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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report:
CABLE MICHIGAN, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania 0-22821 23-2566891
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File no.) Identification No.)
105 Carnegie Center, Princeton,
New Jersey 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 609-734-3700
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(Former name or former address, if changed since last report.)
Item 5. Other Events.
On June 3, 1998, Cable Michigan, Inc. (the "Company") entered into an
Agreement and Plan of Merger dated as of that date (the "Agreement") among the
Company, Avalon Cable of Michigan Holdings Inc. ("Avalon Holdings") and Avalon
Cable of Michigan Inc. ("Avalon Sub"). Pursuant to the Agreement, and subject to
the terms and conditions set forth therein, Avalon Sub will merge into the
Company and the Company will become a wholly owned subsidiary of Avalon Holdings
(the "Merger"). The Company understands that ABRY Partners, Inc., a Boston-based
private equity fund that invests primarily in media and communications
businesses, is the principal investor in Avalon Holdings.
In accordance with the terms of the Agreement, each share of common stock,
par value $1.00 per share ("Common Stock"), of the Company outstanding prior to
the effective time of the Merger (other than shares held by the Company as
treasury stock, shares owned by Avalon Holdings or any subsidiary of Avalon
Holdings, or shares as to which dissenters' rights have been exercised) shall as
a result of the Merger be converted into the right to receive $40.50 in cash
(the "Merger Consideration"), subject to certain possible closing adjustments.
If, at the time of the Merger, the number of the Company's and its subsidiaries
cable television subscribers is more than 500 above an agreed target or more
than 500 below an agreed target, the per share Merger Consideration will be
increased or decreased, as the case may be, by $.000274 per subscriber above or
below the target; provided that the per share Merger Consideration will not be
increased above $41.00 as a result of this adjustment. In addition, if the
Merger takes place on or after December 1, 1998, the Merger Consideration will
be increased at the rate of 8% per annum. The Merger is subject to customary
conditions, including the approval of the Company's shareholders and the receipt
of required regulatory approvals. There can be no assurances that any
transaction will be consummated.
In connection with the Agreement, Level 3 Telecom Holdings Inc. ("LTTH"),
which owns approximately 48% of the shares of Common Stock of the Company, has
entered into a Voting Agreement, dated as of June 3, 1998 (the "Voting
Agreement") with the Company and Avalon Holdings pursuant to which, among other
things, LTTH has agreed that at any meeting of the stockholders of the Company
LTTH will vote all its shares of Common Stock in favor of the Agreement.
Also in connection with the Agreement, the Company, Avalon Holdings and
First Union National Bank, as Escrow Agent, have entered into an Escrow
Agreement dated as of June 3, 1998 (the "Escrow Agreement") pursuant to which
Avalon Holdings has deposited an irrevocable letter of credit in the amount of
$10,000,000 with the Escrow Agent. Pursuant to the Agreement, Avalon Holdings
has agreed to deliver to the Escrow Agent an additional $5,000,000 letter of
credit on the 60th day after the date of the Agreement. The proceeds of such
letters of credit will be paid to the Company if the Agreement is terminated
under certain circumstances including a termination resulting from a material
breach by Avalon Holdings or Avalon Sub.
As permitted by the Agreement, on June 4, 1998, the Company made a proposal
to the Board of Directors of Mercom, Inc. ("Mercom"), a publicly held company in
which the Company holds a 62% interest, to acquire the outstanding shares of
Mercom that the Company does not already own at a price of $11.00 per share.
Mercom has established a special committee composed of independent directors to
evaluate the proposal.
The preceding descriptions of the Agreement, the Voting Agreement and the
Escrow Agreement are qualified in their entirety by reference to the copies of
the Agreement, the Voting Agreement and the Escrow Agreement included as
Exhibits 2.1, 2.2 and 2.3 hereto, respectively, which are hereby incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit 2.1 Agreement and Plan of Merger dated June 3, 1998 among the
Company, Avalon Cable of Michigan Holdings Inc. and Avalon
Cable of Michigan Inc. (previously filed with the Commission
by the Company as Exhibit 1 to Amendment No. 1 filed on June
8, 1998 to its Schedule 13D relating to Mercom, Inc., and
incorporated herein by reference).
