<PAGE> 1
AS FILED PURSUANT TO RULE 424(b)(3) AND (c)
REGISTRATION NO. 333-56679;
333-56679-01; 333-56679-02;
333-56679-03
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 8, 1998 AND
PROSPECTUS SUPPLEMENT DATED NOVEMBER 13, 1998)
RENAISSANCE MEDIA GROUP LLC
RENAISSANCE MEDIA (LOUISIANA) LLC
RENAISSANCE MEDIA (TENNESSEE) LLC
RENAISSANCE MEDIA CAPITAL CORPORATION
10% SENIOR DISCOUNT NOTES DUE 2008
ATTACHED HERETO AND INCORPORATED BY REFERENCE HEREIN IS THE CURRENT REPORT
ON FORM 8-K DATED MARCH 1, 1999.
This Prospectus Supplement, together with the Prospectus, is to be used by
Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Dean Witter Reynolds,
Inc. ("Dean Witter" and, together with Morgan Stanley, "Morgan Stanley Dean
Witter"), in connection with offers and sales of the 10% Senior Discount Notes
due 2008 (the "Notes") in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. Morgan Stanley Dean
Witter may act as principal or as agent in such transactions. The Obligors will
receive no portion of the proceeds of the sales of such Notes and will bear the
expenses incident to the registration thereof. If Morgan Stanley Dean Witter
conducts any market-making activities, it may be required to deliver a
"market-making prospectus" when effecting offers and sales in the Notes because
of the equity ownership of Renaissance Media Holdings LLC ("Holdings") by Morgan
Stanley Capital Partners III, L.P. ("MSCP III"), Morgan Stanley Capital
Investors, L.P. ("MSCI"), MSCP III 982 Investors, L.P. ("MSCP Investors" and,
collectively, with its affiliates, MSCP III, MSCI and their respective
affiliates, the "Morgan Stanley Entities"), all of which are affiliates of
Morgan Stanley Dean Witter. As of September 30, 1998, the Morgan Stanley
Entities owned in the aggregate approximately 87.6% of the outstanding equity of
Holdings. For as long a market-making prospectus is required to be delivered,
the ability of Morgan Stanley Dean Witter to make a market in the Notes may, in
part, be dependent on the ability of the Company to maintain a current
market-making prospectus.
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 23, 1999
RENAISSANCE MEDIA GROUP LLC
RENAISSANCE MEDIA (TENNESSEE) LLC
RENAISSANCE MEDIA (LOUISIANA) LLC
RENAISSANCE MEDIA CAPITAL CORPORATION
(Exact Name of Registrants as Specified in Their Charters)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
333-56679 14-1803051
333-56679-01 14-1801164
333-56679-02 14-1801165
333-56679-03 14-1803049
-------- ----------
(Commission File Numbers) (I.R.S. Employer Identification
Numbers)
ONE CABLEVISION CENTER - SUITE 100
FERNDALE, NY 12734
(Address of Principal Executive Offices) (Zip Code)
(914) 295-2600
(Registrants' telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 3
Item 5. Other Events.
On February 23, 1999, Renaissance Media Holdings LLC ("Holdings"),
Renaissance Media Group LLC ("Group"), Charter Communications, Inc. ("Charter")
and Charter Communications, LLC ("Buyer") entered into a Purchase Agreement (the
"Purchase Agreement"), pursuant to which Holdings will sell, and Buyer will
purchase from Holdings, all of the outstanding limited liability company
interests in Group. The transaction is subject to certain conditions, including
obtaining consents from certain local franchising authorities and the Federal
Communications Commission (the "FCC") in connection with transfer of certain
cable television franchises and FCC licenses, respectively. There can be no
assurance that any of such conditions to the consummation of the transaction
contemplated by the Purchase Agreement will be satisfied in a timely manner or
at all. A copy of the Purchase Agreement is attached hereto as Exhibit 99.1 and
incorporated by reference herein.
The consummation of the transaction contemplated by the Purchase Agreement
shall constitute a "Change of Control" for purposes of the Indenture dated as of
April 9, 1998 by and among Group, Renaissance Media (Louisiana) LLC, Renaissance
Media (Tennessee) LLC, Renaissance Media Capital Corporation (collectively, the
"Issuers") and United States Trust Company of New York, as Trustee, and the 10%
Senior Discount Notes due 2008 issued thereunder, as a result of which the
Issuers must commence an "Offer to Purchase" within thirty (30) days of the
consummation of the transaction contemplated by the Purchase Agreement pursuant
to Section 4.12 of the Indenture.
The description of the Purchase Agreement set forth herein does not purport
to be complete and is qualified in its entirety by the provisions of the
Purchase Agreement.
On February 26, 1999, Group issued a press release announcing its results
for the quarter ended December 31, 1998. A copy of the press release is attached
hereto as Exhibit 99.2 and incorporated by reference herein. A copy of the
Audited Consolidated Financial Statements of Group for the year ended December
31, 1998 is attached hereto as Exhibit 99.3 and incorporated by reference
herein.
Item 7. Financial Statements and Exhibits.
The following exhibits are filed herewith:
Exhibits:
99.1 Purchase Agreement dated as of February 23, 1999 by and among Charter
Communications, Inc., Charter Communications, LLC, Renaissance Media Holdings
LLC and Renaissance Media Group LLC.
99.2 Press release of Renaissance Media Group LLC dated February 26, 1999.
<PAGE> 4
99.3 Audited Consolidated Financial Statements of Renaissance Media Group
LLC for the year ended December 31, 1998.
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to
the Purchase Agreement are omitted. The Purchase Agreement contains a list
identifying the content of the exhibits and schedules thereto, and Renaissance
Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation agree to furnish
supplementally copies of the exhibits and schedules to the Purchase Agreement to
the Securities and Exchange Commission upon request.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RENAISSANCE MEDIA GROUP LLC
Dated March 1, 1999 By: /s/ Mark W. Halpin
--------------------------
Name: Mark W. Halpin
Title: Treasurer and CFO
RENAISSANCE MEDIA (TENNESSEE) LLC
Dated March 1, 1999 By: /s/ Mark W. Halpin
--------------------------
Name: Mark W. Halpin
Title: Treasurer and CFO
RENAISSANCE MEDIA (LOUISIANA) LLC
Dated March 1, 1999 By: /s/ Mark W. Halpin
--------------------------
Name: Mark W. Halpin
Title: Treasurer and CFO
RENAISSANCE MEDIA CAPITAL CORPORATION
Dated March 1, 1999 By: /s/ Mark W. Halpin
--------------------------
Name: Mark W. Halpin
Title: Treasurer and CFO
<PAGE> 6
EXHIBIT INDEX
99.1 Purchase Agreement dated as of February 23, 1999 by and among Charter
Communications, Inc., Charter Communications, LLC, Renaissance Media Holdings
LLC and Renaissance Media Group LLC. [Confidential material omitted and filed
separately with the Securities and Exchange Commission pursuant to a request
for confidential treatment.]
99.2 Press release of Renaissance Media Group LLC dated February 26, 1999.
99.3 Audited Consolidated Financial Statements of Renaissance Media Group
LLC for the year ended December 31, 1998.
<PAGE> 7
PURCHASE AGREEMENT
DATED AS OF FEBRUARY 23, 1999
BY AND AMONG
CHARTER COMMUNICATIONS, INC.,
CHARTER COMMUNICATIONS, LLC
RENAISSANCE MEDIA HOLDINGS LLC
AND
RENAISSANCE MEDIA GROUP LLC
CERTAIN PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION
WITH A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[Confidential Information Omitted and filed separately with the Securities and
Exchange Commission] Represents Confidential portion which has been omitted and
filed separately with the Securities and Exchange Commission.
<PAGE> 8
PURCHASE AGREEMENT
DATED AS OF FEBRUARY 23, 1999
TABLE OF CONTENTS
-----------------
Page
SECTION 1 CERTAIN DEFINITIONS...............................................1
1.1 Terms Defined in this Section................................1
"Adjustment Time".................................................1
"Affiliate".......................................................2
"Assets"..........................................................2
"Basic Subscriber"................................................2
"Bulk Subscriber".................................................2
"Cable Act".......................................................2
"Charter's Disclosure Schedules"..................................2
"Closing".........................................................3
"Closing Date"....................................................3
"Code"............................................................3
"Consents"........................................................3
"Contracts".......................................................3
"Copyright Act"...................................................3
"Credit Agreement"................................................3
"Debt Documents"..................................................3
"Employee Plan"...................................................3
"Employment Agreements"...........................................4
"Encumbrances"....................................................4
"Enforceability Exceptions".......................................4
"Environmental Claim".............................................4
"Environmental Law"...............................................4
"Equity Interests"................................................4
"Equivalent Subscribers"..........................................5
"ERISA"...........................................................5
"ERISA Affiliate" ................................................5
"Escrow Agent"....................................................5
"Exchange Act"....................................................5
"Excluded Assets".................................................5
"FCC".............................................................5
"FCC Regulations".................................................5
"Franchise".......................................................5
"Franchise Area"..................................................6
"Franchising Authorities".........................................6
"GAAP"............................................................6
"Governmental Authority"..........................................6
"Hazardous Substance".............................................6
"Headquarters Employees"..........................................6
"HSR Act".........................................................6
- i -
<PAGE> 9
Page
"Indemnity Agreement".............................................7
"Indenture".......................................................7
"Indenture Closing Documents".....................................7
"Intangibles".....................................................7
"Knowledge".......................................................7
"Legal Restrictions"..............................................7
"Licenses"........................................................8
"Loss"............................................................8
"Material Contract"...............................................8
"Material FCC Consent"............................................8
"Material Lease"..................................................8
"Organizational Documents"........................................8
"Permitted Encumbrances"..........................................8
"Person"..........................................................9
"Pre-Closing Tax Period"..........................................9
"Programming Agreement"...........................................9
"Purchased Interests".............................................9
"Rate Regulatory Matter"..........................................9
"Real Property"...................................................9
"Renaissance Capital"............................................10
"Renaissance Companies"..........................................10
"Renaissance's Disclosure Schedules".............................10
"Renaissance Louisiana"..........................................10
"Renaissance Media"..............................................10
"Renaissance Tennessee"..........................................10
"SEC"............................................................10
"Securities Act".................................................10
"Senior Debt"....................................................10
"Senior Debt Amount".............................................10
"Senior Discount Notes"..........................................10
"Senior Discount Notes Accreted Value"...........................10
"Subsidiary".....................................................11
"Systems"........................................................11
"Tangible Personal Property".....................................11
"Tax"............................................................11
"Tax Return".....................................................11
"Transaction Documents"..........................................11
"Upset Date".....................................................12
1.2 Terms Defined Elsewhere in this Agreement...................12
1.3 Rules of Construction.......................................13
SECTION 2 SALE AND PURCHASE OF PURCHASED INTERESTS; ASSUMPTION OF
LIABILITIES; CASH CONSIDERATION..................................13
2.1 Agreement to Sell and Buy Purchased Interests...............13
- ii -
<PAGE> 10
Page
2.2 Cash Consideration for Purchased Interests..................13
2.3 Cash Consideration Adjustments..............................13
2.4 Payments at Closing.........................................14
2.5 Post-Closing Payment of Cash Consideration Adjustments......16
SECTION 3: REPRESENTATIONS AND WARRANTIES OF GROUP..........................17
3.1 Organization and Authority. ............................18
3.2 Authorization and Binding Obligation....................18
3.3 Organization and Ownership of Renaissance Companies.....18
3.4 Absence of Conflicting Agreements; Consents.............19
3.5 Financial Statements....................................19
3.6 Absence of Undisclosed Liabilities......................20
3.7 Absence of Certain Changes..............................20
3.8 Franchises, Licenses, Material Contracts................20
3.9 Title to and Condition of Real Property and Tangible
Personal Property.......................................21
3.10 Intangibles.............................................22
3.11 Information Regarding the Systems.......................22
3.12 Taxes...................................................23
3.13 Employee Plans..........................................25
3.14 Environmental Laws......................................26
3.15 Claims and Litigation...................................27
3.16 Compliance With Laws....................................27
3.17 Transactions with Affiliates............................28
3.18 Certain Fees............................................28
3.19 Inventory...............................................28
3.20 Overbuilds; Competition.................................28
3.21 Disconnections..........................................29
3.22 Year 2000...............................................29
3.23 Budgets.................................................29
3.24 Cure....................................................29
SECTION 4: REPRESENTATIONS AND WARRANTIES OF HOLDINGS.......................29
4.1 Organization; Authorization and Binding Obligation......29
4.2 Authorization and Binding Obligation....................29
4.3 Absence of Conflicting Agreements; Consents.............30
4.4 Title to Purchased Interests............................30
4.5 Claims and Litigation...................................30
4.6 Certain Fees............................................31
4.7 Cure....................................................31
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER AND
CHARTER..........................................................31
5.1 Organization............................................31
- iii -
<PAGE> 11
Page
5.2 Authorization and Binding Obligation....................31
5.3 Absence of Conflicting Agreements; Consents.............32
5.4 Claims and Litigation...................................32
5.5 Investment Purpose; Investment Company..................32
5.6 Ownership of Buyer......................................33
5.7 Certain Fees............................................33
5.8 Availability of Funds...................................33
5.9 Cure....................................................33
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS.................................33
6.1 Operation of Business Prior to Closing..................33
6.2 Confidentiality; Press Release..........................36
6.3 Cooperation; Commercially Reasonable Efforts............37
6.4 Consents................................................37
6.5 HSR Act Filing..........................................38
6.6 Charter's Actions.......................................39
6.7 Renaissance Debt Obligations............................39
6.8 Retention and Access to the Renaissance Companies'
Records.................................................40
6.9 Employee Matters........................................40
6.10 Tax Matters.............................................41
6.11 Renaissance Name........................................43
6.12 No Recourse; Release of Claims..........................43
6.13 Exculpation and Indemnification.........................44
6.14 Rate Regulatory Matters.................................44
6.15 Guaranty by Charter.....................................45
6.16 Disclosure Schedules....................................46
SECTION 7: CONDITIONS TO OBLIGATIONS OF BUYER AND CHARTER...................46
7.1 Conditions to Obligations of the Buyer and Charter......46
7.2 Conditions to Obligations of Holdings...................47
SECTION 8: CLOSING AND CLOSING DELIVERIES...................................48
8.1 Closing.................................................48
8.2 Deliveries by Holdings..................................49
8.3 Deliveries by Buyer and Charter.........................50
SECTION 9: TERMINATION......................................................51
9.1 Agreement between Holdings and Buyer....................51
9.2 Termination by Holdings.................................51
9.3 Termination by Buyer....................................52
9.4 Effect of Termination...................................52
9.5 Attorneys' Fees.........................................53
- iv -
<PAGE> 12
Page
SECTION 10:SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES................................53
10.1 Survival................................................53
10.2 Indemnification by Holdings.............................53
10.3 Indemnification by Buyer and Charter....................54
10.4 Indemnity Agreement.....................................54
10.5 Certain Limitations on Indemnification Obligations......54
10.6 Procedure for Indemnification...........................57
10.7 Treatment of Indemnification Payments...................58
SECTION 11:MISCELLANEOUS....................................................58
11.1 Fees and Expenses.......................................58
11.2 Notices.................................................58
11.3 Benefit and Binding Effect..............................59
11.4 Further Assurances......................................60
11.5 GOVERNING LAW...........................................60
11.6 WAIVER OF JURY TRIAL....................................60
11.7 SUBMISSION TO JURISDICTION; VENUE.......................60
11.8 Severability............................................60
11.9 Entire Agreement........................................61
11.10 Amendments; Waiver of Compliance; Consents..............61
11.11 Counterparts............................................61
- v -
<PAGE> 13
Schedule Description
- -------- -----------
Schedule 1.1 Licenses
Schedule 1.1(a) Buyer and Charter-Knowledge
Schedule 1.1(b) Holdings and Group-Knowledge
Schedule 1.2 Headquarters Employees
Schedule 3.3 Organization and Ownership of the Renaissance
Companies
Schedule 3.4 Absence of Conflicting Agreements; Consents
Schedule 3.5 Financial Statements
Schedule 3.7 Absence of Certain Changes
Schedule 3.8 Franchises, Licenses, Material Contracts
Schedule 3.9 Title to and Condition of Real Property and Tangible
Personal Property
Schedule 3.10 Intangibles
Schedule 3.11 Information Regarding the Systems
Schedule 3.12 Taxes
Schedule 3.13 Employee Plans
Schedule 3.14 Environmental Laws
Schedule 3.15 Claims and Litigation
Schedule 3.16 Compliance with Laws
Schedule 3.17 Transactions with Affiliates
Schedule 3.20 Overbuilds; Competition
Schedule 3.21 Disconnections
Schedule 3.23 Budgets
Schedule 4.3 Absence of Conflicting Agreements; Consents
Schedule 4.5 Claims and Litigation
Schedule 5.4 Claims and Litigation
Schedule 6.1 Operation of Business Prior to Closing
- vi -
<PAGE> 14
TABLE OF EXHIBITS
Exhibit Description
------- ----------------------------------
Exhibit A Student Subscribers
Exhibit B Excluded Assets
Exhibit C Form of Opinion of Counsel to Holdings and Group
Exhibit D Form of Opinion of Counsel to Buyer and Charter
Exhibit E Indemnity Agreement
Exhibit F Adjustment Escrow Agreement
Exhibit G Form of Opinion of Counsel to Holdings and Group
with respect to certain FCC Matters
- vii -
<PAGE> 15
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is dated as of February 23,
1999, by and among CHARTER COMMUNICATIONS, INC., a Delaware corporation
("Charter"), CHARTER COMMUNICATIONS, LLC, a Delaware limited liability company
("Buyer"), RENAISSANCE MEDIA HOLDINGS LLC, a Delaware limited liability company
("Holdings"), and RENAISSANCE MEDIA GROUP LLC, a Delaware limited liability
company ("Group").
R E C I T A L S:
A. Holdings holds all the outstanding limited liability company interests in
Group.
B. Buyer is an indirect majority-owned subsidiary of Charter.
C. Buyer desires to acquire from Holdings all of its limited liability company
interests in Group.
D. The parties hereto desire to set forth the terms in accordance with which
Buyer shall acquire all the limited liability company interests in Group held by
Holdings for the consideration and on the terms and conditions set forth in this
Agreement.
A G R E E M E N T S:
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties to this Agreement, intending
to be bound legally, agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, have the meanings set forth in this Section:
"Adjustment Escrow Agent" means the Escrow Agent named in the Adjustment
Escrow Agreement.
"Adjustment Escrow Agreement" means the Adjustment Escrow Agreement to be
executed and delivered by Buyer, Charter, Holdings and the Adjustment Escrow
Agent, substantially in the form of Exhibit F hereto.
"Adjustment Time" means (A) with respect to the purchase and sale of the
Purchased Interests and to Current Assets and Current Liabilities and other
items that primarily relate to the Renaissance Companies as a whole, 11:59 p.m.,
New York time, on the Closing Date, and (B)
<PAGE> 16
- 2 -
with respect to Current Assets and Current Liabilities and other items that
primarily relate to a particular System, 11:59 p.m. local time for that System,
on the Closing Date.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the specified Person.
"Assets" means all of the tangible and intangible assets that are owned,
leased or held by the Renaissance Companies and that are used or held for use in
connection with the conduct of the business or operations of the Systems, other
than the Excluded Assets, and less any such Assets that are sold, transferred or
otherwise conveyed by the Renaissance Companies to third Persons prior to the
Closing in accordance with the provisions of this Agreement, provided that with
respect to any assets that are leased by the Renaissance Companies or otherwise
not owned by the Renaissance Companies, "Assets" includes only the interest,
title and rights in such assets held by the Renaissance Companies.
"Basic Subscriber" means, with respect to any System, as of any date of
determination, any Subscriber to a System at the regular basic monthly
subscription rate (including discounted rates offered in the ordinary course of
business consistent with past practice) for at least broadcast basic cable
service (either alone or in combination with any other service) for such System,
who has rendered payment of one month's service and who has not more than Five
Dollars ($5.00) more than two (2) months past due.
"Bulk Subscriber" means, with respect to any System, as of any date of
determination, any Subscriber, other than a Basic Subscriber, to at least
broadcast basic cable service (either alone or in combination with any other
service) for a System which is billed to such Subscriber on a bulk basis to bulk
commercial accounts, such as hotels, motels, hospitals, apartment houses and
similar multiple dwelling units or other commercial accounts and who has
rendered payment for one month's service at such customer's regular basic
monthly subscription rate for such service and who does not have more than
$10.00 (excluding late charges and fees and amounts subject to a bona fide
dispute) that is two months or more past due from the last day of the period to
which any outstanding bill relates.
"Cable Act" means Title VI of the Communications Act of 1934, as amended,
47 U.S.C. Section 151 et seq., and all other provisions of the Cable
Communications Policy Act of 1984, the Cable Television Consumer Protection and
Competition Act of 1992, and the provisions of the Telecommunications Act of
1996 amending Title VI of the Communications Act of 1934, in each case as
amended and in effect from time to time.
"Charter's Disclosure Schedules" means the Disclosure Schedules referred to
in Section 5 of this Agreement and attached to this Agreement.
"Charter Parties" means Charter and Buyer, collectively.
<PAGE> 17
- 3 -
"Closing" means the purchase and sale of the Purchased Interests pursuant
to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, as amended and in effect from time
to time.
"Compensation Arrangement" means any plan or compensation arrangement other
than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers, directors and shareholders of any
Renaissance Company or any ERISA Affiliate any compensation or other benefits,
whether deferred or not, in excess of base salary or wages, including, but not
limited to, any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other employee fringe benefit plan.
"Consents" means the consents, permits, approvals and authorizations of
Governmental Authorities and other Persons necessary to transfer the Purchased
Interests to Buyer and to consummate the other transactions contemplated by this
Agreement.
"Contracts" means all leases, easements, rights-of-way, rights of entry,
programming agreements, pole attachment and conduit agreements, customer
agreements and other agreements (other than Franchises), written or oral
(including any amendments and other modifications thereto), to which any
Renaissance Company is a party or which are binding upon any Renaissance Company
and (A) which are in effect on the date hereof, or (B) which are entered into by
any Renaissance Company between the date hereof and the Closing Date in
accordance with the provisions of this Agreement.
"Copyright Act" means the Copyright Act of 1976, as amended and in effect
from time to time.
"Credit Agreement" means the Credit Agreement dated as of April 9, 1998
among Renaissance Media, the Lenders party thereto, Morgan Stanley Senior
Funding, Inc., as Syndication Agent and Arranger, CIBC, Inc., as Documentation
Agent, and Bankers Trust Company, as Administrative Agent, as the same may be
amended and in effect from time to time.
"Debt Documents" means the Indenture, the Indenture Closing Documents and
the Credit Agreement and all documents or instruments delivered in connection
therewith or pursuant thereto.
