and substance provided for in this
Agreement, with such modifications as are necessary or appropriate to
reflect the provisions of this Article XII and to relate only to the Sale
Assets being purchased by Buyer at the Closing.
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(d) The Escrow Amount shall be disbursed in the manner provided in
Section 1.07(b).
(e) Buyer and Seller shall negotiate in good faith and at the
Closing shall enter into and deliver the Holdover Assets Escrow Agreement in
form and substance mutually and reasonably satisfactory to Buyer and Seller
(with such modifications thereto as may reasonably be requested by the Holdover
Assets Escrow Agent to grant it a security interest in the Holdover Assets
Escrow Fund, subject to the rights of Seller under this Agreement) pursuant to
which Buyer shall deliver to the Holdover Assets Escrow Agent, by wire transfer
of immediately available funds, an amount equal to the product of (A) the
number of EBS's set forth next to the name of each Holdover Franchise Area on
Schedule 3.18 (regardless of any change in the number of EBS's in that
Franchise Area between May 15, 1996 and the Closing Date) times (B) the
Purchase Price divided by the total number of EBS's on Schedule 3.18. The
Holdover Assets Escrow Fund shall be held in escrow pursuant to the terms of
this Agreement and the Holdover Assets Escrow Agreement.
(f) Buyer and Seller shall negotiate in good faith and at the
Closing shall enter into and deliver the Holdover Assets Management Agreement
in form and substance mutually and reasonably satisfactory to Buyer and Seller
(with appropriate modifications to the extent required to comply with any CATV
Instrument included among or relating to the respective Holdover Assets),
whereby Buyer shall assume responsibility for the management of the Holdover
Assets, and shall be entitled to all revenues (and shall be responsible for all
operating expenses) of the Holdover Assets, subject in all respects to the
terms and provisions of the Holdover Assets Management Agreement.
(g) Buyer and Seller shall negotiate in good faith and at the Closing
shall enter into and deliver such other additional documentation that is
necessary or desirable to effect the intents and purposes of this Article XII,
such documentation to be in form and substance mutually and reasonably
satisfactory to Buyer and Seller.
12.02. Subsequent Closing. At all times from and after the Closing, Buyer
and Seller shall cooperate in obtaining any Transfer Consents that are
necessary for Seller's sale and transfer of the Holdover Assets to Buyer, and
the agreements and obligations of Buyer and Seller under Sections 5.02, 5.05,
6.02 and 6.05 shall be fully applicable in seeking such Transfer Consents after
the Closing. Seller shall give to Buyer written notice of the receipt of any
such Transfer Consents after Closing. As soon as practicable after all
Transfer Consents necessary for Seller's sale and transfer of the respective
Holdover Assets (but with respect to the CATV Instruments included therein,
only the Material CATV Instruments) associated with any Hold-
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<PAGE> 77
over Franchise Area have been obtained, on a date to be agreed to between Buyer
and Seller (or, if Buyer and Seller shall fail to agree, on the first Business
Day that is at least ten (10) Business Days after all such Transfer Consents
have been obtained), a closing shall be held at which Seller shall sell and
assign to Buyer, and Buyer shall purchase and acquire from the Seller, the
respective Holdover Assets associated with such Holdover Franchise Area, in
accordance with the following provisions:
(a) At such closing, Seller shall sell and assign to Buyer, and
Buyer shall purchase and acquire from Seller, all of the Holdover Assets
associated with such Holdover Franchise Area, as evidenced by bills of sale and
assignment and assumption agreements in form and substance similar to those
delivered by the parties at the Closing;
(b) At such closing, Seller shall be obligated to deliver to Buyer
the above-described Transfer Consents applicable to the respective Holdover
Assets (but with respect to the CATV Instruments included therein, only the
Material CATV Instruments) being sold, transferred and assigned to Buyer at
such closing. The Closing conditions set forth in Section 7.01, 7.02, 7.03,
7.04, 7.05, 7.11, 7.12, 7.14, 8.01, 8.02 (except as to changes resulting from
Buyer's management of such Holdover Assets), 8.03, 8.04, 8.05, 8.11, 8.12, 8.15
and 8.17 shall apply to such closing insofar as such conditions relate to the
respective Holdover Assets being transferred and assigned to Buyer at such
closing. None of the other closing conditions of Buyer and Seller in Articles
VII and VIII shall apply to such closing; provided that insofar as any such
condition would not have been fulfilled as of the Closing Date with respect to
those Holdover Assets in the event that those Holdover Assets had been sold,
transferred and assigned on that date as part of the Sale Assets, then such
condition shall be required to be fulfilled in that respect as of such later
closing.
(c) At such closing, Buyer and Seller shall execute and deliver
certificates, opinions, and other documents corresponding to those delivered at
the Closing with such modifications as are necessary or appropriate to reflect
the provisions of this Article XII and to relate only to the Holdover Assets
being purchased by Buyer at such closing.
(d) Upon such closing, the Holdover Assets Management Agreement
shall be automatically terminated with respect to the respective Holdover
Assets that are transferred at such closing.
(e) At such closing, Buyer and Seller shall direct the Holdover
Assets Escrow Agent to disburse to Seller, as the purchase price for the
respective Holdover Assets being sold and transferred on such date, a dollar
amount equal (subject to
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Section 12.02(f) below) to the product of (A) the number of EBS's (as reflected
as hereinbefore specified on Schedule 3.18) in each Holdover Franchise Area in
respect of which the associated Holdover Assets are being sold and transferred
on such date times (B) the Purchase Price divided by the total number of EBS's
on Schedule 3.18. All interest and proceeds earned to such closing date on any
portion of the Holdover Assets Escrow Fund being so disbursed shall, to the
extent not previously distributed to Seller in accordance with the Holdover
Assets Escrow Agreement and except as otherwise provided in Section 12.02(f)
below, be disbursed therewith to Seller.
(f) Upon the Holdover Assets Escrow Agent's disbursement to Seller of
the purchase price for the respective Holdover Assets being sold and
transferred on any Holdover Assets closing date, Buyer and Seller shall cause
the Holdover Assets Escrow Agent to deduct from such purchase price a sum equal
to five percent thereof and to deposit that sum into the Indemnification Fund,
to be held therein and disbursed therefrom subject to the terms and provisions
of this Agreement and the Indemnification Escrow Agreement.
12.03. Final Closing. If on the first anniversary of the Closing Date
there shall remain any Holdover Assets that have not been sold or assigned to
Buyer pursuant to this Article XII, then on the fifth (5th) Business Day after
that first anniversary - and subject to the fulfillment by Buyer or Seller (as
the case may be) of the same closing conditions that would be required to be
fulfilled with respect to a closing pursuant to Section 12.02 (except that
Buyer shall be deemed to have waived any condition that any Franchise Transfer
Consent applicable to such remaining Holdover Assets shall have been obtained
and delivered) (and, in the event of the non-fulfillment of any of such
conditions on the 5th Business Day after that first anniversary, then upon the
3rd Business Day after the initial fulfillment thereof subsequent to such 5th
Business Day) - Buyer shall purchase from Seller, and Seller shall sell, assign
and otherwise transfer to Buyer, such remaining Holdover Assets, in accordance
with the following provisions of this Section 12.03. At such closing:
(a) Seller shall sell and assign to Buyer, and Buyer shall purchase
and acquire from Seller, all of the remaining Holdover Assets, as evidenced by
bills of sale and assignment and assumption agreements in form and substance
similar to those delivered by the parties at the Closing;
(b) Buyer and Seller shall execute and deliver certificates,
opinions, and other documents corresponding to those delivered at the Closing
with such modifications as are necessary or appropriate to reflect the
provisions of this Article XII and to apply only to the Holdover Assets being
purchased by Buyer at such closing.
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(c) The Holdover Assets Management Agreement shall be terminated.
(d) (i) Buyer and Seller shall direct the Holdover Assets Escrow Agent
to disburse to Seller, as the purchase price for the respective Holdover Assets
being sold and transferred on such date, a dollar amount equal (subject to
Section 10.03(e) below) to the product of (A) 85% times (B) the number of
EBS's (as reflected as hereinbefore specified on Schedule 3.18) in each
Holdover Franchise Area in respect of which the associated Holdover Assets are
being sold and transferred on such date times (C) the Purchase Price divided by
the total number of EBS's shown on Schedule 3.18, (ii) Buyer and Seller shall
direct the Holdover Assets Escrow Agent to disburse to Seller all interest and
proceeds earned to such closing date on any portion of the Holdover Assets
Escrow Fund being so disbursed to Seller, to the extent not previously
distributed to Seller in accordance with the Holdover Assets Escrow Agreement,
and (iii) Buyer and Seller shall direct the Holdover Assets Escrow Agent to
disburse to Buyer the remaining balance in the Holdover Assets Escrow Fund.
(e) Buyer and Seller shall direct the Holdover Assets Escrow Agent to
deduct from the purchase price disbursed to Seller pursuant to Section
10.03(d)(i) above a sum equal to five percent thereof and deposit that sum into
the Indemnification Fund, to be held therein and disbursed therefrom subject to
the terms and provisions of this Agreement and the Indemnification Escrow
Agreement; provided, however, that Buyer shall have no indemnification claim
against Seller hereunder with respect to any Buyer Damages attributable to any
failure to obtain any Franchise Transfer Consent relating to the Holdover
Assets sold and transferred to Buyer pursuant to this Section 10.3.
12.04. Indemnification. With respect to Buyer's indemnification rights
under Article X hereof, and in consideration of Buyer's right to manage the
Holdover Assets under the Holdover Assets Management Agreement from and after
the Closing Date, the parties hereby acknowledge their intent to apply to any
Buyer claim in respect of any Holdover Asset acquired by Buyer hereunder (i)
the same period of indemnification that would have been afforded with respect
thereto had those assets been purchased by Buyer on the original Closing Date
or (ii) a period of indemnification ending 120 days after the respective
closing date on which the respective Holdover Assets were purchased by Buyer,
whichever such period shall last expire (referred to in this Section 12.04 as
the "last indemnification period"). Accordingly, for purposes of determining
the applicable period of survivability with respect to any representation,
warranty or covenant relating to any Holdover Asset, the closing date on which
any Holdover Asset is sold and transferred to Buyer in accordance with this
Article XII shall (regardless of the actual date thereof) be deemed to have
been the original Closing Date on which the Sale Assets (other
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than the Holdover Assets) shall have been sold and transferred to Buyer
hereunder; provided that if such period of survivability shall have expired (or
would expire) prior to the 120th day after such Holdover Asset closing date,
then such period shall be deemed extended (as to that Holdover Asset) to such
120th day after such Holdover Asset closing date; and provided further that
neither Buyer nor Seller shall have any right to file or otherwise pursue any
claim on account of any breach of any representation, warranty or covenant
with respect to such Holdover Asset except (if the claim shall not have been
otherwise resolved) by the respective claimant's (i) giving the other party
hereto written notice of such claim prior to the expiration of the last
indemnification period, which notice shall specify (insofar as reasonably
practicable) the basis and amount of such claim, and (ii) commencing a formal
proceeding with respect thereto in a court of law before the expiration of the
120-day period immediately following such last indemnification period.
12.05. Good Faith Negotiations. Buyer and Seller shall
negotiate in good faith any other changes to this Agreement necessary or
appropriate to effectuate the intent of this Article XII, including with
respect to Section 5.06.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01. Amendment and Modification. This Agreement may be
amended or modified only by a written agreement executed by Seller and Buyer.
13.02. Waiver of Compliance. Any breach by Seller, on the one
hand, or by Buyer, on the other, of any obligation, covenant, agreement or
condition herein may be waived only in writing and then only if such writing
is signed by the President, any Vice President or any other officer of Buyer or
the President and Chief Executive Officer of Seller, respectively, but such
waiver of, or any failure to insist upon strict compliance with, any
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other breach.
13.03. Expenses, Transfer Taxes, Etc. Whether or not the
transactions contemplated by this Agreement shall be consummated, except as
otherwise expressly provided herein, Seller agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne by it and
Buyer agrees that all fees and expenses incurred by it in connection with this
Agreement shall be borne by it, including, without limitation as
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to Seller or Buyer, all fees of financial advisors, counsel and accountants;
provided, that the parties shall share equally (and each shall pay one-half of)
any and all (i) HSR Act and other governmental and regulatory filing fees
incurred by either party (except as provided in Section 5.02) and (ii)
out-of-pocket costs and expenses paid by Seller to any environmental
engineering firm for such firm's preparation of any Phase I environmental
reviews requested by Buyer with respect to any parcel of Real Property. All
sales (excluding any applicable bulk sales taxes, including without limitation
any Indiana or Kentucky bulk sales taxes, all of which shall be paid by
Seller), recording, transfer and other taxes which may be payable in connection
with the transactions contemplated by this Agreement shall be paid by the
respective party required to pay same by the laws of the Commonwealth of
Kentucky or the State of Indiana (as applicable).
13.04. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given, if delivered by hand, on the date so delivered, and if given
by mail, on the date actually received, and shall be addressed as follows:
(a) if to Seller, to:
American Cable Entertainment of Kentucky-Indiana, Inc. Attention:
Mr. Bruce A. Armstrong, President and Chief Executive Officer Four
Landmark Square, Suite 302 Stamford, CT 06901
with complete copies under separate cover to each of the
following:
Mr. Day L. Patterson, Sr. Vice President and General Counsel
American Cable Entertainment Four Landmark Square, Suite 302
Stamford, CT 06901
Stanley E. Bloch, Esq. Baer Marks & Upham, LLP 805 Third Avenue
New York, NY 10022
or to such other person or address as Seller shall furnish to Buyer in writing
by means of a notice that shall comply with the terms of this Section 13.04;
and
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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(b) If to Buyer, to:
FrontierVision Operating Partners, L.P. Attention: Mr. James C.
Vaughn, President and Chief Executive Officer 1777 South Harrison
Street, Suite P-200 Denver, CO 80210
with a complete copy under separate cover to:
Leonard J. Baxt, Esq. Dow, Lohnes & Albertson 1200 New Hampshire
Avenue, N.W. Suite 800 Washington, D.C. 20036
or to such other person or address as Buyer shall furnish to Seller in writing
by means of a notice that shall comply with the terms of this Section 13.04.
For purposes of this Section 13.04, delivery by overnight courier (e.g.,
Federal Express) shall be deemed to be delivery by hand.
13.05. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither party to this
Agreement shall have any right to assign or otherwise transfer (in whole or in
part) any of its rights, interests, duties or obligations hereunder without the
prior written consent of the other party hereto, except that Seller shall and
hereby does consent to the assignment by Buyer of its rights under Article X
hereof to its lender(s) and/or any person to whom Buyer sells all or any
material part of the Sale Assets or CATV Systems.
13.06. Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or other entity, other than the parties
hereto and their permitted successors or assigns, any rights or remedies under
or by reason of this Agreement.
13.07. Confidentiality. Buyer and Seller each agree to keep confidential
and to cause their respective employees, counsel, accountants and other
representatives to keep confidential, the terms and provisions of this
Agreement as well as all non-public documents and other non-public information
and data delivered pursuant hereto, whether written or oral, relating to
Seller, Buyer or any of the CATV Operations. If the sale transaction
contemplated hereby is not consummated for any reason whatsoever, then Buyer or
Seller shall return to the other all documents and other information and data
obtained from Seller or
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Buyer, as the case may be, and/or any of their respective employees, counsel,
accountants or representatives and each of Buyer and Seller shall destroy all
summaries, notations, analyses and other reports prepared by or for Buyer or
Seller which incorporate or are based upon any of such documents, information
or data. Nothing herein contained shall prevent Buyer or Seller from
delivering any documents, information or data relating to Seller, Buyer or any
of the CATV Operations (i) in connection with any legal proceeding to which it
is a party (or otherwise pursuant to a subpoena), (ii) to Buyer's or Seller's
consultants, advisors, counsel, accountants, lenders and investors provided
that Buyer or Seller shall take appropriate precautions to assure that any such
documents, information and data shall be and remain subject to the provisions
of this Section 13.07, or (iii) in connection with any public offering of any
debt or equity securities of Buyer or of any Affiliate of Buyer.
13.08. Publicity. Seller 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 Seller's
employees concerning this Agreement and the transactions contemplated hereby.
Except as required by applicable law, neither Seller nor Buyer shall make any
such release, announcement or statement without the prior written consent and
approval of the other, which consent and approval shall not be unreasonably
withheld.
13.09. Interpretation. The headings of the Articles and Sections of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof or affect in any way the meaning or interpretation of
this Agreement. Each of Seller and Buyer acknowledges that it has actively
participated in the preparation, drafting and review of this Agreement, and
each party hereby waives any claim that this Agreement or any provision hereof
(or any Exhibit or Schedule hereto) is to be construed against the other party
hereto as the draftsperson thereof.
13.10. Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, and the other documents and certificates delivered on or
after the date hereof by or on behalf of either party hereto to the other party
hereto pursuant to the terms hereof, set forth the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof,
and supersede all prior documents, agreements (including, without limitation,
that certain letter agreement between Seller and Buyer dated January 30, 1996),
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by or on behalf of either party hereto or
any officer, employee, representative or agent of either party hereto.
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13.11. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.12. Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to any conflict of
laws. Any provision of this Agreement prohibited by the laws of the State of
New York shall be ineffective to the extent of such prohibition without
invalidating the remaining provisions of this Agreement. Each party agrees to
submit to personal jurisdiction and to waive any objection as to venue in the
County of New York, State of New York, and further agrees that service of
process on it in any action arising out of or relating to this Agreement shall
be effective if mailed to it at its respective address listed in Section 13.04
hereof.
13.13. Specific Performance. Both Buyer and Seller agree
that damages would be an inadequate remedy for breach by Seller of its
representations, warranties, covenants and obligations set forth in this
Agreement, and that Buyer may have specific performance as a remedy for any
breach by Seller of its obligations under this Agreement. Neither this Section
13.13 nor any other provision of this Agreement shall limit Buyer's remedies at
law or in equity.
13.14. Attorneys' Fees. In any action or proceeding brought
by a party to the Agreement to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover all reasonable costs and
expenses incurred, including reasonable attorney's fees, in connection with
that action or proceeding and including all appellate proceedings.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
AMERICAN CABLE ENTERTAINMENT
OF KENTUCKY-INDIANA, INC.
By: /s/ Bruce A. Armstrong
-------------------------
Bruce A. Armstrong,
President and CEO
ATTEST:
/s/ Day L. Patterson
- ---------------------------
Day L. Patterson,
Secretary
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<PAGE> 85
FRONTIERVISION OPERATING
PARTNERS,
L.P.
By: FrontierVision Partners,
L.P., its general partner
By: FVP GP, L.P., its general
partner
By: FrontierVision Inc., its
general partner
By: /s/ James C. Vaughn
-------------------------
James C. Vaughn,
President
ATTEST:
/s/ Jack S. Koo
- -------------------------
Secretary
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<PAGE> 1
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
DATED AS OF JULY 30, 1996
BY AND BETWEEN
FRONTIERVISION OPERATING PARTNERS, L.P.
AND
SHENANDOAH CABLE TELEVISION COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined in this Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined Elsewhere in this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Agreement to Sell and Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Assumption of Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Disputed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3 REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Organization, Standing, and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Absence of Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Systems Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Real Property and Real Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Employees and Compensation; Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Claims and Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Conduct of Business in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.21 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22 Billing Reports; Accounts Receivable; Financial Statements . . . . . . . . . . . . . . . . 20
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3.23 No WARN Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.24 Further Qualifications and Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Organization, Standing, and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Absence of Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Claims and Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5 OPERATIONS OF THE SYSTEMS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Contracts or Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Franchises and Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Maintenance of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.9 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.12 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 No Rate Increases or Channel Line-Up Changes . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Collections Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6 SPECIAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Filings with the FCC and Franchising Authorities . . . . . . . . . . . . . . . . . . . . . 24
6.2 Other Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.7 No Solicitation or Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Bulk Sales Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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6.10 Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.11 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.12 Employee Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.13 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.14 Use of Names and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.15 Power of Attorney; Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.16 Agreements Regarding Additional Seller Exceptions . . . . . . . . . . . . . . . . . . . . . 28
6.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7 CONDITIONS TO OBLIGATIONS OF BUYER AND
SELLER AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Conditions to Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Conditions to Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8 CLOSING AND CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Upset Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Nonperformance by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Nonperformance by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Buyer Deposit and Seller Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.3 Limitations on Seller's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.6 Indemnification Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.7 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3 Assignments; Benefit and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.7 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.9 Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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SCHEDULES
Schedule 2.2 - Excluded Assets
Schedule 2.7 - Allocation of Purchase Price
Schedule 3.1 - Fictitious and Trade Names
Schedule 3.3 - Absence of Conflicting Agreements
Schedule 3.4 - Liens
Schedule 3.5 - Franchises
Schedule 3.6 - Governmental Permits
Schedule 3.7 - Systems Information
Schedule 3.8 - Real Property and Real Property Interests
Schedule 3.9 - Tangible Personal Property
Schedule 3.10 - Contracts
Schedule 3.11 - Intangibles
Schedule 3.12 - Insurance
Schedule 3.14 - Employees and Compensations; Labor Relations
Schedule 3.18 - Compliance with Laws
Schedule 6.7 - Solicitation/Construction Areas
EXHIBITS
Exhibit A - Form of Noncompetition Agreement
Exhibit B - Form of Opinion of Seller's Counsel
Exhibit C - Form of Opinion of Buyer's Counsel
Exhibit D - Form of Indemnification Escrow Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated as of July 30, 1996, by and
between FrontierVision Operating Partners, L.P., a Delaware limited partnership
("Seller") and Shenandoah Cable Television Company, a Virginia corporation
("Buyer").
RECITALS
A. Seller owns and operates a cable television system with a headend
located in Toms Brook, Virginia, serving the municipalities of Woodstock,
Strasburg, Toms Brook, Maurertown and surrounding areas in Shenandoah County,
Virginia, and a cable television system with a headend located in New Market,
Virginia, serving the municipalities of New Market, Mt. Jackson and surrounding
areas in Shenandoah County, Virginia (each system is referred to hereinafter
individually as a "System" and both systems are referred to collectively as the
"Systems").
B. Seller desires to sell, and Buyer wishes to buy, substantially all
the assets that are owned or held by Seller and used by Seller principally in
connection with the business and operations of the Systems, for the price and
on the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, Buyer and Seller, intending to be bound
legally, agree as follows:
SECTION 1 DEFINITIONS
1.1 Terms Defined in this Section. The following terms, as used in
this Agreement, shall have the meanings set forth in this Section:
"Assets" means the assets to be sold, transferred, or otherwise conveyed
to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (i) all Contracts listed in Schedule 3.10,
other than the Contracts also listed in Schedule 2.2 and (ii) any Contracts
entered into by Seller between the
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date of this Agreement and the Closing Date in compliance with Section 5.2 that
relate principally to the business and operations of either or both of the
Systems and which Buyer agrees in writing to assume as of the Closing Date.
"Basic Subscribers" means the sum of (A) the number of customers other
than commercial or bulk billing accounts (i) who have subscribed to the
services of a System for a period of at least two (2) full calendar months
preceding the Closing Date and who are not more than sixty (60) days past due
in payment of all outstanding amounts (other than a de minimis amount of $10.00
or less) with respect to such subscription; or (ii) each customer (including
commercial and bulk customers) who would have been described in (i) above but
for the fact that, during the period between the date of this Agreement and the
Closing Date, such customer terminated his subscription to the services of a
System and substituted therefor subscription to the services of a cable
television system owned by Buyer (other than in connection with a relocation by
such customer or a dispute between such customer and Seller) plus (B) the
result obtained by dividing the aggregate of the gross billings from all
commercial or bulk billing accounts from the provision of basic service
(excluding any installation or non-recurring charges) for the calendar month
immediately preceding the Closing Date by the average standard monthly rate
charged to single-family households for basic services for that System;
provided, however, that notwithstanding anything herein to the contrary, there
shall be excluded from the definition of "Basic Subscribers" any customer
(including commercial and bulk customers) of either System who has at any time
been disconnected from either System for failure to pay for services in a
timely manner and was subsequently reconnected to either System with all or any
portion of such customer's delinquent account either being forgiven in any
respect, or paid by Seller (or any of its Affiliates or representatives) on
behalf of such customer.
"C4 Agreement" means the Asset Purchase Agreement dated October 27,
1995, as amended, between Seller and the C4 Sellers.
"C4 Sellers" means C4 Media Cable Southeast, Limited Partnership and
County Cable Company, L.P.
"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs, as determined
pursuant to Section 8.
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<PAGE> 9
"Code" shall mean 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, including the
Cable Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996, each as amended, and including all rules and
regulations thereunder.
"Consents" means the consents, permits, or approvals of Governmental
Authorities and other third parties necessary to transfer the Assets to Buyer
or otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses,
subscriber agreements and other agreements (exclusive of programming
agreements, none of which are being transferred hereunder) to which Seller is a
party or which are binding upon Seller and which relate principally to or
principally affect the Assets or the business or operations of either or both
of the Systems, and (i) which are in effect on the date of this Agreement or
(ii) which are entered into by Seller between the date of this Agreement and
the Closing Date; provided that "Contracts" shall not include or apply to any
Excluded Assets.