Exhibit 2.2 Voting Agreement dated June 3, 1998 among the Company,
Avalon Cable of Michigan Holdings Inc. and Level 3 Telecom
Holdings Inc. (previously filed with the Commission by the
Company as Exhibit 2 to Amendment No. 1 filed on June 8,
1998 to its Schedule 13D relating to Mercom, Inc., and
incorporated herein by reference).
Exhibit 2.3 Escrow Agreement dated June 3, 1998 among the Company,
Avalon Cable of Michigan Holdings Inc. and First Union
National Bank.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cable Michigan, Inc.
By: /s/ Mark Haverkate
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Name: Mark Haverkate
Title: President and Chief Operating Officer
June 16, 1998
EXHIBIT INDEX
Exhibit No. Description Page
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Exhibit 2.1 Agreement and Plan of Merger dated June 3, 1998 among the
Company, Avalon Cable of Michigan Holdings Inc. and Avalon
Cable of Michigan Inc. (previously filed with the Commission
by the Company as Exhibit 1 to Amendment No. 1 filed on June
8, 1998 to its Schedule 13D relating to Mercom, Inc., and
incorporated herein by reference).
Exhibit 2.2 Voting Agreement dated June 3, 1998 among the Company,
Avalon Cable of Michigan Holdings Inc. and Level 3 Telecom
Holdings Inc. (previously filed with the Commission by the
Company as Exhibit 2 to Amendment No. 1 filed on June 8,
1998 to its Schedule 13D relating to Mercom, Inc., and
incorporated herein by reference).
Exhibit 2.3 Escrow Agreement dated June 3, 1998 among the Company,
Avalon Cable of Michigan Holdings Inc. and First Union
National Bank.
EXHIBIT 2.3
ESCROW AGREEMENT
AGREEMENT dated as of June 3, 1998 among Avalon Cable of Michigan
Holdings Inc., a Delaware corporation ("Buyer"), Cable Michigan, Inc., a
Pennsylvania corporation (the "Company"), and First Union National Bank, as
Escrow Agent ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Buyer and Company have entered into a Merger Agreement dated
as of June 3, 1998 (as amended from time to time, the "Merger Agreement")
pursuant to which the Company has agreed to merge with Avalon Cable of Michigan
Inc., a Delaware corporation and a wholly owned subsidiary of Buyer;
WHEREAS, pursuant to Section 1.06 of the Merger Agreement, Buyer has
agreed to deposit with the Escrow Agent on the date hereof a $10,000,000 Letter
of Credit (the "First Letter of Credit") and on the sixtieth day after the date
hereof a $5,000,000 Letter of Credit (the "Second Letter of Credit"), each in
the form set forth in Exhibit A hereto, to be held and drawn upon by the Escrow
Agent in accordance with this Agreement or as Buyer and the Company may
otherwise agree;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Appointment of Escrow Agent. Buyer and Seller hereby appoint
the Escrow Agent to, with respect to each Letter of Credit delivered to the
Escrow Agent pursuant to Section 2 hereof, (a) accept, hold and either draw on
or return to Buyer such Letter of Credit all in accordance with the terms hereof
and (b) if such Letter of Credit is drawn in accordance with the terms hereof,
to hold, invest and distribute the proceeds from such drawing (together with any
interest and earnings, the "Proceeds") in accordance with the terms hereof. The
Escrow Agent hereby accepts such appointment and agrees to assume and perform
the duties of Escrow Agent pursuant to the terms and conditions of this
Agreement. As used herein, the term "Letters of Credit" means the First Letter
of Credit and the Second Letter of Credit (each, a "Letter of Credit").