"Employee Plan" means any pension, retirement, profit-sharing, deferred
compensation, vacation, severance, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA to which any Renaissance
<PAGE> 18
- 4 -
Company or any ERISA Affiliate of any Renaissance Company contributes or is
required to contribute or which any Renaissance Company or any such ERISA
Affiliate sponsors or maintains.
"Employment Agreements" means the Employment Agreement dated April 9, 1998
between Renaissance Media LLC and Fred Schulte, the Employment Agreement dated
April 9, 1998 between Renaissance Media LLC and Rodney Cornelius, the Employment
Agreement dated April 9, 1998 between Renaissance Media LLC and Mark Halpin, the
Employment Agreement dated April 9, 1998 between Renaissance Media LLC and
Michael J. Egan, the Employment Agreement dated April 9, 1998 between
Renaissance Media LLC and Darlene Fedun and the Employment Agreement dated April
9, 1998 between Renaissance Media LLC and David L. Testa.
"Encumbrances" means any pledge, claim, mortgage, lien, charge, encumbrance
or security interest of any kind or nature whatsoever.
"Enforceability Exceptions" means the exceptions or limitations to the
enforceability of contracts under bankruptcy, insolvency, or similar laws
affecting creditors' rights generally or by judicial discretion in the
enforcement of equitable remedies and by public policies generally.
"Environmental Claim" means any written claim or notice of any proceeding
before a Governmental Authority arising under or pertaining to any Environmental
Law or Hazardous Substance.
"Environmental Law" means any Legal Requirement pertaining to land use,
air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), the handling, storage, treatment or
disposal of waste, including hazardous waste, and the handling, storage,
manufacture, treatment or transportation of hazardous materials, or to the
protection of public health and safety, occupational health and safety or worker
health and safety or any other environmental matter, including the following
laws as amended and as in effect at the relevant time (including, but not
limited to, the following statutes, any regulations promulgated pursuant to any
of them, any permits, licenses or authorizations issued thereunder, any state or
regional analogues thereto and any permits or regulations issued thereunder):
(A) Clean Air Act (42 U.S.C. ss. 7401, et seq.); (B) Clean Water Act (33 U.S.C.
ss. 1251, et seq.); (C) Resource Conservation and Recovery Act (42 U.S.C. ss.
6901, et seq.); (D) Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss. 9601, et seq.); (E) Safe Drinking Water Act (42
U.S.C. 300f, et seq.); (F) the Hazardous Materials Transportation Act; (G) the
Federal Insecticide, Fungicide and Rodenticide Act and (H) Toxic Substances
Control Act (15 U.S.C. ss. 2601, et seq.).
"Equity Interests" means any and all shares, interests, or other
equivalent interests (however designated) in the equity of any Person, including
capital stock, partnership interests and membership interests, and including any
rights, options or warrants with respect thereto.
<PAGE> 19
- 5 -
"Equivalent Subscribers" means, with respect to any System, as of any date
of determination, the sum of: (A) the number of Basic Subscribers served by such
System as of such date; (B) the number of Basic Subscribers represented by the
Bulk Subscribers served by such System as of such date, which number shall be
calculated for full basic cable service provided by such System by dividing (1)
the monthly billings attributable to such System's Bulk Subscribers for full
basic cable service provided by such System for the calendar month immediately
preceding the date on which such calculation is made, by (2) the full,
non-discounted monthly rate charged by such System for full basic cable service
(excluding pass-through charges for sales taxes, line-itemized franchise fees,
fees charged by the FCC and other similar line-itemized charges); and (C) the
number of equivalent Basic Subscribers represented by the "Student Subscribers"
of the Renaissance Companies as of the date of determination, which number will
be determined as set forth on Exhibit A. For purposes of the foregoing, monthly
billings shall exclude billings for a la carte or optional service tiers and for
premium services, pass-through charges for sales taxes, line-itemized franchise
fees, fees charged by the FCC and other similar line-itemized charges, and
nonrecurring charges or credits which include those relating to installation,
connection, relocation and disconnection fees and miscellaneous rental charges
for equipment such as remote control devices and converters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as amended and in effect from
time to time.
"ERISA Affiliate" means a trade or business affiliated within the meaning
of Sections 414(b), (c) or (m) of the Code.
"Escrow Agent" means the Escrow Agent named in the Indemnity Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder, as in effect from
time to time.
"Excluded Assets" means the assets listed on Exhibit B.
"FCC" means the Federal Communications Commission, or any successor agency
thereof.
"FCC Licenses" means any licenses issued or granted to a Renaissance
Company by the FCC, including all amendments thereto and renewals or
modifications thereof.
"FCC Regulations" means the rules, regulations and published policies and
decisions of the FCC as they are applicable to the Systems and promulgated by
the FCC with respect to the Cable Act, as in effect from time to time.
"Franchise" means any cable television franchise and related agreements,
ordinances, permits, instruments or other authorizations issued or granted to a
Renaissance Company by any
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Governmental Authority, including all amendments thereto and renewals or
modifications thereof.
"Franchise Area" means any geographic area in which a Renaissance Company
is authorized to provide cable television service pursuant to a Franchise or
otherwise provides cable television service for which area a Franchise is being
negotiated or is not required pursuant to applicable Legal Requirements.
"Franchising Authorities" means all Governmental Authorities that have
issued or granted any Franchises relating to the operation of a System.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.
"Governmental Authority" means any federal, state, or local governmental
authority or instrumentality, including any court, tribunal or administrative or
regulatory agency, department, bureau, commission or board.
"Hazardous Substance" means any pollutant, contaminant, hazardous or toxic
substance, material, constituent or waste or any pollutant or any release
thereof that is labeled or regulated as such by any Governmental Authority
pursuant to an Environmental Law, including petroleum or petroleum compounds,
radioactive materials, asbestos or any asbestos-containing material, or
polychlorinated biphenyls.
"Headquarters Employees" means the employees of the Renaissance Companies
set forth in Schedule 1.2.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the regulations promulgated by the Federal Trade Commission with respect
thereto, as amended and in effect from time to time.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables and accrued liabilities entered into in the ordinary course of business
on ordinary terms); (c) all non-contingent reimbursement or payment obligations
with respect to surety instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property) and all obligations under any linefill
agreements; (f) all capitalized lease obligations; (g) all net obligations with
respect to swap Contracts; (h) all indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing
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right, contingent or otherwise, to be secured by) any lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (i) all guaranty obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above; provided,
however, that "Indebtedness" shall not include any obligations such as letters
of credit, surety bonds or performance bonds or similar obligations entered into
in the ordinary course of business.
"Indemnity Agreement" means the Indemnity Agreement to be executed and
delivered by Buyer, Charter, Holdings and the Escrow Agent, substantially in the
form of Exhibit E hereto, which agreement shall be executed and delivered on the
Closing Date.
"Indenture" means the Indenture dated as of April 9, 1998 among Renaissance
Louisiana, Renaissance Tennessee, Renaissance Capital, Group, as guarantor, and
United States Trust Company of New York, as Trustee as the same may be amended
and in effect from time to time.
"Indenture Closing Documents" means the Placement Agreement dated April 6,
1998 among Group, Renaissance Louisiana, Renaissance Tennessee, Renaissance
Capital and Morgan Stanley & Co. Incorporated and the Registration Rights
Agreement dated April 6, 1998 among Group, Renaissance Louisiana, Renaissance
Tennessee, Renaissance Capital and Morgan Stanley & Co. Incorporated, as each of
the same may be amended and in effect from time to time.
"Intangibles" means all copyrights, trademarks, trade names, service marks,
service names, patents, permits, proprietary information, technical information
and data, machinery and equipment warranties, and other similar intangible
property rights and interests (which shall in no event include Franchises,
Licenses or Contracts) issued to or owned by any of the Renaissance Companies.
"Knowledge" means the actual knowledge of the persons listed in Schedule
1.1(a) with respect to Buyer and Charter and the actual knowledge of the persons
listed in Schedule 1.1(b) with respect to Holdings and Group.
"Legal Restrictions" means restrictions arising under the securities laws,
the Cable Act, FCC Regulations, the Franchises and the Licenses.
"Legal Requirements" means applicable common law and any applicable
statute, permit, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated or applied by any Governmental Authority (including, without
limitation, the FCC), including any applicable order, decree or judgment which
may have been handed down, adopted or imposed by any Governmental Authority, all
as in effect from time to time.
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"Licenses" means all domestic satellite, business radio and other FCC
Licenses, and all other licenses, authorizations and permits issued by any
Governmental Authority that are held by a Renaissance Company in the business
and operations of the Systems, excluding the Franchises.
"Loss" means any claims, losses, liabilities, damages, penalties, costs and
expenses (excluding any and all consequential, incidental and special damages).
"Material Adverse Effect" means a material adverse effect on the business,
results of operations, assets, liabilities or financial condition of the
Renaissance Companies, taken as a whole or the Systems, taken as a whole, but
without giving effect to any effect resulting from (i) changes in conditions
(including economic conditions, Rate Regulatory Matters and other federal or
state governmental actions, proposed or enacted legislation or proposed or
enacted regulations) that are applicable to the economy or the cable television
industry in general on a national, regional or state basis or (ii) any changes
in competition affecting the business of the Renaissance Companies.
"Material Contract" means any Contract that is material to the business,
financial condition or results of operations of the Renaissance Companies, taken
as a whole, including the Debt Documents, the Material Leases, and any other
Contract that requires payments in the aggregate of more than $50,000 per year
and has a remaining stated term of longer than twelve (12) months from the date
of this Agreement.
"Material FCC Consent" means any Consent of the FCC that is necessary for
the transfer of control to Buyer in connection with the consummation of the
transactions contemplated by this Agreement with respect to the Licenses
identified in Schedule 1.1.
"Material Lease" means any lease designated as a "Material Lease" in
Schedule 3.9.
"Organizational Documents" means, with respect any Person (other than an
individual), the articles or certificate of incorporation, bylaws, certificate
of limited partnership, partnership agreement, certificate of formation, limited
liability company operating agreement, and all other organizational documents of
any Person other than an individual.
"Permitted Encumbrances" means each of the following: (A) liens for current
taxes and other governmental charges that are not yet due and payable; (B) liens
for taxes, assessments, governmental charges or levies, or claims the
non-payment of which is being diligently contested in good faith or liens
arising out of judgments or awards against the Renaissance Companies with
respect to which at the time there shall be a prosecution for appeal or there
shall be a proceeding to review or the time limit has not yet run for such an
appeal or review with respect to such judgment or award; provided that with
respect to the foregoing liens in this clause (B), adequate reserves shall have
been set aside on the Renaissance Companies' books, and no foreclosure,
distraint, sale or similar proceedings shall have been commenced with respect
thereto that remain unstayed for a period of 60 days after their commencement;
(C) liens of carriers, warehousemen, mechanics, laborers, and materialmen and
other similar statutory liens incurred in the ordinary
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course of business for sums not yet due or being diligently contested in good
faith, and for which adequate reserves have been set aside on the Renaissance
Companies' books; (D) liens incurred in the ordinary course of business in
connection with worker's compensation and unemployment insurance or similar
laws; (E) statutory landlords' liens; (F) with respect to the Real Property,
leases, easements, rights to access, rights-of-way, mineral rights or other
similar reservations and restrictions, defects of title, which are either of
record or set forth in Schedule 3.19 or in the deeds or leases to such Real
Property or which (and, with respect to owned Real Property only, and which)
either individually or in the aggregate, do not have any Material Adverse
Effect; (G) Encumbrances arising under or in respect of the Senior Debt and the
Credit Agreement and the documents and instruments delivered in connection
therewith or pursuant thereto; and (H) any other claims or encumbrances that are
described in Schedule 3.9 and that relate to liabilities and obligations that
are to be discharged in full at the Closing or that will be removed prior to or
at Closing.
"Person" means an individual, corporation, association, partnership, joint
venture, trust, estate, limited liability company, limited liability
partnership, Governmental Authority, or other entity or organization.
"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending
on or before the Closing Date.
"Programming Agreement" means the Program Management Agreement dated as of
April 9, 1998 by and between Renaissance Media and Time Warner Cable, a division
of Time Warner Entertainment Company, L.P., a Delaware limited partnership, as
the same may be amended and in effect from time to time.
"Purchased Interests" means 100% of the limited liability company interests
of Group.
"Rate Regulatory Matter" shall mean, with respect to any cable television
system, any matter or any effect on such system or the business or operations
thereof, arising out of or related to the Cable Act, any FCC Regulations
heretofore adopted thereunder, or any other present or future Legal Requirement
dealing with, limiting or affecting the rates which can be charged by cable
television systems to their customers (whether for programming, equipment,
installation, service or otherwise).
"Real Property" means all of the fee and leasehold estates and, to the
extent of the interest, title, and rights of the Renaissance Companies in the
following: buildings and other improvements thereon, easements, licenses, rights
to access, rights-of-way, and other real property interests that are owned or
held by any of the Renaissance Companies and used or held for use in the
business or operations of the Systems, plus such additions thereto and less such
deletions therefrom arising between the date hereof and the Closing Date in
accordance with this Agreement.
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"Released Parties" means, collectively, Holdings and its Affiliates and
their respective officers, directors, shareholders, members, partners, employees
and agents.
"Renaissance Capital" means Renaissance Media Capital Corporation, a
Delaware corporation.
"Renaissance Companies" means, collectively, Group, Renaissance Media,
Renaissance Capital, Renaissance Louisiana and Renaissance Tennessee, each of
which may be referred to herein individually as a "Renaissance Company."
"Renaissance's Disclosure Schedules" means the Disclosure Schedules
referred to in Sections 3, 4 and 6.1 of this Agreement and attached to this
Agreement.
"Renaissance Louisiana" means Renaissance Media (Louisiana) LLC, a Delaware
limited liability company.
"Renaissance Media" means Renaissance Media LLC, a Delaware limited
liability company.
"Renaissance Tennessee" means Renaissance Media (Tennessee) LLC, a Delaware
limited liability company.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder, as in effect from time
to time.
"Senior Debt" means the outstanding indebtedness of the Renaissance
Companies under the Credit Agreement.
"Senior Debt Amount" means the aggregate principal amount, plus accrued and
unpaid interest, outstanding in respect of the Senior Debt pursuant to the
Credit Agreement as of the Closing Date.
"Senior Discount Notes" means the 10% Senior Discount Notes due 2008 in the
aggregate principal amount at maturity of $163,175,000 issued by Renaissance
Louisiana, Renaissance Tennessee and Renaissance Capital and guaranteed by
Group.
"Senior Discount Notes Accreted Value" means the Accreted Value (as defined
in the Indenture) of the Senior Discount Notes as of the Closing Date.
"Subscriber" means any Person to whom any Renaissance Company provides
cable television programming or other service through the Systems into a single
household, a multiple
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dwelling unit, a hotel or motel unit, a commercial business or any other real
property improvement.
"Subsidiary" means, with respect to any Person, any other Person of which
the outstanding voting Equity Interests sufficient to elect at least a majority
of its board of directors or other governing body (or, if there are no such
voting interests, of which 50% or more of the Equity Interests) are owned
(beneficially or otherwise) directly or indirectly by such first Person or any
Subsidiary thereof.
"Systems" means the cable television systems owned and operated by any
Renaissance Company or any combination of any of them, each of which may be
referred to herein individually as a "System."
"Tangible Personal Property" means all of the equipment, tools, vehicles,
furniture, leasehold improvements, office equipment, plant, converters, spare
parts, and other tangible personal property which are owned or leased by any of
the Renaissance Companies and used or held for use in the conduct of the
business or operations of the Systems, plus such additions thereto and less such
deletions therefrom arising between the date hereof and the Closing Date in
accordance with this Agreement and other than the Excluded Assets.
"Tax" means any and all taxes, fees, levies, duties, tariffs, imposts and
other charges of any kind imposed by any government or taxing authority,
including, without limitation: federal, state, local, or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or governmental assessment, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties.
"Tax Return" means any tax return, declaration of estimated tax, tax report
or other tax statement, or any other similar filing , including any schedule or
attachment thereto, and including any amendment thereof, required to be
submitted to any Governmental Authority with respect to any Tax.
"Transaction Documents" means this Agreement, the Adjustment Escrow
Agreement (if applicable), the Indemnity Agreement and the other documents,
agreements, certificates and other instruments to be executed, delivered and
performed by the parties in connection with the transactions contemplated by
this Agreement.
"Transferable Franchise Area" means any Franchise Area with respect to
which (A) any Consent necessary under a Franchise in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained or shall have been deemed obtained by operation of law in accordance
with the provisions of the Cable Act, or (B) no Consent is necessary under a
Franchise in connection with the consummation of the transactions contemplated
by this Agreement.
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"Upset Date" means the one year anniversary date of this Agreement, subject
to extension as provided in Section 8.1(a)(3) and 8.1(a)(4).
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, and in addition to (i) the definitions set forth in the first
paragraph hereof and in Section 1.1, and (ii) certain defined terms that are
used solely within the section in which they are defined, the following terms
have the meanings set forth in the sections indicated:
Term Section
---- -------
Adjustment Escrow Amount Section 2.4(b)
Antitrust Division Section 6.5
Cash Consideration Section 2.2
CCH Section 5.6
Claimant Section 10.6(a)
Closing Cash Payment Section 2.4
Closing Equivalent Subscribers Section 2.3(a)
Closing Net Liabilities Section 2.3(b)
Confidentiality Agreement Section 6.2(a)
Current Assets Section 2.3(b)(2)
Current Liabilities Section 2.3(b)(3)
DOL Section 3.13(d)(ix)
Fee Properties Section 3.9
Final Closing Statement Section 2.5(a)
Financial Statements Section 3.5(a)
FTC Section 6.5
Indemnity Fund Section 10.4
Indemnifying Party Section 10.6(a)
Inventory Section 3.19
Investment Person Section 3.3(a)
Preliminary Closing Statement Section 2.4
Preliminary Dispute Notice Section 2.4
Referee Section 2.4(a)
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Tax Partnership Section 3.12(f)
Working Capital Section 2.3(b)(1)
Year 2000 Problem Section 3.22
1.3 Rules of Construction. Words used in this Agreement, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender and any other number as the context requires. As used in this
Agreement, the word "including" is not limiting, and the word "or" is not
exclusive. Except as specifically otherwise provided in this Agreement in a
particular instance, a reference to a Section is a reference to a Section of
this Agreement, a reference to an Exhibit is a reference to an Exhibit to this
Agreement, and the terms "hereof," "herein," and other like terms refer to this
Agreement as a whole, including the Disclosure Schedules and the Exhibits to
this Agreement, and not solely to any particular part of this Agreement. The
descriptive headings in this Agreement are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
SECTION 2 SALE AND PURCHASE OF PURCHASED INTERESTS; ASSUMPTION OF LIABILITIES;
` CASH CONSIDERATION.
2.1 Agreement to Sell and Buy Purchased Interests. Subject to the terms and
conditions set forth in this Agreement, Holdings hereby agrees to sell,
transfer, convey and deliver to Buyer at the Closing, and Buyer hereby agrees to
purchase at the Closing, the Purchased Interests free and clear of all
Encumbrances, subject to the Legal Restrictions.
2.2 Cash Consideration for Purchased Interests. Buyer shall pay and deliver
to Holdings at the Closing, as consideration for the sale of the Purchased
Interests, a cash payment equal to Four Hundred Fifty-Nine Million Dollars
($459,000,000), subject to adjustment in accordance with Sections 2.3, 2.4 and
2.5 (the "Cash Consideration"), less the amounts to be deposited by Buyer in
escrow under the Adjustment Escrow Agreement pursuant to Section 2.4(b), to the
extent applicable, and under the Indemnity Agreement and pursuant to Section
10.4.
2.3 Cash Consideration Adjustments.
(a) Closing Equivalent Subscribers. The Cash Consideration shall be
decreased by the number, if any, by which the number of Closing Equivalent
Subscribers is less than 130,645 multiplied by $3,513. For purposes of this
Agreement, "Closing Equivalent Subscribers" means the total number of Equivalent
Subscribers for all of the Systems as of the Closing Date.
(b) Closing Net Liabilities. The Cash Consideration shall be decreased by
the amount of the Closing Net Liabilities. For purposes of this Agreement,
"Closing Net Liabilities" means:
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(i) the Senior Discount Notes Accreted Value; plus
(ii) the Senior Debt Amount; plus
(iii) the principal amount and any accrued but unpaid interest as of
the Adjustment Time in respect of any other indebtedness for
borrowed money (not included in the foregoing clauses (b)(i) and
(ii) of this Section 2.3), if any, of the Renaissance Companies
as of the Closing Date; minus
(iv) Working Capital if such number is greater than zero; plus
(v) the absolute value of Working Capital if such number is less than
zero.
(1) Subject to the other provisions of this Section 2.3(b), "Working
Capital" means Current Assets as of the Adjustment Time minus Current
Liabilities as of the Adjustment Time.
(2) Subject to the other provisions of this Section 2.3(b), "Current
Assets" means the total current assets of the Renaissance Companies as
defined for purposes of GAAP, and prepayments in respect of performance
bonds and long term rights of way with a maturity in excess of one year,
computed for the Renaissance Companies as of the Adjustment Time on a
consolidated basis and without duplication in accordance with GAAP.
(3) Subject to the other provisions of this Section 2.3(b) and Section
3.12(a), "Current Liabilities" means the total current liabilities of the
Renaissance Companies as defined for purposes of GAAP, including, without
limitation, vacation pay, computed for the Renaissance Companies as of the
Adjustment Time on a consolidated basis and without duplication in
accordance with GAAP; provided, however, that notwithstanding GAAP, or
anything to the contrary in this Agreement, Current Liabilities shall not
include and no adjustment to the Cash Consideration shall be made in
respect of: (A) any amount payable in respect of or pursuant to the Debt
Documents; (B) any prepayment penalty or premium, breakage costs, change of
control penalty or premium or other payment arising out of or resulting
from the consummation of the transactions contemplated by this Agreement,
including the termination of any Contract, under or pursuant to the Debt
Documents or any other Contract or other obligation to which any of the
Renaissance Companies is a party or by which it may be bound; or (C) any
Taxes to be paid by the Buyer pursuant to Section 6.10.