"Escrow Agent" means Colorado National Bank, N.A.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Franchises" means all initial authorizations, and amendments and
renewals thereof, issued by Governmental Authorities empowered by federal,
state or local Law to issue such authorizations, whether such authorizations
are designated as franchises, permits, licenses, resolutions, contracts,
certificates, agreements or otherwise, in connection with the construction,
operation or maintenance of either of the Systems, including, without
limitation, the authorizations listed in Schedule 3.5 hereto.
"Franchising Authorities" means the Governmental Authorities which have
issued the Franchises.
"FVI" means FrontierVision Inc., a Delaware corporation, which is the
general partner of the general partner of the general partner of Seller.
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<PAGE> 10
"Governmental Authority" means the United States of America; any state,
commonwealth, territory or possession of the United States of America and any
political subdivision thereof (including counties, municipalities and the
like); and any agency, authority or instrumentality of any of the foregoing,
including any court, tribunal, department, bureau, commission or board.
"Governmental Permits" means all licenses, permits and other
authorizations (other than the Franchises) issued by the FCC, the FAA, or any
other federal, state or local Governmental Authority and held by Seller
principally in connection with the conduct of the business or operations of
either or both of the Systems, including, without limitation, the items listed
in Schedule 3.6 hereto, together with any additions thereto between the date of
this Agreement and the Closing Date.
"Homes Passed" means the sum of each single family residence or dwelling
unit within a building containing multiple dwelling units that is located
within 50 feet of the activated trunk or feeder cable of a System, plus
commercial and other buildings (including hotels) actually served by a System.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, proprietary information,
technical information and data, machinery and equipment warranties, and other
similar intangible property rights and interests (and any goodwill associated
with any of the foregoing) applied for, issued to, transferred to, or owned by
Seller or under which Seller is licensed or franchised and which are used
principally in connection with the business and operations of the Systems,
including, without limitation, the items listed in Schedule 3.11 hereto,
together with any additions thereto between the date of this Agreement and the
Closing Date.
"Judgment" means any judgment, writ, order, injunction, award or decree
of any court, judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
"Law" means any federal, state, municipal, local or foreign law,
statute, ordinance, rule or regulation.
"Lien" means any lien, mortgage, deed of trust, hypothecation, pledge,
mechanics' lien, easement, right-of-way, building or use restriction,
exception, reservation, limitation, impediment, contract right, equitable
interest, right of first refusal, title defect, charge, security interest,
option, restriction or any other claim or third-party right or interest of any
kind.
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<PAGE> 11
"Losses" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations,
assessments, fines, penalties, judgments, losses, damages (including diminution
in value), liabilities, obligations (including those arising out of any action,
such as any settlement or compromise thereof or judgment or award therein) and
reasonable costs and expenses, including, without limitation, interest,
penalties, investigative costs and expenses and attorneys' fees and
disbursements.
"Material Adverse Effect" means a material adverse effect on any of the
Assets or on the business, operations, financial condition or profits of the
Systems taken as a whole (excluding effects arising out of matters of a general
economic nature or matters (including, without limitation, legislation)
affecting the cable television industry generally), or on the ability of Seller
to perform any of its obligations under this Agreement. "Material Adverse
Change" means any change in circumstances that has resulted in a Material
Adverse Effect.
"Permitted Liens" means any of the following: (i) liens for taxes,
assessments and governmental charges not yet due and payable; and (ii) in the
case of leasehold Real Property Interests, the rights of any lessor and any
lien encumbering any lessor's interest in such property.
"Person" means any association, corporation, general or limited
partnership, Governmental Authority, joint venture, limited liability company,
natural person, trust, or unincorporated entity of any kind.
"Real Property" means all real property, and all buildings and other
improvements thereon, used principally in connection with the business or
operations of either or both of the Systems.
"Real Property Interests" means all interests of Seller in any of the
Real Property, including fee estates, leaseholds and subleaseholds, purchase
options, licenses, easements, rights to access, and rights of way, including,
without limitation, the items listed in Schedule 3.8 hereto, together with any
additions thereto between the date of this Agreement and the Closing Date.
"Required Consent" means any Consent listed on Schedule 3.3 designated
as a "Required Consent" that will be required as a condition to Buyer's
obligations at Closing.
"Seller's Knowledge" means the actual knowledge of any officer or
director of Seller, FrontierVision Partners, L.P., FVP GP, L.P. and FVI, James
C. Vaughn, Jack S. Koo, Gary Crosby, William Mahon and Mark Mullineaux.
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<PAGE> 12
"Service Area" means any of the geographic areas in which Seller is
authorized to provide cable television service by the Systems, with or without
a Franchise.
"Tangible Personal Property" means all plant, machinery, equipment,
tools, vehicles, furniture, leasehold improvements that are not Real Property,
office equipment, inventory, spare parts, and other tangible personal property
which is used principally in connection with the conduct of the business or
operations of either or both of the Systems, including, without limitation, the
items listed in Schedule 3.9 hereto, together with any additions thereto
between the date of this Agreement and the Closing Date.
1.2 Terms Defined Elsewhere in this Agreement. For purposes
of this Agreement, the following terms have the meanings set forth in the
sections indicated:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Accounts Receivable Section 3.22
Affiliate Section 3.20
Buyer Deposit Section 9.4
Buyer Deposit Funds Section 9.4
Claimant Section 10.5
Deposit Escrow Agreement Section 9.4
Employees Section 3.14
ERISA Section 3.14
Estimated Purchase Price Section 2.4
Estoppel Certificate Section 6.13
Excluded Assets Section 2.2
Indemnification Escrow Agreement Section 10.6
Indemnification Funds Section 10.6
Indemnifying Party Section 10.5
Purchase Price Section 2.3
Seller Deposit Section 9.4
Seller Deposit Funds Section 9.4
</TABLE>
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<PAGE> 13
SECTION 2 PURCHASE AND SALE OF ASSETS
2.1 Agreement to Sell and Buy. Subject to the terms and conditions
set forth in this Agreement, Seller hereby agrees to sell, transfer and deliver
to Buyer on the Closing Date, and Buyer agrees to purchase, all of the tangible
and intangible assets owned or held by Seller and used by Seller principally in
connection with the conduct of the business or operations of the Systems,
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding the assets described in Section 2.2, free and clear
of all Liens except for Permitted Liens, including the following:
(a) the Tangible Personal Property;
(b) the Real Property Interests;
(c) the Franchises;
(d) the Assumed Contracts;
(e) the Governmental Permits;
(f) the Intangibles and the goodwill of the Systems, if any;
(g) all of Sellers proprietary information, customer lists,
technical information and data, machinery and equipment warranties, maps,
computer discs and tapes, plans, diagrams, blueprints and schematics relating
principally to the business and operation of the Systems;
(h) all accounts receivable of the Systems as of the Closing;
(i) all choses in action of Seller relating principally to the
Systems or any of the Assets;
(j) all deposits and prepaid expenses relating to either or
both of the Systems in respect of which a purchase price adjustment is made in
Seller's favor pursuant to Section 2.3; and
(k) all books and records (including copies of Seller's FCC
and copyright filings) relating principally to the business or operations of
the Systems.
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<PAGE> 14
2.2 Excluded Assets. The Assets shall exclude the following assets:
(a) Seller's cash on hand as of the Closing and all other cash
in any of Seller's bank or savings accounts; any insurance policies, letters of
credit, or other similar items and cash surrender value in regard thereto; and
any stocks, bonds, certificates of deposit and similar investments;
(b) all right, title and interest in or to names, logos or
symbols or any variant thereof employing the name "FrontierVision";
(c) Seller's account books of original entry, general ledgers
and financial records;
(d) all Contracts that are not Assumed Contracts and all of
Seller's programming agreements;
(e) any other assets of Seller not used or held for use
principally in connection with the business or operations of either or both of
the Systems; and
(f) the assets of Seller listed on Schedule 2.2.
2.3 Purchase Price. The Purchase Price for the Assets shall be Eight
Million Two Hundred Eighty Thousand Dollars ($8,280,000.00), adjusted as
provided below:
(a) Proration of Expenses. The Purchase Price shall be
increased or decreased as required to effectuate the following proration of
expenses. All expenses arising from the operation of the Systems, including
business and license fees, pole rental fees, utility charges, real and personal
property taxes and assessments levied against the Assets, property and
equipment rentals, applicable franchise, copyright or other fees, sales and
service charges, prepaid deposits (to the extent such prepaid deposits are
assigned to Buyer at Closing), and similar prepaid and deferred items, shall be
prorated between Buyer and Seller in accordance with the principle that Seller
shall be responsible for all expenses, costs, and liabilities allocable to the
period on and prior to the Closing Date, and Buyer shall be responsible for all
expenses, costs, and obligations allocable to the period after the Closing
Date. Notwithstanding the preceding sentence, there shall be no adjustment
for, and Seller shall remain solely liable with respect to, any Contracts not
included in the Assumed Contracts and any other obligation or liability not
being assumed by Buyer pursuant to this Agreement, including, without
limitation, any liability or obligation for salaries, wages or other employee
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<PAGE> 15
compensation or benefits relating to any employees of Seller, it being
understood that all such employee-related expenses and benefits shall be the
sole responsibility of Seller.
(b) Adjustment for Shortfall in Basic Subscribers. If the
number of Basic Subscribers on the Closing Date is less than 5,300, the
Purchase Price shall be reduced by the dollar amount equal to the product of
(X) $1,600 times (Y) the amount by which the actual number of Basic Subscribers
on the Closing Date is less than 5,300.
(c) Manner of Determining Adjustments. The Purchase Price,
taking into account the adjustments pursuant to Section 2.3, will be determined
finally in accordance with the following procedures:
(1) Seller shall prepare and deliver to Buyer not later
than fifteen days before the Closing Date a preliminary settlement statement
which shall set forth Seller's good faith estimate of the adjustments to the
Purchase Price under Section 2.3, certified by Seller to be true, complete and
accurate as of the date delivered, to the extent such adjustments can be
determined or estimated as of the date of the preliminary settlement statement.
The preliminary settlement statement shall contain all information reasonably
necessary to determine the adjustments to the Purchase Price under Section 2.3,
to the extent such adjustments can be determined or estimated as of the date of
the preliminary settlement statement, and such other information as may be
reasonably requested by Buyer.
(2) Not less than five days prior to the Closing Date,
Buyer shall provide Seller with any objections to such preliminary settlement
statement in writing. After considering Buyer's objections, Seller shall make
such revisions to such preliminary settlement statement as are mutually
acceptable to the parties, and shall deliver a copy of such revised preliminary
settlement statement to Buyer not less than three days prior to the Closing
Date. Any disagreements that may exist with respect to the preliminary
settlement statement, if any, shall be resolved in connection with the
preparation of the final settlement statement pursuant to this Section 2.3.
(3) No later than 60 days after the Closing Date, Buyer
will deliver to Seller a statement setting forth Buyer's determination of the
Purchase Price and the calculation thereof pursuant to Section 2.3, certified
by Buyer to be true, complete and accurate as of the date delivered. If Seller
disputes the amount of the Purchase Price determined by Buyer, it shall deliver
to Buyer within 20 days after its receipt of Buyer's statement a statement
setting forth its determination of the amount of the Purchase Price. If Seller
notifies Buyer of its acceptance of Buyer's statement, or if Seller fails to
deliver its statement within the 20-day
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<PAGE> 16
period specified in the preceding sentence, Buyer's determination of the
Purchase Price shall be conclusive and binding on the parties as of the last
day of the 20-day period.
(4) Buyer and Seller shall use good faith efforts to
resolve any dispute involving the determination of the Purchase Price. If the
parties are unable to resolve the dispute within 15 days following the delivery
of Seller's statement pursuant to clause (3) above, Buyer or Seller may submit
the dispute to Deloitte & Touche LLP ("Deloitte & Touche"), in which event such
party shall deliver to the other party notice thereof. Deloitte & Touche's
resolution of the dispute shall be final and binding on the parties, and a
judgment may be entered thereon in any court of competent jurisdiction. Any
fees of Deloitte & Touche shall be split equally between Buyer and Seller.
2.4 Payment of Purchase Price. At the Closing, Buyer shall pay or
cause to be paid to or for the account of Seller the Purchase Price as adjusted
by the adjustments set forth in Seller's preliminary settlement statement (the
"Estimated Purchase Price") by federal wire transfer of immediately available
funds pursuant to wire instructions which shall be delivered by Seller to Buyer
at least two days prior to the Closing Date.
(a) Payments to Reflect Adjustments.
(1) If the Purchase Price as finally determined
pursuant to Section 2.3 exceeds the Estimated Purchase Price, Buyer shall pay
to Seller, in immediately available funds within five days after the date on
which the Purchase Price is determined pursuant to Section 2.3, the difference
between the Purchase Price and the Estimated Purchase Price (plus interest
thereon calculated at the rate of eight percent (8%) per annum from the Closing
Date).
(2) If the Purchase Price as finally determined
pursuant to Section 2.3 is less than the Estimated Purchase Price, Seller shall
pay to Buyer, in immediately available funds within five days after the date on
which the Purchase Price is determined pursuant to Section 2.3, the difference
between the Purchase Price and the Estimated Purchase Price (plus interest
thereon calculated at the rate of eight percent (8%) per annum from the Closing
Date).
2.5 Assumption of Liabilities and Obligations. As of the Closing
Date, Buyer shall assume and undertake to pay, discharge and perform (a) all
obligations and liabilities of Seller under the Franchises, Governmental
Permits and Assumed Contracts to the extent that such liabilities and
obligations relate solely to the time period after the Closing Date, (b) the
delivery of cable television service to customers of the Systems after the
Closing Date, (c) any taxes accrued after the Closing in connection with the
ownership of the Assets and operation of the Systems, and (d) all the
obligations and liabilities of Seller in respect of which an
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<PAGE> 17
adjustment to the Purchase Price is made in Buyer's favor pursuant to Section
2.3 of this Agreement. Buyer shall not be responsible for any obligations and
liabilities of Seller not assumed by Buyer pursuant to this Agreement.
2.6 Disputed Liabilities. If an adjustment is made in Buyer's favor
for any liability assumed by Buyer but disputed by Seller as of the Closing
Date, and Seller subsequently is successful in satisfying all or part of any
such liability assumed by Buyer, then Buyer shall promptly pay to Seller the
amount of such liability that Seller so satisfied to the extent Buyer is
relieved of any obligation with respect thereto, less any Losses incurred by
Buyer arising out of or resulting from the assumption of such liability.
2.7 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets for all purposes (including financial, accounting
and tax purposes) as set forth in Schedule 2.7 hereto. Seller and Buyer shall
each file their respective tax returns, including IRS Form 8594, in a manner
consistent with such allocation. Neither Seller nor Buyer shall, after filing
IRS Form 8594, revoke or amend IRS Form 8594 without the written consent of the
other party.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Organization, Standing, and Authority. Seller is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware and is duly qualified to conduct business as a
foreign limited partnership in the Commonwealth of Virginia and each
jurisdiction in which the ownership and leasing of the Assets or the nature of
its activities in connection with the operations of the Systems make such
qualification necessary. Seller has all requisite power and authority (a) to
own, lease, and use the Assets as now owned, leased, and used by Seller, (b) to
conduct the business and operations of the Systems as now conducted by Seller,
and (c) to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by Seller hereunder and
thereunder. Schedule 3.1 sets forth (a) all of the fictitious and trade names
which Seller has used or is currently using in connection with the business of
the Systems and, to Seller's Knowledge, all fictitious and trade names used by
any prior owner or operator of the Systems in the past five (5) years in
connection with the business of the Systems, and (b) the location of the chief
executive office of Seller and, to Seller's Knowledge, such prior owners and
operators.
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<PAGE> 18
3.2 Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement by Seller have been duly authorized by all
necessary actions on the part of Seller (all of which are in full force and
effect). This Agreement has been duly executed and delivered by Seller, and
this Agreement constitutes, and when delivered the documents contemplated
hereby will constitute, the legal, valid, and binding obligations of Seller,
enforceable against Seller in accordance with their terms except as the
enforceability of this Agreement and the documents contemplated hereby may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements. Subject to obtaining the
Consents listed on Schedule 3.3 or as otherwise disclosed on Schedule 3.3, the
execution, delivery, and performance by Seller of this Agreement and the
documents contemplated hereby (with or without the giving of notice, the lapse
of time, or both): (a) do not require the consent of, notice to or filing with
any Governmental Authority or any third party; (b) will not conflict with any
provision of the certificate of limited partnership or partnership agreement of
Seller; (c) will not conflict with, result in a breach of, or constitute a
default under, any Law or Judgment, (d) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default under,
or accelerate or permit the acceleration of any performance required by the
terms of, any agreement, instrument, license or permit to which Seller is a
party or by which Seller or any of the Assets may be bound; and (e) will not
create any Lien upon any of the Assets.
3.4 Title to Assets. (a) Seller is the sole and exclusive legal and
equitable owner of, and, except as disclosed on Schedule 3.4, has good title to
the Assets free and clear of all Liens, except for Permitted Liens. Buyer
will, at Closing, acquire good title to, and all of Seller's right, title and
interest in and to the Assets free and clear of all Liens, except for Permitted
Liens. Except as disclosed on Schedule 3.4, no person has an option to
purchase, right of first refusal or other similar right with respect to all or
any part of the Assets. Seller has provided to Buyer true and complete copies
of all agreements, documents, instruments and certificates heretofore executed
and/or delivered in connection with Seller's acquisition of the Assets and the
Systems from the C4 Sellers and that have been reasonably requested by Buyer,
including, without limitation, the C4 Agreement and associated transfer
documents.
(b) The Assets and Excluded Assets constitute all assets,
property and other rights necessary for Buyer to conduct lawfully the business
and operations of each of the Systems as presently conducted.
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<PAGE> 19
3.5 Franchises. Schedule 3.5 lists all Franchises held by Seller
(including the Service Area serviced by each such Franchise, the Franchising
Authority that is a party to each such Franchise, Consent requirement if any,
the franchise date and expiration date for each such Franchise). Seller has
delivered to Buyer true and complete copies of all Franchises. Seller holds
each of the Franchises. Except as set forth on Schedule 3.5, each Franchise is
in full force and effect and constitutes a valid and binding obligation of the
Franchising Authority which is a party to such franchise and is legally
enforceable against such Franchising Authority in accordance with its terms,
and Seller is validly and lawfully operating each of the Systems under the
Franchises applicable to such System. Except as set forth in Schedule 3.5, no
material violation of or material default under any provision of any Franchise
exists, and Seller is not in material violation of or in material default in
the performance of its obligations under any Franchise. There exists no fact
or circumstance which, with the passage of time or the giving of notice or
both, would constitute a material default under any Franchise or permit the
Franchising Authority to cancel or terminate the rights thereunder, except upon
the expiration of the full term thereof. Except as set forth on Schedule 3.5,
all appropriate requests for renewal under the Communications Act have been
filed with the appropriate Franchising Authorities within 30 to 36 months prior
to the expiration of each Franchise. Seller has not made any commitments (oral
or written) to any Franchising Authorities with respect to the Systems other
than those contained in the Franchises. To Seller's Knowledge, no prior owner
of any of the Systems has made any commitment (oral or written) to any
Franchising Authority with respect to any System other than those contained in
the Franchises.
3.6 Governmental Permits. Each Governmental Permit held by Seller is
listed in Schedule 3.6 hereto (including a description of such Governmental
Permit, and the issue and expiration dates thereof). Seller holds all material
Governmental Permits necessary or incidental to the ownership or use of the
Assets or in connection with the operation of the Systems, and each such
Governmental Permit held by Seller is valid and in full force and effect on the
date hereof. Seller has delivered to Buyer true and complete copies of all
such written Governmental Permits, including any amendments thereto. Seller is
not in violation or default of any such Governmental Permit in any respect that
would have a Material Adverse Effect, and there exists no fact or circumstance
which, with the passage of time or the giving of notice or both, would
constitute a material default under any Governmental Permit or permit any
Governmental Authority to cancel or terminate the rights thereunder, except
upon the expiration of the full term thereof. Each licensed facility is being
operated in all material respects in accordance with the requirements of the
relevant Governmental Permit.
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<PAGE> 20
3.7 Systems Information.
(a) Schedule 3.7 sets forth, as of the date indicated on
Schedule 3.7, the approximate number of Basic Subscribers of each System and
the approximate number of Homes Passed by each System. At the Closing, the
Systems collectively will contain approximately 201 miles of aerial plant and
approximately 19 miles of underground plant (in each case, before giving effect
to any construction by or at the direction of Buyer).
(b) Schedule 3.7 also sets forth a true and complete list of
the current channel capacity and alignment (including all broadcast stations
and satellite services carried, cable channel assignment, frequencies utilized
and pilot frequencies) for each of the Systems. Except as set forth on
Schedule 3.7, each System is presently carrying channels and is providing
reception on all such channels in material compliance with the technical
standards set forth in all applicable FCC rules, regulations and requirements.
Schedule 3.7 contains a true and complete list of such frequencies, the
geographic coordinates of the approximate center of each of the System's
Service Areas and the authorized radius of each System. All offset
notifications required to be filed by Seller in connection with its operation
of the Systems have been filed pursuant to Section 76.615 of the FCC's
regulations for all aeronautical frequencies in use by either of the Systems.
Seller's use of such aeronautical frequencies (i) is authorized under
applicable Laws and (ii) is in material compliance with all applicable FCC
rules, regulations and requirements.
(c) Except for Buyer's or any Affiliate of Buyer's operations
in the Service Areas, to Seller's Knowledge, (i) the Systems are the only cable
television systems, multichannel multipoint distribution service, or other
multichannel video programming service (other than any direct broadcast
satellite service) presently servicing a Service Area and (ii) no other cable
television franchises or other local governmental franchises, licenses or
authorizations have been issued and no applications for such franchises,
licenses or other authorizations are pending with respect to providing such
services to a Service Area.
(d) All reports, applications, financial statements and other
documents required to be filed by Seller with respect to its ownership and
operation of the Systems have been filed, except where the failure to file
would not have a Material Adverse Effect. All notices required to be given by
Seller to subscribers of the Systems relating to their right to privacy have
been given in material compliance with the requirements of the Communications
Act. Seller has filed all material copyright notices and reports required to
be filed under Section 111 of the Copyright Act of 1976, as amended, and has
paid all material fees required to be paid by it with respect to such filings
relating to Seller's ownership and operation of each of
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<PAGE> 21
the Systems. There is no inquiry, claim, action or demand pending before the
Copyright Office or any court which questions the copyright filings or payments
made by Seller with respect to any of the Systems. Except as set forth in
Schedule 3.7, all material royalties, fees, reports, schedules and returns of
any federal, state or local administrative agency or any utility relating to
each of the Systems which are required under applicable Law or any Contract,
Franchise or Governmental Permit to be filed or paid by Seller in connection
with its ownership or operation of the Systems have been filed and paid.
(e) All required FAA and FCC approvals with respect to each
System's towers have been obtained by or transferred to and maintained by
Seller in material compliance with the rules, policies and regulations of the
FAA and the FCC. Schedule 3.7 contains a true and complete list of each of the
System's towers and copies of all relevant FAA determinations, if any, with
respect thereto.
(f) All of the communities to which the Systems provide cable
television service have been registered with the FCC. Schedule 3.7 contains a
true and complete list of each such community and its corresponding FCC
community unit identification number. Except as specified on Schedule 3.7,
Seller has not received notice from any community or other political
subdivision served by either of the Systems that it has become certified by the
FCC for the purpose of regulating either System's basic rates, nor to Seller's
Knowledge, has any Person filed a complaint with the FCC with respect to the
programming service rates of either System.
(g) Except as disclosed in Schedule 3.7, to Seller's
Knowledge, each employment unit operated by Seller with respect to the Systems
is currently in material compliance with the equal employment opportunity
requirements of Section 554 of the Communications Act and the FCC's
implementing rules and regulations.
(h) Except as set forth on Schedule 3.7 hereto, to Seller's
Knowledge all broadcast television station signals carried on either of the
Systems, excluding superstations carried pursuant to 47 C.F.R. Section 76.64,
are being carried either pursuant to a must carry election or a retransmission
consent agreement authorizing the retransmission of the station's signal,
except where such failure would not have a Material Adverse Effect. Except as
set forth on Schedule 3.7 hereto, (i) each such retransmission consent
agreement is in full force and effect and consistent with FCC rules and (ii)
there is no dispute pending or, to Seller's Knowledge, threatened, with respect
to the carriage or channel position of any broadcast station by the Systems.
Seller has complied in all material respects with the must carry and
retransmission consent provisions of the Communications Act and the FCC rules
and regulations promulgated thereunder as they relate to the Systems.
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<PAGE> 22
(i) To Seller's Knowledge, Seller and each System are
currently in compliance with 47 C.F.R. Section 76.92 and 76.151, with respect
to network non-duplication protection and syndicated exclusivity, and Seller is
not aware of any complaint filed with the FCC alleging noncompliance with such
regulations with respect to either System.
3.8 Real Property and Real Property Interests. Schedule 3.8 contains
a complete and accurate description of all Real Property and the nature of all
Real Property Interests with respect thereto (including street address, owner,
and use and location of all improvements thereon). None of the Real Property
Interests are fee estates. Seller has delivered to Buyer true and complete
copies of all leases, easements, rights-of-way and other instruments pertaining
to the Real Property (including any and all amendments and other modifications
of such instruments) which are listed on Schedule 3.8 hereto. With respect to
each leasehold interest included in the Real Property Interests being conveyed
under this Agreement, Seller has a valid and enforceable leasehold interest.