SECTION 2 Delivery and Draw on Letter of Credit. In accordance with
Section 1.06 of the Merger Agreement, concurrently with the execution of this
Agreement, Buyer is delivering to the Escrow Agent the First Letter of Credit
duly issued by NationsBank, N.A. and the Escrow Agent hereby acknowledges
receipt of the First Letter of Credit. Also in accordance with Section 1.06 of
the Merger Agreement, on the sixtieth day after the date hereof, Buyer will
deliver to the Escrow Agent the Second Letter of Credit duly issued by
NationsBank, N.A. With respect to each Letter of Credit, on the date that is 30
days prior (or the next business day if such 30th day is not a business day) to
its expiry date, the Escrow Agent shall draw on such Letter of Credit for the
full amount available to be drawn thereunder, deposit the Proceeds therefrom
into a separate interest bearing account established for that purpose (which
shall be the same account for the Proceeds of each Letter of Credit) and invest
such Proceeds therefrom in accordance with Section 3. With respect to each
Letter of Credit, at any time prior to the date upon which the Escrow Agent
draws on such Letter of Credit pursuant to this Agreement, Buyer may replace
such Letter of Credit with an identical letter of credit duly issued by
NationsBank, N.A. with a later expiry date, and in such event such replacement
letter of credit shall be treated as such Letter of Credit for all purposes
hereunder. The Escrow Agent will not draw on the Letters of Credit except as
provided in this Agreement.
SECTION 3 Investment of Proceeds. The Escrow Agent shall invest and
reinvest the Proceeds from the Letters of Credit in accordance with the written
direction of Buyer, in either (i) direct obligations of, or obligations the
principal and interest on which are unconditionally guaranteed by, the United
States of America maturing within less than 91 days of the acquisition thereof,
(ii) repurchase agreements fully collateralized by securities of the kind
specified in clause (i) above, (iii) money market accounts or certificates of
deposit maturing within less than 91 days of the acquisition thereof and issued
by a bank or trust company organized under the laws of the United States of
America or a State thereof (a "United States Bank" with a combined capital
surplus in excess of $250,000,000), (iv) commercial paper issued by a domestic
corporation and given the highest rating by Standard & Poor's Corporation and
Moody's Investors Service, Inc. and maturing within less than 91 days of the
acquisition thereof, (v) demand deposits with any United States Bank or any
federal savings and loan institution having a combined capital surplus in excess
of $250,000,000, or (vi) any money market fund substantially all of which is
invested in the foregoing investment categories, including any money market fund
managed by the Escrow Agent and any of its affiliates. The Proceeds shall
initially be invested in the Escrow Agent's Evergreen Institutional Treasury
Money Market Fund, #697 (the "Escrow Agent Fund"); provided that no transfer
fees shall be incurred upon any transfer of the Proceeds to or from the Escrow
Agent Fund. Buyer and the Company hereby acknowledge that they have received a
prospectus relating to the Escrow Agent Fund. All interest and profits earned on
the Proceeds shall be treated as part of the Proceeds and paid to the party to
which the Proceeds are paid. Any loss on any investment of the Proceeds shall be
borne by the party to which the Proceeds are paid.
SECTION 4. Release of Letter of Credit or Proceeds. (a) If the Escrow
Agent receives a certificate (or counterparts thereof) signed by the chief
executive officer, the president, or any vice president of Buyer (each, a "Buyer
Executive") and the chief executive officer, the president, or any vice
president of the Company (each, a "Company Executive") and directing the Escrow
Agent (i) to return the Letters of Credit to Buyer, (ii) with respect to each
Letter of Credit, if such Letter of Credit has not previously been drawn, draw
on such Letter of Credit for the full amount available to be drawn thereunder
and remit the Proceeds to the Company or (iii) with respect to each Letter of
Credit, if such Letter of Credit has previously been drawn pay the Proceeds to
Buyer or the Company, then the Escrow Agent shall take the action as directed in
such certificate. If the Merger is consummated, Buyer and the Company will
deliver a certificate to the Escrow Agent to return each Letter of Credit to
Buyer or, if either Letter of Credit has previously been drawn, to pay the
Proceeds therefrom to or as directed by Buyer.