2.4 Payments at Closing. No later than ten (10) days prior to the date
scheduled for the Closing, Holdings shall prepare and deliver to Buyer a written
report (the "Preliminary Closing Statement") setting forth Holdings' estimates
of Closing Net Liabilities and Closing Equivalent Subscribers, determined in
accordance with Section 2.3, and the Cash Consideration, as adjusted pursuant to
Section 2.3 and a list and description of the principal methodologies and the
principal accounting policies and practices used in the preparation thereof. The
Preliminary Closing Statement shall be prepared by Holdings in good faith and
shall be certified by Holdings to be its good faith estimate of the Closing Net
Liabilities and Closing Equivalent Subscribers as
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of the date thereof. Holdings shall make available to Buyer such information as
Buyer shall reasonably request relating to the matters set forth in the
Preliminary Closing Statement. If Buyer does not agree with the Closing Net
Liabilities, Closing Equivalent Subscribers or Cash Consideration set forth in
the Preliminary Closing Statement, then on or prior to the third day prior to
the date scheduled for the Closing, Buyer may deliver to Holdings a written
report (the "Preliminary Dispute Notice") setting forth in reasonable detail
Buyer's good faith estimates (supported by substantial evidence) of any amount
set forth in the Preliminary Closing Statement with which Buyer disagrees. In
the case of any such estimated amount set forth in the Preliminary Dispute
Notice, Holdings and Buyer shall endeavor in good faith to agree prior to the
Closing on the appropriate amount of such estimates to be used in calculating
the Closing Cash Payment (as defined below). If Holdings and Buyer do not agree
on any such amounts by the business day prior to the date scheduled for the
Closing, Holdings, at its election, may either:
(a) Elect to postpone the Closing and retain Price Waterhouse Coopers
(the "Referee") to make a determination as to the appropriate treatment for
purposes of agreeing on estimates to be made at Closing of any amounts
under dispute and the Closing shall thereafter take place on the third
business day following resolution of such dispute, subject to satisfaction
or waiver of all applicable conditions precedent. The Referee shall
endeavor to resolve the dispute as promptly as practicable and the
Referee's resolution of the dispute shall be final and binding on the
parties for purposes of the estimates to be made at Closing; provided,
however, that in no event shall such resolution result in (i) amounts less
than the amounts therefor (in the case of liabilities) or greater than the
amounts therefor (in the case of assets) set forth in the Preliminary
Closing Statement or (ii) amounts greater than the amounts therefor (in the
case of liabilities) or less than the amounts therefor (in the case of
assets) set forth in the Preliminary Dispute Notice. The costs and expenses
of the Referee and its services rendered pursuant to this Section 2.4 shall
be borne one-half by Buyer and one-half by Holdings; or
(b) Elect to proceed to Closing and cause Buyer, at the Closing, to
deposit an amount in cash equal to the difference (the "Adjustment Escrow
Amount") between the Cash Consideration, adjusted pursuant to Section
2.3(a) and (b) that would be calculated using the estimates set forth in
the Preliminary Closing Statement (with any changes thereto mutually agreed
to by Buyer and Holdings) and the Cash Consideration adjusted pursuant to
Section 2.3(a) and (b) that would be calculated using the estimates set
forth in the Preliminary Dispute Notice (with any changes thereto mutually
agreed to by Buyer and Holdings), to the Adjustment Escrow Agent, to be
held and disbursed in accordance with the terms of the Adjustment Escrow
Agreement and Section 2.5.
At Closing, Buyer shall pay (x) to the Escrow Agent the sum of the
Indemnity Fund to be held by the Escrow Agent in escrow on behalf of Holdings in
accordance with the terms of the Indemnity Agreement and Section 10.4, (y) if
Holdings has made the election in clause (b) above, to the Adjustment Escrow
Agent, the Adjustment Escrow Amount to be held by the Adjustment Escrow Agent in
escrow on behalf of the parties in accordance with the terms of the Adjustment
Escrow Agreement and Section 2.5 and (z) to Holdings the amount of the Cash
Consideration adjusted pursuant to Section 2.3(a) and (b), as determined
pursuant to this Section
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2.4 (including, without limitation, as determined pursuant to Section 2.4(a) and
as mutually agreed by Buyer and Holdings) (such amount, the "Closing Cash
Payment"), less the aggregate amount paid to the Escrow Agent under clause (x)
and, if applicable, the Adjustment Escrow Agent under clause (y). None of the
Adjustment Escrow Amount will be available for any purpose, other than as
described in Section 2.5(b), and the Adjustment Escrow Amount shall not be
available to satisfy any obligations of Holdings pursuant to Section 10.
2.5 Post-Closing Payment of Cash Consideration Adjustments.
(a) Final Closing Statement. Within seventy-five (75) days after the
Closing Date, Buyer shall prepare and deliver to Holdings a written report (the
"Final Closing Statement") setting forth Buyer's final estimates of Closing Net
Liabilities and Closing Equivalent Subscribers to the extent not previously
determined pursuant to Section 2.4(a), determined in accordance with Section 2.3
and in accordance with the methodologies and the accounting policies and
practices consistent with those used in preparing the Preliminary Closing
Statement, and the Cash Consideration, as adjusted pursuant to Section 2.3. The
Final Closing Statement shall be prepared by Buyer in good faith and shall be
certified by Buyer to be, as of the date prepared, its good faith estimate of
the Closing Net Liabilities, Closing Equivalent Subscribers and Cash
Consideration, as so adjusted, as applicable. Buyer shall allow Holdings and its
agents access at all reasonable times after the Closing Date to copies of the
books, records and accounts of the Renaissance Companies and make available to
Holdings such information as Holdings reasonably requests to allow Holdings to
examine the accuracy of the Final Closing Statement. Within thirty (30) days
after the date that the Final Closing Statement is delivered by Buyer to
Holdings, Holdings shall complete its examination thereof and may deliver to
Buyer a written report setting forth any proposed adjustments to any amounts set
forth in the Final Closing Statement; provided, however, that if Buyer does not
comply with its obligations pursuant to the preceding sentence, such thirty (30)
day period shall run from the day after the date on which Buyer complies with
such obligations. After submission of the Final Closing Statement, Buyer shall
have no right to raise further adjustments in its favor and after submission of
Holdings' report of any proposed adjustments, Holdings shall have no right to
raise further adjustments in its favor. If Holdings notifies Buyer of its
acceptance of the amounts set forth in the Final Closing Statement, or if
Holdings fails to deliver its report of any proposed adjustments within the
period specified in the second preceding sentence, the amounts set forth in the
Final Closing Statement shall be conclusive, final and binding on the parties as
of the last day of such period. Buyer and Holdings shall use good faith efforts
to resolve any dispute involving the amounts set forth in the Final Closing
Statement. If Holdings and Buyer fail to agree on any amount set forth in the
Final Closing Statement within fifteen (15) days after Buyer receives Holdings'
report pursuant to this Section 2.5, (a) then Holdings shall retain the Referee
to make the final determination, under the terms of this Agreement, of any
amounts under dispute. The Referee shall endeavor to resolve the dispute as
promptly as practicable and the Referee'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; provided that in no event shall such resolution
result in (i) amounts less than the amounts therefor (in the case of
liabilities) or more than the amounts therefor (in the case of assets) set forth
in Holdings' written report pursuant to this
<PAGE> 31
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Section 2.5(a) or (ii) amounts greater than the amounts therefor (in the case of
liabilities) or less than the amounts therefor (in the case of assets) set forth
in the Final Closing Statement. The costs and expenses of the Referee and its
services rendered pursuant to this Section 2.5 shall be borne one-half by Buyer
and one-half by Holdings.
(b) Payment of Cash Consideration Adjustments.
(1) After the amount of the Cash Consideration is finally determined
pursuant to Section 2.5(a), payments shall be made as follows:
(A) If the amount of the Cash Consideration as finally determined
pursuant to Section 2.5(a) exceeds the Closing Cash Payment, then
within three business days after the date the amount of Cash
Consideration is finally determined pursuant to Section 2.5(a), (i)
Buyer will pay to Holdings in cash the amount of such excess by wire
or accounts transfer of immediately available funds to an account
designated by Holdings by written notice to Buyer and (ii) Buyer and
Holdings will direct the Adjustment Escrow Agent to pay to Holdings in
cash the Adjustment Escrow Amount, if any.
(B) If the amount of the Closing Cash Payment exceeds the amount
of the Cash Consideration as finally determined pursuant to Section
2.5(a), then within three business days after the date the amount of
Cash Consideration is finally determined pursuant to Section 2.5(a),
(i) Holdings will direct the Adjustment Escrow Agent to pay to Buyer
in cash the amount of such excess to the extent of the Adjustment
Escrow Amount, if any, and (ii) if such excess is greater than the
amount paid to Buyer from the Adjustment Escrow Amount, Holdings will
pay to Buyer in cash the amount of such excess to the extent not paid
from the Adjustment Escrow Amount, by wire or accounts transfer of
immediately available funds to an account designated by Buyer by
written notice to Holdings. If any portion of the Adjustment Escrow
Amount, if any, remains after payment to Buyer of any amounts pursuant
to the preceding sentence, Buyer and Holdings will direct the
Adjustment Escrow Agent to promptly pay such amounts to Holdings.
(2) Any amount which becomes payable pursuant to this Section 2.5 will
constitute an adjustment to the Cash Consideration for all purposes.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF GROUP
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in Renaissance's Disclosure Schedules, as such schedules
are referenced herein, Group hereby represents and warrants to Buyer as set
forth in this Section 3.
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3.1 Organization and Authority. Each of the Renaissance Companies (other
than Renaissance Capital) set forth in Schedule 3.1 is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of Delaware. Renaissance Capital is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Renaissance Companies has the requisite limited liability company or
corporate (as the case may be) power and authority to own, lease and operate its
properties, to carry on its business in the places where such properties are now
owned, leased or operated and in the manner in which such business is now
conducted, and to execute, deliver and perform this Agreement and the other
Transaction Documents to which it is a party according to their respective
terms.
3.2 Authorization and Binding Obligation. The execution, delivery and
performance by Group of this Agreement and the other Transaction Documents to
which it is a party have been duly authorized by all necessary limited liability
company or corporate (as the case may be) action on its part. This Agreement and
the other Transaction Documents to which each Renaissance Company is a party
have been duly executed and delivered by such Renaissance Company (as the case
may be, or, in the case of Transaction Documents to be executed and delivered at
Closing, when executed and delivered will be duly executed and delivered) and
constitute (or, in the case of Transaction Documents to be executed and
delivered at Closing, when executed and delivered will constitute) the legal,
valid, and binding obligation of such Renaissance Company (as the case may be)
enforceable against such Renaissance Company (as the case may be) in accordance
with their terms, except as the enforceability of this Agreement and such other
Transaction Documents may be limited by Enforceability Exceptions.
3.3 Organization and Ownership of Renaissance Companies.
(a) Schedule 3.3 sets forth the name of each Renaissance Company, including
the jurisdiction of incorporation or formation (as the case may be) of each.
Each Renaissance Company is duly qualified, validly existing and in good
standing as a foreign corporation or limited liability company, as the case may
be, in each jurisdiction listed in Schedule 3.3, which are all jurisdictions in
which such qualification is required. Except as disclosed in Schedule 3.3, no
Renaissance Company, directly or indirectly, owns, of record or beneficially,
any outstanding securities or other interest in any Person (each such Person
described in Schedule 3.3, an "Investment Person") or has the right or
obligation to acquire, any Equity Interests, outstanding securities or other
interest in any Person
(b) Schedule 3.3 sets forth the authorized, issued and outstanding Equity
Interests of each Renaissance Company and the record and beneficial owner of
each issued and outstanding Equity Interest of each of them. All of such issued
and outstanding Equity Interests of the Renaissance Companies have been validly
issued, are fully paid and non-assessable and have not been issued in violation
of any federal or state securities laws. Except as set forth in Schedule 3.3,
the owner of the Equity Interests of each Renaissance Company owns such Equity
Interests free and clear of all Encumbrances, but subject to the Legal
Restrictions (except that no representation is made in this Section 3 as to the
Purchased Interests held by Holdings). Except
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as disclosed in Schedule 3.3, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which any Renaissance Company is a party or by which any of them
is bound obligating such Renaissance Company to issue, deliver or sell, or cause
to be issued, delivered or sold, any additional Equity Interests of such
Renaissance Company or obligating such Renaissance Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. The Renaissance Companies
have delivered to Buyer complete and correct copies of the Organizational
Documents of each Renaissance Company as in effect on the date hereof.
3.4 Absence of Conflicting Agreements; Consents. Except for the expiration
or termination of any applicable waiting period under the HSR Act, or as set
forth in Schedule 3.4 or Schedule 3.8 or as would not impair the ability of
Group to perform its obligations under the Transaction Documents, the execution,
delivery and performance by Holdings and Group of this Agreement and the other
Transaction Documents to which they are a party (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 other Person under any
Franchise, FCC License or Material Contract; (b) will not conflict with any
provision of the Organizational Documents of any Renaissance Company, each as
currently in effect; (c) assuming receipt of all Consents listed in Schedule 3.4
or Schedule 3.8, will not conflict with, in any material way, result in a
material breach of, or constitute a material default under any Legal Requirement
to which any Renaissance Company is bound; (d) assuming receipt of all Consents
listed in Schedule 3.4 or Schedule 3.8, 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 Franchise, FCC License, or Material Contract; and (e) assuming
receipt of all Consents, will not result in the creation of any Encumbrance upon
the Assets. Notwithstanding the foregoing, Group makes no representation or
warranty regarding any of the foregoing that may result from the specific legal
or regulatory status of any of the Charter Parties or as a result of any other
facts that specifically relate to the business or activities in which any of the
Charter Parties is or proposes to be engaged other than the cable television
business.
3.5 Financial Statements.
(a) Holdings has furnished Buyer with true and complete copies of the
audited consolidated financial statements (including the notes thereto) of Group
for the year ended December 31, 1998 that are attached hereto as Schedule 3.5
(collectively, the "Financial Statements"), and such Financial Statements are by
that reference incorporated into and deemed a part of Renaissance's Disclosure
Schedules.
(b) Except as disclosed in Schedule 3.5, the Financial Statements: (1) have
been prepared from the books and records of the Renaissance Companies to which
they relate; (2) have been prepared in accordance with GAAP consistently applied
since the inception of Group (except as indicated in the notes thereto); and (3)
present fairly in all material respects the financial condition of the
Renaissance Companies to which they relate as at December 31, 1998, and the
results of operations for the period then ended.
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3.6 Absence of Undisclosed Liabilities.
(a) None of the Renaissance Companies has any indebtedness, liability or
obligation of a type required by GAAP to be reflected on a balance sheet that is
not reflected or reserved against in the balance sheet of the Renaissance
Companies included in the Financial Statements, other than indebtedness,
liabilities and obligations that were incurred in the ordinary course of
business after December 31, 1998, or that would not, in the aggregate,
reasonably be expected to be material in accordance with GAAP.
(b) As of the date hereof, except as provided in or arising pursuant to the
loan or credit agreements, notes, bonds, indentures and other agreements and
instruments listed in Schedule 3.6, or under certain of the property leases
listed in Schedule 3.8, the Renaissance Companies have no Indebtedness.
3.7 Absence of Certain Changes. Since December 31, 1998, except as
disclosed in Schedule 3.7 and except for matters occurring after the date hereof
that are permitted by the provisions of this Agreement or consented to by Buyer
and Charter no Renaissance Company has:
(a) made any sale, assignment, lease or other transfer of assets other than
in the ordinary course of business;
(b) issued any note, bond or other debt security or created, incurred,
assumed or guaranteed any Indebtedness; or
(c) made or promised any material increase in the salary or other
compensation payable or to become payable to any executive officer or other
employee of any enaissance Company other than in the ordinary course of business
or as contemplated under any employment or bonus arrangement currently in
effect.
3.8 Franchises, Licenses, Material Contracts. Schedule 3.8 contains a list
of the Franchises (including the Franchising Authority which granted each
Franchise, the stated expiration date of each Franchise), the System to which
the Franchise applies, FCC Licenses and Material Contracts in effect on the date
hereof, each pending application for a Franchise and a list of any System or
portion thereof owned or operated by the Renaissance Company which does not
require a Franchise authorizing the installation, construction, development,
ownership or operation of the same; which list is true, correct and complete.
The Renaissance Companies possess all Franchises and FCC Licenses necessary to
operate their business as currently conducted. Without material exception, the
Renaissance Companies possess all other Licenses necessary to operate their
business as currently conducted. Holdings has delivered to Buyer true and
complete copies of all Franchises, FCC Licenses and Material Contracts as in
effect on the date hereof. The Franchises, FCC Licenses and Material Contracts
are in full force and effect (subject to expiration at the end of their current
term) and are valid, binding and enforceable
<PAGE> 35
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upon the Renaissance Company that is a party thereto and, to Group's Knowledge,
the other parties thereto in accordance with their terms, except to the extent
such enforceability may be affected by Enforceability Exceptions. Except as
disclosed in Schedule 3.8, the Renaissance Companies are in compliance with the
terms of the Franchises, FCC Licenses and Material Contracts, except for such
noncompliance which in the aggregate is immaterial to the Renaissance Companies,
taken as a whole, or would not prevent the operation of the business of the
Renaissance Companies as currently conducted, and, as of the date of this
Agreement, none of the Renaissance Companies has received any written notice
from a Franchising Authority, a consultant representing a Franchising Authority,
any state cable regulatory authority or the FCC to the effect that any of the
Renaissance Companies are not currently in compliance with the terms of the
Franchise granted by such Franchising Authority or with any FCC License. Except
as set forth in Schedule 3.8, a valid request for renewal has been timely filed
under Section 626(a) of the Cable Act with the proper Franchising Authority with
respect to each Franchise that has expired prior to, or will expire within
thirty months after, the date of this Agreement.
3.9 Title to and Condition of Real Property and Tangible Personal Property.
Schedule 3.9 lists the street address for all Real Property owned in fee by any
of the Renaissance Companies as of the date of this Agreement (excluding
easements, rights-of-way, and similar authorizations) (the "Fee Properties"). A
true and correct copy of (i) each deed pursuant to which any of the Renaissance
Companies acquired any Fee Property, any survey and title insurance policies
issued to such Renaissance Company, (ii) any leases under which any Renaissance
Company is the lessor affecting such Fee Property or (iii) any other easements,
rights-of-way, covenants, conditions and restrictions, document or agreement
affecting title to such Fee Property (and, in the case of this clause (iii), in
the possession of the Renaissance Companies) have been delivered or made
available to Buyer. Schedule 3.9 lists the street address for the Real Property
leased by any of the Renaissance Companies, as lessee, as of the date of this
Agreement and sets forth the parties to the applicable lease and any amendments,
supplements or modifications thereto. Except as disclosed in Schedule 3.9: (a)
the Renaissance Company that owns a fee estate in a Real Property parcel has
good and marketable title thereto; (b) the Renaissance Company that owns any
material item of Tangible Personal Property has good and valid title thereto;
(c) the Renaissance Company that leases Real Property has a valid leasehold
interest therein (subject to expiration of such lease in accordance with its
terms), except to the extent that the failure to have any such valid leasehold
interests would not impair the operation of the Systems in any material respect;
and (d) the Renaissance Company that leases any material item of Tangible
Personal Property has a valid leasehold interest therein (subject to expiration
of such lease in accordance with its terms), in each case of (a), (b), (c) and
(d) above, free and clear of all Encumbrances, other than Permitted Encumbrances
and subject to the Legal Restrictions. Notwithstanding the express language of
this Section 3.9 or as may otherwise be provided in this Agreement, no
representation or warranty is being made as to title to the internal wiring,
house drops and unrecorded dwelling-unit easements, rights of entry or
rights-of-way held or used by the Renaissance Companies.
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3.10 Intangibles. Schedule 3.10 contains a true and correct description and
list of the Intangibles (exclusive of those required to be listed in Schedule
3.8), that are owned or leased by any of the Renaissance Companies and that are
necessary for the conduct of the business or operations of the Systems as
currently conducted. Except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems or as disclosed
in Schedule 3.10, no Renaissance Company is infringing upon any trademarks,
trade names, copyrights or similar intellectual property rights of others.
3.11 Information Regarding the Systems.
(a) Subscribers. Schedule 3.11 sets forth the approximate number of
Equivalent Subscribers as of the date indicated therein (including the
approximate number of Equivalent Subscribers served in each System) and sets
forth a true, complete and correct statement of all Subscribers' rates, tariffs
and other charges for cable television and other services provided by any
Renaissance Company, and a list of all free, discount or other promotional
service obligations (other than those obligations which are regularly offered or
arise in the ordinary course of the business and operations of the Renaissance
Companies) of any Renaissance Company, with respect to the Systems as of the
date of this Agreement. The Renaissance Companies' billing records are prepared
by CSG Systems, Inc. in accordance with its customary practices.
(b) Certain Systems Information. Schedule 3.11 sets forth the approximate
number of plant miles (aerial and underground) for each System, the approximate
bandwidth capability of each System, the channel lineup for each System, and the
monthly rates charged for each class of service offered by each headend, the
stations and signals carried by each System and the channel position of each
such signal and station, which information is true and correct in all material
respects, in each case as of the applicable dates specified therein and subject
to any qualifications set forth therein. Each of the respective channel lineups
set forth in Schedule 3.11 is capable of being viewed in its entirety by each
Subscriber in the applicable System (subject to ordinary course service
interruptions).
(c) Franchise and FCC Matters. Except as set forth in Schedule 3.11, all
reports or other documents, payments or submissions required to be filed by any
of the Renaissance Companies with any of the Franchising Authorities or the FCC
have been duly filed and were correct in all material respects when filed.
Except as set forth in Schedule 3.11, the Renaissance Companies are permitted
under all applicable Franchises and FCC Regulations to distribute the television
broadcast signals distributed by the Systems and to utilize all carrier
frequencies generated by the operations of the Systems, and are licensed to
operate in all material respects all the facilities of the Systems required by
Legal Requirements to be licensed.
(d) Request for Signal Carriage. Except for nonduplication and blackout
notices received in the ordinary course of business, none of the Renaissance
Companies has received any FCC order requiring any System to carry a television
broadcast signal or to terminate carriage of a television broadcast signal with
which it has not complied, and, except as
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disclosed in Schedule 3.11, the Renaissance Companies have complied in all
material respects with all written and bona fide requests or demands received
from television broadcast stations to carry or to terminate carriage of a
television broadcast signal on a System.
(e) Rate Regulatory Matters. Schedule 3.11 sets forth a list of all
Governmental Authorities that are certified to regulate rates of the Systems
pursuant to the Cable Act and FCC Regulations as of the date of this Agreement.
No pending rate complaints have been filed with the FCC against the Systems
according to the FCC's log dated January 1, 1999, which reflects rate complaints
filed through December 31, 1998. Except as disclosed in Schedule 3.11, as of the
date of this Agreement, none of the Renaissance Companies has received any
written notice and, to Group's Knowledge, any notice (other than written notice)
from any Governmental Authority that it has any obligation or liability to
refund to subscribers of the Systems any portion of the revenue received by such
Renaissance Company from subscribers of the Systems (excluding revenue with
respect to deposits for converters, encoders, decoders and related equipment and
other prepaid items) that has not been resolved. Buyer and Charter acknowledge
that, except as expressly warranted in this Section 3.11(e), Group is not making
any representation or warranty regarding any Rate Regulatory Matter and Buyer
and Charter shall not be entitled to make any claim against Holdings or Group
arising out of or relating to any Rate Regulatory Matter, except as provided in
Section 10.2(b).