No default exists under any such lease, and there exists no fact or
circumstance which, with the passage of time or the giving of notice or both,
would constitute a default under any such lease or permit any party thereto to
cancel or terminate the rights thereunder, except upon the expiration of the
full term thereof. All buildings and improvements occupied by Seller on the
Real Property are in good condition and repair consistent with their present
use, and are available for immediate use in the conduct of the business and
operations of the Systems. To Seller's Knowledge, the buildings and
improvements on the Real Property that are used by Seller do not violate
existing building codes or zoning laws (after giving effect to all provisions
of such codes or laws that permit continuation of a condition or use that
precedes adoptions of such codes or laws so long as such provision will
continue to permit continuation of such use after the sale of the Real Property
Interests to Buyer). Seller has received no written notices, citations or
complaints from governmental or non-governmental parties regarding any aspect
of the use and enjoyment of the Real Property. There are no pending or, to
Seller's Knowledge, threatened, condemnation proceedings, lawsuits, or
administrative actions relating to the Real Property, or other matters
affecting adversely Seller's current use, occupancy or value thereof. Seller's
facilities located on the parcels of Real Property are supplied with utilities
and other services necessary for Seller's operation of such facilities,
including, as applicable, gas, electricity, water, telephone, sanitary sewer
and storm sewer, and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcels of Real Property.
The parcels of Real Property abut on and/or have vehicular access to public
roads. To Seller's Knowledge, there are no leases, subleases, licenses,
concessions or other agreements, whether written or oral, granting to any
Person the right to use or occupy any of the Real Property which would impair
Seller's ability to use such Real Property for its intended purpose.
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3.9 Tangible Personal Property. Schedule 3.9 lists all material
items of Tangible Personal Property (including the type and quantity of such
property and the name of the lessor, rental rate and lease term with respect to
such property which is leased) and provides a general description of all
nonmaterial items of Tangible Personal Property. Seller has good title to each
item of Tangible Personal Property indicated on Schedule 3.9 as being owned by
Seller, and, except as disclosed on Schedule 3.4, each such owned item of
Tangible Personal Property is owned free and clear of all Liens except for
Permitted Liens. Each item of Tangible Personal Property indicated on Schedule
3.9 as being leased by Seller is leased under a lease or other instrument
pursuant to which Seller has a valid and enforceable leasehold interest in such
Tangible Personal Property. Seller has complied in all material respects with
all of the terms and conditions of such leases, and Seller has not done or
performed or failed to perform any act which would materially impair its rights
to use such Tangible Personal Property for its intended purpose on the terms of
the lease therefor. There is no existing default under any such leases, except
for any default which, individually or in the aggregate, would not have a
Material Adverse Effect. Each item of Tangible Personal Property is in good
operating condition and repair, subject to ordinary wear and tear. Seller has
received no written notices, citations or complaints from governmental or
non-governmental parties regarding any aspect of the material use and enjoyment
of the Tangible Personal Property.
3.10 Contracts. (a) Schedule 3.10 is a true and complete list of all
Contracts. Seller has delivered to Buyer true and complete copies of all
Contracts listed on Schedule 3.10. All of the Assumed Contracts are validly
existing and in full force and effect and no default exists under any Assumed
Contract, except for any default which, individually or in the aggregate, would
not have a Material Adverse Effect. Seller has not received any notice that
any party to any Assumed Contract intends (i) to terminate such Assumed
Contract or amend the terms thereof without the consent of Seller, (ii) to
refuse to renew such Assumed Contract upon expiration of its term, or (iii) to
renew such Assumed Contract upon expiration only on terms and conditions that
are materially more onerous than those now existing. Except for the need to
obtain the Consents described in Schedule 3.3, Seller has full legal power and
authority to assign its rights under all Assumed Contracts to Buyer in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability or continuation of any such Assumed Contract.
(b) Seller has not at any time prior hereto failed to operate
and maintain either of the Systems in a manner which could now or hereafter
reasonably be expected to result in the cancellation or termination of (except
upon the expiration of the full term thereof), or liability for damages under,
any such Assumed Contract.
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3.11 Intangibles. Schedule 3.11 is a true and complete list of the
Intangibles, all of which are valid and in full force and effect and
uncontested. To Seller's Knowledge, in its operations of the Systems, it is
not infringing upon or otherwise acting adversely to any trademarks, trade
names, copyrights, patents, patent applications, know-how, methods, or
processes owned by any other Person or Persons, and there is no claim or action
pending, or to Seller's Knowledge threatened, with respect thereto.
3.12 Insurance. Schedule 3.12 is a true and complete list of all
insurance policies of Seller that insure any part of the Assets or the business
of the Systems. All policies of insurance listed in Schedule 3.12 are in full
force and effect.
3.13 Reports. All tax returns, ownership and employment reports, and
other documents that Seller is currently required to file with the FCC or with
any other Governmental Authority in relation to Seller's ownership and
operation of the Systems have been filed, and with respect to the Systems,
Seller has complied in all material respects with all reporting requirements of
the FCC and other Governmental Authorities having jurisdiction over Seller and
the Systems. All of such returns, reports, and documents filed by Seller are
complete and correct in all material respects as filed.
3.14 Employees and Compensation; Labor Relations.
(a) Schedule 3.14 contains a true and complete list of the
names, titles and rates of compensation (as of the date indicated on such
schedule) for all employees of Seller as of the date hereof who perform
services primarily in connection with the operation of the Systems (the
"Employees"). Seller does not have any written or oral contracts of employment
with any Employee, other than those listed in Schedule 3.10. Except as set
forth on Schedule 3.14, Seller does not have any pension or profit sharing or
other employee benefit plan for the Employees including but not limited to any
plans subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Seller is not a party to or subject to any collective
bargaining agreements with respect to the Systems. As of the date of this
Agreement, no controversies, disputes, or proceedings are pending or, to
Seller's Knowledge, threatened, between it and any Employee (singly or
collectively). As of the date of this Agreement, no labor union or other
collective bargaining unit represents or claims to represent any of the
Employees.
(b) Seller has complied in all material respects with all
applicable provisions of ERISA, the Code, the National Labor Relations Act,
Title VII of the Civil Rights Act of 1964, and the Age Discrimination in
Employment Act pertaining to employee benefit plans. Seller has no liability
for any delinquent contributions due to employee benefit plans within the
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meaning of Section 515 of ERISA (including, without limitation, related
attorneys' fees, costs, liquidated damages and interest) or for any arrearages
of wages.
(c) All employee benefit plans that are subject to Section
4980B(f) of the Code and Sections 601 through 607 of ERISA comply in all
material respects with and have been administered in material compliance with
the health care continuation-coverage requirements for tax-favored status under
Section 4980B(f) of the Code (formerly Section 162(k) of the Code), and
Sections 601 through 607 of ERISA.
3.15 Taxes.
(a) Seller has filed all reports and returns relating to all
fees, assessments or taxes imposed by the United States or any state, local or
foreign government which are required to be filed by it in connection with its
ownership or operation of the Systems or Assets (which returns and reports are
true, correct and complete in all material respects), and Seller has paid all
such fees, assessments or taxes shown as due on such returns.
(b) No notices respecting asserted or assessed and unresolved
deficiencies for any fees, assessments or taxes have been received by Seller in
respect of such filings for any period.
(c) As of the date of this Agreement, there is no
investigation by any tax agency or authority presently pending or, to Seller's
Knowledge, threatened, relating to the Systems or any Asset in connection with
Seller's ownership and operation of the Systems and Assets, and Seller is not a
party to any action or proceeding by any Governmental Authority, for the
assessment or collection of fees, assessments or taxes relating to the Systems
or any Asset.
(d) To Seller's Knowledge, there are no audits pending, nor
has Seller extended or waived any statute of limitations with respect to any
tax applicable to the Assets or the Systems, which extension or waiver has not
expired.
(e) During its ownership and operation of the Systems and
Assets, Seller has not been subject to audit or adjustment or resettlements
relating to taxes applicable to any of the Assets or the Systems by any
federal, state or local taxing authority.
3.16 Claims and Legal Actions. As of the date of this Agreement,
except for proceedings generally affecting the cable television industry, (a)
there is no action, suit, claim, demand, arbitration or other proceeding (or,
to Seller's Knowledge, any investigation),
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administrative or judicial, pending (or, to Seller's Knowledge, threatened)
against or relating to Seller with respect to its ownership or operation of the
Systems or otherwise relating to the Assets, and (b) no Judgment been issued
against or relating to any of the foregoing.
3.17 Environmental Matters. To Seller's Knowledge, (a) Seller is
currently in compliance with all applicable Environmental Laws and holds all
material permits and other authorizations needed to operate its facilities, (b)
there is no present requirement of any applicable Environmental Law which is
due to be imposed upon it which will increase its cost of complying with such
Environmental Laws, and (c) there has not been and is not now on or under the
leased Real Property any treatment, storage, recycling, disposal or arrangement
therefor, of any Hazardous Waste or any underground storage tanks, in use or
abandoned. For purposes of this Agreement, the terms (i) "Environmental Laws"
include but are not limited to any Law which pertains to, governs or otherwise
regulates any of the following activities, including without limitation the
emission, discharge, release or spilling of any substance into the air, surface
water, groundwater, soil or substrata and the manufacturing, processing, sale,
generation, treatment, storage, disposal or other management of any Waste,
Hazardous Substance or Hazardous Waste, and (ii) "Waste," "Hazardous Substance"
and "Hazardous Waste" include any substance defined as such by any applicable
Environmental Law.
3.18 Compliance with Laws. (a) Except as disclosed on Schedule 3.18,
Seller is not in violation of any applicable Judgment relating to any of the
Systems or Assets, nor is Seller in violation of any federal, state or local
Law or any other requirement of any Governmental Authority or arbitrator
applicable to any of the Systems or the Assets, except for violations which,
individually or in the aggregate, do not have and are not reasonably likely to
have a Material Adverse Effect, provided that this Section 3.18 shall not
relate to matters addressed in Sections 3.7, 3.8 and 3.17, which matters shall
be covered by such Sections.
(b) Without limiting the generality of the foregoing, (i)
Seller has not received any notification from any Governmental Authority to the
effect that Seller or either System is not in compliance with applicable Laws
respecting employment and employment practices, occupational safety and health
Laws, Environmental Laws or FCC rules and regulations, and (ii) Seller has not
received any notification of past violations of such Laws with respect to the
Systems or the Assets (except for such violations which no longer exist).
3.19 Conduct of Business in Ordinary Course. Since February 1, 1996,
Seller has conducted the business and operations of the Systems in the ordinary
course of business and has not:
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(a) entered into any transaction relating to either System
that was entered into other than in the ordinary course of business;
(b) sold or otherwise disposed of any of the Assets, except
obsolete assets where suitable replacements have been made therefor;
(c) suffered any Material Adverse Change in the business,
assets, properties, or financial condition of either System, including any
damage, destruction, or loss affecting any of the Assets;
(d) canceled any debts owed to or claims held by Seller with
respect to either System;
(e) suffered any material write-down of the value of any
Assets;
(f) incurred, or become subject to, any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown)
relating to either System, except current liabilities incurred in the ordinary
course of business;
(g) mortgaged, pledged or subjected to any Lien any of the
Assets (other than the Liens disclosed in Schedule 3.4);
(h) made capital expenditures, or entered into commitments
therefor, aggregating more than Five Thousand Dollars ($5,000); or
(i) made any agreement or commitment to do any of the
foregoing.
3.20 Transactions with Affiliates. Seller has not been involved in
any business arrangement or relationship relating to the Systems with any
affiliate of Seller, and no affiliate of Seller owns any property or right,
tangible or intangible, which is used in the business of the Systems. As used
in this paragraph, "affiliate" has the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
3.21 Brokers. Neither Seller nor any person or entity acting on
Seller's behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transaction contemplated by this Agreement.
3.22 Billing Reports; Accounts Receivable; Financial Statements.
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(a) Seller has delivered to Buyer monthly billing reports for
February, March, April and May 1996. All such billing reports are true and
correct as of the date of each such billing report.
(b) Seller is the true and lawful owner of all accounts
receivable representing amounts earned in connection with the operations of the
Systems through and including the Closing Date ("Accounts Receivable") and has
good title to each Account Receivable, free and clear of all Liens (other than
Permitted Liens or as otherwise disclosed on Schedule 3.4), with the absolute
right to transfer any interest therein. Each such Account Receivable is (i) a
valid obligation of the account debtor enforceable in accordance with its
terms, and (ii) a true and correct statement of the account for merchandise
actually sold and delivered to, or for actual services performed for and
accepted by, such account debtor.
(c) The financial statements to be provided to Buyer pursuant
to Section 6.17 (i) will be prepared in accordance with the books and records
of Seller and with generally accepted accounting principles, consistently
applied, and (ii) will present fairly the financial positions, incomes,
expenses, cash flows, assets and liabilities and results of operations of the
Systems as of the dates and for the periods indicated.
3.23 No WARN Obligation. No notices to employees of the Systems are
required under the federal Worker Adjustment and Retraining Notification Act as
a result of the transactions contemplated hereby.
3.24 Further Qualifications and Exceptions. Notwithstanding anything
to the contrary in this Agreement, the representations and warranties of Seller
contained in Sections 3.4(b), 3.5, 3.6, 3.7(b), 3.10(b), 3.12 and 3.18(a) are
qualified in their entirety by, and made subject to the further exceptions and
disclosures in this Section 3.24.
(a) The Systems' cable plant may not be attached to utility
poles in compliance with the requirements imposed under the applicable pole
attachment agreements or under applicable Law;
(b) The Systems service drops may not comply with the
grounding requirements of the National Electric Safety Code (to the extent such
Code is applicable to the Systems);
(c) The Systems may not comply with the FCC's signal leakage
requirements imposed under Part 76, Subpart K of the FCC rules and regulations
(to the extent such rules and regulations are applicable to the Systems)
(exclusive of the signal leakage
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<PAGE> 29
compliance testing requirements and Report Form 320 requirements to the extent
they apply to the Systems during the period of Seller's ownership or operation
of the Systems, with respect to which the representations and warranties of
Seller contained in the Sections specified in the first sentence of this
Section 3.24 are not qualified);
(d) the as-built drawings for the Systems may not have been
maintained in accordance with applicable requirements; and
(e) the Seller may not hold or own all easements,
rights-of-way or other access rights required to conduct the operations of the
Systems.
The foregoing qualifications and exceptions in (a) through (e) are
sometimes referred to in this Agreement as "Seller's Additional Exceptions".
SECTION 4 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows:
4.1 Organization, Standing, and Authority. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia. Buyer has all necessary corporate power and
authority to own, lease and use its properties and assets, to engage in the
business or businesses in which it is presently engaged, and to execute and
deliver this Agreement and the documents contemplated hereby, and to perform
and comply with all of the terms, covenants, and conditions to be performed and
complied with by Buyer hereunder and thereunder.
4.2 Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement by Buyer have been duly authorized by all
necessary actions on the part of Buyer (all of which are in full force and
effect). This Agreement has been duly executed and delivered by Buyer, and
this Agreement constitutes, and when delivered the documents contemplated
hereby will constitute, the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms except as the
enforceability of this Agreement and the documents contemplated hereby may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
4.3 Absence of Conflicting Agreements. Subject to obtaining the
Consents, the execution, delivery, and performance by Buyer of this Agreement
and the documents contemplated hereby (with or without the giving of notice,
the lapse of time, or both): (a) do
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<PAGE> 30
not require the consent of, notice to, or filing with any Governmental
Authority or any third party; (b) will not conflict with any provision of the
Articles of Incorporation or Bylaws of Buyer; (c) will not conflict with,
result in a breach of, or constitute a default under, any Law (including
without limitation the Communications Act) or Judgment; and (d) will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license, or
permit to which Buyer is a party or by which Buyer may be bound, that may
impair Buyer's ability to acquire or operate the Assets.
4.4 Claims and Legal Actions. Except for proceedings generally
affecting the cable television industry, there is no claim, legal action,
counterclaim, suit, arbitration, governmental investigation or other legal,
administrative, or tax proceeding, nor any Judgment, in progress or pending, or
to the knowledge of Buyer threatened, against or relating to Buyer which may
impair Buyer's ability to acquire or operate the Assets, nor does Buyer know or
have reason to be aware of any basis for the same.
4.5 Brokers. Neither Buyer nor any person or entity acting on its
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transaction contemplated by this Agreement.
SECTION 5 OPERATIONS OF THE SYSTEMS PRIOR TO CLOSING.
5.1 Generally. Seller agrees that, between the date of this
Agreement and the Closing Date, Seller shall operate the Systems in the
ordinary course of business and in compliance with the other covenants in this
Section 5, except as otherwise required or contemplated by this Agreement.
5.2 Contracts or Commitments. Without the written consent of Buyer
(which shall not be unreasonably withheld or delayed), Seller shall not (i)
enter into or commit to any transaction or Contract other than in the usual and
ordinary course of business, or (ii) modify, terminate, renew, suspend or
abrogate any Franchise, Governmental Permit or Assumed Contract.
5.3 Disposition of Assets. Seller shall not sell or otherwise
dispose of any of the Assets except obsolete assets where suitable replacements
have been made therefor.
5.4 Encumbrances. Seller shall not create, assume or permit to exist
any Lien upon the Assets, except for Permitted Liens and such Liens as are
disclosed on Schedule 3.4 which will be removed at or prior to Closing.
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<PAGE> 31
5.5 Franchises and Governmental Permits. Seller shall not cause or
permit, by any act or failure to act, any of the Franchises or Governmental
Permits to expire or to be revoked, suspended, or modified, or take any action
that could cause any Franchising Authority or other Governmental Authority to
institute proceedings for the suspension, revocation, or adverse modification
of any of the Franchises or Governmental Permits, except for such matters as
are disclosed on Schedule 3.5.
5.6 Access to Information. Seller shall, upon reasonable advance
notice, give Buyer and its counsel, accountants, engineers, and other
authorized representatives reasonable access to the Assets and to all other
properties, equipment, books, records, Contracts, and documents relating to the
Systems and the Assets for the purpose of audit and inspection, and will, upon
reasonable advance notice, furnish or cause to be furnished to Buyer or its
authorized representatives all information with respect to the affairs and
business of the Systems that Buyer may reasonably request.
5.7 Maintenance of Assets. Seller shall maintain all of the Assets
in good condition (ordinary wear and tear excepted), and use, operate, and
maintain all of the Assets in a reasonable manner.
5.8 Insurance. Seller shall at all times prior to and through the
Closing maintain the existing insurance policies on the Systems and the Assets
in amounts not less than those in effect on the date hereof.
5.9 Books and Records. Seller shall maintain the books and records
relating to the Systems in accordance with Seller's past practices.
5.10 Compliance with Laws. Except as provided in Section 6.16(a),
Seller shall comply in all material respects with all Laws applicable or
relating to its ownership and operation of the Systems.
5.11 Preservation of Business. Seller shall use reasonable efforts to
preserve the business of the Systems and the Assets intact and to preserve the
goodwill and business of the subscribers, advertisers and others having
business relations with the Systems.
5.12 Payment of Obligations. Seller shall pay or discharge all taxes
and obligations, including, without limitation, those for federal, state or
local income, property, unemployment, withholding, sales, transfer, stamp,
documentary, use and other taxes, to the extent due and payable before the
Closing Date (other than taxes arising from the transfer of
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<PAGE> 32
the Assets under this Agreement which shall be paid in accordance with the
terms of this Agreement).
5.13 No Rate Increases or Channel Line-Up Changes. Seller shall not
implement any increase or decrease in the rates charged to the subscribers of
either System or implement any channel line-up changes, other than as required
by any applicable Laws.
5.14 Collections Policy. Seller shall enforce the collection of past
due accounts of subscribers in a manner (including enforcement of service
disconnection policies) in the ordinary course of business. Seller shall not
discontinue or otherwise change its collection practices in contemplation of
the transactions contemplated by this Agreement.
SECTION 6 SPECIAL COVENANTS AND AGREEMENTS.
6.1 Filings with the FCC and Franchising Authorities. As soon as
practicable, but in no event later than 30 days after the date of this
Agreement, the parties shall file with the FCC and any Franchising Authorities
from which consent to the transactions contemplated by this Agreement must be
obtained as provided in this Agreement, all required applications requesting
consent to such transactions. Buyer shall assist Seller in all reasonable
respects (including, without limitation, by attending meetings with the parties
who must provide such consents and by providing the financial data, information
as to operating experience, appropriate insurance and surety bonds reasonably
required in order to obtain such consents), and the parties shall take with due
diligence all reasonable steps necessary to expedite the processing of the
application or applications and to secure such consent or approval. Seller and
Buyer shall furnish each other with any correspondence from or to, and notify
each other of any other communications with, the FCC and the Franchising
Authorities that relate to the obtaining of such consents and approvals, and
each party shall have the right to participate in any hearings or proceedings
before the FCC and the Franchising Authorities with respect to such consents
and approvals. Each party shall bear its own costs and expenses (including the
fees and disbursements of its counsel) in connection with the preparation of
the portion of any such application to be prepared by it and in connection with
the processing of that application.
6.2 Other Consents. Seller shall use reasonable efforts (but shall
not be required to undertake extraordinary or unreasonable measures to obtain
such consents and approvals, including without limitation, the initiation or
prosecution of legal proceedings, or to make any payment except as may be
required to cure any default by Seller under any Assumed Contract and except
for the incidental costs of preparing and submitting applications and other
requests, costs of responding to reasonable inquiries and ordinary and
customary filing fees and processing charges), and Buyer shall assist Seller in
all reasonable respects (including, without
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limitation, by attending meetings with the parties who must provide such
consents and by providing the financial data, information as to operating
experience, appropriate insurance and surety bonds reasonably required in order
to obtain such consents), to obtain all consents and approvals of third parties
required for the transfer to Buyer of any of the Assets. If the party from
whom such consent is requested proposes to issue in the name of Buyer a new
system agreement in lieu of consenting to an assignment, Buyer shall agree to
accept such proposal so long as the terms and conditions of the new agreement
are reasonably acceptable to Buyer (it being understood that any such terms and
conditions that are no less favorable than those presently held by Seller shall
be deemed reasonably acceptable and that no such agreement shall be effective
until the Closing Date).
6.3 Risk of Loss. The risk of any loss, damage, impairment,
confiscation, or condemnation of any of the Assets from any cause whatsoever
shall be borne by Seller at all times prior to the Closing and thereafter shall
be borne by Buyer.
6.4 Confidentiality. Except for such disclosure to attorneys,
accountants, bankers and present investors as may be necessary for the
consummation of the transaction contemplated by this Agreement, and except as
and to the extent required by Law, each party will keep confidential any
confidential information obtained from the other party in connection with the
transactions contemplated by this Agreement. If this Agreement is terminated,
each party will return to the other party all documents, information and other
materials obtained by such party from the other party in connection with the
transactions contemplated by this Agreement. Any press releases or other
publicity relating to the transaction contemplated by this Agreement shall be
subject to prior review and coordination between Seller and Buyer, subject to
their respective disclosure obligations under applicable Laws.
6.5 Cooperation. Buyer and Seller shall cooperate fully with each
other and their respective counsel, accountants and other representatives in
connection with any actions required to be taken as part of their respective
obligations under this Agreement, and Buyer and Seller shall execute such other
documents as may be necessary and desirable to the implementation and
consummation of this Agreement, and otherwise use their reasonable best efforts
to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement.
6.6 Other Negotiations. From the date of this Agreement until the
earlier of the Closing or the termination of this Agreement in accordance with
its terms, (a) Seller shall not solicit any offer from any other Person for any
form of business combination or acquisition or disposition of all or any of the
Assets or the Systems, nor shall Seller initiate or enter into any negotiations
or provide confidential information with respect to any such business
combination
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or acquisition, (b) neither party shall solicit any offer from any other Person
for any transaction involving such party or any of its subsidiaries that would
preclude or in any way interfere with the consummation of the transactions
contemplated by this Agreement, nor shall either party initiate or enter into
any negotiations or provide confidential information with respect to any such
transaction without the consent of the other party, and (c) neither party shall
authorize any representative, agent, officer, director or principal stockholder
to take, and each party shall use its best efforts to prevent any such person
or entity from taking, any of the actions prohibited in this paragraph.
Nothing contained in this Section 6.6 shall prohibit Buyer or Seller from
responding to any unsolicited proposal or inquiry by advising the person or
entity making such proposal or inquiry of the terms of this Section 6.6.
6.7 No Solicitation or Construction. From the date of this Agreement
until the earlier of the Closing or the termination of this Agreement in
accordance with its terms, Buyer shall not (a) solicit any cable television
customers or potential customers or conduct other cable television marketing or
promotion efforts within the Service Areas and/or (b) construct, or commence to
construct, any cable television plant within the Service Areas; provided,
however, that nothing in this Section 6.7 shall in any way restrict Buyer's
activities in the ordinary course of business within the areas described in
Schedule 6.7.