(b) If the Merger Agreement is terminated by the Company pursuant to
Section 9.01(e) or 9.01(i) of the Merger Agreement, then (i) the Company shall
deliver to the Escrow Agent a certificate signed by a Company Executive
directing the Escrow Agent to pay the Proceeds to the Company and (ii) on the
fifth business day after the receipt of such certificate the Escrow Agent shall,
subject to the dispute resolution provisions of Section 5 hereof, (A) with
respect to each Letter of Credit that has not previously been drawn, draw on
such Letter of Credit for the full amount available to be drawn thereunder and
pay the Proceeds therefrom to the Company and (B) with respect to each Letter of
Credit that has previously been drawn, pay the Proceeds therefrom to the
Company.
(c) If the Merger Agreement is terminated other than as described in
subsection (b) above, then (i) Buyer shall deliver to the Escrow Agent a
certificate signed by a Buyer Executive directing the Escrow Agent to return
each Letter of Credit to Buyer (or with respect to each Letter of Credit that
has previously been drawn, to pay the Proceeds therefrom to Buyer) and (ii) on
the fifth business day after the receipt of such certificate the Escrow Agent
shall, subject to the dispute resolution procedures set forth in Section 5
hereof, take the action set forth in such certificate.
SECTION 5. Disputes. (a) The party delivering an officer's certificate
pursuant to Section 4(b) or (c) (the "Delivering Party") shall deliver to the
other party (the "Receiving Party") a copy of each officer's certificate
simultaneously with its delivery to the Escrow Agent. If the Receiving Party
objects to the officer's certificate, the Receiving Party shall notify (a
"Notice of Dispute") the Delivering Party and the Escrow Agent in writing before
the fifth business day after receipt of such officer's certificate by the Escrow
Agent. If the Receiving Party fails to deliver a Notice of Dispute to the
Delivering Party and the Escrow Agent before such fifth business day, the
direction set forth in such officer's certificate shall be conclusive and
binding on the Receiving Party, and the Escrow Agent shall take the action as
directed in such officer's certificate.
(b) If the Delivering Party and the Escrow Agent receive a Notice of
Dispute before such fifth business day, Buyer and the Company shall negotiate in
good faith and use all reasonable efforts to agree upon their rights with
respect thereto. If Buyer and Seller shall so agree, a certificate setting forth
such agreement shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely upon any such certificate and shall act in accordance with the
terms of such certificate as provided in Section 4(a) hereof.
(c) If, after receipt of a duly delivered Notice of Dispute, Buyer and
the Company are not able to resolve the dispute through agreement, then the
Escrow Agent shall not take any action in respect of the officer's certificate
until such dispute is resolved. In the event such dispute is resolved pursuant
to judicial process, then upon receipt of an officer's certificate from Buyer or
the Company stating that such dispute has been finally resolved and attaching
thereto a final and non-appealable judgment of a court of competent jurisdiction
resolving such dispute, the Escrow Agent shall take action in accordance with
such judgment.
SECTION 6. Substitute Form W-9. The Buyer and the Company shall provide
the Escrow Agent with a correct taxpayer identification number on a substitute
Form W-9 within 90 days of the date hereof and indicate thereon that it is not
subject to backup withholding on income earned on any amount received hereunder.
SECTION 7. Termination of Escrow Amount. This Agreement shall terminate
when the Escrow Agent shall have delivered the Letter of Credit to Buyer or the
Proceeds to Buyer or the Company pursuant to Section 4 or 5 hereof.
SECTION 8. Escrow Agent.