(f) Insurance. The Systems and Assets are insured against claims, loss or
damage in amounts generally customary in the cable television industry and
consistent with the Renaissance Companies' past practices. All such policies are
with financially sound insurers and are each outstanding and in full force and
effect on the date hereof. As of the date hereof, no insurance carrier has
denied any claim for insurance made by any Renaissance Company in respect of any
of the Systems and Assets or refused to renew any policy issued in respect of
any of the Systems and Assets.
(g) Right of First Refusal. Except as disclosed in Schedule 3.11, no Person
(including any Governmental Authority) has any right to acquire any interest in
any of the Systems (including, without limitation, any right of refusal or
similar right), other than rights of condemnation or eminent domain afforded by
law or upon the termination of or default under any Franchise.
3.12 Taxes.
(a) The Renaissance Companies have filed or have caused to be filed in a
timely manner all required Tax Returns with the appropriate Governmental
Authorities in all jurisdictions in which such Tax Returns are required to be
filed by the Renaissance Companies (except Tax Returns for which the filing date
has not expired or has been extended and such extension period has not expired),
and all Taxes shown on such Tax Returns (other than sales, use and property
Taxes in an aggregate amount not to exceed $50,000) have been properly accrued
or paid to the extent such Taxes have become due and payable. Schedule 3.12
lists all jurisdictions where material Tax Returns are required to be filed with
respect to the Renaissance
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Companies. Holdings has delivered to Buyer true, correct and complete
copies of such Tax Returns (in the form filed). The Financial Statements reflect
an adequate reserve in accordance with GAAP (without regard to any amounts
reserved for deferred taxes) for all material unpaid Taxes payable by the
Renaissance Companies for all Tax periods and portions thereof through the date
of such Financial Statements. Unpaid Taxes of the Renaissance Companies (other
than (i) any Taxes referred to in Section 6.10(d) and (ii) Taxes attributable to
Buyer's actions on the Closing Date that are not in the ordinary course of
business) for all Pre-Closing Tax Periods shall be included as Current
Liabilities in the computation of Closing Net Liabilities to the extent that
such unpaid Taxes are not reflected on the Financial Statements. Except as
disclosed in Schedule 3.12, none of the Renaissance Companies has executed any
waiver or extension of any statute of limitations on the assessment or
collection of any Tax or with respect to any liability arising therefrom. Except
as disclosed in Schedule 3.12, none of the federal, state or local income Tax
Returns filed by the Renaissance Companies has been audited by any taxing
authority. Except as disclosed in Schedule 3.12, (i) neither the Internal
Revenue Service nor any other taxing authority has asserted, or to the best
Knowledge of Group, threatened to assert any deficiency or claim for additional
Taxes (other than sales, use and property Taxes in an aggregate amount not to
exceed $50,000) against, or any adjustment of Taxes (other than sales, use and
property Taxes in an aggregate amount not to exceed $50,000) relating to, any of
the Renaissance Companies and, to the best Knowledge of Group, no basis exists
for any such deficiency, claim or adjustment, and (ii) there are no proposed
reassessments of any property owned by any of the Renaissance Companies that
would affect the Taxes of any of the Renaissance Companies. None of the
Renaissance Companies has any liability for the Taxes of any person (other than
any Renaissance Company) pursuant to Section 1.1502-6 of the Treasury
Regulations promulgated under the Code or comparable provisions of any taxing
authority in respect of a consolidated, combined or unitary Tax Return. There
are no material Tax liens on any assets of the Renaissance Companies, other than
liens for current Taxes not yet due and payable and liens for Taxes that are
being contested in good faith by appropriate proceedings.
(b) Except as disclosed in Schedule 3.12, none of the Renaissance Companies
was included or is includible in any consolidated, combined or unitary Tax
Return with any entity.
(c) None of the Renaissance Companies has entered into any compensatory
agreements with respect to the performance of services which payment thereunder
would result in a non-deductible expense to such Renaissance Company pursuant to
Section 280G of the Code or an excise Tax to the recipient of such payment
pursuant to Section 4999 of the Code. No acceleration of the vesting schedule
for any property that is substantially unvested within the meaning of the
regulations under Section 83 of the Code will occur in connection with the
transactions contemplated by this Agreement.
(d) No consent under Section 341(f) of the Code has been filed with respect
to any of the Renaissance Companies.
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(e) Each of the Renaissance Companies has had since its inception and will
continue to have through the Closing Date the federal tax status (i.e.
partnership, C corporation or S corporation) such entity reported on its 1997
federal Tax Returns except as results from any actions taken pursuant to this
Agreement.
(f) Except as disclosed in Schedule 3.12, none of the Renaissance Companies
has been at any time a member of any partnership, joint venture or other
arrangement or contract which is treated as a partnership for federal, state,
local or foreign tax purposes (a "Tax Partnership") or the holder of a
beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired, except for a Tax Partnership which is a
Renaissance Company.
(g) Except as disclosed in Schedule 3.12, there are no tax sharing
agreements or similar arrangements with respect to or involving any of the
Renaissance Companies.
(h) Except as disclosed in Schedule 3.12, none of the Renaissance Companies
has any (i) income reportable for a period ending after the Closing Date but
attributable to a transaction (e.g., an installment sale) occurring in or a
change in accounting method made for a period ending on or prior to the Closing
Date which resulted in a deferred reporting of income from such transaction or
from such change in accounting method (other than a deferred intercompany
transaction), or (ii) deferred gain or loss arising out of any deferred
intercompany transaction.
3.13 Employee Plans.
(a) Employee Plans. Schedule 3.13 contains a list of all Employee Plans and
material Compensation Arrangements. The Renaissance Companies have delivered or
made available to Buyer (or, in accordance with Section 6.1(b), will deliver or
make available to Buyer following execution of this Agreement) true, complete
and correct copies of each Employee Plan and each Compensation Arrangement, if
any, together with any other material documents relating to such Employee Plan
or Compensation Arrangement, including, without limitation, any governmental
filings relating to such Employee Plan or Compensation Arrangement. None of the
Renaissance Companies or any of their ERISA Affiliates is or has been required
to contribute to any "multiemployer plan," as defined in ERISA Section 3(37),
nor has any Renaissance Company or any such ERISA Affiliate experienced a
complete or partial withdrawal, within the meaning of ERISA Section 4203 or
4205, from such a "multiemployer plan." Except as required under Code Section
4980B or ERISA Sections 601-609, no Employee Plan provides health, life
insurance or medical coverage to former employees of the Renaissance Companies.
(b) Qualified Plans. Except as disclosed in Schedule 3.13, with respect to
each Employee Plan, and after taking into consideration the effect of the
payments to be made with respect to the Employee Plans: (1) each such Employee
Plan that is intended to be tax-qualified is the subject of a favorable
determination letter, and no such determination letter has
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been revoked, and to the best of Group's Knowledge, no revocation has been
threatened, no event has occurred and no circumstances exist that would
adversely affect the tax-qualification of such Employee Plan; (2) no Employee
Plan is subject to Section 302 or Title IV of ERISA or Section 412 of the Code;
(3) no non-exempt prohibited transaction, within the definition of Section 4975
of the Code or Title 1, Part 4 of ERISA, has occurred which would subject the
Renaissance Companies to any material liability; (4) there is no termination or
partial termination, or requirement to provide security with respect to any
Employee Plan; (5) the fair market value of the assets of any Employee Plan
would equal or exceed the value of all liabilities and obligations of such
Employee Plan if such plan were to terminate on the Closing Date; and (6) the
transactions contemplated by this Agreement will not result in liability under
ERISA to any Renaissance Companies or Buyer, or any of their respective ERISA
Affiliates, or any entitlement to any additional benefits or any acceleration of
the time of payment or vesting of any benefits under any Employee Plan of any
Renaissance Company for any employee of any Renaissance Company.
(c) Plan Administration. Each Employee Plan and each Compensation
Arrangement has been operated and administered in all material respect in
accordance with its terms and all applicable laws, including but not limited to
ERISA and the Code. To the best Knowledge of Group, there are no investigations
by any governmental agency or other claims (except claims for benefits payable
in the normal operation of the Plan), suits or proceedings against or involving
any Plan or asserting any rights to or claims for benefits under any Plan that
could give rise to any material liability, and there are not any facts that
could give rise to any material liability in the event of such investigation,
claim, suit or proceeding.
(d) Welfare Plan Funding. The list of Employee Plans in Schedule 3.13
discloses whether each Plan that is an "employee welfare benefit plan" as
defined in section 3(1) of ERISA is (i) unfunded, (ii) funded through a "welfare
benefit fund," as such term is defined in section 419(e) of the Code, or other
funding mechanism or (iii) insured.
(e) Each of the Renaissance Companies and their ERISA Affiliates have
properly classified individuals providing services to any Renaissance Company or
any ERISA Affiliates as employees or nonemployees except to the extent that a
misclassification would not be material.
(f) Labor Unions. As of the date of this Agreement, other than as disclosed
in Schedule 3.13, none of the Renaissance Companies is party to or bound by any
collective bargaining agreement. As of the date of this Agreement, other than as
disclosed in Schedule 3.13, to the Knowledge of Group, (1) none of the employees
of the Renaissance Companies is presently a member of any collective bargaining
unit related to his or her employment and (2) no collective bargaining unit has
filed a petition for representation of any of the employees of the Renaissance
Companies.
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3.14 Environmental Laws. Except as disclosed in Schedule 3.14: (a) the
Renaissance Companies' operations with respect to the Systems comply in all
material respects with all applicable Environmental Laws as in effect on the
Closing Date; and (b) none of the Renaissance Companies has used the Real
Property for the manufacture, transportation, treatment, storage or disposal of
Hazardous Substances except for gasoline and diesel fuel and such use of
Hazardous Substances (in cleaning fluids, solvents and other similar substances)
customary in the construction, maintenance and operation of a cable television
system and in amounts or under circumstances that would not reasonably be
expected to give rise to material liability for remediation. Except as disclosed
in Schedule 3.14, as of the date of this Agreement, no Environmental Claim has
been filed or issued against the Renaissance Companies. To Group's Knowledge,
the Renaissance Companies' operations with respect to the Systems have complied
with all applicable Environmental Laws, except such non-compliance that would
not reasonably be expected to have a Material Adverse Effect.
3.15 Claims and Litigation. Except as disclosed in Schedule 3.15, as of the
date of this Agreement, there is no claim, legal action, arbitration or other
legal, administrative or tax proceeding, order, decree, or judgment or complaint
or, to Group's Knowledge, investigation, dispute or controversy reasonably
likely to result in litigation against or relating to the Renaissance Companies
(or any of their respective Affiliates, directors, officers, employees or agents
related to the business or operations of any Renaissance Companies) or the
business or operations of any of the Systems (other than FCC and other
proceedings generally affecting the cable television industry and not specific
to the Renaissance Companies and other than rate complaints or certifications
filed by customers or Franchising Authorities), other than routine collection
matters or ordinary course matters expected to be covered by insurance policies
maintained by the Renaissance Companies, subject to applicable deductibles.
3.16 Compliance With Laws. Except as disclosed in Schedule 3.16 and except
for any such noncompliance as has been remedied, each of the Renaissance
Companies, the Systems and the Assets are in compliance in all material respects
with all Legal Requirements (including, without limitation, (i) the Code, ERISA,
the National Labor Relations Act, the Cable Act, FCC Regulations, and the
Copyright Act and (ii) the FCC's Cumulative Leakage Index). Group has delivered
to Buyer complete and correct copies of all FCC forms relating to rate
regulation filed by the Renaissance Companies with any Governmental Authority
with respect to the Systems and copies of all correspondence from or to the
Renaissance Companies with any Governmental Authority relating to rate
regulation generally and any other Rate Regulatory Matter or specific rates
charged to subscribers of the Systems, and any other documentation prepared by
the Renaissance Companies supporting an exemption from the rate regulation
provisions of the Cable Act claimed by any Renaissance Company with respect to
any of the Systems. Group has made available to Buyer, to the extent in the
possession of the Renaissance Companies, copies of all FCC forms relating to
rate regulation filed with any Governmental Authority with respect to the
Systems by parties other than the Renaissance Companies and copies of all
correspondence from or to parties other than the Renaissance Companies with any
Governmental Authority relating to rate regulation generally and any other Rate
Regulatory Matter or specific rates charged to subscribers of the Systems, and
any other documentation supporting any exemption
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from the rate regulation provisions of the Cable Act claimed by the Systems by
parties other than the Renaissance Companies. Notwithstanding the foregoing or
any other provision of this Agreement to the contrary, and without limiting the
provisions of Sections 6.14 and 10.2(b), Group does not make any representation
or warranty with respect to compliance with any Legal Requirements dealing with,
limiting or affecting the rates which can be charged by cable television systems
to their customers (whether for programming, equipment, installation, service or
otherwise) or any other Rate Regulatory Matter.
3.17 Transactions with Affiliates. Except to the extent disclosed in the
Financial Statements and the notes thereto or Schedule 3.17, none of the
Renaissance Companies is involved in any business arrangement or business
relationship or is a party to any agreement, contract, commitment or transaction
with any Affiliate of any of the Renaissance Companies (other than another
Renaissance Company), and no Affiliate of any of the Renaissance Companies
(other than another Renaissance Company) owns any property or right, tangible or
intangible, that is used in the business of the Renaissance Companies (other
than in its capacity as a direct or indirect equity or debt holder of the
Renaissance Companies).
3.18 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of any Renaissance Company in connection with
this Agreement, any Transaction Document or the transactions contemplated hereby
or thereby, or is entitled to any payment in connection herewith or therewith
which, in either case, would result in any obligation or liability to Buyer or
Charter, except that Holdings has retained certain brokers and advisors and will
pay all fees and expenses of such brokers and advisors in connection with the
transactions contemplated hereby.
3.19 Inventory. Each Renaissance Company has inventory, spare parts and
materials relating to the Systems of the type and nature and maintained at a
level consistent with past practice (the "Inventory"), and such Inventory will
be sufficient to operate their respective businesses in the ordinary course for
at least thirty (30) days after the Closing.
3.20 Overbuilds; Competition. Except as set forth in Schedule 3.20, as of
the date of this Agreement, (i) no construction programs have been undertaken by
any Governmental Authority or other active cable television, multichannel
multipoint distribution system (as defined by the rules and regulations of FCC),
or multipoint distribution system provider in any of the Franchise Areas and, to
Group's Knowledge, without investigation but upon inquiry of its regional
managers and as should reasonably be known to a reasonable cable television
operator, no such construction programs are proposed or threatened to be
undertaken; (ii) no franchise or other applications or requests of any Person to
provide cable television service in the Franchise Areas have been filed more
than two (2) weeks prior to the date hereof or, to Group's Knowledge (subject to
the same limitation referred to in clause (i) above), have been filed less than
two (2) weeks prior to the date hereof or are pending, threatened, or proposed;
(iii) there is no other cable television or other video services provider within
any of the Franchise Areas which is providing or, to Group's Knowledge (subject
to the same limitation referred to in clause (i) above), has applied for a
franchise to provide cable television services or other video services to any of
the
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Franchise Areas in competition with any of the Renaissance Companies; and (iv)
none of the Renaissance Companies has received any written notice that any other
provider of cable television services or other existing or prospective video
service provider intends to provide such cable television or other video service
in competition with any Renaissance Company. Except as set forth in Schedule
3.20, no Renaissance Company is, nor is any Affiliate of any Renaissance
Company, a party to any agreement restricting the ability of any third party to
operate cable television systems or any other video programming distribution
business within any of the Franchise Areas.
3.21 Disconnections. Schedule 3.21 sets forth (i) the number of Subscribers
which each of the Renaissance Companies have disconnected from service during
each of the six (6) months prior to the date hereof and (ii) a general
description of the Renaissance Companies' policies relating to the connection
and disconnection of Subscribers from service.
3.22 Year 2000. Each Renaissance Company has (i) initiated a review and
assessment of all areas within its business that would reasonably be expected to
be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by such Renaissance Company may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan.
3.23 Budgets. Schedule 3.23 sets forth true, correct and complete copies of
the Renaissance Companies' capital and operating budgets for 1999.
3.24 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Group (as modified by Renaissance's Disclosure
Schedules) on the date such representation or warranty is made shall be deemed
not to constitute a breach of such representation or warranty if such event or
circumstance is cured on or prior to the Closing Date or the earlier termination
of this Agreement.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in Renaissance's Disclosure Schedules, Holdings hereby
represents and warrants to Buyer as set forth in this Section 4.
4.1 Organization; Authorization and Binding Obligation. Holdings is a
limited liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware.
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4.2 Authorization and Binding Obligation. Holdings has the requisite
limited liability company power and authority to execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party
according to their respective terms. The execution, delivery, and performance by
Holdings of this Agreement and the other Transaction Documents to which Holdings
is a party have been duly authorized by all necessary action on the part of
Holdings. This Agreement and the other Transaction Documents to which Holdings
is a party have been duly executed and delivered by Holdings (or, in the case of
Transaction Documents to be executed and delivered at Closing, when executed and
delivered will be duly executed and delivered) and constitute (or, in the case
of Transaction Documents to be executed and delivered at Closing, when executed
and delivered will constitute) the legal, valid, and binding obligation of
Holdings, enforceable against Holdings in accordance with their terms, except as
the enforceability of this Agreement and such other Transaction Documents may be
limited by Enforceability Exceptions.
4.3 Absence of Conflicting Agreements; Consents. Except for the expiration
or termination of any applicable waiting period under the HSR Act, or as set
forth in Schedule 4.3 or as would not impair the ability of Holdings to perform
its obligations under this Agreement and the Transaction Documents to which it
is a party, the execution, delivery and performance by Holdings of this
Agreement and the other Transaction Documents to which it is a party (with or
without the giving of notice, the lapse of time, or both): (a) do not require
the consent of, declaration to, notice to, or filing with any Governmental
Authority or any other Person under any material agreement or instrument to
which Holdings is bound; (b) will not conflict with any provision of the
Organizational Documents of Holdings as currently in effect; (c) assuming
receipt of all Consents, will not conflict in any material way with, result in
any material breach of, or constitute a default in any material respect under
any Legal Requirement to which Holdings is bound; (d) assuming receipt of all
Consents, 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 material agreement
or instrument to which Holdings is bound; and (e) assuming receipt of all
Consents, will not result in the creation of any Encumbrance, but subject to the
Legal Restrictions, upon the Purchased Interests held by Holdings.
Notwithstanding the foregoing, Holdings makes no representation or warranty
regarding any of the foregoing that may result from the specific legal or
regulatory status of Buyer, Charter or their Affiliates or as a result of any
other facts that specifically relate to the business or activities in which any
of Buyer, Charter or their Affiliates is or proposes to be engaged other than
the cable television business.
4.4 Title to Purchased Interests. Holdings holds all legal and beneficial
rights to the Purchased Interests, free and clear of all Encumbrances, but
subject to the Legal Restrictions.
4.5 Claims and Litigation. Except as disclosed in Schedule 4.5, as of the
date of this Agreement, there is no claim, legal action, arbitration or other
legal, administrative or tax proceeding pending or threatened in writing or, to
Holdings' Knowledge, threatened (other than in writing), nor is there
outstanding any order, decree or judgment against or relating to the Renaissance
Companies, the Assets or the business or operations of any of the Systems (other
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than FCC and other proceedings generally affecting the cable television industry
and not specific to the Renaissance Companies and other than rate complaints or
certifications filed by customers or Franchising Authorities) that would have an
adverse effect on Holdings' ability to perform its obligations under this
Agreement.
4.6 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of Holdings in connection with this Agreement
or the transactions contemplated by this Agreement, or is entitled to any
payment in connection herewith or therewith which, in either case, would result
in any obligation or liability to Buyer or Charter, except that Holdings has
retained certain brokers and advisors and will pay all fees and expenses of such
brokers and advisors in connection with the transactions contemplated hereby.
4.7 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Holdings (as modified by Renaissance's
Disclosure Schedules) on the date such representation or warranty is made shall
be deemed not to constitute a breach of such representation or warranty if such
event or circumstance is cured on or prior to the Closing Date or the earlier
termination of this Agreement.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER AND CHARTER
Buyer and Charter jointly and severally represent and warrant to Group and
Holdings as set forth in this Section 5.
5.1 Organization. Each of Buyer and Charter is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Each of Buyer and Charter has the requisite corporate power and
authority to own, lease and operate its properties, to carry on its business in
the places where such properties are now owned, leased or operated and such
business is now conducted and to execute, deliver and perform this Agreement and
the other Transaction Documents to which Buyer or Charter (as the case may be)
is a party according to their respective terms. Each of Buyer and Charter is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which such qualification is required.
5.2 Authorization and Binding Obligation. The execution, delivery and
performance by each of Buyer and Charter (as the case may be) of this Agreement
and the other Transaction Documents to which it is a party have been duly
authorized by all necessary corporate, shareholder or other action on the part
of Buyer or Charter (as the case may be). This Agreement and the other
Transaction Documents to which Buyer or Charter (as the case may be) is a party
have been duly executed and delivered by Buyer or Charter (as the case may be)
(or, in the case of Transaction Documents to be executed and delivered at
Closing, when executed and delivered will be duly executed and delivered) and
constitute (or, in the case of Transaction Documents to be executed and
delivered at Closing, when executed and delivered will constitute) the legal,
valid, and binding obligation of each of Buyer or Charter (as the case may be),
enforceable against Buyer or Charter (as the case may be) in accordance with
their terms, except as the
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enforceability of this Agreement and such other Transaction Documents may be
limited by Enforceability Exceptions.
5.3 Absence of Conflicting Agreements; Consents. Except for the expiration
or termination of any applicable waiting period under the HSR Act, and the
filing by Charter with the SEC of any reports required to be filed in connection
with the consummation of the transactions contemplated hereby, the execution,
delivery and performance by each of Buyer and Charter of this Agreement and the
other Transaction Documents to which Buyer or Charter (as the case may be) is a
party (with or without the giving of notice, the lapse of time, or both): (a) do
not require any Consent, declaration to, or filing with any Governmental
Authority or any other Person that has not been obtained; (b) will not conflict
with any provision of the Organizational Documents of Buyer or Charter (as the
case may be), as currently in effect; (c) will not conflict with, result in a
material breach of, or constitute a default in any material respect under any
Legal Requirement to which Buyer or Charter (as the case may be) is bound; 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 material agreement or instrument
to which Buyer or Charter (as the case may be) is a party or bound.
Notwithstanding the foregoing, neither Buyer nor Charter makes any
representation or warranty regarding any of the foregoing that may result from
the specific legal or regulatory status of any Renaissance Company or as a
result of any other facts that specifically relate to the business or activities
in which Holdings or any Renaissance Company is or proposes to be engaged other
than the cable television business.