6.8 No Inconsistent Action. Neither Seller nor Buyer shall take any
action that is inconsistent with its obligations under this Agreement or that
could hinder or delay the consummation of the transactions contemplated by this
Agreement.
6.9 Bulk Sales Law. Buyer hereby waives compliance by Seller with
the provisions of any bulk sales law in any jurisdiction, if applicable to the
transfer of the Assets. Any loss, liability, obligation, or cost suffered by
Seller or Buyer as the result of the failure of Seller or Buyer to comply with
the provisions of any bulk sales law applicable to the transfer of the Assets
as contemplated by this Agreement shall be borne by Seller.
6.10 Access to Books and Records. Seller shall provide Buyer access
and the right to copy for a period of three years from the Closing Date any
books and records relating to the Assets but not included in the Assets. Buyer
shall provide Seller access and the right to copy for a period of three years
from the Closing Date any books and records relating to the Assets that are
included in the Assets.
6.11 Noncompetition Agreement. At Closing, Seller and Buyer shall
enter into the Noncompetition Agreement in the form of Exhibit A.
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6.12 Employee Transition.
(a) Not later than ninety (90) days after the date of this
Agreement, Seller shall cause the employees of each System to be notified of
the pending sale of the Systems to Buyer as provided in this Agreement and
Seller's intent to discontinue its operations with respect to the Systems,
subject to the occurrence of Closing. Buyer shall have the right in its sole
discretion, but no obligation, to hire any of the employees of the Systems. No
later than thirty (30) days prior to the Closing Date, Buyer shall have the
right to make written offers of employment, conditioned upon the occurrence of
the Closing, to those employees of the Systems that Buyer desires, in its sole
discretion, to employ as of the Closing Date. Such offers shall provide in
reasonable detail the terms and conditions of employment, including salary or
wage rate and benefits. Buyer shall promptly provide to Seller a written list
of the employees of the Systems to whom Buyer makes such offers and those
employees who accept Buyer's offer and those employees who reject Buyer's
offer.
(b) Buyer shall not assume any liability or obligation to or
in connection with any Employee or other employee or former employee of either
System, and nothing in this Agreement shall be construed as a commitment or
obligation of Buyer to accept, or otherwise continue, the employment of any of
the Employees or other employees of the Systems. Without limiting the
generality of the foregoing, Seller shall remain solely responsible for any and
all obligations and liabilities, including, without limitation, those pursuant
to the Code, ERISA and any and all federal, state and local discrimination
laws, in respect of any of the Employees or other employees or former employees
of either System and their respective beneficiaries and dependants, relating to
or arising in connection with, during the course of or as a result of (i) the
employment or the actual or constructive termination of employment of any such
employee by such employee's current employer (including, without limitation, in
connection with the consummation of the transactions contemplated by this
Agreement); (ii) the participation in or accrual of benefits or compensation
under, or the failure to participate in or to accrue compensation or benefits
under, any Employee Benefit Plan (as such term is defined in ERISA) of such
employee's current employer or any of its affiliates; (iii) accrued but unpaid
salaries, wages, bonuses, incentive compensation, vacation or sick pay or other
compensation or payroll items (including, without limitation, deferred
compensation); and (iv) the provisions of health continuation coverage for
employees of either System required by Part 6 of Title 1 of ERISA and Section
4980B of the Code.
(c) This Section 6.12 shall operate exclusively for the
benefit of the parties to this Agreement and not for the benefit of any other
person or entity, including without limitation, any Employee or other employee
or former employee of either System.
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6.13 Estoppel Certificates. Seller shall use reasonable efforts to
provide to Buyer, at or prior to the Closing, a certificate ("Estoppel
Certificate"), reasonably satisfactory to Buyer, of (a) the lessor under each
Real Property lease and (b) the Franchising Authority for each Franchise, to
the effect that such lease or Franchise, as the case may be, (i) is valid, in
full force and effect and not in default, (ii) to the extent required by such
lease or Franchise, has been approved for assignment to Buyer, and (iii) may be
pledged as collateral to Buyer's lender(s) to secure indebtedness.
6.14 Use of Names and Logos. For a period of thirty (30) days after
Closing, Buyer shall be entitled to use the trademarks, trade names, service
marks, service names, logos and similar proprietary rights of Seller to the
extent incorporated in or on the Assets transferred to Buyer at Closing,
provided that Buyer shall exercise reasonable efforts to remove all such names,
marks, logos and similar proprietary rights of Seller from such Assets as soon
as reasonably practicable following Closing.
6.15 Power of Attorney; Accounts Receivable. At Closing, Seller shall
grant to Buyer the limited, irrevocable right, in Seller's name, place and
stead, as Seller's attorney-in-fact, to cash, deposit, endorse or negotiate
checks received on or after the Closing Date made out to Seller in payment for
cable television and related services provided by the Systems. In addition, on
or prior to the Closing Date, Seller shall provide written instructions to its
lock-box service provider to promptly forward to Buyer all such cash, deposits
and checks that it may receive. From and after the Closing, Seller shall
promptly remit to Buyer any payment received by Seller on or after the Closing
Date in respect of any Account Receivable.
6.16 Agreements Regarding Additional Seller Exceptions.
(a) Seller shall have no obligation under this Agreement to
correct, cure or eliminate any of the matters referred to as Seller's
Additional Exceptions in Section 3.24 hereof; provided, however, that Seller
shall not take any affirmative action(s) that could reasonably be expected to
cause the condition of any of the Seller's Additional Exceptions to worsen, and
it being understood that Seller shall perform all required tests to measure
compliance with the cumulative leakage index requirements under Section 76.611
of the FCC's rules and regulations and shall file with the FCC a properly
completed and accurate FCC Form 320 for each System showing complying index
scores.
(b) Buyer and Seller agree and acknowledge that the Additional
Seller Exceptions do not include, and Buyer does not waive any rights under
this Agreement in respect of, any matter that, individually and not in the
aggregate with any other matters, results in Losses to Buyer of $25,000 or more
(such losses being referred to as "Extraordinary
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Losses"); provided, however, that any such Extraordinary Losses shall be
subject to the provisions of Section 10 of this Agreement (including, without
limitation, the $50,000 deductible described in Section 10.3(c) and, if
applicable, the $500,000 ceiling described in Section 10.3(d)). In addition,
Seller and Buyer acknowledge and agree that nothing contained in this Section
6.16 or Sections 3.24 or 5.10 shall relieve Seller of its obligations or
enlarge Seller's obligations under this Agreement, nor be construed as a waiver
or enlargement of Buyer's rights under this Agreement, with respect to any
fines, fees, penalties or other amounts assessed against Seller or the C4
Sellers arising out of or related to the Seller's Additional Exceptions that
relate to the period on or prior to the Closing Date.
6.17 Financial Statements. Seller shall provide to Buyer unaudited
monthly balance sheets, income and expense statements and statements of cash
flow separately prepared for the Systems commencing with February 1996 and for
each calendar month thereafter that ends on or prior to the Closing Date. Such
financial statements for February, March, April, May and June 1996 shall be
provided to Buyer no later than forty-five (45) days from the date of this
Agreement, and such financial statements for each additional aforesaid month
ending on or prior to the Closing Date shall be provided within thirty (30)
days after the end of such month. In addition, Seller shall use reasonable
efforts to assist Buyer in obtaining such audited financial statements
separately prepared for the Systems that are contemplated and described in the
engagement letters referenced in Sections 7.1(k) and 7.2(h) hereof (it being
understood however that Seller shall not be responsible for the fees payable to
Williams, Rogers, Lewis & Co., P.C. in connection with Buyer's engagement of
such accountants, which fees Buyer shall and hereby does agree to pay).
SECTION 7 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER AT CLOSING.
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at
the Closing are subject at Buyer's option to the fulfillment prior to or at the
Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and complete in
all material respects (except that where any statement in a representation or
warranty expressly includes a materiality qualification, such statement shall
be true and correct in all respects giving effect to such qualification) at and
as of the Closing Date as though made at and as of that time, except changes
arising out of matters of a general economic nature or matters (including,
without limitation, legislation) affecting the cable television industry
generally.
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(b) Covenants and Conditions. Seller shall have performed and
complied with in all material respects all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) Consents. Each of the Required Consents shall have been
obtained and delivered to Buyer without the imposition of any condition that
would have an adverse effect on the terms or conditions of any of the Assumed
Contracts, Franchises or Governmental Permits to which any Required Consent
relates, and each such Required Consent shall be in form and substance
reasonably satisfactory to Buyer.
(d) FCC Consent. The FCC shall have consented, to the extent
such consent is legally required, to the transfer to Buyer of all Governmental
Permits issued by the FCC.
(e) Deliveries. Seller shall have made or stand willing to
make all the deliveries to Buyer set forth in Section 8.2.
(f) UCC, Tax and Judgment Searches. Buyer shall have received
satisfactory UCC, tax and judgment searches with respect to each of the names
listed in Schedule 3.1 hereto, each search to be dated as of a recent date
prior to the Closing Date for filings in those jurisdictions where the Assets
are located and where a filing would be required to perfect an interest or
priority against the Assets, provided that such searches shall not be deemed
not to be satisfactory by reason of any Permitted Liens.
(g) Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which might reasonably
be expected to restrain, prohibit or invalidate the transactions contemplated
by this Agreement, other than an action or proceeding instituted or threatened
by either party hereto.
(h) Absence of Material Adverse Change. Since the date of
this Agreement, there shall have been no occurrence which has had or will have
a Material Adverse Effect.
(i) Judgment. There shall not be in effect any Judgment that
would prevent or make unlawful the Closing.
(j) Excluded Retransmission Consent Agreements. Either (i)
Buyer shall have entered into new retransmission consent agreements with each
of the stations listed in Item 3 of Schedule 2.2, or, in the alternative,
amended its existing agreements with such
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stations, in either case to authorize Buyer to continue to carry such stations
on the Systems on and after the Closing Date on terms and conditions
substantially similar to the terms and conditions of Buyer's existing
agreements with such stations; or (ii) Seller shall have obtained all consents
and taken all other action necessary to permit Buyer to lawfully continue to
carry such stations on the Systems on and after the Closing Date under Seller's
existing agreements with such stations, in which event the condition in this
Section 7.1(j) shall have been satisfied.
(k) Financial Statement Requirements. Buyer shall have
received the financial statements with respect to the Systems that are
described in Buyer's two engagement letters, each dated June 24, 1996, with
Williams, Rogers, Lewis & Co., P.C., copies of which have been provided to
Seller.
7.2 Conditions to Obligations of Seller. All obligations of Seller
at the Closing are subject at Seller's option to the fulfillment prior to or at
the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) Covenants and Conditions. Buyer shall have performed and
complied with in all material respects all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) Consents. Each of the Required Consents shall have been
obtained and delivered to Buyer without the imposition of any condition that
would have an adverse effect on the terms or conditions of any of the Assumed
Contracts, Franchises or Governmental Permits to which any Required Consent
relates.
(d) FCC Consent. The FCC shall have consented, to the extent
such consent is legally required, to the transfer to Buyer of all Governmental
Permits issued by the FCC.
(e) Deliveries. Buyer shall have made or stand willing to
make all the deliveries set forth in Section 8.3.
(f) Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which might reasonably
be expected to restrain,
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prohibit or invalidate the transactions contemplated by this Agreement, other
than an action or proceeding instituted or threatened by either party hereto.
(g) Judgment. There shall not be in effect any Judgment that
would prevent or make unlawful the Closing.
(h) Financial Statement Requirements. Buyer shall have
received the financial statements with respect to the Systems that are
described in Buyer's two engagement letters, each dated June 24, 1996, with
Williams, Rogers, Lewis & Co., P.C., copies of which have been provided to
Seller.
SECTION 8 CLOSING AND CLOSING DELIVERIES.
8.1 Closing.
(a) Closing Date. The Closing shall take place at 10:00 a.m.
on such date which is five (5) business days after such date on which the
closing conditions set forth in Sections 7.1(c), 7.1(d), 8.1(c) and 8.1(d)
shall have been satisfied or waived (to the extent permitted by law), or on
such other date as the parties may mutually agree in writing, it being
understood that nothing in this Section 8.1(a) shall be construed as a waiver
by either party of any condition to either party's obligations at the Closing
set forth in Sections 7.1 and 7.2, respectively.
(b) Closing Place. The Closing shall be held at the offices
of Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800,
Washington, D.C. 20036, or any other place or by any other means (including by
mail) that is agreed upon by Buyer and Seller.
8.2 Deliveries by Seller. Prior to or on the Closing Date, Seller
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Transfer Documents. Duly executed bills of sale, motor
vehicle titles, assignments, and other transfer documents which shall be
sufficient to vest good title to the Assets (including the Accounts Receivable)
in the name of Buyer, free and clear of all Liens except for Permitted Liens.
(b) Consents and Estoppel Certificates. A manually executed
copy of any instrument evidencing receipt of any Required Consent or any
Estoppel Certificate received by Seller.
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<PAGE> 41
(c) Officer's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Seller by the President of FVI, certifying
that (1) except (A) changes arising out of matters of a general economic nature
or matters (including, without limitation, legislation) affecting the cable
television industry generally or (B) as disclosed in said certificate, the
representations and warranties of Seller contained in this Agreement are true
and complete in all material respects at and as of the Closing Date as though
made at and as of that date; and (2) that Seller has in all material respects
performed and complied with all of its obligations, covenants, and agreements
set forth in this Agreement to be performed and complied with on or prior to
the Closing Date.
(d) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Seller by the Secretary of FVI certifying
that the resolutions, as attached to such certificate, authorizing and
approving the execution of this Agreement and the consummation of the
transaction contemplated hereby were duly adopted by the Board of Directors of
FVI and that such resolutions have not been amended, rescinded or modified
since their adoption and remain in full force and effect.
(e) Franchises, Governmental Permits, Assumed Contracts,
Business Records, Etc. Copies or, if available, originals of all Franchises,
Governmental Permits, Assumed Contracts, blueprints, schematics, working
drawings, plans, projections, engineering records, and all files and records
included in the Assets.
(f) Accounts Receivable. A complete and accurate list of the
Accounts Receivable as of a date no more than five business days prior to the
Closing Date, including, with respect to each of the Account Receivable, the
account number, date of issuance, name and address of account debtor, aggregate
amount, and balance due, all as certified to be true, complete and accurate as
of such date by the President of FVI on behalf of Seller.
(g) Opinion of Counsel. Opinion of Dow, Lohnes & Albertson,
Seller's counsel, addressed to Buyer and its lender(s), dated as of the Closing
Date, substantially in the form of Exhibit B attached hereto.
(h) Releases. Duly executed UCC-3 termination statements,
mortgage releases and such other release and termination instruments as Buyer
shall reasonably request to release any Liens (other than Permitted Liens) from
the Assets transferred to Buyer at Closing.
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<PAGE> 42
(i) Noncompetition Agreement. The Noncompetition Agreement
duly executed by Seller.
(j) Indemnification Escrow Agreement. The Indemnification
Escrow Agreement duly executed by Seller.
8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer
shall deliver to Seller the following, in form and substance reasonably
satisfactory to Seller and its counsel:
(a) Purchase Price. The Estimated Purchase Price as provided
in Section 2.4.
(b) Assumption Agreements. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform Seller's
obligations as provided in this Agreement.
(c) Officer's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Buyer by its President, certifying (1)
that, except as disclosed in said certificate, the representations and
warranties of Buyer contained in this Agreement are true and complete in all
material respects at and as of the Closing Date as though made at and as of
that date; and (2) that Buyer has in all material respects performed and
complied with all of its obligations, covenants, and agreements set forth in
this Agreement to be performed and complied with on or prior to the Closing
Date.
(d) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Buyer by its Secretary, certifying that the
resolutions, as attached to such certificate, authorizing and approving the
execution of this Agreement and the consummation of the transaction
contemplated hereby were duly adopted by the Board of Directors of Buyer and
that such resolutions have not been amended, rescinded or modified since their
adoption and remain in full force and effect.
(e) Opinion of Counsel. An opinion of Buyer's counsel dated
as of the Closing Date, substantially in the form of Exhibit C attached hereto.
(f) Noncompetition Agreement. The Noncompetition Agreement
duly executed by Buyer.
(g) Indemnification Escrow Agreement. The Indemnification
Escrow Agreement duly executed by Buyer.
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SECTION 9 TERMINATION.
9.1 Upset Date. This Agreement may be terminated by Buyer or Seller
by written notice to the other party and the purchase and sale of the Systems
abandoned, if the Closing shall not have occurred on or before the date which
is 120 days from the date of this Agreement (the "Upset Date"); provided,
however, that the right to terminate this Agreement under this Section 9.1
shall not be available to any party whose breach of its representations,
warranties, covenants or agreements contained in this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur by the Upset Date
or the inability of the conditions precedent to the other party's obligation to
close specified in Sections 7.1 and 7.2, as applicable, to be satisfied.
9.2 Nonperformance by Buyer. This Agreement may be terminated by
Seller by written notice to Buyer if Buyer shall breach or fail to comply with
any of its representations, warranties, covenants or agreements contained in
this Agreement, or any such representation or warranty shall have become
untrue, in any such case such that the conditions precedent to Seller's
obligation to close specified in Sections 7.2(a) and (b) will not be satisfied,
and such breach has not been promptly cured by the earlier to occur of (a) the
date that is fifteen (15) days following receipt by Buyer of written notice of
such breach or (b) the Upset Date; provided, however, that Seller's right to
terminate under this Section 9.2 shall not be available if Seller shall then be
in material breach or material noncompliance with any of its representations,
warranties, covenants or agreements contained in this Agreement.
9.3 Nonperformance by Seller. This Agreement may be terminated by
Buyer by written notice to Seller if Seller shall breach or fail to comply with
any of its representations, warranties, covenants or agreements contained in
this Agreement, or any such representation or warranty shall have become
untrue, in any such case such that the conditions precedent to Buyer's
obligation to close specified in Sections 7.1(a) and (b) will not be satisfied,
and such breach has not been promptly cured by the earlier to occur of (a) the
date that is fifteen (15) days following receipt by Seller of written notice of
such breach or (b) the Upset Date; provided, however, that Buyer's right to
terminate under this Section 9.3 shall not be available if Buyer shall then be
in material breach or material noncompliance with any of its representations,
warranties, covenants or agreements contained in this Agreement.
9.4 Buyer Deposit and Seller Deposit. Simultaneously with the
execution and delivery of this Agreement, Buyer and Seller have each deposited
with the Escrow Agent cash in the amount of One Hundred Thousand Dollars
($100,000) in accordance with a Deposit Escrow Agreement ("Deposit Escrow
Agreement") dated of even date herewith among Buyer, Seller and the Escrow
Agent (such deposits, the "Buyer Deposit" and "Seller Deposit,"
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<PAGE> 44
respectively, and all amounts held from time to time by the Escrow Agent
pursuant to the Deposit Escrow Agreement in respect of such deposits, including
any interest or other earnings in respect of such deposits, the "Buyer Deposit
Funds" and "Seller Deposit Funds," respectively). The Buyer Deposit Funds and
Seller Deposit Funds shall be held and disbursed by the Escrow Agent in
accordance with the terms of the Deposit Escrow Agreement and the following
provisions:
(a) At the Closing, all Buyer Deposit Funds held by the Escrow
Agent shall be disbursed to or at the direction of Buyer, and all Seller
Deposit Funds held by the Escrow Agent shall be disbursed to or at the
direction of Seller.
(b) If this Agreement is terminated pursuant to Section 9.1 of
this Agreement, then all Buyer Deposit Funds shall be disbursed by the Escrow
Agent to or at the direction of Buyer and all Seller Deposit Funds shall be
disbursed by the Escrow Agent to or at the direction of Seller.
(c) If this Agreement is terminated by Seller pursuant to
Section 9.2 of this Agreement, then all Seller Deposit Funds and the Buyer
Deposit shall be disbursed by the Escrow Agent to or at the direction of
Seller, and any remaining Buyer Deposit Funds, if any, shall be disbursed to or
at the direction of Buyer.
(d) If this Agreement is terminated by Buyer pursuant to
Section 9.3 of this Agreement, then all Buyer Deposit Funds and the Seller
Deposit shall be disbursed by the Escrow Agent to or at the direction of Buyer,
and any remaining Seller Deposit Funds, if any, shall be disbursed to or at the
direction of Seller.
9.5 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1 of
this Agreement, the parties hereto shall not have any further liability to each
other with respect to the purchase and sale of the Assets.
(b) If this Agreement is terminated by Seller pursuant to
Section 9.2 of this Agreement, then the payment to Seller of the Buyer Deposit
pursuant to Section 9.4(c) shall be liquidated damages and shall constitute
full payment and the exclusive remedy for any damages suffered by Seller by
reason of Buyer's breach of this Agreement.
(c) If this Agreement is terminated by Buyer pursuant to
Section 9.3 of this Agreement, then the payment to Buyer of the Seller Deposit
pursuant to Section 9.4(d) shall be
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liquidated damages and shall constitute full payment and the exclusive remedy
for any damages suffered by Buyer by reason of Seller's breach of this
Agreement. Buyer hereby waives any right prior to the Closing to seek specific
performance of any of the terms of this Agreement other than Seller's covenants
in Sections 5 and 6 of the Agreement (it being understood, however, that
Buyer's right to seek the specific performance of Seller's covenants under
Sections 6.5 and 6.8 shall not include specific performance of Seller's
agreement and covenant under Section 2 to sell the Assets).
Seller and Buyer agree in advance that actual damages would be difficult to
ascertain and that the amount of $100,000 is a fair and equitable amount to
reimburse Buyer or Seller for damages sustained due to the other party's breach
of this Agreement; provided, however, that nothing contained in this sentence
shall in any way be construed to limit either party's obligations contained in
Section 10 of this Agreement or limit the parties' rights of specific
performance provided for herein.
SECTION 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 Survival of Representations and Warranties. All representations
and warranties and covenants and agreements contained in this Agreement shall
be deemed continuing representations and warranties and covenants and
agreements and shall survive the Closing. All such representations and
warranties and covenants and agreements shall also survive and be unaffected by
(and shall not be deemed waived by) any investigation, audit, appraisal or
inspection at any time made by or on behalf of any party hereto.
10.2 Indemnification by Seller. From and after the Closing Date,
Seller hereby agrees to indemnify and hold Buyer harmless against and with
respect to, and shall reimburse Buyer for any and all Losses asserted against,
resulting to, imposed upon or incurred by Buyer, directly or indirectly, by
reason of or resulting from:
(a) Any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Seller contained in this Agreement or in any
certificate, document, or instrument delivered to Buyer under this Agreement.
(b) Any and all obligations of Seller not assumed by Buyer
pursuant to Section 2.5 of this Agreement, including any liabilities arising at
any time under any Contract not included in the Assumed Contracts.
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(c) The failure of the parties to comply with the provisions
of any bulk sales law applicable to the transfer of the Assets.
(d) Any and all liabilities or obligations of Seller resulting
from its operation or ownership of the Systems or the Assets on or prior to the
Closing Date, including any liabilities arising under the Franchises,
Governmental Permits or the Assumed Contracts which relate to events occurring
during Seller's operation or ownership of the Systems or the Assets on or prior
to the Closing Date.
(e) Any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(f) Any untrue representation of the C4 Sellers contained in
the C4 Agreement, any breach of warranty of the C4 Sellers contained in the C4
Agreement or the nonfulfillment of any covenant to be performed by the C4
Sellers prior to or after the closing under the C4 Agreement, it being
understood that (i) Buyer is entitled to rely on such representations and
warranties of C4 for purposes of entering into this Agreement; provided,
however, (i) that Seller shall in no way be deemed to be restating such
representations or warranties for any purpose and (ii) that the representations
and warranties of the C4 Sellers that are comparable to the representations and
warranties of Seller contained in this Agreement and that are identified in the
first paragraph of Section 3.24 of this Agreement shall be deemed qualified in
their entirety by, and made subject to the Additional Seller's Exceptions
contained in Section 3.24 hereof and that such covenants of the C4 Sellers
shall be deemed qualified in their entirety by, and made subject to the further
exceptions contained in Section 6.16(a) hereof.
(g) Any and all liabilities or obligations of the C4 Sellers
resulting from their operation or ownership of the Systems or the Assets on or
prior to the Closing Date, including any liabilities arising under the
Franchises, Governmental Permits or the Assumed Contracts which relate to
events occurring during their operation or ownership of the Systems or the
Assets on or prior to the Closing Date.
10.3 Limitations on Seller's Indemnity. Notwithstanding anything in
this Agreement to the contrary, Seller's indemnity obligations hereunder shall
be subject to and limited by each of the qualifications set forth below:
(a) Seller shall have no liability to Buyer under subsection
(a) of Section 10.2 of this Agreement with respect to breaches of
representations and warranties (other than any breach of the representations
and warranties contained in Section 3.4 hereof, claims for
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which shall survive indefinitely, and any breach of the representations and
warranties contained in Section 3.15, claims for which may be brought at any
time until the expiration of the applicable statute of limitations with respect
thereto) or nonperformance of any covenants or agreements required to be
performed prior to Closing after March 31, 1997 except with respect to bona
fide and valid claims for which notice has been given prior to March 31, 1997.