(a) Resignation and Removal of Escrow Agent. The Escrow Agent may
resign from the performance of its duties hereunder at any time by giving ten
(10) days' prior written notice to Buyer and the Company or may be removed, with
or without cause, by Buyer and the Company, acting jointly by furnishing a
certificate signed by a Buyer Executive and by a Company Executive (a "Joint
Written Direction") to the Escrow Agent, at any time by the giving of ten (10)
days' prior written notice to the Escrow Agent. Such resignation or removal
shall take effect upon the appointment of a successor Escrow Agent as provided
below. Upon any such notice of resignation or removal, Buyer and the Company
jointly shall appoint a successor Escrow Agent hereunder, which shall be a
commercial bank, trust company or other financial institution with a combined
capital and surplus in excess of $100,000,000. Upon the acceptance in writing of
any appointment as Escrow Agent hereunder by a successor Escrow Agent, such
successor Escrow Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and obligations under
this Escrow Agreement, but shall not be discharged from any liability for
actions taken as Escrow Agent hereunder prior to such succession. After any
retiring Escrow Agent's resignation or removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Escrow Agent under this Escrow Agreement. The retiring
Escrow Agent shall transmit all records pertaining to the Letter of Credit and
the Proceeds held by it and shall deliver the Letter of Credit (or if the Letter
of Credit has been drawn, the Proceeds) to the successor Escrow Agent, after
making copies of such records as the retiring Escrow Agent deems advisable and
after deduction and payment of the retiring Escrow Agent of all fees and
expenses (including court costs and reasonable attorney's fees) payable to,
incurred by or expected to be incurred by the retiring Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder. Any charge of 1/4 of 1 percent of the amount being transferred,
minimum U.S. $250.00, in connection with the transfer of the letter of credit
(pursuant to the terms thereof) shall be borne one-half by the Company and
one-half by Buyer.
(b) Liability of Escrow Agent. The Escrow Agent shall have no liability
or obligation with respect to the Letter of Credit and the Proceeds except for
the Escrow Agent's willful misconduct or gross negligence. The Escrow Agent's
sole responsibility shall be for the safekeeping and drawing on or returning the
Letter of Credit, and the safekeeping, investment and distribution of the
Proceeds, in accordance with the terms of this Escrow Agreement. The Escrow
Agent shall have no implied duties or obligations and shall not be charged with
knowledge or notice of any fact or circumstance not specifically set forth
herein or in any notice or certificate delivered pursuant hereto. The Escrow
Agent may rely upon any instrument, not only as to its due execution, validity
and effectiveness, but also as to the truth and accuracy of any information
contained therein, which the Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by the person or parties purporting to
sign the same and to conform to the provisions of this Escrow Agreement. In no
event shall the Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. The Escrow Agent shall not be obligated to
take any legal action or commence any proceeding in connection with the Letter
of Credit or the Proceeds, any account in which any Proceeds are deposited, this
Escrow Agreement or the Merger Agreement, or to appear in, prosecute or defend
any such legal action or proceeding. The Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the construction of
any of the provisions hereof or any other agreement or of its duties hereunder,
or relating to any dispute involving any party herein, and shall incur no
liability and shall be fully indemnified from any liability whatsoever in acting
in accordance with the opinion or instruction of such counsel. The reasonable
fees and expenses of any such counsel shall be paid one-half by Buyer and
one-half by the Company promptly upon demand of the Escrow Agent; provided, that
if such fees and expenses result solely form the fault of either Buyer or the
Company, then such party shall pay the entire amount of such fees and expenses.
Notwithstanding the foregoing sentence, if either Buyer or the Company shall
fail to satisfy its obligation to pay such fees and expenses pursuant to this
Section, then the Escrow Agent shall have the right to receive the entire amount
of such fees and expenses from the other party; provided that such party shall
have the right to be reimbursed by the other party for all payments made on its
behalf. The Escrow Agent is authorized, in its sole discretion, to comply with
orders or process entered by any court with respect to the Letter of Credit and
the Proceeds without determination by the Escrow Agent of such court's
jurisdiction in the matter. If any portion of the Letter of Credit or the
Proceeds is at any time attached, garnished or levied upon under any court
order, or in case the payment, assignment, transfer, conveyance or delivery of
any such property shall be stayed or enjoined by any court order, or in case any
order, judgment or decree shall be made or entered by any court affecting such
property or any part thereof, then and in any such event, the Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any such order,
writ, judgment or decree which it is advised by legal counsel selected by it is
binding upon it without the need for appeal or other action, and if the Escrow
Agent complies with any such order, writ, judgment or decree, it shall not be
liable to any of the parties hereto or to any other person or entity by reason
of such compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.