5.4 Claims and Litigation. As of the date of this Agreement, except as
disclosed in Schedule 5.4, there is no pending or written threat of a claim,
legal action, arbitration, governmental investigation or other legal,
administrative or tax proceeding pending, nor any order, decree or judgment in
progress or pending, or, to the Charter Parties' Knowledge, threatened other
than in writing, against or relating to any of Buyer or Charter or the assets or
business of Buyer or Charter or their respective Subsidiaries (other than FCC
and other proceedings generally affecting the cable television industry and not
specific to Buyer, Charter or their Subsidiaries and other than rate complaints
or certifications filed by customers or franchising authorities), that would
have an adverse effect on Buyer's or Charter's ability to perform its
obligations under this Agreement.
5.5 Investment Purpose; Investment Company. Buyer is acquiring the
Purchased Interests for investment for its own account and not with a view to
the sale or distribution of any part thereof within the meaning of the
Securities Act. Each of Buyer and Charter (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Purchased Interests and is capable of bearing the economic risks of such
investment. Each of Buyer and Charter is an informed and sophisticated
purchaser, and has engaged expert advisors, experienced in the evaluation and
purchase of companies such as the Renaissance Companies as contemplated
hereunder. Each of Buyer and Charter has undertaken such investigation and has
been provided with and has evaluated such documents and information as it has
deemed
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necessary to enable it to make an informed and intelligent decision with respect
to the execution, delivery and performance of this Agreement. Each of Buyer and
Charter acknowledges that Holdings and Group have given Buyer and Charter
complete and open access to the key employees, documents and facilities of the
Renaissance Companies. Each of Buyer and Charter will undertake prior to Closing
such further investigation and request such additional documents and information
as it deems necessary. Buyer agrees to accept the Purchased Interests and the
Systems in the condition they are in on the Closing Date based upon its own
inspection, examination and determination with respect thereto as to all
matters, and without reliance upon any express or implied representations or
warranties of any nature made by or on behalf of or imputed to Holdings or
Group, except as expressly set forth in this Agreement. Buyer is not an
"investment company" as defined in the Investment Company Act of 1940, as
amended.
5.6 Ownership of Buyer. Charter holds of record and owns beneficially more
than fifty percent (50%) of all the outstanding Equity Interests of Charter
Communications Holdings LLC, a Delaware limited liability company ("CCH"). CCH
owns, indirectly through subsidiaries, all of the cable properties of the
Charter Companies (as defined in the draft Offering Circular dated February 23,
1999 (09:13) of CCH and Charter Communications Holdings Capital Corporation).
5.7 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of Buyer or Charter in connection with this
Agreement or the transactions contemplated by this Agreement, or is entitled to
any payment in connection herewith or therewith which, in either case, would
result in any obligation or liability to Holdings or Group.
5.8 Availability of Funds. Buyer has, as of the date hereof, the ability to
obtain, and will have, as of the Closing Date, sufficient cash, lines of credit
or other immediately available funds to enable it to consummate the transactions
contemplated hereby.
5.9 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Buyer or Charter on the date such representation
or warranty is made shall be deemed not to constitute a breach of such
representation or warranty if such event or circumstance is cured on or prior to
the Closing Date or the earlier termination of this Agreement.
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS
6.1 Operation of Business Prior to Closing. Except as required by
applicable Legal Requirements or as contemplated by this Agreement or Schedule
6.1, and subject to Group's obligation to comply with the terms and conditions
hereof and the operation of the Renaissance Companies' business in the ordinary
course, and except as consented to by Buyer, between the date hereof and the
Closing Date, Group will cause the Renaissance Companies to operate the Systems
in the ordinary course of business (subject to, and except as modified by,
compliance with the following negative and affirmative covenants) and abide by
the following negative and affirmative covenants:
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(a) Negative Covenants. The Renaissance Companies shall not do any of
the following between the date hereof and the Closing Date:
(1) Franchises. Fail to timely file a valid request for renewal
in accordance with Section 626(a) of the Cable Act, or fail to use
commercially reasonable efforts to renew on substantially the same or
on other commercially reasonable terms any Franchise that will expire
after the date hereof and prior to the date which is thirty (30)
months after the Closing Date in accordance with its terms (it being
understood that the Renaissance Companies shall not be required to
take any steps necessary to obtain renewals of any Franchise earlier
than such steps are required to be taken by applicable FCC
Regulations, and obtaining renewals of any Franchise shall not be a
condition precedent to Buyer's or Charter's obligations hereunder).
(2) Contracts. Modify or amend in any material respect, except in
the ordinary course of business, any Contract that shall survive the
Closing; or enter into any new Contracts that will be binding on the
Renaissance Companies following the Closing except: (A) agreements for
the provision of services to customers; (B) the renewal or extension
of any existing Contract on its existing terms, in all material
respects, in the ordinary course of business; (C) with respect to
utility pole attachment agreements, Contracts with terms as
customarily required by the utility whose poles are utilized; (D)
Contracts in connection with capital expenditures made in accordance
with Section 6.1(b)(7); or (E) any other contracts or commitments
entered into in the ordinary course of business that are terminable on
not more than sixty days prior notice without the payment of any
penalty or that do not involve post-Closing obligations in excess of
Fifty Thousand Dollars ($50,000) in any one case or in excess of Five
Hundred Thousand Dollars ($500,000) in the aggregate.
(3) Disposition of Assets. Sell, assign, lease, swap or otherwise
transfer or dispose of any of the Assets, except for Assets consumed
or disposed of in the ordinary course of business.
(4) Encumbrances. Create, assume or permit to exist any
Encumbrance upon the Assets, except for Permitted Encumbrances or
other Encumbrances disclosed in Schedule 3.9 and subject to the Legal
Restrictions.
(5) Indebtedness. Permit the Renaissance Companies to incur any
additional indebtedness for borrowed money, except to the extent (if
not repaid at or prior to the Closing) included in the computation of
Closing Net Liabilities; provided that any such incurrence shall be in
the ordinary course of business and the Renaissance Companies shall
give Buyer prior notice of such borrowing;
(6) Compensation. Increase annually recurring compensation by
more than 5%, on average, for the Renaissance Companies' employees
retained in connection with the conduct of the business or operation
of the Systems, except for customary merit or time-in-grade
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increases for qualifying employees or otherwise in accordance with the
Renaissance Companies' employee policies.
(7) Waivers. Waive any material right relating to the Systems or
the Assets.
(8) Marketing Plan. Implement any new marketing plans not
contemplated in the Renaissance Companies' budget, except as set forth
in Schedule 6.1 or as consented to by Buyer, such consent not to be
unreasonably withheld.
(b) Affirmative Covenants. Group shall, and shall cause the
Renaissance Companies to, do the following between the date hereof and the
Closing Date:
(1) Access to Information. Subject to Buyer's and Charter's
obligations hereunder and under the Confidentiality Agreement with
respect to confidentiality, allow Buyer and its authorized
representatives reasonable access during normal business hours to the
Assets and the physical plant, offices, properties and records of the
Renaissance Companies for the purpose of inspection, and furnish or
cause to be furnished to Buyer or its authorized representatives all
information with respect to the Assets or the Renaissance Companies
that Buyer may reasonably request. Any investigation or request for
information shall be conducted in such a manner as not to interfere
with the business or operations of the Renaissance Companies and the
Systems.
(2) Insurance. Maintain the existing insurance policies on the
Systems and the Assets (or comparable replacement policies).
(3) Books and Records. Maintain the Renaissance Companies' books
and records substantially in accordance with past practices.
(4) Financial Information. Furnish to Buyer (i) within forty-five
days after the end of each month and each calendar quarter between the
date hereof and the Closing Date, an unaudited consolidated balance
sheet and statement of operations for the Renaissance Companies for
each such month and each such calendar quarter and (ii) any other
information (including, without limitation, management notes)
furnished to the Renaissance Companies' senior lenders or filed by the
Renaissance Companies with the SEC, which financial information shall
be prepared from the Renaissance Companies' books and records
maintained in the ordinary course of business substantially in
accordance with past practices.
(5) Compliance with Laws. Comply in all material respects with
all Legal Requirements applicable to the Renaissance Companies and the
operation of the Systems.
(6) Keep Organization Intact. Except with respect to any
voluntary departure of any of the Renaissance Companies' employees
between the date hereof and Closing, use commercially reasonable
efforts to preserve intact the Renaissance Companies' business and
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organization relating to the Systems and preserve for Buyer the
goodwill of the Renaissance Companies' suppliers, customers and others
having business relations with them.
(7) Capital Expenditure Program. Continue capital expenditures in
the ordinary course of business in a manner substantially consistent
with Schedule 6.1.
(8) Earth Stations. Within seven (7) days of the date hereof, use
commercially reasonable efforts to contract for frequency coordination
studies in preparation of filing an application to register with the
FCC at least one receive-only earth station ("TVRO") at each Systems'
headend or other site at which one or more TVROs are located as of the
date hereof and which are used to provide programming to such
headends, and within seven (7) days of receiving each coordination
study, file such registration applications with the FCC.
(c) Certain Permitted Actions. Notwithstanding anything in this
Agreement (including Sections 6.1(a) and (b) above) to the contrary, Buyer
and Charter consent and agree as follows:
(1) Contractual Commitments. The Renaissance Companies may comply
with all of their contractual commitments under their existing
Contracts and under any Contracts entered into after the date of this
Agreement in compliance with Section 6.1(a)(2) or with Buyer's and
Charter's consent (in each case, as such Contracts may be in effect
from time to time in accordance with Section 6.1(a)(2) or with Buyer's
and Charter's consent). The Renaissance Companies may take such
actions as are contemplated by the other Sections of this Agreement
and otherwise comply with their obligations under the other Sections
of this Agreement.
(2) Excluded Assets. The Renaissance Companies may, prior to
Closing, terminate, transfer or assign to Holdings, its designee or
any other Person, each of the Excluded Assets on such terms as shall
be determined by Holdings, in its sole discretion.
6.2 Confidentiality; Press Release.
(a) Buyer, Charter and Holdings are parties to a Confidentiality Agreement
dated February 12, 1999 (the "Confidentiality Agreement"). Notwithstanding the
execution, delivery and performance of this Agreement, or the termination of
this Agreement prior to Closing, the Confidentiality Agreement shall remain in
full force and effect in accordance with its terms, but shall expire
concurrently with the Closing hereunder.
(b) No party will issue any press release or make any other public
announcements concerning this Agreement or the transactions contemplated hereby
except with the prior approval (not to be unreasonably withheld) of the other
parties, except that if any such disclosure is required by law, no party will
make such disclosure without first providing to the other parties an advance
copy of any such disclosure and a reasonable opportunity to review and comment.
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6.3 Cooperation; Commercially Reasonable Efforts. Without limiting any of
the obligations of the parties hereunder, the parties shall cooperate with each
other and their respective counsel, accountants, agents and other
representatives in all commercially reasonable respects in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and otherwise use their commercially reasonable efforts to consummate
the transactions contemplated hereby and to fulfill their obligations hereunder
as expeditiously as practicable. Charter shall provide to Holdings such
information relating to Charter and its Subsidiaries and their businesses and
operations as Holdings shall reasonably request.
6.4 Consents.
(a) Following the execution hereof, until the Closing Date, Group shall use
its best efforts, and shall cause the Renaissance Companies to use their best
efforts, and Charter shall use its best efforts, and shall cause Buyer to use
its best efforts, to obtain as expeditiously as possible all Consents required
to be obtained by the Renaissance Companies, including Consents under the
Franchises, FCC Licenses and Contracts of the Renaissance Companies. Group
shall, and shall cause the Renaissance Companies to, and Charter shall, and
shall cause Buyer to, prepare and file, or cause to be prepared and filed,
within fifteen (15) days after the date hereof (subject to extension for a
period of up to an additional ten (10) days, if reasonably necessary for a party
to complete its application), all applications (including FCC Forms 394 or other
appropriate forms) required to be filed with the FCC and any Franchising
Authority that are necessary for the transfer of control to Buyer in connection
with the consummation of the transactions contemplated by this Agreement of the
Franchises and the FCC Licenses identified in Schedule 3.8. The parties shall
also make appropriate requests, as soon as practicable after the date hereof,
for any Consents required under any Contract (other than the Debt Documents,
which shall be governed by Section 6.7). If, notwithstanding their best efforts,
Group and the other Renaissance Companies are unable to obtain any of the
Consents, none of the Renaissance Companies nor Holdings shall be liable to
Buyer or Charter for any breach of covenant, and, for the avoidance of doubt,
after the Closing, Holdings shall not have any obligation with respect to
obtaining any Consents or any liability for the failure of such Consents to be
obtained. Except as expressly set forth in Section 6.4(b) below, nothing herein
shall require the expenditure or payment of any funds (other than in respect of
normal and usual attorneys fees, filing fees or other normal costs of doing
business) or the giving of any other consideration by Buyer, Charter, Holdings
or, prior to consummation of the Closing, any Renaissance Company, or any
adjustment to the Cash Consideration to be paid to Holdings.
(b) (i) Without limiting Section 6.4(b)(i), (ii) or (iii), each of Buyer
and Charter agrees that if in connection with the process of obtaining any
Consent, a Governmental Authority or other Person purports to require any
condition or any change to a Franchise, License or Contract to which such
Consent relates that would be applicable to any of Buyer, Charter or any
Renaissance Company as a requirement for granting its Consent, which condition
or change involves a monetary payment or commitment to such Governmental
Authority or other Person, either of Buyer and Charter, on the one hand, or
Holdings, on the other hand, may elect, in its
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sole discretion, to satisfy such monetary payment or commitment, in which case,
Buyer and Charter will accept (and agree that Holdings may cause any Renaissance
Company to accept) any condition or change in the Franchise, License or Contract
to which such Consent relates to the extent provided herein.
(ii) If, in connection with the process of obtaining any Consent from
a Franchising Authority, such Franchising Authority makes a bona fide claim
that any amount is owed by the relevant Renaissance Company as a result of
a default under, or breach of, the corresponding Franchise, by such
Renaissance Company or any predecessor in interest, Holdings shall satisfy
all outstanding monetary obligations of such Renaissance Company or
predecessor in interest in respect of any such bona fide default or breach.
(iii) If a Governmental Authority or other Person imposes any
commercially reasonable non-monetary obligation in connection with granting
its Consent under a Franchise, License or Contract, Buyer and Charter will
comply with such obligation after Closing (and agree that Holdings may
cause any Renaissance Company to accept) any such commercially reasonable
non-monetary obligation.
(c) Buyer shall promptly furnish to any Governmental Authority or other
Person from whom a Consent is requested such accurate and complete information
regarding Buyer, Charter and their Subsidiaries, including financial information
concerning Buyer and Charter and other information relating to the cable and
other media operations of Buyer and Charter, as a Governmental Authority or
other Person may reasonably require in connection with obtaining any Consent,
and Buyer shall promptly furnish to Group a copy of any such information
provided to a Governmental Authority or other Person, and any other information
concerning Buyer and Charter as Group may reasonably request in connection with
obtaining any Consent. To the extent Group is required to supply such
information as to Buyer, Charter and their Subsidiaries to Persons from whom
Consents are sought, Group may supply such information and shall have no
obligation to Buyer or Charter with respect to the disclosure or use of such
information by such Persons.
(d) It is understood and agreed that nothing herein shall prevent Buyer or
Charter (or their employees, agents, representatives and any other Person acting
on behalf of Buyer or Charter) from making statements or inquiries to, attending
meetings of, making presentations to, or from responding to requests initiated
by, Governmental Authorities or other Persons from which a Consent is sought,
and Buyer shall use commercially reasonable efforts to apprise Holdings of all
such requests.
6.5 HSR Act Filing. As soon as practicable after the execution of this
Agreement, but in any event no later than fifteen (15) days after such execution
(subject to extension for a period of up to an additional ten (10) days, if
reasonably necessary for a party to complete its notification and report) if not
filed by the expiration of such fifteen (15) day period, the parties will each
complete and file, or cause to be completed and filed, any notification and
report required to be filed under the HSR Act; and each such filing shall
request early termination of the
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waiting period imposed by the HSR Act. The parties shall use commercially
reasonable efforts to respond as promptly as reasonably practicable to any
inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Authority in connection with antitrust matters. The parties shall use
commercially reasonable efforts to overcome any objections which may be raised
by the FTC, the Antitrust Division or any other Governmental Authority having
jurisdiction over antitrust matters.
6.6 Charter's Actions.
(a) No party hereto, nor any of their respective Affiliates, will take any
action that is inconsistent with its obligations under this Agreement or which
does, or would reasonably be expected to, hinder or delay the consummation of
the transaction contemplated by this Agreement. Without limiting the generality
of the foregoing, at all times between the date hereof and the Closing Date,
each of Buyer and Charter will take all necessary or advisable actions to
ensure, and each of Buyer and Charter will ensure, that Buyer is able to deliver
the Cash Consideration at Closing.
(b) At all times between the date hereof and the Closing Date, (i) Charter
shall continue to hold of record and own beneficially more than fifty percent
(50%) of all the outstanding Equity Interests of CCH, and (ii) Buyer shall be a
wholly-owned (direct or indirect) subsidiary of CCH.
6.7 Renaissance Debt Obligations.
(a) Buyer and Charter acknowledge and agree that all obligations of the
Renaissance Companies with respect to the Senior Discount Notes and the Senior
Debt (including all principal, accrued and unpaid interest and all other
amounts), shall remain obligations of the Renaissance Companies through and
after Closing, and each of Buyer and Charter will cooperate with the Renaissance
Companies with respect to any information relating to Buyer and Charter that
shall be reasonably requested by any of the holders of the Senior Debt.
(b) After the Closing, Buyer and Charter agree to cause the Renaissance
Companies to commence an Offer to Purchase (as defined in the Indenture) in
accordance with the terms and conditions of the Indenture and to discharge all
of their obligations under the Indenture in accordance with its terms, and Buyer
and Charter agree that Holdings shall not have any liability or obligation in
respect thereof, including, without limitation, any change of control penalty or
premium or other payment arising out of or resulting from the consummation of
the transactions contemplated by this Agreement under or pursuant to the
Indenture or the Senior Discount Notes.
(c) Simultaneously with the Closing and without limiting any other
obligations of Buyer and Charter, Buyer and Charter shall satisfy and discharge
all obligations
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of the Renaissance Companies in respect of the Senior Debt and the Credit
Agreement (including all principal, accrued and unpaid interest and all other
amounts, including any prepayment penalty or premium or any breakage costs) that
become due and payable concurrently with, or as a result, of the consummation of
the Closing.
6.8 Retention and Access to the Renaissance Companies' Records. Except as
provided in Section 6.10(c)(1), Holdings shall, for a period of five years from
the Closing Date, have access to, and the right to copy, at its expense, during
usual business hours upon reasonable prior notice to Buyer and Charter, all of
the books and records relating to the Renaissance Companies, Assets and Systems
that were transferred to Buyer pursuant to this Agreement. Buyer shall retain
and preserve all such books and records for such five year period. Subsequent to
such five year period, Buyer shall only destroy such books and records if there
is no ongoing litigation, governmental audit or other proceeding, and subsequent
to thirty days' notice to Holdings of its right to remove and retain such books
and records or to copy such books and records prior to their destruction.
6.9 Employee Matters.
(a) At Closing, Group shall cause the appropriate Renaissance Companies to
terminate the employment of the Headquarters Employees and the Employment
Agreements, in each case, without liability in respect thereof to any
Renaissance Company, including, without limitation, pursuant to the Employment
Agreements.
(b) Except as any employment agreement between any Renaissance Company and
any employee may otherwise require, all employees of the Renaissance Companies
who continue in employment following the Closing shall be employed on such terms
and conditions as are substantially similar in the aggregate to the terms and
conditions of employment of Buyer's and Charter's employees. Each such employee
shall receive credit for all purposes other than benefit accrual purposes under
any retirement plan or program under any Employee Plan or Compensation
Arrangement of the Buyer for past service with any Renaissance Company and, to
the extent credited under any Employee Plan or Compensation Arrangement of any
Renaissance Company, for past service with any predecessor employer.
(c) Buyer shall offer group health plan coverage to all of the employees of
the Renaissance Companies and to the spouse and dependents of such employees who
become employed by the Buyer or any ERISA Affiliate of the Buyer as of the
Closing on terms and conditions generally applicable to all of Buyer's similarly
situated employees. For purposes of providing such coverage, Buyer shall waive
all preexisting condition limitations for all such employees covered by the
health care plan of any Renaissance Company as of the Closing and shall provide
such health care coverage effective as of the Closing without the application of
any eligibility period for coverage. In addition, Buyer shall credit all
employee payments toward deductible, out-of-pocket and co-payment obligation
limits under the Renaissance Companies' 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
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the Closing Date, with respect to employees of the Renaissance Companies and the
spouse and any dependents of such employees who become employed by Buyer as of
the Closing Date.
(d) Buyer shall assume full responsibility and liability for offering and
providing "continuation coverage" to any "covered employee" and any "qualified
beneficiary" who is covered by a "group health plan" sponsored or contributed to
by any of the Renaissance Companies who has experienced a "qualifying event" or
is receiving "continuation coverage" on or prior to the Closing. "Continuation
coverage," "covered employee," "qualified beneficiary," "qualifying event" and
"group health plan" all shall have the meanings given such terms under Section
4980B of the Code and Section 601 et seq. of ERISA. For purposes of this
Section, each employee of any Renaissance Company who experiences a loss of
healthcare coverage as the result of the transactions contemplated by this
Agreement together with his or her spouse and dependents, if any, shall be
deemed eligible for continuation coverage as provided herein.
(e) Holdings shall cause Renaissance Media to file or cause to be filed an
application for a determination letter from the Internal Revenue Service with
respect to the Renaissance Media LLC 401(k) Plan on or before the close of the
remedial amendment period applicable in the case of disqualifying provisions
under a new plan as described in 26 C.F.R. ss. 1.401(b)-1.
6.10 Tax Matters.
(a) Tax Periods Ending on or Before the Closing Date. Holdings shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Renaissance Companies (i) that are due on or before the Closing Date, or
(ii) that relate to taxable periods ending on or prior to the Closing Date but
are required to be filed after the Closing Date. Such Tax Returns shall be
prepared in accordance with each Renaissance Company's past custom and practice,
and, except as otherwise provided in this Agreement, allocations of items of
income and gain and loss and deduction shall be made using the
closing-of-the-books method. In the case of any Renaissance Company that is a
limited liability company, such Tax Returns shall be prepared in accordance with
the Organizational Documents of such Renaissance Company as in effect
immediately prior to the Closing Date. In preparing each Renaissance Company's
Tax Returns, Holdings shall consult with Buyer in good faith and shall provide
Buyer with drafts of such Tax Returns (together with the relevant back-up
information) for review and consent (which consent shall not be unreasonably
withheld) at least twenty days prior to filing; provided, however, if Buyer has
not provided comments on such Tax Returns to Holdings within such twenty-day
period, then such consent shall be deemed to be given and, if Buyer's comments
or refusal to provide such consent results in any penalties imposed upon
Holdings or any Renaissance Company for failing to file a timely Tax Return,
then Buyer shall be liable for and shall pay, such penalties; provided further,
however, if any such penalties for failure to file a timely Tax Return could be
avoided by filing an extension to file such Tax Return with the applicable
Governmental Authority, Holdings shall, or shall cause the appropriate
Renaissance Company to, timely file such extension. After the Closing, Buyer
shall not prepare or cause to
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be prepared or file or cause to be filed any Tax Return for the Renaissance
Companies for any period ending on or prior to the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing Date. Buyer
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Renaissance Companies for Tax periods which begin before the
Closing Date and end after the Closing Date. Such Tax Returns shall be prepared
in accordance with each Renaissance Company's past custom and practice but,
except as otherwise provided in this Agreement, allocations of items of income
and gain and loss and deduction shall be made using the closing-of-the-books
method. In preparing such Tax Returns, Buyer shall consult with Holdings in good
faith and shall provide Holdings with drafts of such Tax Returns (together with
the relevant back-up information) for review at least ten days prior to filing.