(b) Seller shall have no liability to Buyer under subsections
(f) or (g) of Section 10.2 of this Agreement after March 31, 1997, except with
respect to bona fide and valid claims for which notice has been given prior to
March 31, 1997.
(c) Seller shall have no liability to Buyer under Sections
10.2(a) or (f) (or Section 10.2(e) insofar as any such Losses relate back to
Losses under Sections 10.2(a) or (f)) of this Agreement unless and then only to
the extent that the aggregate amount of such losses exceeds $50,000.
(d) Seller's total liability to Buyer in respect of Seller's
indemnification obligations arising under Section 10.2(a) of this Agreement
shall not exceed $500,000.
(e) The indemnity obligations of Seller hereunder shall not
apply to any Loss suffered by Buyer by reason of the fact that one or more of
Seller's representations were not true, correct or complete in all material
respects at and as of the Closing Date, if such representation or warranty was
true, correct and complete when originally made and ceased to be true, correct
and complete in all material respects due to events or circumstances beyond the
reasonable control of Seller.
(f) Seller shall have no liability to Buyer hereunder for any
Losses incurred by Buyer or on behalf of Buyer in asserting any alleged claim
against Seller where it is ultimately determined (including by agreement of
Buyer and Seller) that Buyer is not entitled to indemnification by Seller.
10.4 Indemnification by Buyer. After the Closing, Buyer hereby agrees
to indemnify and hold Seller harmless against and with respect to, and shall
reimburse Seller for any and all Losses asserted against, resulting to, imposed
upon or incurred by Seller, directly or indirectly, by reason of or resulting
from:
(a) Any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Buyer contained in this Agreement or in any
certificate, document, or instrument delivered to Seller under this Agreement.
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(b) Any and all obligations of Seller assumed by Buyer
pursuant to Section 2.5 of this Agreement.
(c) The operation or ownership of the Systems or the Assets by
Buyer after the Closing Date to the extent that such Losses do not result from
any event or circumstance for which Seller is required hereunder to indemnify
Buyer.
(d) Any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
Buyer shall have no liability to Seller hereunder for any losses
incurred by Seller or on behalf of Seller in asserting any alleged claim
against Buyer where it is ultimately determined (including by agreement of
Seller and Buyer) that Seller is not entitled to indemnification by Buyer.
10.5 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall
within twenty-five (25) days of discovery of the facts or circumstances giving
rise to such claim give notice to the party from which indemnification is
claimed (the "Indemnifying Party") of any claim, whether between the parties or
brought by a third party, specifying in reasonable detail the factual basis for
the claim; provided, however, that the failure to give such notice shall not
affect the rights of the Claimant hereunder except to the extent that the
Indemnifying Party shall have suffered actual damages or been otherwise
prejudiced by reason of such failure. If the claim relates to an action, suit,
or proceeding filed by a third party against Claimant, such notice shall be
given by Claimant within ten days after written notice of such action, suit, or
proceeding was given to Claimant.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying
Party shall have fifteen days to make such investigation of the claim as the
Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
or its authorized representatives the information relied upon by the Claimant
to substantiate the claim. If the Claimant and the Indemnifying Party agree at
or prior to the expiration of the fifteen-day period (or any mutually agreed
upon extension thereof) to the validity and amount of such claim, the
Indemnifying Party shall immediately pay to the Claimant the full amount of the
claim. If the Claimant and the Indemnifying Party do not
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agree within the fifteen-day period (or any mutually agreed upon extension
thereof), the Claimant may seek appropriate remedy at law.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense to participate in or assume
control of the defense of such claim if notice thereof is provided to Claimant
within ten business days after notice from the Claimant of any such claim for
Losses, and the Claimant shall cooperate fully with the Indemnifying Party,
subject to reimbursement for actual out-of-pocket expenses incurred by the
Claimant as the result of a request by the Indemnifying Party. If the
Indemnifying Party elects to assume control of the defense of any third-party
claim within such ten business day period, the Claimant shall have the right to
participate in the defense of such claim at its own expense, but the
Indemnifying Party shall control such defense. If the Indemnifying Party shall
elect not to undertake such defense, or shall fail to provide notice to
Claimant of its election to undertake such defense within the aforesaid ten
business day period, or, within a reasonable time after providing such notice
to Claimant, shall fail to defend such claim, the Claimant shall have the right
to undertake the defense, compromise or settlement of such claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Indemnifying Party, and the Indemnifying Party shall pay to the
Claimant, in addition to the other sums required to be paid hereunder, any
reasonable costs and expenses incurred by the Claimant in connection with such
defense, compromise or settlement as and when such costs and expenses are so
incurred. Anything in this Section 10.5 to the contrary notwithstanding, with
respect to any third party claim, (i) the Indemnifying Party shall not, without
the Claimant's written consent (which shall not be unreasonably withheld or
delayed), settle or compromise any such claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the third party claimant or the plaintiff to the Claimant of a release from all
liability in respect of such Losses in form and substance reasonably
satisfactory to the Claimant, (ii) in the event that the Indemnifying Party
undertakes defense of any such claim, the Indemnifying Party shall have an
obligation to keep the Claimant informed of the status of the defense of such
claim and furnish the Claimant with all documents, instruments and information
that the Claimant shall reasonably request in connection therewith, and (iii)
neither party shall dispose of, compromise or settle any claim or action in a
manner that is not reasonable under the circumstances and in good faith.
(d) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
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(e) The indemnifications rights provided in Section 10 shall
extend to the shareholders, members, directors, officers, employees, and
representatives of any Claimant although for the purpose of the procedures set
forth in this Section 10.5, any indemnification claims by such parties shall be
made by and through the Claimant.
10.6 Indemnification Escrow. On the Closing Date, Buyer, Seller and
the Escrow Agent shall execute an Indemnification Escrow Agreement
substantially in the form attached hereto as Exhibit D (the "Indemnification
Escrow Agreement"), in accordance with which, on the Closing Date, Seller shall
deposit Three Hundred Thousand Dollars ($300,000) of the Estimated Purchase
Price with the Escrow Agent (all amounts held from time to time by the Escrow
Agent pursuant to the Indemnification Escrow Agreement in respect of such
$300,000, including any interest or other earnings in respect of such deposits,
the "Indemnification Funds") in order to provide a fund for the payment of any
claims for which Buyer is entitled to indemnification as provided in this
Section 10. All funds and documents deposited with the Escrow Agent pursuant
to this Section 10.6 shall be held and disbursed in accordance with the terms
of the Indemnification Escrow Agreement and the following provisions: (a) half
of the Indemnification Funds not then subject to outstanding indemnification
claims of Buyer under this Agreement shall be released by the Escrow Agent to
Seller on the six-month anniversary of the Closing Date; and (b) any remaining
Indemnification Funds not then subject to outstanding indemnification claims of
Buyer under this Agreement shall be released by the Escrow Agent to Seller on
the twelve month anniversary of the Closing Date.
10.7 Exclusive Remedy. Notwithstanding anything in this Agreement to
the contrary, after Closing, except as provided in Section 2.3 with respect to
adjustments to the Purchase Price and except with respect to covenants to be
performed by the other party after the Closing (with respect to which each
party shall have the right to have such covenants specifically performed by the
other party), the remedies contained in this Section 10 shall be the sole and
exclusive remedies of the parties, and each party hereby waives all other
remedies which such party might otherwise have.
SECTION 11 MISCELLANEOUS
11.1 Fees and Expenses. Seller and Buyer shall each pay one-half of
any FCC filing fees, state or local sales or transfer taxes, and other
governmental charges arising in connection with the conveyance of the Assets by
Seller to Buyer pursuant to this Agreement. Seller and Buyer shall each pay
one-half of the costs of obtaining the UCC, tax and judgment searches
contemplated by Section 7.1(f). Except as otherwise provided in this
Agreement, each party shall pay its own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement,
including all fees and expenses of
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<PAGE> 51
counsel, accountants, agents, and representatives, and each party shall be
responsible for all fees or commissions payable to any finder, broker, advisor,
or similar person retained by or on behalf of such party.
11.2 Notices. All notices, demands, and requests required or
permitted to be given under the provisions of this Agreement shall be (a) in
writing, (b) delivered by personal delivery, sent by commercial delivery
service or registered or certified mail, return receipt requested, or
transmitted by telecopy, (c) deemed to have been given on the date of receipt,
and (d) addressed as follows:
If to Seller: FrontierVision Operating Partners, L.P.
1777 South Harriston Street
Suite P-200
Denver, Colorado 80210-3925
Attention: Mr. James C. Vaughn, President
Facsimile: (303) 757-6105
With a copy to: Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
Attention: David D. Wild, Esq.
Facsimile: (202) 776-2222
If to Buyer: Shenandoah Cable Television Company
124 South Main Street
Edinburg, Virginia 22824-0459
Attention: Mr. Christopher E. French, President
Facsimile: (540) 984-8192
With a copy to: Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20002-1109
Attention: Anthony S. Harrington, Esq.
Facsimile: 202-637-5910
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
11.2.
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<PAGE> 52
11.3 Assignments; Benefit and Binding Effect. Neither Seller nor
Buyer may assign this Agreement without the prior written consent of the other
party hereto. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
11.4 Further Assurances. The parties shall take any actions and
execute any other documents that may be necessary or desirable to the
implementation and consummation of this Agreement, including, in the case of
Seller, any additional bills of sale, deeds, or other transfer documents that,
in the reasonable opinion of Buyer, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets to Buyer pursuant to
this Agreement.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA (WITHOUT
REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF).
11.6 Headings. The headings in this Agreement are included for ease
of reference only and shall not control or affect the meaning or construction
of the provisions of this Agreement.
11.7 Gender and Number. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires.
11.8 Entire Agreement. This Agreement, the schedules hereto, and all
instruments, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter hereof. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented, or changed except by an agreement in writing that makes
specific reference to this Agreement and which is signed by the party against
which enforcement of any such amendment, supplement, or modification is sought.
11.9 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of either of the parties to comply with any
obligation, representation, warranty, covenant, agreement, or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
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<PAGE> 53
warranty, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.9.
11.10 Counterparts. This Agreement may be signed in two counterparts
with the same effect as if the signature on each counterpart were upon the same
instrument.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Partners, L.P., its
general partner
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general partner
By: /s/ James C. Vaughn
-----------------------------
James C. Vaughn, President
SHENANDOAH CABLE TELEVISION COMPANY
By: /s/ Christopher E. French
------------------------------------
Christopher E. French, President
- 53 -
<PAGE> 1
EXHIBIT 10.13
ASSET PURCHASE AGREEMENT
BETWEEN
PHOENIX GRASSROOTS CABLE SYSTEMS, L.L.C.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
DATED
July 19, 1996
i
<PAGE> 2
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A List of Communities
Exhibit B Form of Opinion of Seller's Counsel
Schedule 2.2 Excluded Assets
Schedule 2.6 Utility Liabilities
Schedule 3.4 Franchises
Schedule 3.5 Real Property
Schedule 3.6 Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Consents
Schedule 3.9 Existing Liens to Be Discharged Prior to Closing
Schedule 3.10 Information on Systems
Schedule 3.11 Financial Statements
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Employees
Schedule 3.14 Taxes
Schedule 3.15 Claims and Legal Actions
Schedule 3.16 Environmental Matters
Schedule 3.18 Exceptions to Conduct of Business in Ordinary Course
Schedule 3.19 FCC Matters
Schedule 3.20 Bonds and Letters of Credit
Schedule 5.1 Conduct of the Systems
Schedule 5.7 Consent Form
</TABLE>
ii
<PAGE> 3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated July 19, 1996, by and between
FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware limited partnership
("BUYER"), and PHOENIX GRASSROOTS CABLE SYSTEMS, L.L.C. a Delaware limited
liability company ("SELLER").
R E C I T A L S:
Seller owns and operates cable television systems serving the
communities listed on Exhibit A (collectively, the "SYSTEMS").
Seller desires to sell, and Buyer wishes to buy, all of Seller's
assets used in the operation of the Systems and the cable television
business related thereto for the price and on the terms and conditions
hereinafter set forth.
A G R E E M E N T S:
In consideration of the above recitals and the covenants and agreements
contained herein, Seller and Buyer agree as follows:
1. DEFINED TERMS
The following terms shall have the following meanings in this Agreement:
1.0.1. "ACCOUNTS RECEIVABLE" means the right to payment for services
billed by Seller (including, without limitation, those billed to subscribers of
the Systems and those for services and advertising time provided by the Seller)
and unpaid as of the Closing Date.
1.0.2. "AGREEMENT" means this Asset Purchase Agreement.
1.0.3. "ASSETS" means all the tangible and intangible assets, real,
personal and mixed, comprising or that are otherwise used in connection with
the conduct of the business or operations of the Systems, including, without
limitation, those specified in Section 2.1 but excluding the Excluded Assets.
1.0.4. "CLOSING" means the consummation of the transactions
contemplated by this Agreement.
<PAGE> 4
1.0.5. "CLOSING DATE" means the date of the Closing specified in
Section 7.
1.0.6. "CODE" shall mean 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.
1.0.7. "COMPENSATION ARRANGEMENT" shall mean any plan or compensation
arrangement other than an Employee Plan or a Multiemployer Plan, whether
written or unwritten, which provides to employees or former employees of Seller
or any entity related to Seller (under the terms of Sections 414(b), (c), (m)
or (o) of the Code) with respect to the Systems any compensation or other
benefits, whether deferred or not, in excess of base salary or wages and
excluding overtime pay, including, but not limited to, any bonus or incentive
plan, stock rights plan, deferred compensation arrangement, stock purchase
plan, severance pay plan and any other perquisites and employee fringe benefit
plan.
1.0.8. "CONSENTS" means all of the consents, permits or approvals of
government authorities and other third parties necessary to transfer the Assets
to Buyer or otherwise to consummate lawfully the transactions contemplated
hereby in compliance with all contractual obligations to third parties,
including estoppel language reasonably satisfactory to Buyer confirming the
absence of defaults under the applicable Contract or Franchise (as those terms
are defined below).
1.0.9. "CONTRACTS" means all pole attachment and conduit agreements,
personal property leases, subscription agreements with customers for cable
services provided by the Systems, maintenance agreements, retransmission
consent agreements and other agreements, written or oral (including any
amendments and other modifications thereto) to which Seller is a party and that
relate to the Assets or the business or operations of the Systems (other than
the Franchises, programming agreements and any other contracts that are
Excluded Assets), and (i) are in effect on the date hereof and (ii) are entered
into by Seller in the ordinary course of business of the Systems and as
permitted by this Agreement between the date hereof and the Closing Date.
1.0.10. "EMPLOYEE PLAN" shall mean 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 (other than a Multiemployer
Plan) to which Seller or any entity related to Seller (under the terms of
Sections 414(b), (c), (m) or (o) of the Code) contributes or which Seller or
any entity related to Seller (under the terms of Sections 414(b), (c), (m) or
(o) of the Code) sponsors, maintains or otherwise is bound.
1.0.11. "EQUIVALENT BILLING UNIT" shall mean an active customer for
basic cable service either in a single household or in a multi-unit dwelling
(including a hotel unit); provided, however, that the number of customers in a
multi-unit dwelling that obtains service on a "bulk-rate" or similar basis
shall be determined by dividing the gross bulk-rate or similar revenue for
non-pay services attributable to such multi-unit dwelling by the basic
subscription rate for individual households subscribing to the same level of
service as is provided to such
<PAGE> 5
multi-unit dwelling. For purposes of this definition, an "active customer"
shall mean any person at any given time that is paying for and receiving any
level of cable television service from the Systems who has an account that is
not more than 61 days past due (except for amounts which are past due pending
the resolution of a bona fide dispute or past due amounts of $10 or less,
provided such account is otherwise current). For purposes of this definition,
the number of days past due of a customer account shall be counted from the
date of the bill giving rise to such account or, with respect to coupon book
billings, on the tenth day following the date of the coupon.
1.0.12. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder, as in effect from time to
time.
1.0.13. "FAA" means the Federal Aviation Administration.
1.0.14. "FCC" means the Federal Communications Commission.
1.0.15. "FRANCHISES" means all municipal, county, state and federal
franchises, franchise applications (if any), domestic satellite, business radio
and other licenses, earth station registrations, and all authorizations and
permits relating to the Systems granted by any governmental instrumentality,
including all amendments thereto and modifications thereof.
1.0.16. "FRANCHISING AUTHORITIES" means all governmental authorities
which have issued municipal or county cable franchises relating to the
operation of the Systems or before which are pending any franchise applications
filed by the Seller relating to the operation of the Systems.
1.0.17. "MATERIAL ADVERSE EFFECT" means a material adverse effect on
the operations, assets, financial condition or value of one or more Systems or
on the ability of the Seller to perform its obligations under this Agreement.
1.0.18. "MULTIEMPLOYER PLAN" means a plan, as defined in ERISA Section 3(37)
or 4001(a)(3), to which Seller or any trade or business which would be
considered a single employer with Seller under Section 4001(b)(1) of ERISA
contributes or is required to contribute.
1.0.19. "PERMITTED ENCUMBRANCES" shall mean any of the following liens
or encumbrances: (i) landlord's liens and liens for current taxes, assessments
and governmental charges not yet due or being contested in good faith by
appropriate proceedings; (ii) statutory liens or other encumbrances (excluding
liens securing indebtedness) that are minor or technical defects in title that
do not materially affect the value, marketability or utility of the
<PAGE> 6
Assets subject thereto; (iii) such liens, liabilities or encumbrances as
are Assumed Liabilities; and (iv) restrictions set forth in, or rights granted
to Franchising Authorities as set forth in, the Franchises or applicable laws
relating thereto.
1.0.20. "PERSONAL PROPERTY" means all of the machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, supplies and other tangible personal property that are
owned or leased by Seller and used, useful or held for use as of the date
hereof in the conduct of the business or operations of the Systems, plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and as permitted by this Agreement between the date hereof and the
Closing Date.
1.0.21. "PURCHASE PRICE" means the purchase price specified in Section
2.4, as adjusted in accordance with this Agreement.
1.0.22. "REAL PROPERTY" means all of the buildings and other
improvements thereon, leasehold interests in real estate, easements, licenses,
rights to access, rights-of-way and other real property interests that are (i)
leased by Seller and used as of the date hereof in the business or operations
of the Systems; or (ii) owned by Seller and used as of the date hereof in the
business or operations of the Systems, plus such additions thereto and
deletions therefrom arising in the ordinary course of business and permitted by
this Agreement between the date hereof and the Closing Date.
1.0.23. List of Additional Definitions. The following is a list of
some additional terms used in this Agreement and a reference to the Section
hereof in which such term is defined:
<TABLE>
<S> <C> <C>
TERM SECTION
---- -------
1. AAA 10.1
2. AAA Rules 10.1
3. Accounting Firm 2.5.6
4. Additional Financial Statements 5.6
5. Assumed Liabilities 2.6
6. Assumption Agreements 7.3.2
7. Average Two Month Revenue 2.5.3
8. Balance Sheet 4.6.1
9. Buyer Preamble
10. Communications Act 3.4
11. Claimant 9.4.1
12. Closing Certificate 2.5.4
13. Copyright Act 3.19.4
14. CPS 3.1.9.6
15. Current Two Month Period 2.5.3
16. Deposit 2.4.1
17. Environmental Law 3.16
18. Environmental Notice 3.16
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
19. Environmental Reports 6.1.7
20. Equity Offering 4.7
21. Escrow Agent 2.4.1
22. Escrow Agreement 2.4.1
23. Estimate 2.5.4
24. Excluded Assets 2.2
25. Expiring Franchises 3.4
26. Financial Statements 3.11
27. Financing 4.7
28. Hazardous Substance 3.16
29. Indemnifying Party 9.4.1
30. Interim Period 2.5.7
31. Liens 2.1
32. Losses 9.2
33. Post-Closing Certificate 2.5.6
34. Post-Closing Escrow 2.4.2
35. Prior Two Month Period 2.5.3
36. Purchase Price 2.4
37. Registration Statement 5.6
38. Required Consents 6.1.4
39. Response Period 2.5.6
40. SEC 5.6
41. Seller Preamble
42. Signals 3.19.1
43. Systems Recitals
44. Tax Returns 3.14
45. Taxes 3.14
46. Threshold 9.5
47. Utility Liabilities 2.6
48.
</TABLE>
2. SALE AND PURCHASE OF ASSETS
2.1. Agreement to Sell and Purchase. Subject to the terms and conditions
set forth in this Agreement, Seller hereby agrees to sell, transfer and
deliver to Buyer on the Closing Date, and Buyer agrees to purchase from the
Seller on the Closing Date, all of the Assets, including, without limitation,
those described below, free and clear of any claims, liabilities, security
interests, mortgages, liens, pledges, conditions, title defects, conditional
<PAGE> 8
sales agreements, charges or other liens or encumbrances of any nature
whatsoever (collectively, "LIENS"), except for Permitted Encumbrances:
2.1.1. The Personal Property;
2.1.2. The Real Property;
2.1.3. The Franchises;
2.1.4. All subscription agreements with customers for cable
services provided by the Systems;
2.1.5. The Contracts listed on SCHEDULE 3.7 (other than
those constituting Excluded Assets);
2.1.6. Subscriber contracts entered into in the ordinary
course of business and those Contracts in existence on the date hereof and not
listed in SCHEDULE 3.7 which (i) were entered into in the ordinary course of
the Systems' business, (ii) are not material to the operations of any System,
(iii) may be terminated by Buyer, as Seller's assignee, without penalty of any
type not later than one (1) year following the Closing, (iv) do not involve the
performance of any material non-monetary obligation on the part of Buyer, and
(v) do not involve the payment by Buyer, as Seller's assignee, of more than
$10,000 for all such Contracts in the aggregate.
2.1.7. Contracts that are entered into by Seller in the
ordinary course of business of the Systems and as permitted by this Agreement
between the date hereof and the Closing Date;
2.1.8. Such other Contracts (other than those constituting
Excluded Assets) as Buyer may, in its discretion, elect to assume;
2.1.9. The Accounts Receivable;
2.1.10. All of Seller's intangible personal property,
proprietary information, copyrights, trademarks, trade names, technical
information and data, machinery and equipment warranties, maps, computer discs,
and tapes, plans, diagrams, blueprints and schematics, including filings with
the Franchising Authorities and the FCC relating to the Systems;
2.1.11. All choses in action of Seller relating to the
Systems;
2.1.12. All books and records relating to the business or
operations of the Systems, including executed copies of the Contracts and all
correspondence and memoranda relating thereto, customer records and all records
required by the Franchising Authorities to be kept, subject to the right of
Seller to have such books and records made available to Seller for a reasonable
period, not to exceed five years from the Closing Date; and
<PAGE> 9
2.1.13. The goodwill and going concern value generated by
Seller with respect to the Systems.
2.2. Excluded Assets. The Assets shall exclude the following
assets (the "EXCLUDED ASSETS"):
2.2.1. Except to the extent taken into account in making the
prorations under Section 2.5 hereunder, Seller's cash on hand as of the Closing
Date and all other cash in any of Seller's bank or deposit accounts, including,
without limitation, customer advance payments and deposits; any and all bonds,
surety instruments, insurance policies and all rights and claims thereunder,
letters of credit or other similar items and any cash surrender value in regard
thereto, and any stocks, bonds, mutual funds, certificates of deposit and
similar investments;
2.2.2. Any books and records that Seller is required by law
to retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the Systems other than those described in
Section 2.1.11, subject to the right of Buyer to have access to and to copy for
five (5) years from the Closing Date, and Seller's corporate minute books and
other books and records related to internal corporate matters and financial
relationships with Seller's lenders and affiliates;
2.2.3. Except to the extent taken into account in making the
prorations under Section 2.5 hereunder, any claims, rights and interest in and
to any refunds of federal, state or local franchise, income or other taxes or
fees of any nature whatsoever for periods prior to the Closing Date including,
without limitation, fees paid to the U.S. Copyright Office or any choses in
action owned by Seller relating to such refunds;
2.2.4. Any Employee Plan, Compensation Arrangement or
Multiemployer Plan;
2.2.5. The name "Phoenix Grassroots Cable Systems, L.L.C.";
and
2.2.6. The property described on SCHEDULE 2.2
2.3. Purchase Price. The purchase price for the Assets shall be
Nine Million Six Hundred Thirteen Thousand Two Hundred Fifty Dollars
($9,613,250) (the "PURCHASE PRICE"), which amount shall be adjusted as provided
in Section 2.5 below.
2.4. Method of Payment. The Purchase Price shall be paid in full
in the following manner:
<PAGE> 10
2.4.1. Deposit Upon execution and delivery of this
Agreement by Seller and Buyer, Buyer shall deliver to Colorado National Bank
("ESCROW AGENT"), the sum of Two Hundred Thousand Dollars ($200,000) (the
"DEPOSIT"), to be held and applied pursuant to the terms of that certain Escrow
Agreement (the "ESCROW AGREEMENT"), to be executed concurrently herewith by
Buyer, Seller and Escrow Agent.
2.4.2. Closing Payment; Post-Closing Escrow. At the
Closing, Buyer shall cause to be paid in immediately available funds by wire
transfer to one or more bank accounts designated in writing by Seller prior to
the Closing Date a portion of the Purchase Price equal to Nine Million Four
Hundred Thirteen Thousand Two Hundred Fifty Dollars ($9,413,250), plus or
minus, as applicable, any adjustments made at Closing pursuant to Section 2.5.