(c) Indemnification of Escrow Agent. From and at all times after the
date of this Escrow Agreement, Buyer and the Company, jointly and severally,
shall, to the fullest extent permitted by law and to the extent provided herein,
indemnify and hold harmless the Escrow Agent and each director, officer,
employee, attorney, agent and affiliate of the Escrow Agent (collectively, the
"Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including without limitation Buyer or the Company, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
person under any statute or regulations, including, but not limited to, any
federal or state securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party is a
party to any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, that no Indemnified Party shall have the right to be
indemnified hereunder for any liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted from the
gross negligence or willful misconduct of any Indemnified Party. Any such
indemnity shall be paid one-half by Buyer and one-half by the Company; provided
that if such indemnity results solely from the fault of either Buyer or the
Company, then such party shall pay the entire amount of such indemnity.
Notwithstanding the foregoing sentence, if either Buyer or the Company shall
fail to satisfy its obligation to make indemnity payments pursuant to this
Section, then the Escrow Agent shall have the right to receive the entire amount
of such indemnity payment from the other party; provided that such party shall
have the right to be reimbursed by the other party for all payments made on its
behalf. If any such action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly notify Buyer and the
Company in writing, and Buyer and the Company shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Such
Indemnified Party shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by such Indemnified Party in its sole
discretion) in any such action and to participate in the defense thereof, and
the fees and expenses of such counsel shall be paid by such Indemnified Party,
except that Buyer and the Company shall be required to pay such reasonable fees
and expenses if (i) Buyer and the Company agree to pay such reasonable fees and
expenses, (ii) Buyer and the Company shall fail to assume the defense of such
action or proceeding or shall fail to employ counsel reasonably satisfactory to
the Indemnified Party in any such action or proceeding, (iii) Buyer or the
Company is the plaintiff in any such action or proceeding or (iv) the named or
potential parties to any such action or proceeding (including any potentially
impleaded parties) include both the Indemnified Party and Buyer or the Company,
and the Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to Buyer and the Company and that joint
representation would therefore present an actual or potential conflict of
interest. Buyer and the Company shall be jointly and severally liable to pay
fees and expenses of counsel pursuant to the preceding sentence. All such fees
and expenses payable by Buyer and the Company pursuant to the preceding sentence
shall be paid one-half by Buyer and one-half by the Company (except that any (a)
obligation to pay under clause (i) shall apply only to the party so agreeing and
(b) if such obligation arises solely from the fault of either Buyer or the
Company, then such party shall pay the entire amount) from time to time as
incurred, both in advance of and after the final disposition of such action or
claim; provided, that if such fees and expenses result solely from the fault of
either Buyer or the Company, then such party shall pay the entire amount of such
fees and expenses. Notwithstanding the foregoing sentence, if either Buyer or
the Company shall fail to satisfy its obligation to pay such fees and expenses
pursuant to this Section, then the Escrow Agent shall have the right to receive
the entire amount of such fees and expenses from the other party; provided that
such party shall have the right to be reimbursed by the other party for all
payments made on its behalf. All of the foregoing losses, damages, costs and
expenses of the Indemnified Parties shall be payable by Buyer and the Company,
jointly and severally, upon demand by such Indemnified Party. The obligations of
Buyer and the Company under this Section 8 shall survive any termination of this
Escrow Agreement and the resignation or removal of the Escrow Agent.
The parties agree that neither the payment by Buyer or the Company of
any claim by Escrow Agent for indemnification hereunder shall impair, limit,
modify, or affect, as between Buyer and the Company, the respective rights and
obligations of Buyer, on the one hand, and the Company, on the other hand, under
the Merger Agreement.