(c) Cooperation on Tax Matters.
(1) Buyer and Holdings shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section 6.10 and any audit, litigation, or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Buyer and Holdings agree (A) to retain all books and
records with respect to Tax matters pertinent to the Renaissance Companies
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Buyer or Holdings, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Buyer or Holdings, as the case
may be, shall allow the other party to take possession of such books and
records to the extent they would otherwise be destroyed or discarded.
(2) Buyer and Holdings further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including
Taxes with respect to the transactions contemplated hereby).
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the transactions consummated pursuant to
this Agreement shall be paid one-half by Buyer and one-half by Holdings when
due. Buyer and Holdings will cooperate in all reasonable respects to prepare and
file all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees.
Buyer shall be liable for any Taxes attributable to any election made by Buyer
or any Affiliate of Buyer with
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respect to any of the Renaissance Companies under Section 338 of the Code or any
comparable provision of state or local law.
(e) Buyer covenants that it will not, and it will not cause or permit any
Renaissance Company or any Affiliate of Buyer, (i) to take any action on or
after the Closing Date, including but not limited to the distribution of any
dividend or the effectuation of any redemption, that could give rise to any tax
liability of any holder of membership interests in Holdings or (ii) to make or
change any tax election, amend any Tax Return or take any tax position on any
Tax Return, take any action, omit to take any action or enter into any
transaction that results in any increased tax liability of any holder of
membership interests in Holdings in respect of any Pre-Closing Tax Period.
(f) Except to the extent taken into account in Closing Net Liabilities,
Buyer shall promptly pay or cause to be paid to Holdings all refunds of taxes
and interest thereon received by Buyer, any Affiliate of Buyer, or any
Renaissance Company attributable to taxes paid by Holdings or any Renaissance
Company with respect to any Pre-Closing Tax Period.
(g) From and after the date of this Agreement, Holdings and each
Renaissance Company shall not without the prior written consent of the Buyer
(which consent shall not be unreasonably withheld) make, or cause or permit to
be made, any Tax election that would adversely affect any of the Renaissance
Companies or Buyer.
6.11 Renaissance Name. The parties agree that Holdings and its Affiliates
(other than the Renaissance Companies) shall retain the right to use the names
"Renaissance" and "Renaissance Media" and any and all derivations thereof,
including the Renaissance Companies' internet domain and the internet addresses,
"renmedia.com" and "R-Media.com"; provided that Buyer shall be entitled to have
the Renaissance Companies use such name, but not such internet domain and
internet addresses, for a period of one (1) year after the Closing. From and
after the expiration of such period, Holdings and its Affiliates (other than the
Renaissance Companies) shall retain the sole and exclusive right to use the name
"Renaissance" and any and all derivations thereof, including the Renaissance
Companies' internet domain and the internet addresses "renmedia.com" and
"R-Media.com" and Buyer agrees to have such name removed from all trucks, signs
and the other Assets used in the operation of the Systems.
6.12 No Recourse; Release of Claims. Anything in this Agreement or
applicable law to the contrary notwithstanding, other than claims against
Holdings or Group as and to the extent expressly provided for in Section 9.4 and
Section 10 of this Agreement (and other than any claim for fraud), neither Buyer
nor Charter will have any claim or recourse against any of the Released Parties
as a result of the breach of any representation, warranty, covenant or agreement
of Holdings or Group contained herein or otherwise arising in connection with
the transactions contemplated by or the Transaction Documents or the business or
operations of the Renaissance Companies prior to the Closing. Effective as of
the Closing, each of Buyer and Charter and each of their respective Subsidiaries
hereby releases and forever discharges each of the Released Parties from all
actions, causes of action, suits, debts and claims (other than claims for fraud)
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arising out of facts or circumstances prior to the Closing, whether at law or in
equity or otherwise, which Buyer or Charter ever had or now or hereafter may
have for, upon or by reason of any matter, cause or thing whatsoever related to
the Renaissance Companies, whether, contingent, accrued or otherwise arising out
of facts or circumstances prior to the Closing; provided that the foregoing
shall not limit Buyer's indemnification rights provided for in Section 10.
6.13 Exculpation and Indemnification. After the Closing, Buyer, Charter and
the Renaissance Companies will be bound by and will assume the same obligations
to satisfy (and Buyer and Charter will cause the Renaissance Companies to
continue to satisfy) the rights of exculpation, indemnification and advancement
of expenses to which the present and former members, stockholders, directors,
representatives, officers, employees and agents of the Renaissance Companies and
any of their respective Affiliates are entitled with respect to any matter
existing or occurring prior to the Closing and/or with respect to this Agreement
and the Transaction Documents, under each such Renaissance Company's
Organizational Documents, by contract or agreement or by resolution of the Board
of Representatives or Board of Directors (as the case may be) of such
Renaissance Company, in accordance with the terms and conditions of any such
exculpation and indemnification provisions as in effect on the date of this
Agreement. Without limiting the foregoing, Charter and Buyer agree to maintain
in place for a period of not less than six years from the Closing, for the
benefit of the parties mentioned in the foregoing sentence, directors' and
officers' insurance, on substantially the same terms and to the same extent as
presently in effect for the Renaissance Companies.
6.14 Rate Regulatory Matters. The parties acknowledge and agree that
notwithstanding anything in this Agreement or any other Transaction Document to
the contrary (including any representation or warranty made by Group in Sections
3.11(e), 3.15 or 3.16), any matter relating to, in connection with or resulting
or arising from any Rate Regulatory Matter, or any actions taken prior to or
after the date hereof by any Renaissance Company to comply with or in a good
faith attempt to comply with any Rate Regulatory Matter (including any rate
reduction, refund, penalty or similar action having the effect of reducing the
rates previously or subsequently paid by subscribers, whether instituted or
implemented by or imposed on any Renaissance Company and changes to rate
practices instituted or implemented by or imposed on any Renaissance Company),
shall not: (a) cause or constitute, directly or indirectly, a breach by Group or
Holdings of any of its representations, warranties, covenants or agreements
contained in this Agreement or any other Transaction Document (and such
representations, warranties, covenants, and agreements shall hereby be deemed to
be modified appropriately to reflect and permit the impact and existence of such
Rate Regulatory Matters and to permit any action by any Renaissance Company to
comply with or attempt in good faith to comply with such Rate Regulatory
Matters); (b) otherwise cause or constitute, directly or indirectly, a default
or breach by any Renaissance Company or Holdings under this Agreement or any
other Transaction Document; (c) result in the failure of any condition precedent
to the obligations of Buyer under this Agreement or any other Transaction
Document; (d) otherwise excuse Buyer's or Charter's performance of their
obligations under this Agreement or any other Transaction Document; or (e)
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give rise to any claim for (i) any adjustment to the Cash Consideration or other
compensation or (ii) indemnification, except as provided in Section 10.2(b).
6.15 Guaranty by Charter. Subject to the provisions of this Section 6.15,
Charter hereby fully, unconditionally and irrevocably guarantees to Holdings the
due and punctual payment of the Cash Consideration and any other monetary
obligations of Buyer and the due and punctual performance of all other
obligations of Buyer to Holdings, all in accordance with the terms of this
Agreement. Charter hereby acknowledges that, with respect to all of Buyer's
obligations, including those to pay money, including, without limitation, the
Cash Consideration, this guaranty shall be a guaranty of payment and performance
and not of collection and shall not be conditioned or contingent upon the
pursuit of any remedies against Buyer. Charter hereby waives diligence, demand
of payment, filing of claims with a court in the event of merger or bankruptcy
of Buyer, any right to require a proceeding first against Buyer, the benefit of
discussion, protest or notice and all demands whatsoever, and covenants that
this guaranty will not be discharged as to any obligation except by satisfaction
of such obligation in full. Until Holdings has been paid in full any amounts due
and owing to it under this Agreement, Charter hereby irrevocably waives any
claim or other rights which it may now or hereafter acquire against Buyer that
arise from the existence, payment, performance or enforcement of its obligations
under this guaranty and this Agreement, including, without limitation, any right
of reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of Holdings against Buyer or any collateral
which Holdings hereafter acquires, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from Buyer, directly or indirectly, in
cash or other property or by set-off or in any other manner, payment or security
on account of such claim or other rights. To the fullest extent permitted by
applicable law, the obligations of Charter hereunder shall not be affected by
(a) the failure of the applicable obligee to assert any claim or demand or to
enforce any right or remedy against Charter pursuant to the provisions of this
Agreement or otherwise, (b) any rescission, waiver, amendment or modification
of, or any release from any of the terms or provisions of this Agreement or the
invalidity or unenforceability (in whole or in part) of this Agreement, unless
consented to in writing by Charter, Holdings and Group and (c) any change in the
existence (corporate or otherwise) of Buyer, Charter or Holdings or any
insolvency, bankruptcy, reorganization or similar proceeding affecting any of
them or their assets. If any amount shall be paid to Charter in violation of the
fourth sentence of this Section 6.15, and the obligations of Buyer under this
Agreement shall not have been discharged in full, such amount shall be deemed to
have been paid to Charter for the benefit of, and held in trust for the benefit
of, Holdings, and shall forthwith be paid to Holdings. Charter acknowledges that
it will receive direct and indirect benefits from the consummation of the
transactions contemplated by this Agreement and that the waivers set forth in
this Section 6.15 are knowingly made in contemplation of such benefits. Nothing
contained in this Section 6.15 is intended to or shall impair, as among Charter
and Holdings, the obligations of Charter, which are absolute and unconditional,
upon failure by Buyer, to perform its obligations under this Agreement,
including, without limitation, its obligation to pay to Holdings the Cash
Consideration and any other monetary obligations of Buyer when payable in
accordance with the terms of this Agreement, or is intended to or shall affect
the relative rights of Holdings and
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creditors of Charter, nor shall anything herein prevent Holdings from exercising
all remedies otherwise permitted by applicable law.
6.16 Disclosure Schedules. The parties acknowledge and agree that (i)
Renaissance's Disclosure Schedules and Charter's Disclosure Schedules may
include certain items and information solely for informational purposes for the
convenience of the parties hereto and (ii) the disclosure of any matter in
Charter's Disclosure Schedules or Renaissance's Disclosure Schedules shall not
be deemed to constitute an acknowledgment by Holdings or Group, in the case of
Renaissance's Disclosure Schedules, or Buyer or Charter, in the case of
Charter's Disclosure Schedules, that the matter is material.
SECTION 7: CONDITIONS TO OBLIGATIONS OF BUYER AND CHARTER
7.1 Conditions to Obligations of the Buyer and Charter. All obligations of
Buyer and Charter at the Closing hereunder are subject to the fulfillment (or
waiver at the option of Buyer or Charter) prior to or at the Closing of each of
the following conditions:
(a) Representations and Warranties of Group. As to the representations
and warranties of Group set forth in Section 3 and of Holdings set forth in
Section 4, (1) those representations and warranties set forth in Section 3
and Section 4 which are expressly stated to be made solely as of the date
of this Agreement or another specified date shall be true and correct in
all respects as of such date (without regard to the materiality or material
adverse effect qualifiers set forth therein), and (2) all other
representations and warranties of Group set forth in Section 3 and Section
4 respectively, shall be true and correct in all respects at and as of the
time of the Closing as though made at and as of that time (without regard
to the materiality or material adverse effect qualifiers set forth
therein); provided that for purposes of each of clauses (1) and (2) above,
the representations and warranties shall be deemed true and correct in all
respects to the extent that the aggregate effect of the inaccuracies in
such representations and warranties as of the applicable times does not
constitute a Material Adverse Effect.
(b) Covenants. Group and Holdings shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by them prior to or at the
Closing.
(c) Consents. The Material FCC Consents shall have been obtained. The
aggregate number of Equivalent Subscribers as of any applicable date, in
those Franchise Areas that are Transferable Franchise Areas shall be at
least ninety-five percent (95%) of the aggregate number of Equivalent
Subscribers in all Franchise Areas as of such applicable date.
(d) Hart-Scott-Rodino. The requisite waiting period under the HSR Act
shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved.
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(e) Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a
court of competent jurisdiction having the force of law that would prevent
the Closing, provided that Buyer and Charter shall have used commercially
reasonable efforts to prevent the entry of any such judgment, decree, order
or other prohibition and to appeal as expeditiously as possible any such
judgment, decree, order or other prohibition that may be entered.
(f) Deliveries. Group and Holdings shall have made or stand willing to
make all the deliveries to Buyer and Charter described in Section 8.2.
(g) Compliance with FIRPTA. Holdings shall have provided the Buyer
with a statement, in a form reasonably satisfactory to the Buyer, pursuant
to Section 1.1445-2(b)(2) of the Treasury Regulations, certifying that
Holdings is not a foreign person.
(h) Material Adverse Effect. From and after the date of this Agreement
until the Closing Date, no event shall have occurred which has had a
Material Adverse Effect.
(i) Holdings Franchise Notice. Holdings shall have delivered to Buyer
a notice that the condition set forth in the second sentence of Section
7.1(c) has been satisfied at least two (2) business days prior to the date
scheduled for Closing.
7.2 Conditions to Obligations of Holdings.
All obligations of Holdings at the Closing hereunder are subject to the
fulfillment (or waiver at the option of Holdings) prior to or at the Closing of
each of the following conditions:
(a) Representations and Warranties. As to the representations and
warranties of Buyer and Charter set forth in Section 5, (1) those
representations and warranties set forth in Section 5 which are expressly
stated to be made solely as of the date of this Agreement or another
specified date shall be true and correct in all material respects as of
such date, and (2) all other representations and warranties shall be true
and correct in all material respects at and as of the Closing as though
made at and as of that time.
(b) Covenants. Buyer and Charter shall have performed and complied
with in all material respects all covenants and agreements required by this
Agreement to be performed or complied with by them prior to or at the
Closing.
(c) Hart-Scott-Rodino. The requisite waiting period under the HSR Act
shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved.
(d) Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a
court of competent jurisdiction having the force of law that would prevent
the Closing, provided that Group and Holdings shall
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have used commercially reasonable efforts to prevent the entry of any such
judgment, decree, order or other prohibition and to appeal as expeditiously
as possible any such judgment, decree, order or other prohibition that may
be entered.
(e) Deliveries. Buyer and Charter shall have made or stand willing to
make all the deliveries described in Section 8.3.
SECTION 8: CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date.
(1) Subject to satisfaction or, to the extent permitted by law,
waiver, of the closing conditions described in Section 7, and subject
to Section 8.1(a)(2), 8.1(a)(3) and 8.1(a)(4), the Closing shall take
place on the date specified by Holdings by notice to Buyer, which
specified date shall be no earlier than two business days and no later
than five business days after satisfaction or waiver of the conditions
set forth in Sections 7.1(c) and (d) and Sections 7.2(c), or on such
earlier or later date as Holdings and Buyer shall mutually agree;
provided, however, subject to Section 8.1(a)(3) and 8.1(a)(4), the
Closing shall not take place beyond the Upset Date.
(2) If on the date on which the Closing would otherwise be
required to take place pursuant to Section 8.1(a)(1) (A) there shall
be in effect any judgment, decree, order or other prohibition of a
court of competent jurisdiction having the force of law that would
prevent or make unlawful the Closing, or (B) any other circumstance
beyond the reasonable control of the Renaissance Companies, Holdings,
Buyer or Charter (which shall in no event include any matters relating
to financing of the transactions contemplated hereby) shall exist that
would prevent the Closing or the satisfaction of any of the conditions
precedent to any party set forth in Section 7, then either Holdings or
Buyer may, at its option, postpone the date on which the Closing is
required to take place until such date, to be set by the party that
elects to postpone the date for Closing pursuant to this subsection
(2) on at least five business days' written notice to the other party,
as soon as practicable after such judgment, decree, order or other
prohibition ceases to be in effect, or such other circumstance ceases
to exist; provided, however, that any postponement of the date on
which the Closing is required to take place to a date beyond the Upset
Date shall require the consent of both Holdings and Buyer.
(3) Notwithstanding anything in this Agreement to the contrary,
if on the date scheduled for Closing, the Closing has not occurred
because any notice period required by Section 8.1(a)(1) or (2) has not
lapsed, the Upset Date shall be extended until one business day after
the lapse of such period.
(4) If the date on which the Closing would otherwise be required
to take place pursuant to Section 8.1(a)(1), 8.1(a)(2) or 8.1(a)(3)
the Referee shall not have
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completed its determination pursuant to Section 2.4(a) of any of the
amount disputed by Holdings and Buyer, then Holdings may, at its
option, postpone the date on which the Closing is required to take
place until the third (3rd) business day after the date the Referee
makes its final determination pursuant to Section 2.4(a); provided,
however, that if such postponement results in the Closing taking place
on a date after the Upset Date, the Upset Date shall be extended until
one business day after the date of the Closing as postponed pursuant
to this Section 8.1(a)(4).
(b) Closing Place. The Closing shall be held at the offices of Paul,
Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York, 10022
or any other place or time as Group and Buyer shall mutually agree.
8.2 Deliveries by Holdings. Holdings shall deliver or cause to be
delivered to Buyer the following:
(a) Purchased Interests. An assignment agreement providing for the
assignment of the Purchased Interests by Holdings to Buyer, in a form
reasonably satisfactory to Buyer.
(b) Officer's Certificate of Group. A certificate executed by Group,
dated as of the Closing Date, certifying that the closing conditions
specified in Sections 7.1(a) and (b) have been satisfied as to Group,
except as disclosed in said certificate.
(c) Officer's Certificate of Holdings. A certificate executed by
Holdings, dated as of the Closing Date, certifying that the closing
conditions specified in Sections 7.1(a) and (b) have been satisfied as to
Holdings, except as disclosed in such certificate.
(d) Secretaries' Certificate. A certificate executed by each of
Holdings and Group, dated as of the Closing Date, (1) certifying that the
resolutions, as attached to said certificate, were duly adopted by the
members of Holdings and Group, as the case may be, authorizing and
approving the execution by such party of this Agreement and the other
Transaction Documents to which such party is a party and the consummation
of the transactions contemplated hereby and thereby and that such
resolutions remain in full force and effect; and (2) providing, as
attachments thereto, Certificates of Good Standing for each of the
Renaissance Companies certified by an appropriate state official of the
State of their organization, all certified by such state officials as of a
date not more than fifteen days before the Closing Date.
(e) Consents. Copies of Consents which have been obtained by Holdings
or any of the Renaissance Companies prior to the Closing.
(f) Opinion of Counsel. Opinions of counsel to Holdings and Group,
dated as of the Closing Date, substantially in the forms of Exhibit C and
Exhibit G hereto.
(g) Indemnity Agreement. The Indemnity Agreement, duly executed by
Holdings and the Escrow Agent.
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(h) Adjustment Escrow Agreement. The Adjustment Escrow Agreement, duly
executed by Holdings and the Adjustment Escrow Agent if required pursuant
to Section 2.4(b).
(i) Employment Agreement Releases. Releases, in form and substance
reasonably acceptable to Buyer, executed by each Person who is a party to
the Employment Agreements (other than the Renaissance Companies), releasing
any claims such Persons may have against any of the Renaissance Companies
pursuant to the Employment Agreements.
(j) Securities Releases. If, as of the Closing Date, there are
outstanding any options, warrants or other similar claims or securities in
respect of the Equity Interests of the Renaissance Companies (collectively,
"Options"), other than Options held by any Renaissance Company, releases,
in form and substance reasonably acceptable to Buyer, executed by each
holder of such Options, releasing and terminating such Options and all
rights of such holder thereunder.
8.3 Deliveries by Buyer and Charter. Prior to or at the Closing, Buyer
and Charter shall deliver to Holdings the following:
(a) Purchase Consideration.
(1) As provided in Section 2.4, the Closing Cash Payment to
Holdings, by wire or accounts transfer of immediately available funds
to one or more accounts designated by Holdings by written notice to
Buyer not less than two days prior to the Closing.
(2) As provided in Sections 2.4 and 10.4, the Indemnity Fund to
the Escrow Agreement, by wire or accounts transfer of immediately
available funds to the account specified in the Indemnity Agreement.
(3) As and to the extent provided by Section 2.4(b), the Purchase
Price Escrow Amount to the Adjustment Escrow Agent, by wire or
accounts transfer of immediately available funds to the account
specified in the Adjustment Escrow Agreement.
(b) Officers' Certificate. A certificate executed by each of Buyer and
Charter, dated as of the Closing Date, certifying that the closing
conditions specified in Sections 7.2(a) and (b) have been satisfied, except
as disclosed in said certificate.
(c) Secretaries' Certificate. A certificate executed by each of Buyer
and Charter, dated as of the Closing Date, (1) certifying that the
resolutions, as attached to said certificate, were duly adopted by the
Board of Directors and shareholders of Buyer and Charter (as the case may
be), authorizing and approving the execution by Buyer and Charter of this
Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby and
that such resolutions remain in full force
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and effect; and (2) providing, as attachments thereto, a Certificate of
Good Standing for Buyer and Charter (as the case may be) certified by an
appropriate state official of the State of Delaware, certified by such
state official as of a date not more than fifteen days before the Closing
Date.
(d) Opinion of Counsel. An opinion of counsel to Buyer and Charter,
dated as of the Closing Date, substantially in the form of Exhibit D
hereto.
(e) Indemnity Agreement. The Indemnity Agreement, duly executed by
Buyer, Charter and the Escrow Agent.
(f) Adjustment Escrow Agreement. The Adjustment Escrow Agreement, duly
executed by Buyer, Charter and the Adjustment Escrow Agent if required
pursuant to Section 2.4(b).
SECTION 9: TERMINATION
9.1 Agreement between Holdings and Buyer. This Agreement may be terminated
at any time prior to the Closing and the purchase and sale of the Purchased
Interests abandoned, by written agreement between Holdings and Buyer.