The Two Hundred Thousand Dollar ($200,000) Deposit, constituting the balance of
the Purchase Price, will be retained by the Escrow Agent as security for
Seller's obligations to Buyer following the Closing pursuant to the terms of
the Escrow Agreement (the "POST-CLOSING ESCROW"). Pursuant to the Escrow
Agreement, (i) six (6) months following the Closing, $100,000 of the Deposit
together with the interest thereon less the amount of any then asserted
indemnification claims shall be released from the Post-Closing Escrow and paid
to Seller, and (ii) twelve (12) months following the Closing, the balance of
the amount in the Post-Closing Escrow together with the interest thereon less
the amount of any then asserted indemnification claims shall be released from
the Post-Closing Escrow and paid to Seller.
2.4.3. Disposition of Escrow Deposit; Liquidated Damages.
At the Closing, the interest on the Deposit shall be paid by wire transfer of
immediately available funds to Seller as a credit against the Purchase Price or
to Buyer. If the Closing does not occur because of breach by Buyer of its
representations and warranties hereunder or of the covenants and obligations to
be performed by Buyer hereunder, provided Seller has satisfied its obligations
hereunder, and provided further, that all conditions precedent to Buyer's
obligation to close the transactions contemplated herein have been satisfied
then, the Deposit and earnings thereon shall be delivered to Seller as
liquidated damages, which shall be the sole remedy of Seller for such breach,
and Seller shall have no other recourse against Buyer or any of its affiliates
under or in connection with this Agreement or the transactions contemplated
hereby. SELLER AND BUYER HAVE MADE THIS PROVISION FOR LIQUIDATED DAMAGES
BECAUSE IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN AND
CALCULATE ON THE DATE HEREOF THE AMOUNT OF ACTUAL DAMAGES SUSTAINED BY SELLER
FOR THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT
OF COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH OF DEFAULT,
AND SELLER AND BUYER AGREE THAT THESE SUMS REPRESENT REASONABLE COMPENSATION TO
SELLER FOR SUCH BREACH. In any other case, if the Closing does not occur and
this Agreement is terminated, then, the Deposit and earnings thereon shall be
delivered to Buyer. All payments and releases of funds from escrow by the
Escrow Agent shall be made in accordance with the procedures and provisions set
forth in the Escrow Agreement.
2.5. Adjustments and Prorations.
<PAGE> 11
2.5.1. All expenses and other liabilities arising from the
Systems up until midnight on the day prior to the Closing Date, including
franchise fees, pole and other rental charges payable with respect to cable
television service, utility charges, real and personal property taxes and
assessments levied against the Assets, salesperson advances, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Assets
hereunder), and similar prepaid and deferred items, shall be prorated between
Buyer and Seller in accordance with the principle that Seller shall be
responsible for all expenses, costs and liabilities allocable to the conduct of
the business or operations of the Systems for the period prior to the Closing
Date, and Buyer shall be responsible for all expenses, costs and obligations
allocable to the conduct of the business or operations of the Systems on the
Closing Date and for the period thereafter.
2.5.2. The Purchase Price shall be adjusted at Closing as
follows: (i) by increasing the Purchase Price by an amount equal to (A) 100 %
of the face amount of all Accounts Receivable that are outstanding 30 days or
less from the date of the bill giving rise thereto and (B) 75 % of the face
amount of all Accounts Receivable that are outstanding more than 30 but fewer
than 61 days from the date of the bill giving rise thereto; and (ii) by
reducing the Purchase Price by an amount equal to (w) any customer advance
payments (i.e., customer payments received by Seller prior to Closing but
relating to service to be provided by Buyer after Closing) and customer
deposits (including any interest owing thereon), (x) any other advance payments
(i.e., advertising payments received by Seller prior to Closing but relating to
service to be provided by Buyer after Closing), (y) Accounts Receivable
relating to services to be performed after the Closing and the responsibility
for which is assumed by Buyer under this Agreement and (z) liabilities assumed
pursuant to Section 2.6(v).
2.5.3. (a) The Purchase Price shall also be reduced in
accordance with Section 2.5.3(b) below, if the Average Two Month Revenue of the
Systems is less than $269,000. As used herein, "AVERAGE TWO MONTH REVENUE"
shall mean (i) the sum of advance billings of the Systems for July 1996 and
August 1996, plus installation revenues, home shopping revenues, late fees and
advertising revenues for June 1996 and July 1996, plus or minus (as applicable)
debit and credit prorates for June 1996 and July 1996, divided by (ii) two (2).
However, Average Two Month Revenue shall exclude any amounts in excess of
$32,000 per month which are attributable to seasonal subscriber activity. All
determinations hereunder shall be made on a basis consistent with Seller's past
practices and, to the extent not inconsistent with Seller's past practices, in
accordance with generally accepted accounting principles consistently applied.
2.5.3. (b) If the Two Month Average Revenue is less than
$269,000, the Purchase Price shall be reduced proportionately to an amount
equal to the
<PAGE> 12
Purchase Price before giving effect to such adjustment multiplied by a
fraction, the numerator of which shall be the Two Month Average Revenue and the
denominator of which shall be $269,000.
2.5.4. Seller shall prepare and submit to the Buyer, not
later than five (5) days prior to the Closing, a written good faith estimate of
the amount of the adjustments to the Purchase Price in accordance with this
Section 2.5 (the "ESTIMATE"). The Estimate shall be based upon the books and
records of the Systems, including the Accounts Receivable (including the aging
reports), billing information, revenues and other applicable information as
shown on the latest records of Seller. The Estimate submitted to the Buyer
shall be accompanied by (a) a statement setting forth in reasonable detail the
calculation of the Estimate and (b) a certificate signed by a senior officer of
the Seller certifying that, to the best of such officer's knowledge, but
without any personal liability to such officer, the Estimate was calculated in
good faith in accordance with the provisions of this Section 2.5. The Seller
shall also deliver to the Buyer such other information as may be reasonably
requested by the Buyer to verify the Estimate.
2.5.5. Without limiting Buyer's rights under Section 2.5.6
below, in the event Buyer believes in good faith that the Estimate is or may be
materially inaccurate with respect to the adjustments and prorations to be made
pursuant to this Section 2.5, and if the parties are unable to agree on a
revised Estimate with respect to such adjustments and prorations prior to the
Closing, then Buyer shall have the right to cause a portion of the Purchase
Price equal to the amount in dispute in excess of the Deposit to be added to
the Post-Closing Escrow at Closing, which amount shall be disbursed to Buyer or
Seller, as appropriate, immediately upon completion of the Purchase Price
adjustment procedures set forth in Section 2.5.6 below, irrespective of whether
Buyer has any then pending indemnification claims against Seller.
2.5.6. Within 21 days after the Closing Date, Seller shall
deliver to Buyer a compilation of the adjustments and prorations to be made
pursuant to this Section 2.5, together with such supporting information as
Buyer may reasonably request, certified by a senior officer of Seller, to the
best of such officer's knowledge, but without liability to such officer (the
"POST-CLOSING CERTIFICATE"). In the event Seller fails to deliver to Buyer a
Post-Closing Certificate within such 21 day period, then Buyer may, within 60
days thereafter, prepare a Post-Closing Certificate, in which case the
provisions of this Section 2.5.6 shall be interpreted so as to reverse the
roles of the parties with respect to responses and discrepancies. If Buyer
shall conclude that the Post-Closing Certificate does not accurately reflect
the adjustments and prorations to be made to the Purchase Price in accordance
with this Section 2.5, Buyer shall, within 40 days after the receipt of the
Post-Closing Certificate (such 40 day period being referred to as the "RESPONSE
PERIOD"), deliver to Seller its written statement of any discrepancies believed
to exist. If Buyer fails to so notify Seller of any discrepancies, then the
calculations set forth in the Post-Closing Certificate shall be controlling for
all purposes hereof. On or before the fifth (5th) business day following the
earlier to occur of the expiration of the Response Period and the date Seller
receives Buyer's statement of discrepancies, Buyer shall pay to Seller or
Seller shall pay to Buyer, as the case may be, the amount, if any, owed in
accordance with the Post-Closing Certificate as to which there is no
<PAGE> 13
discrepancy. Buyer and Seller shall use good faith efforts to jointly resolve
the discrepancies within fifteen (15) days of Seller's receipt of Buyer's
written statement of discrepancies, which resolution, if achieved, shall be
binding upon all parties to this Agreement and not subject to dispute or
review. If Buyer and Seller cannot resolve the discrepancies to their mutual
satisfaction within such 15 day period, Buyer and Seller shall retain a
mutually acceptable national independent public accounting firm (the
"ACCOUNTING FIRM") at such firm's San Francisco, California office that has
neither been engaged to perform nor has performed any services to Seller or
Buyer or their respective affiliates during the two years prior to the Closing
Date to review the Post-Closing Certificate together with Buyer's discrepancy
statement and any other relevant documents. The cost of retaining the
Accounting Firm shall be borne equally by Buyer and Seller. The Accounting
Firm shall report its conclusions as to adjustments pursuant to this Section
2.5 which shall be conclusive on all parties to this Agreement and not subject
to dispute or review. In the event the parties are unable to agree on which
accounting firm to retain, if the Accounting Firm shall not be engaged on terms
reasonably satisfactory to Seller and Buyer within 30 days of Seller's receipt
of Buyer's written statement of discrepancies or if the Accounting Firm shall
fail to render a decision within 45 days of the date it is retained, then the
matter shall be submitted for arbitration in accordance with Section 10 hereof.
Within five (5) days of receipt of the Accounting Firm or Arbitrator's
decision, as the case may be, with respect to such dispute, if Buyer is
determined to owe an amount to Seller, Buyer shall pay such amount thereof to
Seller, and if Seller is determined to owe an amount to Buyer, Seller shall pay
such amount thereof to Buyer. All amounts owed by Buyer or Seller to the other
in accordance with this Section shall be paid in immediately available funds.
Unless expressly agreed in writing by Buyer, no payments by Seller pursuant to
this Section 2.5 may be made from the Post-Closing Escrow.
2.5.7. Absence of Consents. The parties acknowledge that
their intent and agreement is for Seller to transfer the Systems to Buyer at
Closing in an orderly manner without interruption in service, and that certain
required Consents to the transfer to Buyer of Seller's rights under the
Contracts and Franchises relating to the operation of the Systems may not have
been obtained on the Closing Date, or that such rights may not be transferred
at the Closing for other reasons, provided, however, that Buyer shall have no
obligation to close the transactions contemplated hereby in the absence of
receiving any Required Consents and the transfer of such rights. If said
transfer is not completed on the Closing Date, Seller agrees to maintain such
Contracts and Franchises and, should Buyer so request, any insurance policies
and performance bonds related to any non-transferred Franchises, in full force
and effect for the benefit of Buyer (with any casualty insurance policies
naming Buyer and Buyer's lenders as loss payees and any liability insurance
policies so maintained naming Buyer, Buyer's lenders, Seller and such other
parties as are required to be so named as additional insureds)
<PAGE> 14
until such transfer is completed (the "INTERIM PERIOD"). During the Interim
Period, Buyer shall be responsible for obtaining such Consents, and Seller will
provide reasonable assistance to Buyer but at Buyer's sole cost and expense.
Seller also agrees to permit Buyer, at Buyer's option, to utilize the benefits
of such Contracts, Franchises, insurance policies and performance bonds in
order to continue to operate the Systems. Buyer agrees that all expenses
incurred by Seller in complying with the foregoing during the Interim Period
(other than charges for personnel or internal operating, administrative or
overhead expenses of Seller or any creditor of Seller) shall be reimbursed to
Seller by Buyer on a monthly basis, within twenty (20) days after receipt by
Buyer of Seller's reasonably detailed and itemized statement therefor for each
calendar month during the Interim Period.
2.6. Assumption of Liabilities and Obligations. As of the Closing
Date, Buyer shall assume and pay, discharge and perform the following
(collectively, the "ASSUMED LIABILITIES"): (i) all the obligations and
liabilities of Seller under the Franchises and the Contracts referenced in
Sections 2.1.4, 2.1.5, 2.1.6 and 2.1.7 insofar as they relate to the time
period on and after the Closing Date and arise out of events (other than the
Closing itself) occurring on or after the Closing Date; (ii) all obligations
and liabilities of Seller to customers of the Systems for any advance payments
or deposits, if and to the extent that an adjustment was made to the Purchase
Price with respect to such customers pursuant to Subsection 2.5. above; (iii)
all obligations and liabilities arising out of events occurring on or after the
Closing Date related to Buyer's ownership of the Assets or its conduct of the
business or operations of the Systems on or after the Closing Date; and (iv)
Seller's obligations to the entities listed in SCHEDULE 2.6 for the current and
past due pole rental fees and past due make-ready fees as specifically
described in SCHEDULE 2.6 ("Utility Liabilities"); provided, however, that in
no event shall the amount assumed by Buyer under this clause (iv) exceed
$161,753. All other obligations and liabilities of Seller shall remain and be
the obligations and liabilities of Seller and shall not become obligations or
liabilities of Buyer. Other than the Assumed Liabilities, Buyer shall not
assume or become liable for, and does not agree to perform or discharge, any
liabilities or obligations of Seller.
2.7. Allocation of Purchase Price. As contemplated under Section
1060 of the Internal Revenue Code, Buyer and Seller shall each submit Form 8594
to the Internal Revenue Service following the Closing. Such forms shall
allocate the Purchase Price among the Assets consistent with an appraisal to be
conducted at Buyer's expense by an appraiser designated by Buyer.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date of this Agreement and a
s of the Closing Date, as follows:
3.1. Organization, Standing and Authority. Seller is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is qualified to conduct business
in the States of Maine and New Hampshire and in each other jurisdiction in
which the property owned, leased or operated by it requires it to be so
qualified. Seller has the requisite power and authority (i) to own, lease and
use the Assets as presently owned, leased and used by Seller, and (ii) to
conduct the business and operations of
<PAGE> 15
the Systems as presently conducted by Seller. Seller is not a participant in
any joint venture or partnership or similar agreement with any other person or
entity with respect to any part of the Systems' operations or the Assets.
3.2. Authorization and Binding Obligation. Seller has the
requisite power and authority to execute and deliver this Agreement and to
carry out and perform all of its other obligations under the terms of this
Agreement. All member, manager and other action by Seller necessary for the
authorization, execution, delivery and performance by Seller of this Agreement
has been taken and such action has not been rescinded, repealed, amended or
conditioned in any manner. This Agreement has been duly executed and delivered
by Seller and this Agreement constitutes the valid and legally binding
obligation of Seller, enforceable against it in accordance with its terms,
except (i) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and (ii) as the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
3.3. Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Seller will not violate the certificate of
formation or operating agreement of Seller, or subject to obtaining the
Consents listed on SCHEDULE 3.8, (i) violate any law, judgment, order,
ordinance, injunction, decree, rule or regulation of any court or governmental
instrumentality applicable to Seller with respect to the Assets, or (ii)
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license or
permit to which Seller is a party or may be bound and by which the Assets or
the Systems are affected.
3.4. Franchises. SCHEDULE 3.4 includes a true and complete list of
all Franchises that are held for use in connection with the operations of the
Systems. No other franchises, franchise applications, licenses, registrations,
authorizations or permits are required by applicable law in connection with the
operation of the Systems in the ordinary course of business. True and complete
copies of such Franchises (including any and all amendments thereto) have been
delivered to Buyer and are included in SCHEDULE 3.4. To the best of Seller's
knowledge, each of the Franchises listed on SCHEDULE 3.4 is in full force and
effect in accordance with its terms. No proceedings are pending or, to
Seller's knowledge, threatened, to revoke, terminate, modify or cancel any of
such Franchises. Except as listed on SCHEDULE 3.4, and except for any
noncompliance or default that would not have a Material Adverse Effect, there
exists no fact or circumstance which, with the passage of time or the
<PAGE> 16
giving of notice or both, would constitute a material default under any
Franchise, or permit the Franchising Authority to cancel or terminate the
rights thereunder, except upon the expiration of the full term thereof. For
any Franchise that has an unexpired term of fewer than three (3) years from the
date hereof ("EXPIRING FRANCHISES"), except for the communities of Greenbush,
Maine, Friendship, Maine, Middleton, New Hampshire and Enfield, New Hampshire,
a timely request for renewal has been submitted to the appropriate Franchising
Authority pursuant to Section 626(a) of the Communications Act of 1934, as
amended (the "COMMUNICATIONS ACT"). Seller (i) has not been notified by any
Franchising Authority of any decision not to renew or of any finding that would
reasonably be expected to serve as a basis for a decision not to renew (other
than in respect of Franchises that have been renewed after receipt of such
notice); and (ii) has no knowledge such notice is to be received. Seller has
not made any commitments (oral or written) to any Franchising Authority with
respect to the Systems other than those contained in the Franchises, and to
Seller's knowledge, no prior owner of any of the Systems has made any
commitment (oral or written) to any Franchising Authority with respect to any
System other than those contained in the Franchises.
3.5. Real Property. SCHEDULE 3.5 contains a list of all Real
Property interests, including, without limitation, all leases, easements,
licenses, rights to access, rights of way and other real property interests to
which Seller is a party as of the date hereof, but excluding easements, rights
of way and similar interests in real property which are not used or useful in
connection with the operation of the Systems. Seller has good and marketable
title to such interests in Real Property and has quiet enjoyment under all
leasehold interests, free of all Liens except Permitted Encumbrances and Liens
specified in SCHEDULE 3.9.
3.6. Personal Property. Seller has good and marketable title in
fee simple to all Personal Property owned by Seller, and as of the Closing Date
none of the Personal Property will be subject to Liens, except for Permitted
Encumbrances and Liens specified in SCHEDULE 3.9. SCHEDULE 3.6 lists all
Seller's leasehold interests in property owned by others and leasehold
interests in personal property held by others in personal property owned by
Seller, in each case, to the extent such personal property is used in the
operation of the Systems.
3.7. Contracts. SCHEDULE 3.7 lists all Contracts in existence as
of the date hereof except for Contracts fitting within the parameters of
Section 2.1.6. To the best of Seller's knowledge, each of the Contracts listed
on SCHEDULE 3.7 is in full force and effect and legally enforceable in
accordance with its terms upon the other parties thereto and, except as
disclosed in SCHEDULE 3.7, there exists no default thereunder. Seller has
provided Buyer with true and complete copies of all Contracts listed on
SCHEDULE 3.7. To the best of Seller's knowledge, Seller has delivered to Buyer
all agreements, letters, documentation and notices relating to any dispute,
disagreement or claim arising under or relating to any of the Contracts or any
of the Utility Liabilities.
3.8. Consents. Except for the Consents described in SCHEDULE 3.8,
no consent, approval, permit or authorization of, or declaration to or filing
with any governmental or regulatory authority, or any other third party is
required to consummate this Agreement and the transactions contemplated hereby.
<PAGE> 17
3.9. Complete Systems. The Assets comprise all of the assets
necessary to conduct the business and operations of the Systems as presently
conducted. The Assets are in good working order, ordinary wear and tear
excepted. Seller holds good and marketable title to all Assets free and clear
of all Liens other than Permitted Encumbrances and Liens described on SCHEDULE
3.9. All indebtedness secured by Liens described on SCHEDULE 3.9 has been paid
or satisfied in full, and all such Liens shall be discharged of record within
twenty(20) days following the date of this Agreement.
3.10. Information on Systems.
3.10.1. The Systems have at least 6900 Equivalent Billing
Units and have the bandwidth capacity set forth on SCHEDULE 3.10.
3.10.2. As of the date hereof, the rates charged to customers
for each class of service and categories of customers for the Systems are set
forth in SCHEDULE 3.10.
3.10.3. The Systems duly and properly carry and deliver the
programming on the channels indicated in SCHEDULE 3.10. Seller has obtained
all required FCC clearances and authorizations for the operation of the Systems
in the manner presently operated.
<PAGE> 18
3.11. Financial Statements.
3.11.1. SCHEDULE 3.11 contains true and complete copies of
(i) financial statements of the Systems containing balance sheets and
statements of income as at and for each month-end of each of the full calendar
months through May 31, 1996 that Seller has owned the Systems (collectively,
the "FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
subject to normal recurring year-end adjustments, which will not be material in
amount. The Financial Statements are in accordance with the books and records
of the Seller and present fairly the financial condition of the Systems as at
their respective dates and the results of operations for the periods ended on
their respective dates.
3.11.2. Seller does not have any liability or obligation
related to the Assets or the Systems (whether accrued, absolute, contingent or
otherwise) which is of a nature required to be reflected in financial
statements prepared in accordance with generally accepted accounting principles
consistently applied (including footnotes thereto), including, without
limitation, any liability that might result from an audit of its tax returns,
except for (i) the liabilities and obligations of Seller that are specified and
reserved against in the Financial Statements, to the extent and in the amounts
so specified and reserved against; and (ii) liabilities incurred or accrued in
the ordinary course of business since the date of the most recent Financial
Statements, and which do not in the aggregate have a Material Adverse Effect.
3.11.3. Seller is not insolvent within the meaning of the
Federal Bankruptcy Code or any applicable fraudulent transfer law and will not
be rendered insolvent by virtue of the transactions contemplated herein.
Without limiting the foregoing, the Purchase Price exceeds the total amount of
Seller's liabilities, and Seller will not make any payments or distributions of
any kind, whether in respect of any indebtedness, or otherwise, of any portion
of the Purchase Price to Seller's members or their affiliates until all of
Seller's liabilities to others (excluding Assumed Liabilities) shall have been
paid or satisfied in full or until adequate provision has been made for the
payment or satisfaction thereof.
3.12. Employee Benefit Plans.
3.12.1. All of Seller's Employee Plans and Compensation
Arrangements providing benefits to employees of the Systems are listed and
described in SCHEDULE 3.12, and copies of any such written Employee Plans and
Compensation Arrangements (or related insurance policies) and any amendments
thereto have been made available to Buyer, along with copies of employee
handbooks or similar documents describing such Employee Plans and Compensation
Arrangements that are utilized in connection with the operation of the Systems.
Except as disclosed in SCHEDULE 3.12, there is not now in effect or to become
effective after the date of this Agreement, any new Employee Plan or
Compensation Arrangement or any amendment to an existing Employee Plan or
Compensation Arrangement which will affect the benefits of employees or former
employees of the Systems.
<PAGE> 19
3.12.2. Each of Seller's Employee Plans and Compensation
Arrangements has been administered without material exception in compliance
with its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state
laws.
3.12.3. Except as disclosed in SCHEDULE 3.12, Seller does not
contribute to or has never been required to contribute to any Multiemployer
Plan.
3.12.4. Seller is not aware of the existence of any
governmental audit or examination of any of Seller's Employee Plans or
Compensation Arrangements or of any facts that would lead it to believe that
any such audit or examination is pending or threatened. There exists no
action, suit or claim (other than routine claims for benefits) with respect to
any such Employee Plan or Compensation Arrangement pending or, to the knowledge
of Seller, threatened with respect to any of such Employee Plan or Compensation
Arrangements.
3.12.5. No accumulated funding deficiency (within the meaning
of Section 412 of the Code) exists with respect to any Employee Plan and no
waiver of funding requirements pursuant to Section 412(d) of the Code has been
sought or received with respect to any Employee Plan. None of the Assets are
subject to any lien arising pursuant to Section 412(n) of the Code or Section
4068 of ERISA.
3.12.6. No Employee Plan which is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA), provides for continuing benefits or
coverage for any participant (or beneficiary) after the termination of the
participant's employment except as may be required under Section 4980B of the
Code or applicable state statutory law.
3.13. Labor Relations. SCHEDULE 3.13 lists the names, dates of hire
and current annual salaries of all persons employed by Seller in connection
with the operation of the Systems. Except as disclosed in SCHEDULE 3.13,
Seller is not a party to or subject to any collective bargaining agreements
with respect to the Systems. Seller has no written or oral employment
arrangements with any employee of the Systems, other than (i) oral employment
arrangements terminable at will without penalty or severance obligation; or
(ii) those listed in SCHEDULE 3.7.
3.14. Taxes, Returns and Reports. All federal, state and local tax
returns required to be filed by Seller in connection with the operation of the
Systems with respect to any federal, state or local taxes (the "TAXES") have
been filed. Except as set forth in SCHEDULE 3.14, all Taxes which are due and
payable or disputed in good faith have been properly accrued or paid or are
being contested in good faith by appropriate proceedings. Seller has no
<PAGE> 20
knowledge of any legal, administrative or tax proceedings pursuant to which
Seller is or could be made liable for any Taxes, penalties, interest or other
charges, the liability for which could extend to Buyer as transferee of the
Assets, and no event has occurred that could impose on Buyer any transferee
liability for any Taxes, penalties or interest due or to become due from
Seller.
3.15. Claims and Legal Actions. Except as set forth in SCHEDULE
3.15, and except for any investigations and rule-making proceedings affecting
the cable industry generally, there is (i) no legal action, counterclaim, suit,
arbitration; (ii) to the knowledge of Seller, any claim or governmental
investigation; or (iii) any other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or pending, or to the knowledge of
Seller, threatened against or relating to the Assets or the business or
operations of the Systems. None of the matters disclosed in SCHEDULE 3.15
could have a Material Adverse Effect.