SECTION 9. Fees and Expenses of Escrow Agent. Buyer and the Company
shall compensate the Escrow Agent for its services hereunder in accordance with
Schedule A attached hereto and, in addition, shall reimburse the Escrow Agent
for all of its reasonable out-of-pocket expenses, including attorneys' fees,
travel expenses, telephone and facsimile transmission costs, postage (including
express mail and overnight delivery charges), copying charges and the like. All
of the compensation and reimbursement obligations set forth in this Section 9
shall be payable one-half by Buyer and one-half by the Company upon demand by
the Escrow Agent. The obligations of Buyer and the Company under this Section 9
shall survive any termination of this Escrow Agreement and the resignation or
removal of the Escrow Agent. Buyer and the Company hereby grant to the Escrow
Agent and the Indemnified Parties a security interest in and lien upon the
Letter of Credit and the Proceeds to secure all obligations hereunder to the
Escrow Agent and the Indemnified Parties.
SECTION 10. Miscellaneous
(a) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answerback, by express or overnight mail delivered by a nationally
recognized air courier (delivery charges prepaid) or by registered or certified
mail) postage prepaid, return receipt requested) to the respective parties as
follows:
if to Buyer, to:
Avalon Cable of Michigan Holdings Inc.
c/o ABRY Partners, L.P.
18 Newbury Street
Boston, Massachusetts 02116
Telecopy: (617) 859-2797
Attention: Jay Grossman
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy: (312) 861-2200
Attention: Jill Sugar Factor
if to the Company, to:
Cable Michigan, Inc.
105 Carnegie Center
Princeton, New Jersey 08540
Telecopy: (609) 734-3830
Attention: General Counsel
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Taylor, Esq.
Telecopy: (212) 450-4800
if to the Escrow Agent, to:
First Union National Bank
765 Broad Street
Newark, N.J. 07102
Attention: Corporate Trust Department
Telecopy: (973) 430-2117
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person or by telecopy shall be deemed
effective on delivery. Any notice or communication sent by air courier shall be
deemed effective on the first business day at the place at which such notice or
communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed. Notwithstanding anything herein to the
contrary, all notices to the Escrow Agent shall be deemed duly given on the date
of receipt by the Escrow Agent.
(b) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(c) Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of New York, without regard to the
conflicts of law rules of such state.
(d) Definitions. Terms used herein that are defined in the Merger
Agreement are, unless otherwise defined, used herein as therein defined.
(e) Amendments. (i) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and is signed, in
the case of an amendment, by each party hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(ii) No failure or delay by any party in exercising any right, 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, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
(f) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
(g) Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
(h) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(i) Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby shall be brought in the
in any federal court in the Borough of Manhattan, New York, New York or any New
York State court in the Borough of Manhattan, New York, New York, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10(a) shall be deemed
effective service of process on such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the day and year
first above written.
AVALON CABLE OF MICHIGAN
HOLDINGS INC.
By: /s/ Peggy Koenig
----------------------------------
Name: Peggy Koenig
Title: President
CABLE MICHIGAN, INC.
By: /s/ Mark Haverkate
---------------------------------
Name: Mark Haverkate
Title: President, Chief Operating
Officer
FIRST UNION NATIONAL BANK,
as Escrow Agent
By: /s/ Stephanie Roche
---------------------------------
Name: Stephanie Roche
Title: Vice President
EXHIBIT A
TO ESCROW AGREEMENT
IRREVOCABLE STANDBY LETTER OF CREDIT
No. _____________
June 3, 1998
First Union National Bank
765 Broad Street
Newark, New Jersey 07101
Attention: Corporate Trust Office
Dear Sirs:
We hereby establish, at the request and for the account of ABRY
Broadcast Partners III, L.P., a Delaware limited partnership (the "Company"), in
your favor, as the Escrow Agent under the Escrow Agreement dated on or about
June 3, 1998 (the "Escrow Agreement") provided for under the Agreement and Plan
of Merger dated on or about June 3, 1998 among Avalon Cable of Michigan
Holdings, Inc., Avalon Cable of Michigan, Inc. and Cable Michigan, Inc. (the
"Merger Agreement"), our Irrevocable Standby Letter of Credit No. ________, in
the amount of U.S. $10,000,000.00, effective immediately and expiring at the
close of banking business at the counters of NationsBank, N.A., Dallas, Texas on
June 3, 1999 (the "Stated Expiry Date").