9.2 Termination by Holdings. This Agreement may be terminated at any time
prior to the Closing by Holdings and the purchase and sale of the Purchased
Interests abandoned, upon written notice to Buyer, upon the occurrence of any of
the following:
(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1 if each condition set forth in Section 7.1 has
been satisfied (or will be satisfied by the delivery of documents at the
Closing) or waived in writing by Buyer on such date and either (i) a
condition set forth in Section 7.2 has not been satisfied (or will not be
satisfied by the delivery of documents at the Closing) or waived in writing
by Holdings on such date or (ii) Buyer or Charter has nonetheless refused
to consummate the Closing. Notwithstanding the foregoing, Holdings may not
rely on the failure of any condition set forth in Section 7.2 to be
satisfied if such failure was principally caused by Holding's or any
Renaissance Company's failure to act in good faith or a breach of or
failure to perform any of its representations, warranties, covenants or
other obligations in accordance with the terms of this Agreement.
(b) Upset Date. If the Closing shall not have occurred on or prior to
the Upset Date as extended as provided in Section 8.1(a)(3) or Section
8.1(a)(4), unless the failure of the Closing to occur was principally
caused by Holding's or any Renaissance Company's failure to act in good
faith or a breach of or failure to perform any of its representations,
warranties, covenants or other obligations in accordance with the terms of
this Agreement.
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9.3 Termination by Buyer. This Agreement may be terminated at any time
prior to the Closing by Buyer and the purchase and sale of the Purchased
Interests abandoned, upon written notice to Holdings, upon the occurrence of any
of the following:
(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1 if each condition set forth in Section 7.2 has
been satisfied (or will be satisfied by the delivery of documents at the
Closing) or waived in writing by Holdings on such date and either (i) a
condition set forth in Section 7.1 has not been satisfied (or will not be
satisfied by the delivery of documents at the Closing) or waived in writing
by Buyer on such date or (ii) Holdings has nonetheless refused to
consummate the Closing. Notwithstanding the foregoing, Buyer may not rely
on the failure of any condition set forth in Section 7.1 to be satisfied if
such failure was principally caused by Buyer's or Charter's failure to act
in good faith or a breach of or failure to perform any of its
representations, warranties, covenants or other obligations in accordance
with the terms of this Agreement.
(b) Upset Date. If the Closing shall not have occurred on or prior to
the Upset Date as extended as provided in Section 8.1(a)(3) or Section
8.1(a)(4), unless the failure of the Closing to occur was principally
caused by any Buyer's or Charter's failure to act in good faith or a breach
of or failure to perform any of its representations, warranties, covenants
or other obligations in accordance with the terms of this Agreement.
9.4 Effect of Termination. If this Agreement is terminated as provided in
this Section 9, then this Agreement will forthwith become null and void and
there will be no liability on the part of any party to any other party or any
other Person in respect thereof, provided that:
(a) Surviving Obligations. The obligations of the parties described in
Sections 6.2, 9.4 and 11.1 (and all other provisions of this Agreement
relating to expenses) will survive any such termination.
(b) Withdrawal of Applications. All filings, applications and other
submissions relating to the consummation of the transaction contemplated
hereby shall, to the extent practicable, be withdrawn from the Governmental
Authority or other Person to whom made.
(c) Willful Breach by Buyer or Charter. No such termination will
relieve Buyer or Charter from liability for a willful breach by Buyer or
Charter of this Agreement (which shall in all events include, without
limitation, a failure to pay the Cash Consideration and discharge the
Senior Debt and the Credit Agreement), and in such event Holdings and Group
shall have all rights and remedies available at law and equity, including
the remedy of specific performance.
(d) Willful Breach by Holdings or Group. No such termination will
relieve Holdings or Group from liability for a willful breach of this
Agreement, and in such event Buyer
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and Charter shall have all rights and remedies available at law or equity,
including the remedy of specific performance.
9.5 Attorneys' Fees. Notwithstanding any provision in this Agreement that
may limit or qualify a party's remedies, in the event of a default by any party
that results in a lawsuit or other proceeding for any remedy available under
this Agreement, the prevailing party shall be entitled to reimbursement from the
defaulting party of its reasonable legal fees and expenses (whether incurred in
arbitration, at trial, or on appeal).
SECTION 10: SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN
REMEDIES
10.1 Survival. All representations, warranties and covenants of Holdings
and Group set forth herein will survive the Closing (i) until the expiration of
the applicable statute of limitations in the case of the representation and
warranty contained in Section 4.4 and (ii) until the nine (9) month anniversary
of the Closing Date in all other cases. All representations and warranties of
Buyer and Charter and all covenants of Buyer and Charter to be performed and
discharged in full prior to the Closing, in each case, set forth herein, will
survive the Closing until the nine (9) month anniversary of the Closing Date.
All covenants of Buyer and Charter to be performed in whole or in part after the
Closing will survive the Closing until performed and discharged in full.
Notwithstanding anything to the contrary contained herein, all claims made in
respect of such representations, warranties and covenants will be subject to any
applicable limitations set forth in this Section 10.
10.2 Indemnification by Holdings. After the Closing, but subject to
Sections 10.4 and 10.5, Holdings agrees to indemnify and hold Buyer and Charter
and either of their Affiliates and their respective officers, directors,
representatives, shareholders, members, partners, agents and employees harmless
against and with respect to, and shall reimburse Buyer and Charter and either of
their Affiliates for:
(a) any and all Losses resulting from any untrue representation or
breach of warranty by Holdings or Group or the nonfulfillment of any
covenant to be performed by Holdings or Group contained in this Agreement
or in any other document or instrument delivered pursuant hereto by
Holdings or Group; provided, however, that each representation and warranty
(whether made as of the date of this Agreement or made on and as of the
Closing Date) contained in this Agreement for which indemnification is
sought hereunder shall be read (including for purposes of determining
whether a breach of such representation or warranty has occurred) without
regard to, and as if such representation or warranty did not contain,
materiality or material adverse effect qualifications that may be contained
therein; and
(b) any rate refund liability imposed on any of the Renaissance
Companies for any period arising prior to the Adjustment Time pursuant to
the existing provisions of the Cable Act or any FCC Regulations heretofore
adopted thereunder (but only to the extent of the out-of-pocket costs
payable in respect thereof and it being understood that any claim for
indemnification
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in respect of such liability may be made only pursuant to this Section
10.2(b) and not under any other provision of this Section 10.2).
10.3 Indemnification by Buyer and Charter. After the Closing, but subject
to Section 10.5, Buyer and Charter jointly and severally agree to indemnify and
hold Holdings and its Affiliates and their respective officers, directors,
representatives, shareholders, members, partners, agents and employees harmless
against and with respect to, and shall reimburse Holdings for any and all Losses
resulting from any untrue representation, breach of warranty, or nonfulfillment
of any covenant by Buyer or Charter contained in this Agreement or any other
document or instrument delivered pursuant hereto by Buyer or Charter.
10.4 Indemnity Agreement. At the Closing, Buyer, Charter, Holdings and the
Escrow Agent shall execute the Indemnity Agreement, in accordance with which,
at the Closing, pursuant to Section 2.4, Buyer will deposit with the Escrow
Agent [Confidential Information Omitted and filed separately with the
Securities and Exchange Commission] on behalf of Holdings in order to provide
a fund for, and the exclusive source for, the payment of any indemnification to
which Buyer or Charter is entitled under this Section 10 (such escrow, the
"Indemnity Fund"), except that the Indemnity Fund shall not be the exclusive
source for the payment of any indemnification claims made in respect of a
breach of the representation and warranty contained in Section 4.4. The
Indemnity Fund will be administered in accordance with the provisions of this
Section 10 and the Indemnity Agreement.
10.5 Certain Limitations on Indemnification Obligations. Notwithstanding
anything in this Agreement to the contrary:
(a) (i) Holdings will not be required to indemnify and will not
otherwise be liable to Buyer or Charter for any matter described in Section
10.2 unless and until the aggregate amount of all Losses of Buyer and
Charter in the aggregate arising therefrom for which Holdings would have
indemnification liability to Buyer and Charter but for this Section 10.5(a)
(i) exceeds, and then only to the extent of the excess above, Seven Hundred
Fifty Thousand Dollars ($750,000.00).
(ii) Buyer and Charter will not be required to indemnify and will
not otherwise be liable to Holdings for a breach of their
representations and warranties set forth herein unless and until the
aggregate amount of all Losses of Holdings in the aggregate arising
therefrom for which Buyer or Charter would have indemnification
liability to Holdings but for this Section 10.5(a)(ii) exceeds, and
then only to the extent of the excess above, Seven Hundred Fifty
Thousand Dollars ($750,000.00); provided, however, that it is
understood and agreed that this Section 10.5(a)(ii) shall not apply to
any amount payable to Holdings in respect of the nonfulfillment of any
covenant to be performed by Buyer or Charter contained in this
Agreement or any other document or instrument delivered pursuant
hereto by Buyer or Charter.
(iii) Buyer and Charter will not be required to indemnify, and
will not otherwise be liable to, Holdings for a breach of their
representations and warranties for any amount in excess of
[Confidential Information Omitted and filed separately with the
Securities and Exchange Commission] in the
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aggregate; provided, however, that it is understood and agreed this
Section 10.5(a)(iii) shall not apply to any amount payable to Holdings
in respect of the breach of any covenant to be performed by Buyer or
Charter contained in this Agreement or any other document or
instrument delivered pursuant hereto.
(b) (i) Holdings will not be required to indemnify and will not
otherwise be liable to Buyer or Charter with respect to any Losses arising
under Section 10.2 unless Buyer or Charter (as the case may be) gives
Holdings written notice of a claim pursuant to Section 10.6(a), (i) in
respect of any breach of the representation and warranty contained in
Section 4.4, prior to the expiration of the applicable statute of
limitations (without any extension or waiver) in respect of such claim, and
(ii) in respect of any other claim, on or prior to the date that is nine
(9) months after the Closing Date. Notwithstanding the foregoing, all
amounts held pursuant to the Indemnity Agreement in excess of amounts
previously notified by Buyer or Charter to Holdings as subject to a then
outstanding bona fide claim by Buyer or Charter shall be released to
Holdings on the first business day following the nine (9) month anniversary
of the Closing Date in accordance with the Indemnity Agreement. Thereafter,
any amounts remaining under the Indemnity Agreement shall be released from
escrow and paid over to Holdings in accordance with the Indemnity
Agreement.
(ii) Buyer and Charter will not be required to indemnify and will
not otherwise be liable to Holdings with respect to any Losses arising
under Section 10.3 with respect to any breach of the representations
and warranties of Buyer and Charter set forth herein unless Holdings
gives Buyer or Charter (as the case may be) written notice of such a
claim pursuant to Section 10.6(a) on or prior to the date that is nine
(9) months after the Closing Date.
(c) All payments required to be made by Holdings in respect of its
indemnification obligations under this Section 10 shall be made solely from
the Indemnity Fund (except in respect of any breach of the representation
and warranty contained in Section 4.4) and the sole and exclusive remedy
available to Buyer and Charter for any breach by Holdings or Group of its
representations, warranties, covenants, obligations or agreements hereunder
or under any of the documents or instruments delivered pursuant hereto by
Group or Holdings shall be a claim for indemnification pursuant to the
terms of this Section 10.
(d) (i) Anything in this Agreement or applicable law to the contrary
notwithstanding, other than claims pursuant to Section 10, other than
claims against the Indemnity Fund as provided for in this Agreement, and
subject to the limitations set forth herein, after the Closing and except
in respect of any claim for a breach of the representation and warranty
contained in Section 4.4, none of Holdings, its Affiliates or any of their
respective officers, directors, shareholders, members, partners, employees
or agents shall have any obligation or liability to Buyer or Charter under
this Section 10 or otherwise, and neither Buyer nor Charter will have any
claim or recourse against Holdings, its Affiliates or any of their
respective officers, directors, shareholders, members, partners, employees
or agents as a result of the breach of any representation, warranty,
covenant or agreement of Holdings or Group contained herein or otherwise
arising out of or in connection with the transactions contemplated
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by this Agreement or the Transaction Documents or the business or
operations of the Renaissance Companies prior to the Closing (except in
respect of any claim for a breach of the representation and warranty
contained in Section 4.4) and the provisions of this Section 10 shall be
the sole and exclusive remedy for any such claim by Buyer or Charter for
any such matters (except in respect of any claim for a breach of the
representation and warranty contained in Section 4.4), whether such claims
are framed in contract, tort or otherwise.
(ii) Anything in this Agreement or applicable law to the contrary
notwithstanding, other than claims pursuant to this Section 10, and
subject to the limitations set forth herein, after the Closing, none
of Buyer, Charter, their Affiliates or any of their respective
officers, directors, shareholders, members, partners, employees or
agents shall have any obligation or liability to Holdings and, other
than claims pursuant to this Section 10, Holdings will not have any
claim or recourse against Buyer, Charter, their Affiliates or any of
their respective officers, directors, shareholders, members, partners,
employees or agents, in each case, as a result of the breach of any
representation, warranty, covenant or agreement of Buyer or Charter
contained herein or otherwise arising out of or in connection with the
transactions contemplated by this Agreement or the Transaction
Documents and the provisions of Section 10 shall be the sole and
exclusive remedy for any such claim by Holdings for any such matters,
whether such claims are framed in contract, tort or otherwise.
Notwithstanding anything to the contrary contained herein, nothing in
this Section 10.5(d)(ii) shall restrict, limit or affect any covenant,
agreement, liability or obligation of Buyer or Charter pursuant to the
terms and conditions of this Agreement, including, without limitation,
pursuant to Section 6.15 and this Section 10, and any liability Buyer
or Charter may have as the result of any untrue representation, breach
of warranty or default or nonperformance of any covenant, agreement,
liability or obligation pursuant to this Agreement or otherwise.
(e) The parties hereto agree to use commercially reasonable efforts to
collect any and all insurance proceeds and other amounts recoverable from
third parties to which it may be entitled in respect of any Loss prior to
seeking indemnity as Claimant from the Indemnifying Party.
(f) Holdings will not be liable with respect to any Loss to the extent
that the amount of such Loss was included in the computation of Closing Net
Liabilities in accordance with Section 2.
(g) Notwithstanding anything in this Agreement to the contrary,
Holdings shall not have any liability or obligation (for indemnification or
otherwise) arising as a result of the occurrence of the Closing without
certain Consents or any Buyer's or Charter's waiver of any closing
condition, nor shall any adjustment be made to the Cash Consideration in
respect of the foregoing.
(h) Notwithstanding anything to the contrary contained herein,
Holdings shall not be required to indemnify or otherwise be liable to Buyer
or Charter, pursuant to this Section 10 or otherwise, in respect of any
breach of the representation and warranty contained in Section
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4.4 in an aggregate amount in excess of the Cash Consideration (as
decreased by the amount of Closing Net Liabilities), as finally determined
pursuant to Section 2.5, received by Holdings.
10.6 Procedure for Indemnification. The procedure for indemnification shall
be as follows:
(a) The party claiming indemnification (the "Claimant") shall promptly
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 and the amount thereof (if known and quantifiable); provided,
however, that the failure to give such notice shall not impair the
Claimant's rights hereunder unless the Indemnifying Party is materially
prejudiced thereby.
(b) With respect to claims solely between the parties, following
receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty (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 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, subject to the terms hereof and the terms of, and
procedures set forth in, the Indemnity Agreement. If the Claimant and the
Indemnifying Party do not agree within thirty (30) days following receipt
of notice of the claim from the Claimant (or any mutually agreed upon
extension thereof), the Claimant may seek an appropriate remedy.
(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, 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; provided that notwithstanding the
foregoing, if such claim is from a Franchising Authority or other
Governmental Authority and Charter or Buyer are seeking indemnification
against Holdings in respect of such claim, Charter and Buyer may retain
control of the defense of such claim, but Holdings shall have the right, at
its own expense, to participate in the defense of such claim, and Buyer and
Charter shall cooperate with Holdings in defending such claim and keep
Holdings informed of all material strategies and developments therein.
Neither Charter nor Buyer may settle any such claim by a Franchising
Authority or other Governmental Authority for which Holdings would be
liable without the consent of Holdings, which shall not be unseasonably
withheld. 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 participate in or assume control of the defense of any
third-party claim, the Claimant will not enter into any settlement of such
claim which could result in indemnification liability without the
Indemnifying Party's prior written
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consent (which shall not be unreasonably withheld). Any such settlement
will be binding upon Buyer and Charter or Holdings, as the case may be, for
purposes of determining whether any indemnification payment is required
pursuant to this Section 10.
10.7 Treatment of Indemnification Payments. Buyer, Charter and Holdings
will treat all payments made pursuant to this Section 10 (including all payments
made to Buyer or Charter out of the Indemnity Fund but excluding the release of
any Indemnity Fund to Holdings) as an adjustment to the Cash Consideration for
all purposes.
SECTION 11: MISCELLANEOUS
11.1 Fees and Expenses. 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 counsel, accountants, agents, and
representatives.
11.2 Notices. All notices, demands, and requests required or permitted to
be given under the provisions of this Agreement shall be in writing, may be sent
by telecopy (with automatic machine confirmation), delivered by personal
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, shall be deemed to have been given on the date of actual
receipt, which may be conclusively evidenced by the date set forth in the
records of any commercial delivery service or on the return receipt, and shall
be addressed to the recipient at the address specified below, or with respect to
any party, to any other address that such party may from time to time designate
in a writing delivered in accordance with this Section 11.2:
If to Buyer: Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Attention: Jerald L. Kent, President & C.E.O.
(with a copy to Curtis S. Shaw, General Counsel)
Telephone: 314-965-0555
Telecopier: 314-965-8793
with copies (which shall not
constitute notice) to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Daniel G. Bergstein, Esq.
Telephone: (212) 318-6000
Telecopier: (202) 319-4090
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If to Group or Holdings: (prior
to the Closing) or
Holdings (after the
Closing): Renaissance Media Group LLC
or
Renaissance Media Holdings LLC
1 Cablevision Center, Suite 100
Ferndale, New York 12734
Attention: Fred Schulte, C.E.O.
Telephone: 914-295-2600
Telecopier: 914-295-2601
with copies (which shall not
constitute notice) to: Morgan Stanley Dean Witter Capital Partners
1221 Avenue of the Americas
New York, New York 10036
Attention: Michael Janson
Telephone: 212-762-6925
Telecopier: 212-762-7951
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W., Suite 800
Washington, D.C. 20036
Attention: John T. Byrnes, Esq.
Telephone: 202-776-2528
Telecopier: 202-776-2222
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Carole Schiffman, Esq.
Telephone: 212-450-4000
Telecopier: 212-450-4800
11.3 Benefit and Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto (and, in the case of Sections 6.12
and 6.13, the parties specified therein) and their respective successors and
permitted assigns; provided that (a) neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by Holdings or Group
without the prior written consent of Buyer and Charter (which consent shall not
be unreasonably withheld or delayed), and (b) neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by Buyer or
Charter without the prior written consent of (i) Holdings or Group, prior to the
Closing, or (ii) Holdings, after the Closing (which consent shall not be
unreasonably withheld or delayed), except that Buyer may assign this Agreement,
and its rights, interests and obligations hereunder to an Affiliate of Buyer as
long as such assignment does not hinder or delay the consummation of the
transactions contemplated hereby
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and by the other Transaction Documents. Consent shall be deemed to be reasonably
withheld if the consenting party reasonably determines that the assignment would
be reasonably likely to hinder or delay the Closing or adversely affect the
payment of the Cash Consideration at the Closing. This Agreement is not intended
to confer upon any Person other than the parties hereto (and, in the case of
Section 6.12 and 6.13, the parties specified therein) any rights or remedies
hereunder.
11.4 Further Assurances. After the Closing 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 upon the reasonable
request of any other party, at the expense of the requesting party.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
11.6 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF.
11.7 SUBMISSION TO JURISDICTION; VENUE. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE FEDERAL AND STATE
COURTS SITTING IN THE BOROUGH OF MANHATTAN, STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT IN ANY SUCH NEW YORK STATE OR FEDERAL
COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
11.8 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
Notwithstanding the
<PAGE> 75
- 61 -
foregoing, in the event of any such determination the effect of which is to
affect materially and adversely any party, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled and consummated to the maximum extent possible.
11.9 Entire Agreement. This Agreement, the Disclosure Schedules and the
Exhibits hereto, the other Transaction Documents to be delivered by the parties
pursuant to this Agreement and the Confidentiality Agreement collectively
represent the entire understanding and agreement between Buyer, Charter, Group
and Holdings with respect to the subject matter hereof and thereof and supersede
all prior agreements, understandings and negotiations between the parties. Buyer
and Charter acknowledge that none of Holdings or Group has made any, or makes
any, promises, representations, warranties, covenants or undertakings, express
or implied, other than those expressly set forth in this Agreement, the other
Transaction Documents and the Confidentiality Agreement.
11.10 Amendments; Waiver of Compliance; Consents. This Agreement may be
amended and any provision of this Agreement may be waived; provided that any
such amendment or waiver (a) will be binding upon Holdings or Group prior to the
Closing only if such amendment or waiver is set forth in a writing executed by
Holdings or Group, (b) will be binding upon Holdings after the Closing only if
such amendment or waiver is set forth in a writing executed by Holdings and (c)
will be binding upon Buyer or Charter only if such amendment or waiver is set
forth in a writing executed by Buyer and Charter.
11.11 Counterparts. This Agreement may be signed in counterparts with the
same effect as if the signature on each counterpart were upon the same
instrument.
11.12 Specific Performance. The parties recognize that in the event either
of Holdings or Group should refuse to perform at the Closing any of its
obligations under the provisions of this Agreement, monetary damages alone will
not be adequate. The Charter Parties shall therefore be entitled, in addition to
any other remedies which may be available, including money damages, to obtain
specific performance of any of the obligations of the Renaissance Parties under
the provisions of this Agreement to be performed at Closing. In the event of any
action to enforce this Agreement specifically pursuant to this Section 11.12,
Holdings or Group, as applicable, hereby waives the defense that there is an
adequate remedy at law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGES]
<PAGE> 76
- 62 -
IN WITNESS WHEREOF, this Agreement has been executed by each of Buyer,
Charter, Holdings and Group as of the date first written above.