3.16. Environmental Matters.
(a) Except as disclosed in SCHEDULE 3.16, to the best of
Seller's knowledge (i) the Real Property is free of all friable
asbestos; (ii) no Hazardous Substance is currently or has ever been located in,
on, under or about any of the Real Property in a manner which violates any
Environmental Law in any material respect or which requires cleanup or
corrective action of any kind under any Environmental Law; (iii) Seller is in
past and current compliance with, is not in violation of, and has no liability
under, any Environmental Law; and all prior owners or occupants of the Real
Property occupied and used the Real Property in compliance with all applicable
Environmental Law; (iv) the Systems are capable of continued operation in
compliance with all Environmental Law; (v) no Hazardous Substances have been
used, treated or disposed in, on, over or under the Real Property, except for
such substances which are in such amounts and of the type typically found in
commercial cleaning products or standard office supplies of businesses similar
to Seller's, as to which Seller is in compliance with all applicable
Environmental Law; and (vi) there are no tanks on or below the surface of the
Real Property.
(b) Except as disclosed in SCHEDULE 3.16, Seller has not
received any notice from any governmental authority indicating that the
Real Property or any property adjacent thereto has been or may be placed on any
federal or state "Superfund" or "Superlien" list ("ENVIRONMENTAL NOTICE"). To
the best of Seller's knowledge, there has not been any Environmental Notice
with respect to any of the Real Property received by any prior owner or
occupant of the Real Property which has not been fully satisfied and complied
with in a timely fashion.
(c) Except as disclosed in SCHEDULE 3.16, to the best of
Seller's knowledge, Seller has no liability relating to Seller's ownership
or operation of the Systems for any illness or personal injury to any
employee other than such matters for which claims have been filed under
applicable Workers' Compensation regulations (and to the best of Seller's
knowledge, there is no likely basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand
(under the common law or pursuant to statute) against Seller giving rise to any
such liability).
<PAGE> 21
(d) As used in this Agreement, the term "Hazardous
Substances" includes any substance heretofore or hereafter designated
as "hazardous" or "toxic", including, without limitation, petroleum and
petroleum related substances, or having characteristics identified as
"hazardous" or "toxic" under any Environmental Law. As used hereunder, the
term "Environmental Law" shall include (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 6601, et
seq., (ii) the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., (iii) the Federal Water Pollution Control Act, 33 U.S.C. Section 1251,
et seq., (iv) the Clean Air Act, 42 U.S.C. Section 7401, et seq., (v) Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq., (vi) Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., (vii) Rivers and Harbors Act of
1899, 33 U.S.C. Section 401 et seq., (viii) Endangered Species Act of 1973, 16
U.S.C. Section 1531 et seq., (ix) Occupational Safety and Health Act of 1970,
29 U.S.C. Section 651 et seq., and (x) the Community Right to Know Act, 42
U.S.C. Section 11001, et seq., all as amended, and all other laws, rules, and
regulations of any federal, state, or local government (or agency thereof)
concerning release or threatened release of hazardous substances, public health
and safety, or pollution or protection of the environment.
3.17. Compliance with Laws. Seller has complied and is in
compliance with all federal, state and local laws, rules, regulations and
ordinances applicable to the Systems, except for such noncompliance which would
not have a Material Adverse Effect.
3.18. Conduct of Business in Ordinary Course. Except as set forth
on SCHEDULE 3.18, during the entire time that Seller has owned or operated the
Systems, Seller has conducted the business and operations of the Systems only
in the ordinary course and has not suffered any changes, events or conditions
other than matters affecting the cable television industry generally
(including, without limitation, legislative, regulatory or litigation matters)
and matters relating to or arising from local or national economic conditions
(including financial and capital markets) none of which has a Material Adverse
Effect.
3.19. FCC and Copyright Compliance.
3.19.1. To the best of Seller's knowledge, SCHEDULE 3.19
contains a true and complete list of all FCC licenses, permits, authorizations
and registrations used in connection with the ownership and operation of the
Systems, true and complete copies of which (to the extent in the possession of
Seller) have been provided to Buyer by Seller. Seller is authorized under all
applicable FCC rules, regulations and orders to distribute the transmissions
(whether television, satellite, radio or otherwise) of video programming or
other information that the Seller makes available to customers of the Systems
(the "SIGNALS") presently being carried to the customers of and by the Systems
and to utilize all carrier
<PAGE> 22
frequencies generated by the operations of the Systems, and is licensed or
authorized to operate all the facilities required by law to be licensed,
including without limitation, any business radio and any cable television relay
service stations, being operated as part of the Systems. Except as provided in
SCHEDULE 3.19, Seller's operation of the Systems and of any FCC-licensed or
registered facility used in conjunction with Seller's operation of the Systems,
is in compliance with the FCC's rules and regulations and the provisions of the
Communications Act, except for such noncompliance which would not have a
Material Adverse Effect. All reports, applications, statements, fees and other
documents and payments required by the FCC or any Franchising Authority to be
filed and/or to be paid to the FCC or any Franchising Authority with respect to
the ownership and operation of the Systems (including, without limitation,
aeronautical frequency use notifications, FCC Form 320, FCC Form 325 Schedule
A, FCC Form 395-A and FCC Form 159) have been timely filed or paid, as the case
may be. Seller has provided to Buyer true and complete copies of all such
filings (to the extent in Seller's possession) made with respect to the
ownership and operation of the Systems for the past three (3) years. Seller
makes available to customers of the Systems and third parties all equipment and
facilities required under any applicable federal, state and local laws, rules,
regulations and ordinances.
3.19.2. SCHEDULE 3.19 contains a true and complete list of
each System's towers, tower coordinates and total height above ground level of
each tower. 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 in the manner presently operated and are listed in SCHEDULE 3.19.
Seller has provided to Buyer true and complete copies of all such FAA approvals
and authorizations obtained in connection with the ownership and operation of
the Systems. The towers are being operated in compliance with applicable FCC
and FAA rules, except for such noncompliance which would not have a Material
Adverse Effect.
3.19.3. As of the date of this Agreement and to the best of
Seller's knowledge, and except as disclosed on SCHEDULE 3.19: (i) Seller is
currently the only person providing or intending to provide wireline or
wireless cable television services or similar video programming or related
services (excluding direct broadcast satellite services) within all or part of
the geographic areas served by the Systems; and (ii) no person other than the
Seller has been granted a presently valid cable television franchise or has a
pending application for a cable television franchise in any of the geographic
areas presently served by the Systems.
3.19.4. Seller has filed and 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 of 1976, as amended (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 Section 111 of the Copyright Act. Seller has
provided to Buyer true and complete copies of all such statements of account
and other documents and instruments (to the extent in Seller's possession)
filed and deposited with the U.S. Copyright Office in connection with the
ownership and operation of the Systems for the past three (3) years. The
Systems are in compliance with the Copyright Act and the rules and regulations
of the U.S. Copyright Office. To the knowledge of Seller, there is no inquiry,
claim, action
<PAGE> 23
or demand pending before the U.S. Copyright Office or from any other party
which questions the copyright filings or payments made by the Systems.
3.19.5. All notices required to be given by the Seller to
subscribers of the Systems have been given in material compliance with the
requirements of the Communications Act and applicable FCC regulations and
policies. Each FCC employment unit operated by Seller with respect to the
Systems is currently in material compliance with the Communications Act and
applicable FCC regulations and policies.
3.19.6. No Franchising Authority or other political
subdivision served by any System has become certified by the FCC to regulate
such System's basic service rate. Seller has not received any complaint on FCC
Form 329 concerning the cable programming service ("CPS") rates of any System,
and Seller is not aware of any CPS rate regulation of any System.
3.20. Bonds, Insurance and Letters of Credit. Except as otherwise
specified in SCHEDULE 3.20, each insurance policy, each performance bond and
each letter of credit required to be maintained, or which is maintained
covering the property comprising the Systems and Assets, and/or the operation
of the Systems, is set forth in SCHEDULE 3.20, and a copy of each such policy,
letter of credit or bond has been delivered to Buyer by Seller. Each of such
policies, letters of credit and bonds is current and in full force and effect.
Seller has not received any notice of default under or intended cancellation or
nonrenewal of any such policies, letter of credit or bonds. Seller has not
failed to give any notice or present any claim under any insurance policy or
bond in a due and timely manner, nor has Seller made a claim under any
insurance policy or bond or requested the insurer to defend Seller under a duty
to defend provision, which coverage the insurer denied. There are no pending
or threatened requests to make a draw under any such letter of credit. To the
best of Seller's knowledge, no application for any insurance, letter of credit
or bond with respect to the Assets or the Systems has been denied for any
reason. Seller will continue to maintain in effect through the Closing Date,
and for such periods thereafter as may be required under Section 2.5.7 hereof,
those bonds, letters of credit and insurance policies in connection with the
Assets and/or the operation of the Systems. During such periods, Seller will
not take any action or refrain from taking any action if the taking of such
action or failure to take such action, respectively, adversely affects the
insurability of the Assets or the Systems.
3.21. Full Disclosure. To the best of Seller's knowledge, no
representation or warranty made by Seller in this Agreement or in any
certificate, document, or other instrument furnished or to be furnished by
Seller pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary to
make any statement made herein or therein not misleading.
<PAGE> 24
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date of this Agreement and
as of the Closing Date, as follows:
4.1. Organization, Standing and Authority. Buyer is a limited
partnership validly existing and in good standing under the laws of the State
of Delaware and is, or will be prior to Closing, qualified to conduct business
as a foreign limited partnership in the States of Maine and New Hampshire.
Buyer has the requisite partnership power and authority to execute and deliver
this Agreement and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by Buyer hereunder.
4.2. Authorization and Binding Obligation. Buyer has the
partnership power and authority to execute and deliver this Agreement and to
carry out and perform all of its other obligations under the terms of this
Agreement. All partnership action by Buyer necessary for the authorization,
execution, delivery and performance by Buyer of this Agreement has been taken.
This Agreement has been duly executed and delivered by Buyer and this Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable
against it in accordance with its terms, except (i) as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally; and (ii) as the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
4.3. Absence of Conflicting Agreements. The execution, delivery
and performance of this Agreement by Buyer will not violate the certificate of
limited partnership or limited partnership agreement of Buyer, or subject to
obtaining any required Consents, (i) require the consent, approval, permit or
authorization of, or declaration to or filing with any governmental or
regulatory authority, or any other third party, (ii) violate any material law,
judgment, order, ordinance, injunction, decree, rule or regulation of any court
or governmental instrumentality, or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of, any material agreement, instrument, license or permit to which Buyer is a
party or by which Buyer may be bound, such that Buyer could not perform
hereunder and acquire or operate the Assets.
4.4. Claims and Legal Actions. Except for any investigations and
rule-making proceedings affecting the cable industry generally, there is (i) no
legal action, counterclaim, suit, arbitration; (ii) to the knowledge of Buyer,
any claim or governmental investigation; or (iii) any other legal,
administrative or tax proceeding, nor any order, decree or judgment, in
progress or pending, or to the knowledge of Buyer, threatened against Buyer or
any of its affiliates which, if adversely determined, would restrain or enjoin
the consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
<PAGE> 25
4.5. Financial Condition. Buyer is not insolvent within the
meaning of the Federal Bankruptcy Code or any applicable fraudulent transfer
law and will not be rendered insolvent by virtue of the transactions
contemplated herein.
4.6. Full Disclosure. To the best of Buyer's knowledge, no
representation or warranty made by Buyer in this Agreement or in any
certificate, document, or other instrument furnished or to be furnished by
Buyer pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary to
make any statement made herein or therein not misleading.
5. COVENANTS OF THE PARTIES
5.1. Conduct of the Business of the Systems. Except as expressly
permitted under this Agreement, disclosed on SCHEDULE 5.1 or with the prior
written consent of Buyer, between the date hereof and the Closing Date, Seller
shall do the following:
5.1.1. Seller shall operate the business of the Systems in
the ordinary course of business in accordance with past practices;
5.1.2. Seller shall use reasonable efforts (i) to preserve
the business of the Systems and Assets intact and to preserve the goodwill and
business of the subscribers, advertisers, suppliers and others having business
relations with the Systems; and (ii) to retain the services of the employees of
the Systems;
5.1.3. Seller shall not (i) enter into any transaction or
incur any liability or obligation which, if entered into or incurred prior to
the date of this Agreement, would have been required to be listed on the
Schedules hereto, (ii) sell, lease, hypothecate, transfer or otherwise dispose
of any of the Assets, other than dispositions in the ordinary course of
business of assets where suitable replacements have been made therefor, (iii)
grant or agree to grant any increase in the rates of salaries or compensation
payable to employees of the Systems (other than as required by law and
regularly scheduled bonuses and increases in the ordinary course of business as
disclosed on SCHEDULE 3.12 or one-time bonuses to induce employees to remain
employed with Seller through the Closing Date), (iv) provide for any new and
material pension, retirement or other employment benefits for employees of the
Systems or any material increase in any existing benefits (other than as
required by law), (v) implement any retiering or repackaging of cable
television programming offered by the Systems; or (vi) take or agree to take,
any of the foregoing actions or any actions that would (A) make any
representation or warranty of Seller contained in this Agreement untrue or
<PAGE> 26
incorrect as of the Closing Date, or (B) result in any of the conditions to
Closing in this Agreement not being satisfied;
5.1.4. Seller shall not cause or permit, by any act or
failure to act, any of the Franchises to expire or to be revoked, suspended, or
modified, or take any action that could reasonably be expected to cause any
governmental authority to institute proceedings for the suspension, revocation,
or material adverse modification of any Franchise, and Seller shall timely file
appropriate requests for renewal pursuant to 626(a) of the Communications Act
with respect to the Franchise for Greenbush, Maine and any other Franchise as
to which such request may be filed pursuant to said Section 626(a);
5.1.5. Seller shall pay all obligations relating to the
Systems as they become due, consistent with past practices, and shall cause all
such obligations to be paid or satisfied as of the Closing Date;
5.1.6. Seller shall not take any action that is inconsistent
with its obligations under this Agreement or that could reasonably be expected
to hinder or delay the consummation of the transactions contemplated by this
Agreement;
5.1.7. Seller shall maintain all of the Assets in good
condition (ordinary wear and tear excepted), consistent with their overall
condition on the date of this Agreement, and shall use, operate, and maintain
all of the Assets in a reasonable manner;
5.1.8. Seller shall maintain inventories at levels
consistent with past practices and in any event at levels not less than the
levels reflected in the most recent Financial Statements;
5.1.9. Seller shall comply in all material respects with all
laws, rules, and regulations applicable or relating to the ownership and
operation of the Systems;
5.1.10. Seller shall not create, assume or permit to exist
any Lien claim, liability, upon the Assets, except for Permitted Encumbrances
and Liens described in SCHEDULE 3.9; and
5.1.11. Seller shall not change customer rates for any
service or charges for remotes or installation, or change billing, disconnect
or marketing practices.
5.1.12. Except for any Assumed Liabilities (including Utility
Liabilities), with respect to any violations of pole attachment agreements or
similar arrangements asserted by the owner of any poles utilized by the
Systems, Seller will take such steps as may be necessary to cure such
violations at Seller's expense. To the extent such violations are not capable
of being cured prior to the Closing and do not involve material risks to Buyer
should Buyer proceed with the Closing prior to such violations having been
cured, the parties shall proceed with the Closing, with the Purchase Price
being reduced on the Closing Date by a mutually agreeable amount to reflect the
cost and risk of such uncured violations.
<PAGE> 27
5.1.13. Seller shall use its best efforts to cause all
conditions in Section 6.1 to be fulfilled on or before the Closing Date.
5.2. Access to Information. Seller shall allow Buyer and its
authorized representatives reasonable access to the Assets and to all other
properties, equipment, books, records, Contracts and documents relating to the
Systems for the purpose of audit and inspection, and furnish or cause to be
furnished to Buyer or its authorized representatives all information with
respect to the affairs and business of the Systems as Buyer may reasonably
request.
5.3. Insurance. Seller shall keep the Systems insured in
accordance with customary industry practices until the Closing.
5.4. Notice of Adverse Changes. Between the date of this Agreement
and the Closing Date, Seller shall promptly notify the Buyer in writing of any
materially adverse developments affecting the Systems which become known to the
Seller, including, without limitation, (i) any change in the condition,
financial or otherwise, of the Systems that could have a Material Adverse
Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of the Systems, or (iii) any
notice of any violation, forfeiture, or complaint under any of the Franchises
that could have a Material Adverse Effect.
5.5. Delivery of Financial Information. Seller shall furnish to
Buyer (i) as soon as they are available, but in no event later than thirty (30)
days after the end of each month subsequent to the date of such latest monthly
financial statement through the end of the month preceding the Closing Date,
monthly financial statements prepared on a basis consistent with the Financial
Statements; (ii) as soon as they are available, but in no event later than
fifteen (15) days after the end of each month a report prepared consistent with
past practices showing monthly revenues and subscriber information for the
systems; and (iii) promptly upon request, such other financial information
(including information on billings, installations, disconnects, payables and
receivables) as Buyer may reasonably request. The income statements delivered
by Seller to Buyers pursuant to this section shall be prepared from the books
and records of Seller in accordance with generally accepted accounting
principles consistently applied, shall accurately reflect the books, records,
and accounts of the Systems, shall be complete and correct in all material
respects, and shall present fairly the results of operations of the Systems for
the periods then ended. Promptly after the preparation thereof, Seller shall
deliver to the Buyer copies of any other financial statements, subscriber
counts and other operational data regularly prepared by Seller for its internal
use. Seller also shall provide Buyer on a periodic basis with reports of
capital expenditure made with respect to the Systems.
<PAGE> 28
5.6. Additional Financial Information. Buyer recognizes that
Seller claims to have acquired the Systems pursuant to Section 9505 of the
California Commercial Code and has owned the Systems for a short period of time
and, accordingly, certain data, documents, reports, statements and other
information regarding the Systems may be unavailable. However, Seller
recognizes that Buyer may need additional financial information with respect to
the Systems in connection with a registration statement or other filings to be
made by Buyer with the Securities and Exchange Commission (the "SEC"). Such
information may be required for preparing audited financial statements of the
Systems for prior years and for portions of the current year. Seller agrees to
cooperate and to cause Seller's accountants and auditors to cooperate with
Buyer, but at Buyer's sole cost and expense, in order to enable Buyer to comply
with applicable SEC requirements.
5.7. Consents. Following the execution hereof, Seller shall make
(and Buyer shall assist Seller in making) such applications to the Franchising
Authorities and other third parties, whose Consents are legally or
contractually required for the valid assignment and transfer of the Assets to
Buyer, and shall otherwise use its best efforts to obtain the Required Consents
(and shall use reasonable efforts to obtain the other Consents) as
expeditiously as possible. Such efforts shall include, if necessary, the
making of payments or the giving of other consideration by Seller to third
parties to resolve claims (whether disputed or undisputed) raised by such third
parties and not constituting Assumed Liabilities. Any application to any
governmental authority or other third party for any authorization, consent,
order, or approval necessary for the transfer of any Franchise shall be
reasonably acceptable to Buyer and such consent, order or approval shall, in
substance, cover the matters specified in SCHEDULE 5.7 attached hereto. Seller
shall not agree to any materially adverse change in any Franchise or Contract
as a condition to obtaining any authorization, consent, order, or approval
necessary for the transfer of such Franchise or Contract unless Buyer shall
otherwise consent. Buyer shall actively assist Seller in obtaining such
Consents and shall actively cooperate with Seller in the preparation, filing
and prosecution of such applications as may reasonably be necessary. Buyer
shall also prepare any applicable Forms 394 with respect to the Franchises.
Notwithstanding the foregoing, Buyer shall have no obligation to make any
payment to any Franchise authority or to any other party to any Contract in
assisting Seller in obtaining any of the Consents, amendments, releases or
agreements described in this section or to agree to any materially adverse
change in any Franchise or other Contract to be assigned to Buyer. Buyer
shall, at Seller's request, promptly furnish Seller with copies of such
documents and information with respect to Buyer, including financial
information and information relating to the cable and other operations of Buyer
and any of its affiliated or related companies, as Seller may reasonably
request in connection with the obtaining of any of the Consents or as may be
reasonably requested by any person in connection with any Consent. Each party
shall provide to the other copies of all Consents as they are received.
5.8. Cooperation. Buyer and Seller shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Buyer and Seller shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use diligent efforts to consummate the transactions
contemplated hereby and to fulfill their obligations hereunder.
<PAGE> 29
5.9. Taxes, Fees and Expenses. Buyer, on the one hand, and Seller,
on the other hand, shall each pay 50% of all sales, use, transfer or purchase
taxes and fees and application fees, if any, arising out of the transactions
contemplated herein. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
5.10. Brokers. Buyer and Seller each represents and warrants that
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement. Buyer agrees to indemnify and
hold harmless Seller against any fee, commission, loss or expense arising out
of any claim by any broker or finder employed or alleged to have been employed
by it, and Seller agrees to indemnify and hold harmless Buyer against any fee,
commission, loss or expense arising out of any claim by any broker or finder
employed or alleged to have been employed by it.
5.11. Risk of Loss.
5.11.1. The risk of loss, damage or destruction to the Systems
from fire, theft or other casualty or cause shall be borne by Seller at all
times up to completion of the Closing. It is expressly understood and
agreed that in the event of any material loss or damage to any material portion
of the Assets from fire, casualty or other cause prior to the Closing, Seller
shall notify Buyer of same in writing immediately. Such notice shall specify
with particularity the loss or damage incurred, the cause thereof, if known or
reasonably ascertainable, and the insurance coverage related thereto.
5.11.2. Notwithstanding any other provision contained in this
Agreement:
(i) In the event there is damage (including loss
of revenue) to the Systems equal to or greater than $50,000 which is not
repaired, replaced or restored prior to the Closing, Buyer, at its sole option
upon written notice to Seller: (A) may elect to consummate the Closing and
accept the Assets in their unrestored condition, in which event Seller shall
pay or assign to Buyer all proceeds of insurance theretofore received or to be
received covering the Assets involved, and the Purchase Price shall be reduced
by an amount equal to any applicable insurance deductible; or (B) may rescind
this Agreement and declare it of no further force and effect, in which event
there shall be no Closing and this Agreement and all the terms and provisions
hereof shall thereupon be deemed null and void and Buyer shall be entitled to a
return of the Deposit and all interest thereon and the parties shall have no
further liability to each other.
<PAGE> 30
(ii) if the damage (including loss of
revenue) sustained is less than $50,000, this Agreement shall remain in full
force and effect and the Purchase Price shall be reduced by an amount equal to
the amount of such damage, and Seller shall retain all proceeds of insurance
theretofore received or to be received covering the Assets involved.
5.11.3. Employee Benefit Matters. Buyer shall have no
obligation to employ any of Seller's employees employed at the Systems. Seller
shall be responsible for and shall cause to be discharged and satisfied in full
all amounts owed to any employee, if any, including, without limitation, wages,
salaries, sick pay, accrued vacation, employment, incentive, compensation or
bonus agreements or other benefits or payments on account of termination,
including, without limitation, the opportunity to elect continued coverage
under a group health plan pursuant to Section 4980B of the Code. Buyer shall
not assume or accept any obligation or liability under any Employee Plan or
Compensation Arrangement, nor shall Buyer be obligated to continue any Employee
Plan or Compensation Arrangement. Without limiting the generality of the
foregoing, Buyer shall not assume any liability under or otherwise be obligated
to continue, any group health plan maintained by Seller. To the extent that
the transactions contemplated by this Agreement may constitute a "qualifying
event" under the provisions of Section 4980B of the Code with respect to any
current or former employee of Seller or any spouse, former spouse, dependent
child, or former dependent child of any such person, Seller and not Buyer shall
provide and be responsible for continuation coverage in accordance with Section
4980B of the Code. Seller and not Buyer shall provide and be responsible for
continuation coverage to existing qualified beneficiaries who have the right to
elect or retain such continuation coverage in accordance with Section 4980B of
the Code.
5.12. Noncompetition. Seller covenants and agrees that for a period
of five (5) years from the Closing Date neither it nor any of its affiliates
will own, manage, operate, control or engage, directly or indirectly, in the
business of operating a wireline or wireless video cable television system
within the area currently serviced by the Systems. Notwithstanding the
foregoing, nothing herein shall be construed to prohibit or restrict the
ownership of a company's securities listed on a national securities exchange or
the National Association of Securities Dealers Automated Quotation System,
which (A) constitutes less than 5% of each class of equity of such company, (B)
does not constitute control over such company and (C) is held solely for
investment purposes.
5.13. Billing System Transition. Prior to and following the
Closing, Seller will cooperate with Buyer with respect to the conversion of the
System's billing and collection functions to the billing system utilized by
Buyer. In furtherance of the foregoing, for 180 days following the Closing, or
until such earlier time as the Systems' billing and collection functions have
been converted to the system utilized by Buyer, Seller will continue to perform
or cause to be performed all of the Systems' billing and collection services in
the same manner as presently conducted, and Buyer shall reimburse Seller for
Seller's out-of-pocket cost in providing such services.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER TO
CLOSE
<PAGE> 31
6.1. Conditions Precedent to Obligations of Buyer to Close. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Buyer for purposes of
consummating such transactions:
6.1.1. Representations and Warranties. All representations
and warranties of Seller contained in this Agreement shall be true and complete
at and as of the Closing Date as though such representations and warranties
were made at and as of such time except for changes contemplated or permitted
by this Agreement, which changes shall be reflected on revised Schedules as
provided in Section 7.2.3.