We hereby irrevocably authorize you to draw on us, in an amount not to
exceed the amount of this Letter of Credit set forth above and in accordance
with the terms and conditions hereinafter set forth, in a single drawing by your
draft, drawn on us and accompanied by (i) your written and completed certificate
purportedly signed by you in substantially the form of Annex A attached hereto
and (ii) the original of this Letter of Credit. Such draft must be marked "Drawn
under NatonsBank, N.A., Irrevocable Standby letter of Credit No. _________.
We engage with you that any draft drawn under and in compliance with
the terms of this Letter of Credit will be duly honored as hereinafter provided
on presentation to us at our Letter of Credit Department, 901 Main Street,
Dallas, Texas 75202, on or before the close of banking business on the earlier
of (i) the Stated Expiry Date and (ii) such earlier date on which this Letter of
Credit automatically terminates pursuant to the terms of the next succeeding
paragraph. If we receive your draft and certificate at such office, all in
conformity with the terms and conditions of this Letter of Credit, not later
than 10:00 A.M. (Dallas, Texas time), we will honor the same on the same day by
payment made by wire transfer of immediately available funds in accordance with
the payment instructions set forth in your certificate. If we receive your draft
and certificate at such office, all in conformity with the terms of this Letter
of Credit, after 10:00 A.M. (Dallas, Texas time), we will honor the same on the
next succeeding banking day by payment made by wire transfer of immediately
available funds in accordance with the payment instructions set forth in your
certificate.
Upon the earliest of (i) our honoring your draft presented hereunder,
(ii) the date on which this Letter of Credit is surrendered to us with a written
notice from you that this Letter of Credit is being returned to us for
cancellation, (iii) the date on which we receive written notice from you that an
alternate letter of credit or other credit facility has been substituted for
this Letter of Credit and (iv) the Stated Expiry Date, this Letter of Credit
shall automatically terminate.
This Letter of Credit is transferable in its entirety by you only to
your successor as Escrow Agent under the Escrow Agreement, provided that you
certify to us that such transferee has succeeded you as Escrow Agent under the
Escrow Agreement in accordance with the terms of the Escrow Agreement and you
and such successor Escrow Agent comply with our usual and customary procedures
for transfer, including, without limitation, your delivery to us of our written
full transfer form H-4 (H-4 attached or to follow by mail). The original Letter
of Credit, together with all original amendments (if any) must be returned to us
with the completed transfer form and payment of our customary charge of 1/4 of 1
percent of the amount being transferred, minimum U.S. $250.00.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Purchase Agreement), except only the
certificate and the draft referred to herein; and any such reference shall not
be deemed to incorporate herein by reference any document, instrument or
agreement, except for such certificate and such draft.
This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). This Letter of Credit shall, as to
matters not governed by the Uniform Customs, be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas, including the
Uniform Commercial Code as in effect in the State of Texas.
Very truly yours,
NATIONSBANK, N.A.
By:
--------------------------------
Title:
Annex A
CERTIFICATE FOR DRAWING UNDER IRREVOCABLE STANDBY
LETTER OF CREDIT NO.________________
DATED JUNE 3, 1998
The undersigned, a duly authorized officer of the undersigned (the
"Beneficiary"), hereby certifies to NationsBank, N.A. (the "Bank"), with
reference to Irrevocable Standby Letter of Credit No. ____________ (the "Letter
of Credit", the terms defined therein and not otherwise defined herein being
used herein as therein defined) issued by the Bank in favor of the Beneficiary,
as follows:
(1) The Beneficiary is the Escrow Agent under the Escrow
Agreement provided for under the Merger Agreement.
(2) The Beneficiary is authorized, in accordance with the
Escrow Agreement, to make a drawing under the Letter of Credit.
(3) The amount of the draft accompany this Certificate is U.S.
$------------.
(4) Payment under this draw request should be made as set
forth in the wiring instructions attached hereto.
IN WITNESS WHEREOF, the Beneficiary has executed and delivered this
Certificate as of the ____day of ____________, 19__.
-----------------------------
Escrow Agent
By:__________________________
Name:________________________
Title:_________________________