6.1.2. Covenants and Conditions. Seller shall have
performed and complied with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date.
6.1.3. No Injunction, Etc. No action, suit or other
proceeding shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, or arising out of,
this Agreement or the consummation of the transactions contemplated hereby
which, if successful, would have a Material Adverse Effect.
6.1.4. Consents. All Consents designated on SCHEDULE 3.8
with an asterisk ("REQUIRED CONSENTS") shall have been duly obtained and
delivered to Buyer and shall not have been amended, rescinded, repealed or
conditioned.
6.1.5. Deliveries. Seller shall have made or stand willing
and able to make all the deliveries to Buyer set forth in Section 7.2.
6.1.6. Material Adverse Change. Between the date of this
Agreement and the Closing Date, there shall have occurred no material adverse
change in the financial condition of the Systems, taken as a whole, other than
matters affecting the cable television industry generally (including without
limitation legislative, regulatory or litigation matters) and matters relating
to or arising from local or national economic conditions (including financial
and capital markets).
6.1.7. Environmental Report. Provided that Buyer shall have
ordered such environmental site assessments not later than ten (10) business
days after the execution of this Agreement, Buyer shall have received, at
Buyer's expense, Phase I environmental site assessments (the "ENVIRONMENTAL
REPORTS") of the Real Property performed by a recognized
<PAGE> 32
environmental firm reasonably satisfactory to Buyer. The Environmental Reports
shall show no environmental condition on or affecting such Real Property that
(i) could reasonably be expected to impair the use or value of such Real
Property for the continued operation of the Systems as presently operated or
subject Buyer to any liability for fines, penalties, or cleanup or response
costs if Buyer consummates this Agreement, or (ii) would cause a reasonable
purchaser to perform further investigation or testing before proceeding with
the transfer of the Real Property.
6.1.8. Title Commitment. Provided that Buyer shall have
ordered such commitments not later than ten (10) days after the execution of
this Agreement, Buyer shall have received, at Buyer's expense, written
commitments to issue owner's and lessee's policies of title insurance, naming
Buyer as the insured, written by a responsible title insurance company
authorized to write title insurance with respect to real estate in the states
where the Real Property is located, which policies shall guarantee good and
marketable title to the Real Property and shall show no exceptions for rights
of occupancy or use by third parties, no gaps in the chain of title, no
violations of any applicable zoning or other ordinance, statute, rule or
regulation and no other matter adversely affecting title to the Real Property
and shall otherwise be reasonably satisfactory to Buyer.
6.1.9. FCC Counsel Satisfaction. Buyer's FCC counsel shall
be reasonably satisfied with the accuracy of Seller's representations and
warranties in this Agreement pertaining to the Franchises and to FCC, FAA and
copyright matters, or if Seller so elects, Seller shall have delivered to Buyer
an opinion of FCC counsel reasonably satisfactory to Buyer in form and
substance.
6.1.10. No Unresolved Default Claims. No Franchising
Authority or any party to any Contract shall have notified Buyer or Seller that
any default exists under any Franchise or Contract, the result of which could
be a Material Adverse Effect, except for such defaults as shall have been
waived in writing prior to the Closing or as shall constitute Assumed
Liabilities.
6.2. Conditions Precedent to Obligations of Seller to Close. The
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:
6.2.1. Representations and Warranties. All representations
and warranties of Buyer contained in this Agreement shall be true and complete
at and as of the Closing Date as though such representations and warranties
were made at and as of such time except to the extent changes are permitted or
contemplated pursuant to this Agreement.
6.2.2. Covenants and Conditions. Buyer shall have performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
6.2.3. No Injunction, Etc. No action, suit or other
proceeding shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body
<PAGE> 33
to enjoin, restrain, prohibit or obtain substantial damages in respect of, or
which is related to, or arising out of, this Agreement or the consummation of
the transaction contemplated hereby which if successful would have a Material
Adverse Effect.
6.2.4. Deliveries. Buyer shall have made or stand willing
and able to make all the deliveries set forth in Section 7.3.
7. CLOSING AND CLOSING DELIVERIES
7.1. Closing. The Closing shall take place at 10:00 a.m. on a
date specified by Buyer upon at least ten (10) days prior written notice to
Seller, which date shall not be earlier than the date all Required Consents of
the issuers of the Franchises shall have been obtained nor later than thirty
(30) days following the satisfaction or waiver of all Closing conditions set
forth in Section 6.1, or on such other date as Buyer and Seller may mutually
agree (the "CLOSING DATE"). The Closing shall be held at the offices of
Edwards & Angell, 101 Federal Street, Boston, Massachusetts 02110, or the
Closing will be conducted by mail or at such other place and time as the
parties may agree.
7.2. Deliveries by Seller. Prior to or on the Closing Date, Seller
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
7.2.1. Transfer Documents. Duly executed bills of sale,
warranty deeds, motor vehicle titles, assignments and other transfer documents
which shall be sufficient to vest good and marketable title to the Assets in
the name of Buyer or its permitted assignees, free and clear of any Liens,
except for Permitted Encumbrances;
7.2.2. Consents. The original of each Consent;
7.2.3. Officer's Certificate. A certificate, dated as of
the Closing Date, executed by the President or a Vice President of Seller,
certifying: (i) that the representations and warranties of Seller contained in
this Agreement are true and complete at and as of the Closing Date as though
made on and as of such time, except for changes contemplated or permitted by
this Agreement, which changes shall be reflected on revised Schedules attached
to such certificate and (ii) that Seller has performed and complied with
covenants, agreements and conditions required by this Agreement to be performed
or complied with by Seller prior to or on the Closing Date;
7.2.4. Secretary's Certificate. A certificate, dated as of
the Closing Date, executed by the Secretary of Seller: (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by Seller's
Manager and members (if required), authorizing and
<PAGE> 34
approving the execution of this Agreement and the consummation of the
transaction contemplated hereby and that such resolutions remain in full force
and effect; and (ii) certifying as to the incumbency of each signatory to this
Agreement executed by such Seller; and
7.2.5. Opinions of Counsel. Opinion of Seller's counsel
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit B.
7.2.6. Evidence of Payment of Creditors. Evidence
reasonably satisfactory to Buyer of the payment and satisfaction of all
indebtedness and liabilities of Seller to trade creditors, lenders and other
third parties.
7.3. Deliveries by Buyer. Prior to or on the Closing Date, Buyer
shall deliver to Seller the following, in form and substance reasonably
satisfactory to Seller and their counsel:
7.3.1. Purchase Price. The Purchase Price, as adjusted,
less the amount of the Deposit;
7.3.2. Assumption Agreements. Appropriate assumption
agreements (the "ASSUMPTION AGREEMENTS") in form reasonably satisfactory to
Buyer pursuant to which Buyer shall assume the Assumed Liabilities.
7.3.3. Officer's Certificate. A certificate, dated as of
the Closing Date, executed by the President or a Vice President of Buyer,
certifying (i) that the representations and warranties of Buyer contained in
this Agreement are true and complete as of the Closing Date as though made on
and as of that date, except for changes contemplated by this Agreement; and
(ii) that Buyer has performed all of its obligations and complied with all of
its covenants set forth in this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date; and
7.3.4. Secretary's Certificate. A certificate, dated as of
the Closing Date, executed by a senior officer of Buyer: (i) certifying that
the resolutions, as attached to such certificate, were duly adopted by Buyer,
authorizing and approving the execution of this Agreement and the consummation
of the transaction contemplated hereby and that such resolutions remain in full
force and effect; and (ii) certifying as to the incumbency of each signatory to
this Agreement executed by Buyer.
8. TERMINATION
8.1. Method of Termination. This Agreement may be terminated or
abandoned only as follows:
8.1.1. By the mutual consent of Seller and Buyer;
8.1.2. By either party (provided that such party is not then
in breach of any of its representations, warranties or obligations hereunder)
by written notice to the other if the Closing shall not have occurred on or
before November 30, 1996; or
<PAGE> 35
8.1.3. By either party if the other party shall have
breached its obligations hereunder and such breach shall remain uncured for
fifteen (15) days following written notice of such breach from the terminating
party.
8.2. Rights Upon Termination.
8.2.1. In the event of a termination of this Agreement
pursuant to Section 8.1.1 or 8.1.2 hereof, each party shall pay the costs and
expenses incurred by it in connection with this Agreement, and no party (or any
of its officers, directors, employees, agents, representatives or stockholders)
shall be liable to any other party for any cost, expense, damage or loss of
anticipated profits hereunder.
8.2.2. In the event of a termination of this Agreement
pursuant to Sections 8.1.3 hereof as a result of any untrue representation,
breach of warranty or nonfulfillment of any covenant by Buyer contained in this
Agreement, Seller shall only have rights provided for in Section 2.4.3 hereof.
8.2.3. In the event of a breach of this Agreement or a
termination of this Agreement pursuant to Sections 8.1.3 hereof as a result of
any untrue representation, breach of warranty or nonfulfillment of any covenant
by Seller contained in this Agreement, Buyer shall have the right to seek all
remedies available to it as provided hereunder or at law or equity, including
the remedy of specific performance. In the event of any action to enforce this
Agreement, Seller hereby waives the defense that there is an adequate remedy at
law.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
9.1. Representations and Warranties. All representations,
warranties, covenants and agreements contained in this Agreement or in any
documents or instruments delivered pursuant hereto shall be deemed continuing
representations, warranties, covenants and agreements, and all such
representations and warranties shall survive the Closing Date for a period
ending on the first anniversary of the Closing Date unless a longer period of
survival is otherwise provided for in this Agreement; provided, however, that
the representations, warranties set forth in Sections 3.5, 3.6 and 3.7, in the
first three sentences of Section 3.4, in the first and third sentences of
Section 3.9, and in Sections 3.16 and 3.17 shall survive through the expiration
of all statutes of limitation (if any) applicable to any claim, right of action
or Losses to which Buyer could be subject in the event of a breach of such
representations and warranties. The written assertion of any claim by Buyer or
Seller against the other hereunder with respect to the breach or alleged breach
of any representation or
<PAGE> 36
warranty shall extend the period during which such representation and warranty
survives through the date such claim is resolved.
9.2. Indemnification by Seller. Seller shall indemnify and hold
Buyer harmless against and with respect to, and shall reimburse Buyer on demand
for any and all losses, liabilities, damages and expenses, including, without
limitation, reasonable legal fees and expenses (collectively, "LOSSES")
resulting from:
9.2.1. Any untrue representation, breach of warranty or
nonfulfillment of any covenant by Seller contained herein;
9.2.2. Any and all obligations of Seller other than Assumed
Liabilities;
9.2.3. The operation or ownership of the Systems or Assets
prior to the Closing Date, including, without limitation, any and all
liabilities arising under the Franchises or the Contracts which relate to
events occurring prior to the Closing Date and any alleged noncompliance with
environmental laws or other laws which relates to events or circumstances
existing prior to the Closing Date; and
9.2.4. Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
9.3. Indemnification by Buyer. Provided that the Closing shall
have occurred, Buyer shall indemnify and hold Seller harmless against and with
respect to, and shall reimburse Seller on demand for any and all Losses
resulting from:
9.3.1. Any untrue representation or breach of warranty or
nonfulfillment of any covenant by Buyer contained herein;
9.3.2. Any and all of the Assumed Liabilities;
9.3.3. Buyer's operation or ownership of the Systems or
Assets on and after the Closing Date; and
9.3.4. Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including reasonable legal
fees and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
9.4. Procedure for Indemnification. The procedure for
indemnification shall be as follows:
9.4.1. The party claiming indemnification (the "CLAIMANT")
shall give notice to the party from whom indemnification is claimed (the
"INDEMNIFYING PARTY") of any claim, whether between the parties or brought by a
third party, describing (i) the factual basis for such claim; and (ii) the
estimated amount of the claim, if known. If the claim relates to an
<PAGE> 37
action, suit or proceeding filed by a third party against Claimant, such notice
shall be given by Claimant within ten days after written notice of such action,
suit or proceeding was given to Claimant, provided that failure to give such
notice within such ten-day period shall not bar or otherwise prejudice the
Claimant's rights to indemnification with respect to such third-party action,
suit or proceeding unless the Indemnifying Party is materially prejudiced
thereby vis a vis each third party.
9.4.2. With respect to any claim by a third party as to
which the Claimant is entitled to indemnification hereunder, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, provided that (i) the Indemnifying Party
notifies the Claimant of its election to do so within 30 days of the date it
receives notice of such third-party claim, (ii) the remedy sought by the third
party claimant is exclusively the payment of money and not any non-monetary
remedies and (iii) the Indemnifying Party waives the provisions of Section 9.5
with respect to such claim. If the Indemnifying Party elects to assume control
of the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not so elect to assume control of any third party
claim, it shall be bound by the results obtained by the Claimant with respect
to such claim.
9.4.3. If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
9.5. Indemnification Threshold. Neither party shall have any
liability under Section 9.1 or 9.2 for breaches of representations and
warranties by such party unless and until the Losses arising therefrom exceed
in the aggregate $50,000 (the "THRESHOLD"), and if a party's Losses exceed the
Threshold in the aggregate, such party shall be entitled to recover all of its
Losses, including, without limitation, the amount of the Threshold.
9.6. Interest. Any amount owed by either party to the other under
this Section 9 or under Section 2.5 shall, if not paid within thirty (30) days
following the date demand for such payment is made, bear interest at a rate of
fifteen percent (15%) per annum from the date demand for such payment is made
until payment in full is received.
10. DISPUTE RESOLUTION
10.1. Arbitration. Any controversy, dispute or claim, including,
but not limited to, a claim for specific performance, between Seller and Buyer
arising out of or in connection with,
<PAGE> 38
or relating to, this Agreement or the transactions contemplated hereby or the
breach, termination or validity hereof, shall be finally settled by arbitration
conducted expeditiously in accordance with the Commercial Arbitration Rules
(the "AAA RULES") of the American Arbitration Association (the "AAA") in effect
at the time of the commencement of the arbitration proceeding by a sole
arbitrator appointed by the AAA. The arbitrator shall be an attorney with no
less than 15 years experience in the practice of corporate law (with
substantial experience in the acquisition and financing of cable television
systems); provided, however, in the case of an arbitration proceeding to
resolve a dispute with respect to the calculation of the adjustments to be made
to the Purchase Price as contemplated by Section 2.5, the arbitrator shall be
an accountant with a so-called "Big 6" accounting firm that has not performed
any services for Seller or Buyer during the two years prior to the Closing
Date. The arbitration decision or award shall be reasoned and in writing.
Judgment upon the decision or award rendered by the arbitrator may be entered
and specifically enforced in any count having jurisdiction thereof. The situs
for any such arbitration shall be San Francisco, California. A final award
shall be rendered as soon as reasonably possible and in any event within 120
days of the filing with AAA of any demand for arbitration. The parties agree
that the arbitrator shall have the right to shorten the length of any notice
periods or other time periods provided in the AAA Rules and to implement
Expedited Procedures under the AAA rules in order to ensure that the
arbitration process is completed within the time frames provided herein.
Buyer, on the one hand, and Seller, on the other hand, shall each bear 50% of
the costs of any such arbitration, including, without limitation, the fees and
expenses of the arbitrator; provided, however, the arbitrator shall have the
right (but not the obligation) to reapportion Seller's and Buyer's relative
shares of such costs in accordance with the arbitrator's determination of the
relative merits of the parties' respective claims. Notwithstanding the
provisions of Section 11.3, any arbitration held pursuant to the provisions of
this section shall be governed by the Federal Arbitration Act.
10.2. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT ON, WITH
RESPECT TO OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.3. Survival. The provisions of this Section 10 shall survive any
termination of this Agreement for any reason.
11. MISCELLANEOUS
11.1. Notices. All notices, demands and requests required or
permitted to be given under the provisions of this Agreement shall be (i) in
writing; (ii) delivered by personal delivery, facsimile transmission (to be
followed promptly by written confirmation mailed by certified mail as provided
below) or sent by commercial delivery service or certified mail, return receipt
requested; (iii) deemed to have been given on the date of personal delivery,
the date of transmission and receipt of facsimile transmissions, or the date
set forth in the records of the delivery service or on the return receipt; and
(iv) addressed as follows:
<PAGE> 39
If to Seller:
c/o Phoenix Cable, Inc.
10 South Franklin Turnpike
Ramsey, NJ 07446
Attn.: James H. Feeney, President
Facsimile No.: (201) 825-8794
With a copy to:
Frandzel & Share
6500 Wilshire Blvd.
Los Angeles, CA 90048
Attn.: Patricia Y. Trendacosta, Esq.
Facsimile No.: (213) 651-2577
If to Buyer:
FrontierVision Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attn.: James C. Vaughn, President
Facsimile No.: (303) 757-6105
With a copy to:
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Attn.: Stephen O. Meredith, Esq.
Facsimile No.: (617) 439-4170
or to any such other persons or addresses as the
parties may from time to time designate in a writing delivered in accordance
with this Section 11.1.
11.2. Benefit and Binding Effect. Neither party hereto may assign
this Agreement without the prior written consent of the other party hereto;
provided, however, that Buyer may assign this Agreement to its affiliates and
collaterally assign its rights under this Agreement to its lenders without the
consent of Seller; provided, further, however, that Buyer shall not be
<PAGE> 40
released and shall continue to be fully liable for its obligations hereunder;
and provided further this Agreement is assumed by such assignee (excluding
lenders) pursuant to an assumption agreement reasonably satisfactory to Seller.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.3. Governing Law. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of New Hampshire, without
regard to the conflicts of law principles of such state.
11.4. Headings. The headings herein are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
11.5. Gender and Number. Words used herein, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender, masculine, feminine or neuter, and any other number, singular
or plural, as the context requires.
11.6. Entire Agreement. This Agreement, all schedules and exhibits
hereto, and all documents and certificates to be delivered by the parties
pursuant hereto collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter hereof. All
schedules and exhibits attached to this Agreement shall be deemed part of this
Agreement and incorporated herein, where applicable, as if fully set forth
herein. This Agreement supersedes all prior negotiations between Buyer and
Seller with respect to the transactions contemplated hereby, and all letters of
intent and other writings relating to such negotiations, and cannot be amended,
supplemented or, except as provided in Section 11.8, modified except by an
agreement in writing signed by Buyer and the Seller.
11.7. Further Assurances. Each party covenants that at any time,
and from time to time, before or after the Closing Date, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent
and purposes of this Agreement.
11.8. Waiver of Compliance; Consents. Except as otherwise provided
in this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived in writing by the party entitled to the benefits thereof, but
such waiver or failure to insist upon strict compliance with such obligation,
representation, warranty, covenant, agreement or condition shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other failure.
11.9. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law
provided that the economic and legal substance of the transactions contemplated
by this Agreement is not affected in any manner that is materially adverse to
any party affected by such invalidity or unenforceability.
<PAGE> 41
11.10. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument. A signature delivered by facsimile transmission
shall be deemed an original signature for all purposes under this Agreement.
11.11. No Third Party Beneficiaries. This Agreement constitutes an
agreement solely among the parties hereto, and, is not intended to and will
not confer any rights, remedies, obligations or liabilities, legal or equitable
on any person (including, without limitation, any of Seller's employees) other
than the parties hereto and their respective successors or assigns, or
otherwise constitute any person (including, without limitation, any of Seller's
employees) a third party beneficiary under or by reason of this Agreement.
11.12. 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 drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
11.13. Time of the Essence. Time is of the essence under this
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a
weekend or on day that is not a business day in New York and in each state in
which one or more Systems is located, the time for the giving of such notice or
the performance of such act will be extended to the next succeeding business
day in all such states.
<PAGE> 42
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and
Seller as of the date first above written.
BUYER:
-----
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Partners, L.P., its General Partner
By: FVP GP, L.P., its General Partner
By: FrontierVision Inc., its General Partner
By: /s/ JAMES C. VAUGHN
----------------------------------------
Title: James C. Vaughn, President
SELLER:
------
PHOENIX GRASSROOTS CABLE SYSTEMS, L.L.C.
By: Phoenix Leasing Incorporated, Its Manager
By: /s/ JAMES H. FEENEY
----------------------------------------
Title: James H. Feeney, President
<PAGE> 43
AGREEMENT TO BE BOUND
The undersigned hereby agrees to be bound only by the provisions of
Section 5.12 of the foregoing Asset Purchase Agreement (pertaining to
noncompetition) upon the same terms as Seller is bound.
James H. Feeney
PHOENIX LEASING INCORPORATED
By: /s/ JAMES H. FEENEY
------------------------------------
Name:
Title:
PHOENIX CABLE INCORPORATED
By: /s/ JAMES H. FEENEY
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 12
FrontierVision Operating Partners, L.P.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
PRO FORMA FOR THE
TRANSACTIONS AND PRO FORMA FOR THE
THE EXISTING AND TRANSACTIONS AND
ACQUISITION SYSTEMS FOR THE PERIOD THE EXISTING AND
FOR THE THREE FOR THE THREE FROM INCEPTION ACQUISITION SYSTEMS
MONTHS ENDED MONTHS ENDED (APRIL 17, 1995) TO FOR THE YEAR ENDED
MARCH, 31 1996 MARCH 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1995
-------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ (1,427) $ (10,049) $ (2,704) $ (46,639)
Add (Deduct): - - - -
Income Tax Provision (Benefit)
Less: Minority Interest - - - -
----------- ------------ ------------- --------------
Pre Tax Income (Loss) (1,427) (10,049) (2,704) (46,639)
----------- ------------ ------------- --------------
Add: Fixed Charges
Interest 2,372 9,872 2,488 39,759
Amortization of debt offering
expenses 100 409 69 1,638
----------- ------------ ------------- --------------
Total fixed charges 2,472 10,281 2,557 41,397
----------- ------------ ------------- --------------
$ (1,045) $ 232 $ (147) $ (5,242)
=========== ============ ============= ==============
Fixed Charges $ 2,472 $ 10,281 $ 2,557 $ 41,397
=========== ============ ============= ==============
Ratio of Earnings to Fixed
Charges N/A 10.049 N/A N/A
Deficiency of Earnings to Fixed
Charges $ 1,427 - $ 2,704 $ 46,639
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 29, 1996 on the financial statements of FrontierVision Operating
Partners, L.P., included in or made part of this Form S-1 registration
statement.
ARTHUR ANDERSEN LLP
Denver, Colorado,
August 1, 1996
<PAGE> 1
EXHIBIT 23.2
[PIAKER & LYONS, P.C. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated May 7, 1996 on the financial statements of United Video
Cablevision, Inc. - Main and Ohio Divisions included in or made part of
FrontierVision Operating Partners, L.P.'s Form S-1 registration statement.
/s/ Piaker & Lyons, P.C.
PIAKER & LYONS, P.C.
Vestal, New York
August 1, 1996
<PAGE> 1
EXHIBIT 23.3
[WILLIAMS, ROGERS, LEWIS LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
use of our report dated March 11, 1996 on the financial
statements of C4 Media Cable Southeast, Limited Partnership
included in or made part of FrontierVision Operating Partners,
LP's Form S-1 registration statement.
/s/ WILLLIAMS, ROGERS, LEWIS & CO.
-----------------------------------
Williams, Rogers, Lewis & Co., P.C.
August 1, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 27, 1996 on the financial statements of Triax Southeast
Associates, L.P. included in or made part of FrontierVision Operating Partners,
L.P.'s Form S-1 registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado,
August 1, 1996
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of FrontierVision
Operating Partners, L.P. on Form S-1 of our report dated March 15, 1996 (Except
as to Note 1 which is dated August 1, 1996), relating to the financial
statements of American Cable Entertainment of Kentucky-Indiana, Inc. appearing
in the Prospectus which is part of this Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Stamford, Connecticut
August 1, 1996
<PAGE> 1
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of FrontierVision
Operating Partners, L.P. and FrontierVision Capital Corporation on Form S-1 of
our report dated April 10, 1996 (relating to the combined financial statements
of the Ashland and Defiance Clusters), appearing in the Prospectus, which is
part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Atlanta, Georgia
August 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001020291
<NAME> FRONTIERVISION CAPITAL CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JUL-14-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 2650 407
<SECURITIES> 0 0
<RECEIVABLES> 2065 513
<ALLOWANCES> (40) (42)
<INVENTORY> 0 0
<CURRENT-ASSETS> 2226 672
<PP&E> 42917 64169
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 143512 188258
<CURRENT-LIABILITIES> 3526 3336
<BONDS> 97105 124072
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 46407 60009
<TOTAL-LIABILITY-AND-EQUITY> 143512 188258
<SALES> 4369 9780
<TOTAL-REVENUES> 4369 9780
<CGS> 0 0
<TOTAL-COSTS> 2311 4688
<OTHER-EXPENSES> 127 570
<LOSS-PROVISION> 40 2
<INTEREST-EXPENSE> 1386 2473
<INCOME-PRETAX> (2703) (1426)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2703) (1426)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2703) (1426)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