CHARTER: BUYER:
CHARTER COMMUNICATIONS, INC. CHARTER COMMUNICATIONS, LLC
By: /s/ Curtis S. Shaw By: /s/ Curtis S. Shaw
----------------------------- ------------------------------
Curtis S. Shaw Curtis S. Shaw
Senior Vice-President Senior Vice President
GROUP: HOLDINGS:
RENAISSANCE MEDIA GROUP LLC RENAISSANCE MEDIA HOLDINGS LLC
By: /s/ Fred H. Schulte By: /s/ Fred H. Schulte
----------------------------- -----------------------------
Fred H. Schulte Fred H. Schulte
CEO CEO
<PAGE> 77
Exhibit 99.2
Renaissance Media Group LLC Reports 1998 Results for the Quarter Ended
December 31, 1998
Growth in Revenue of 10.2% and EBITDA of 10.9%
FERNDALE, N.Y., Feb. 26 /PRNewswire/ -- Renaissance Media Group LLC (the
"Company") today reported results for the quarter ended December 31, 1998 and
for the period from April 9, 1998 to December 31, 1998 (the "year to date
period"). The Company acquired certain cable systems located in Louisiana,
Mississippi and Tennessee from TWI Cable Inc. on April 9, 1998 and prior to that
date had no operations. The year to date results discussed herein reflect the
results of the acquired cable systems for the period from April 9, 1998 to
December 31, 1998 and corporate overhead costs since January 1, 1998. For the
quarter ended December 31, 1998, the Company reported revenue of $14.4 million,
cable system cash flow of $7.9 million, and EBITDA of $7.2 million. The results
of operations for the comparable period in 1997, under TWI Cable Inc. ownership
were: revenues of $13.0 million, cable system cash flow of $7.2 million and
EBITDA of $6.5 million. The percentage increases in 1998 over 1997 in revenue,
cable system cash flow and EBITDA were 10.2%, 10.8% and 10.9%, respectively.
For the year to date period, the Company reported revenue of $41.5 million,
cable system cash flow of $22.5 million and EBITDA of $20.5 million. The results
of operations for the comparable period in 1997, under TWI Cable Inc. ownership
were: revenues of $37.4 million, cable system cash flow of $20.5 million and
EBITDA of $18.5 million. The percentage increases in 1998 over 1997 in revenue,
cable system cash flow and EBITDA were 11.0%, 9.7% and 10.7%, respectively.
Revenue results for the quarter ended December 31, 1998 versus the comparable
period in 1997 reflected a 13.8% growth in basic service revenue and a 17.8%
growth in advertising revenues. Basic service revenues increased due to
increases in subscription rates and basic subscribers over prior year amounts.
Cable system cash flow margin increased .3% to 55.3% in 1998 from 55.0% in 1997.
EBITDA margin was 50.0% in 1998 versus 49.6% in 1997.
Revenue results for the year to date period versus the comparable period in 1997
reflected a 13.4% growth in basic service revenue and a 18.5% growth in
advertising revenues. Basic service revenues increased due to increases in
subscription rates and basic subscribers over prior year amounts. Cable system
cash flow margin decreased .7% to 54.2% in 1998 from 54.9% in 1997, due
primarily to increases in programming costs offset in part by increases in
capitalized internal costs associated with new capital projects. EBITDA margin
was 49.3% in 1998 versus 49.5% in 1997.
On February 23, 1999, Renaissance Media Holdings LLC ("Holdings"), the parent
company of Renaissance Media Group LLC, executed a Purchase Agreement pursuant
to which Holdings will sell all of its' outstanding limited liability company
interests in the Company to Charter Communications, LLC, a subsidiary of Charter
Communications, Inc. Reflecting on the
<PAGE> 78
transaction, Fred Schulte, Renaissance Media Group's Chairman and CEO commented,
"The strong performance of our cable systems to date results from the efforts of
all our dedicated employees, who will serve Charter well as they continue with
their growth strategy. Notwithstanding the pending transaction, we will continue
to operate `business as usual' and proceed with our operating initiatives and
upgrade projects."
The Company's basic subscriber and premium units were 129,164 and 58,712
respectively at December 31, 1998. Basic subscribers increased 2,606 over
December 30, 1997 levels. Premium units decreased 6,251 over December 1997
levels. While premium units decreased approximately 10%, premium revenue
decreased only 4.8% from the prior year due to discounted premium promotions in
1997 not continuing into 1998.
Renaissance Media Group LLC is a newly formed company owned by investment funds
managed by Morgan Stanley Dean Witter as well as TWI Cable Inc. and six former
executives of Cablevision Industries Corporation. The Company was formed to
acquire, operate and develop medium-sized cable television systems.
Forward-looking statements in this report are made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including, without limitation, the effects of legislative and
regulatory changes; the need for regulatory approvals; the potential of
increased levels of competition for the Company; technological changes; the need
to arrange adequate financing; and other risks detailed in the Company's
Registration Statement and periodic reports filed with the Securities and
Exchange Commission.
Source: Renaissance Media Group LLC
Contact: Mark W. Halpin, Executive Vice President / Chief Financail Officer
Renaissance Media Group LLC
<PAGE> 79
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Renaissance Media Group LLC
We have audited the accompanying consolidated balance sheet of Renaissance
Media Group LLC as of December 31, 1998 and the related consolidated statements
of operations, changes in members' equity, and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial position of Renaissance
Media Group LLC at December 31, 1998, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 22, 1999
except for Note 11, as to which the date is
February 24, 1999
<PAGE> 80
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 8,482
Accounts receivable -- trade (less allowance for doubtful
accounts of $92).......................................... 726
Accounts receivable -- other................................ 584
Prepaid expenses and other assets........................... 340
Escrow deposit.............................................. 150
Investment in cable television systems:
Property, plant and equipment............................. 71,246
Less: Accumulated depreciation............................ (7,294)
--------
63,952
--------
Cable television franchises............................... 236,489
Less: Accumulated amortization............................ (11,473)
--------
225,016
--------
Intangible assets......................................... 17,559
Less: Accumulated amortization............................ (1,059)
--------
16,500
--------
Total investment in cable television systems......... 305,468
--------
Total assets...................................... $315,750
========
LIABILITIES AND MEMBERS' EQUITY
Accounts payable............................................ $ 2,042
Accrued expenses(a)......................................... 6,670
Subscriber advance payments and deposits.................... 608
Deferred marketing support.................................. 800
Advances from Holdings...................................... 135
Debt........................................................ 209,874
--------
Total Liabilities................................. 220,129
--------
Members' Equity:
Paid in capital............................................. 108,600
Accumulated deficit......................................... (12,979)
--------
Total members' equity................................ 95,621
--------
Total liabilities and members' equity............. $315,750
========
</TABLE>
- ---------------
(a) includes accrued costs from transactions with affiliated companies of $921.
See accompanying notes to financial statements.
<PAGE> 81
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES.................................................... $ 41,524
--------
COSTS & EXPENSES
Service Costs(a).......................................... 13,326
Selling, General & Administrative......................... 7,711
Depreciation & Amortization............................... 19,107
--------
Operating Income....................................... 1,380
Interest Income........................................ 158
Interest (Expense) (b)................................. (14,358)
--------
(Loss) Before Provision for Taxes...................... (12,820)
Provision for Taxes.................................... 135
--------
Net (Loss)............................................. $(12,955)
========
</TABLE>
- ---------------
(a) includes costs from transactions with affiliated companies of $7,523.
(b) includes $676 of amortization of deferred financing costs.
See accompanying notes to financial statements.
<PAGE> 82
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PAID TOTAL
IN ACCUMULATED MEMBER'S
CAPITAL (DEFICIT) EQUITY
------- ----------- --------
<S> <C> <C> <C>
Contributed Members' Equity -- Renaissance Media Holdings
LLC and Renaissance Media LLC............................ $ 15,000 $ (24) $14,976
Additional capital contributions........................... 93,600 -- 93,600
Net (Loss)................................................. -- (12,955) (12,955)
-------- -------- -------
Balance December 31, 1998.................................. $108,600 $(12,979) $95,621
======== ======== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 83
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net (loss).................................................. $(12,955)
Adjustments to non-cash and non-operating items:
Depreciation and amortization............................. 19,107
Accretion on Senior Discount Notes........................ 7,363
Other non-cash charges.................................... 730
Changes in operating assets and liabilities:
Accounts receivable -- trade, net...................... (726)
Accounts receivable -- other........................... (584)
Prepaid expenses and other assets...................... (338)
Accounts payable....................................... 2,031
Accrued expenses....................................... 6,660
Subscriber advance payments and deposits............... 608
Deferred marketing support............................. 800
--------
Net cash provided by operating activities................... 22,696
--------
INVESTING ACTIVITIES:
Purchased cable television systems:
Property, plant and equipment.......................... (65,580)
Cable television franchises............................ (235,412)
Cash paid in excess of identifiable assets............. (8,608)
Escrow deposit............................................ (150)
Capital expenditures...................................... (5,683)
Cable television franchises............................... (1,077)
Other intangible assets................................... (526)
--------
Net cash (used in) investing activities..................... (317,036)
--------
FINANCING ACTIVITIES:
Debt acquisition costs.................................... (8,323)
Principal repayments on bank debt......................... (7,500)
Advances from Holdings.................................... 33
Proceeds from bank debt................................... 110,000
Proceeds from 10% Senior Discount Notes................... 100,012
Capital contributions..................................... 108,600
--------
Net cash provided by financing activities................... 302,822
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 8,482
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997.............. --
--------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1998.............. $ 8,482
========
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID............................................. $ 4,639
========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 84
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Renaissance Media Group LLC ("Group") was formed on March 13, 1998 by
Renaissance Media Holdings LLC ("Holdings"). Holdings is owned by Morgan Stanley
Capital Partners III, L.P. ("MSCP III"), Morgan Stanley Capital Investors, L.P.
("MSCI"), MSCP III 892 Investors, L.P. ("MSCP Investors" and, collectively, with
its affiliates, MSCP III and MSCI and their respective affiliates, the "Morgan
Stanley Entities"), Time Warner and the Management Investors. On March 20, 1998,
Holdings contributed to Group its membership interests in two wholly-owned
subsidiaries; Renaissance Media (Louisiana) LLC ("Louisiana") and Renaissance
Media (Tennessee) LLC ("Tennessee"), which were formed on January 7, 1998.
Louisiana and Tennessee acquired a 76% interest and 24% interest, respectively,
in Renaissance Media LLC ("Media") from Morgan Stanley Capital Partners III,
Inc. ("MSCP"), on February 13, 1998 through an acquisition of entities under
common control accounted for as if it were a pooling of interests. As a result,
Media became a subsidiary of Group and Holdings. Group and its aforementioned
subsidiaries are collectively referred to as the "Company". On April 9, 1998,
the Company acquired (the "Acquisition") six cable television systems (the
"Systems") from TWI Cable, Inc. ("TWI Cable"), a subsidiary of Time Warner Inc.
("Time Warner"). See Note 3. Prior to this Acquisition, the Company had no
operations other than start-up related activities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NEW ACCOUNTING STANDARDS
During fiscal 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133").
FAS 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The Company
will adopt FAS 133 as of January 1, 2000. The impact of the adoption on the
Company's consolidated financial statements is not expected to be material.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of the Company and its wholly owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
CONCENTRATION OF CREDIT RISK
A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Company generally extends credit to customers and the ultimate collection of
accounts receivable could be affected by the local economy. Management performs
continuous credit evaluations of its customers and may require cash in advance
or other special arrangements from certain customers. Management does not
believe that there is any significant credit risk which could have a material
effect on the Company's financial condition.
REVENUE AND COSTS
Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
<PAGE> 85
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
ADVERTISING COSTS
Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $491 in 1998.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments in short-term,
highly liquid securities, which have maturities when purchased of three months
or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at purchased and capitalized
cost. Capitalized internal costs principally, consist of employee costs and
interest on funds borrowed during construction. Capitalized labor, materials and
associated overhead amounted to approximately $1,429 in 1998. Replacements,
renewals and improvements to installed cable plant are capitalized. Maintenance
and repairs are charged to expense as incurred. Depreciation expense for the
year ended December 31, 1998 amounted to $7,314. Property, plant and equipment
is depreciated using the straight-line method over the following estimated
service lives:
<TABLE>
<S> <C>
Buildings and leasehold improvements........................ 5 - 30 years
Cable systems, equipment and subscriber devices............. 5 - 30 years
Transportation equipment.................................... 3 - 5 years
Furniture, fixtures and office equipment.................... 5 - 10 years
</TABLE>
Property, plant and equipment at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Land...................................................... $ 432
Buildings and leasehold improvements...................... 1,347
Cable systems, equipment and subscriber devices........... 62,740
Transportation equipment.................................. 2,181
Furniture, Fixtures and office equipment.................. 904
Construction in progress.................................. 3,642
-------
71,246
Less: accumulated depreciation.............................. (7,294)
-------
Total............................................. $63,952
=======
</TABLE>
CABLE TELEVISION FRANCHISES AND INTANGIBLE ASSETS
Cable television franchise costs include the assigned fair value, at the
date of acquisition, of the franchises from purchased cable television systems.
Intangible assets include goodwill, deferred financing and other intangible
assets. Cable television franchises and intangible assets are amortized using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Cable television franchises................................. 15 years
Goodwill.................................................... 25 years
Deferred financing and other intangible assets.............. 2 - 10 years
</TABLE>
<PAGE> 86
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Intangible assets at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Goodwill.................................................... $ 8,608
Deferred Financing Costs.................................... 8,323
Other intangible assets..................................... 628
-------
17,559
Less: accumulated amortization.............................. (1,059)
-------
Total............................................. $16,500
=======
</TABLE>
The Company periodically reviews the carrying value of its long-lived
assets, including property, plant and equipment, cable television franchises and
intangible assets, whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. To the extent the estimated future cash
inflows attributable to the asset, less estimated future cash outflows, is less
than the carrying amount, an impairment loss is recognized to the extent that
the carrying value of such asset is greater than its fair value.
ESTIMATES USED IN FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. ACQUISITIONS
TWI CABLE
On April 9, 1998, the Company acquired six cable television systems from
TWI Cable. The systems are clustered in southern Louisiana, western Mississippi
and western Tennessee. This Acquisition represented the first acquisition by the
Company. The purchase price for the systems was $309,500 which was paid as
follows: TWI Cable received $300,000 in cash, inclusive of an escrow deposit of
$15,000, and a $9,500 (9,500 units) equity interest in Renaissance Media
Holdings LLC, the parent company of Group. In addition to the purchase price,
the Company incurred approximately $1,385 in transaction costs, exclusive of
financing costs.
The Acquisition was accounted for using the purchase method and,
accordingly, results of operations are reported from the date of the Acquisition
(April 9, 1998). The excess of the purchase price over the estimated fair value
of the tangible assets acquired has been allocated to cable television
franchises and goodwill in the amount of $235,387 and $8,608, respectively.
DEFFNER CABLE
On August 31, 1998, the Company acquired the assets of Deffner Cable, a
cable television company located in Gadsden, Tennessee. The purchase price was
$100 and was accounted for using the purchase method. The allocation of the
purchase price is subject to change, although management does not believe that
any material adjustment to such allocation is expected.
BAYOU VISION, INC.
On February 3, 1999, Media acquired the cable television assets of Bayou
Vision, Inc. and Gulf South Cable, Inc. serving approximately 1,950 subscribers
in the Villages of Estherwood, Morse and Mermentau and Acadia and Livingston
Parish, Louisiana. The cash purchase price was approximately $2,700 and was paid
out of available Company funds.
<PAGE> 87
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Unaudited Pro Forma summarized results of operations for the Company for
the year ended December 31, 1998 and 1997, assuming the Acquisition, Notes (as
hereinafter defined) offering and Credit Agreement (as hereinafter defined) had
been consummated on January 1, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1998
---- ----
<S> <C> <C>
Revenues.................................................... $ 50,987 $ 56,745
Expenses.................................................... 53,022 55,210
-------- --------
Operating (loss) income..................................... (2,035) 1,535
Interest expense and other expenses......................... (19,740) (19,699)
-------- --------
Net (Loss).................................................. $(21,775) $(18,164)
======== ========
</TABLE>
4. DEBT
As of December 31, 1998, debt consisted of:
<TABLE>
<S> <C>
10.00% Senior Discount Notes at Accreted Value(a)........... $107,374
Credit Agreement(b)......................................... 102,500
--------
$209,874
========
</TABLE>
(a) On April 9, 1998, in connection with the Acquisition described in Note
3, the Company issued $163,175 principal amount at maturity, $100,012 initial
accreted value, of 10.00% senior discount notes due 2008 ("Notes"). The Notes
pay no interest until April 15, 2003. From and after April 15, 2003 the Notes
will bear interest, payable semi-annually in cash, at a rate of 10% per annum on
April 15 and October 15 of each year, commencing October 15, 2003. The Notes are
due on April 15, 2008.
(b) On April 9, 1998, Renaissance Media entered into a credit agreement
among Morgan Stanley & Co. Incorporated as Placement Agent, Morgan Stanley
Senior Funding Inc., as Syndication Agent, the Lenders, CIBC Inc., as
Documentation Agent and Bankers Trust Company as Administrative Agent (the
"Credit Agreement"). The aggregate commitments under the Credit Agreement total
$150,000, consisting of a $40,000 revolver, $60,000 Tranche A Term Loans and
$50,000 Tranche B Term Loans (collectively the "Term Loans"). The revolving
credit and term loans are collateralized by a first lien position on all present
and future assets and the member's interest of Media, Louisiana and Tennessee.
The Credit Agreement provides for interest at varying rates based upon various
borrowing options and the attainment of certain financial ratios and for
commitment fees of 1/2% on the unused portion of the revolver. The effective
interest rate, including commitment fees and amortization of related deferred
financing costs and the interest-rate cap, for the year ended December 31, 1998
was 8.82%.
On April 9, 1998, $110,000 was borrowed under the Credit Agreement's
Tranche A and B Term Loans. On June 23, 1998, $7,500 was repaid resulting in
$102,500 of outstanding Tranche A and B Term Loans as of December 31, 1998.
As of December 31, 1998, the Company had unrestricted use of the $40,000
revolver. No borrowings had been made by the Company under the revolver through
that date.
<PAGE> 88
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Annual maturities of borrowings under the Credit Agreement for the years
ending December 31 are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 776
2000........................................................ 1,035
2001........................................................ 2,701
2002........................................................ 9,506
2003........................................................ 11,590
2004........................................................ 11,590
Thereafter.................................................. 65,302
--------
102,500
Less: Current portion....................................... (776)
--------
$101,724
========
</TABLE>
The Credit Agreement and the Indenture pursuant to which the Notes were
issued contain restrictive covenants on the Company and subsidiaries regarding
additional indebtedness, investment guarantees, loans, acquisitions, dividends
and merger or sale of the subsidiaries and require the maintenance of certain
financial ratios.
Total interest cost incurred for the year ended December 31, 1998,
including commitment fees and amortization of deferred financing and
interest-rate cap costs was $14,358, net of capitalized interest of $42.
5. INTEREST RATE-CAP AGREEMENT
The Company purchases interest-rate cap agreements that are designed to
limit its exposure to increasing interest rates and are designated to its
floating rate debt. The strike price of these agreements exceeds the current
market levels at the time they are entered into. The interest rate indices
specified by the agreements have been and are expected to be highly correlated
with the interest rates the Company incurs on its floating rate debt. Payments
to be received as a result of the specified interest rate index exceeding the
strike price are accrued in other assets and are recognized as a reduction of
interest expense (the accrual accounting method). The cost of these agreements
is included in other assets and amortized to interest expense ratably during the
life of the agreement. Upon termination of an interest-rate cap agreement, any
gain is deferred in other liabilities and amortized over the remaining term of
the original contractual life of the agreement as a reduction of interest
expense.
On December 1, 1997, the Company purchased an interest-rate cap agreement
from Morgan Stanley Capital Services Inc. The carrying value as of December 31,
1998 was $47. The fair value of the interest-rate cap, which is based upon the
estimated amount that the Company would receive or pay to terminate the cap
agreement as of December 31, 1998, taking into consideration current interest
rates and the credit worthiness of the counterparties, approximates its carrying
value.
The following table summarizes the interest-rate cap agreement:
<TABLE>
<CAPTION>
NOTIONAL INITIAL
PRINCIPAL EFFECTIVE TERMINATION CONTRACT FIXED RATE
AMOUNT TERM DATE DATE COST (PAY RATE)
- --------- ---- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
$100,000 2 years 12/1/97 12/1/99 $100 7.25%
</TABLE>
<PAGE> 89
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
6. TAXES
For the year ended December 31, 1998, the provision for income taxes has
been calculated on a separate company basis. The components of the provision for
income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Federal:
Current................................................... $ --
Deferred.................................................. --
State:
Current................................................... 135
Deferred.................................................. --
----
Provision for income taxes............................. $135
====
</TABLE>
The Company's current state tax liability results from its obligation to
pay franchise tax in Tennessee and Mississippi and tax on capital in New York.
The Company has a net operating loss ("NOL") carryforward for income tax
purposes which is available to offset future taxable income. This NOL totals
approximately $14,900 and expires in the year 2018. The Company has established
a valuation allowance to offset the entire potential future tax benefit of the
NOL carryforward and, therefore, has recognized no deferred tax asset with
respect to the NOL.
Louisiana and Tennessee have elected to be treated as corporations for
federal income tax purposes and have not recorded any tax benefit for their
losses as the realization of theses losses by reducing future taxable income in
the carry forward period is uncertain at this time.
7. RELATED PARTY TRANSACTIONS
(A) TRANSACTIONS WITH MORGAN STANLEY ENTITIES
In connection with the Acquisition, Media entered into the Credit Agreement
with Morgan Stanley Senior Funding Inc. and Morgan Stanley & Co. Incorporated
acted as the Placement Agent for the Notes. In connection with these services
the Morgan Stanley Entities received customary fees and expense reimbursement.
(B) TRANSACTIONS WITH TIME WARNER AND RELATED PARTIES
In connection with the Acquisition, Media entered into an agreement with
Time Warner, pursuant to which Time Warner manages the Company's programming in
exchange for providing the Company access to certain Time Warner programming
arrangements.
(C) TRANSACTIONS WITH MANAGEMENT
Prior to the consummation of the Acquisition described in Note 3, Media
paid fees in 1998 to six senior executives of the Company who are investors in
the Company (the "Management Investors") for services rendered prior to their
employment by Media relating to the Acquisition and the Credit Agreement. These
fees totaled $287 and were recorded as transaction and financing costs.
<PAGE> 90
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
(D) DUE TO MANAGEMENT INVESTORS
Prior to the formation of the Company, the Management Investors advanced
$1,000 to Holdings, which was used primarily for working capital purposes. Upon
formation of the Company, Holdings contributed certain assets and liabilities to
Group and the $1,000 advance from the Management Investors was recorded as paid
in capital.
(E) TRANSACTIONS WITH BOARD MEMBER
The Company has utilized the law firm of one of its board members for legal
services for the Acquisition, financing agreements and various ongoing legal
matters. These fees totaled approximately $1,348 for the year ended December 31,
1998.
8. ACCRUED EXPENSES
Accrued expenses as of December 31, 1998 consist of the following:
<TABLE>
<S> <C>
Accrued programming costs................................... $1,986
Accrued interest............................................ 1,671
Accrued franchise fees...................................... 1,022
Accrued legal and professional fees,........................ 254
Accrued salaries, wages and benefits........................ 570
Accrued property and sales tax.............................. 637
Other accrued expenses...................................... 530
------
$6,670
======
</TABLE>
9. EMPLOYEE BENEFIT PLAN
Effective April 9, 1998, the Company began sponsoring a defined
contribution plan which covers substantially all employees (the "Plan"). The
Plan provides for contributions from eligible employees up to 15% of their
compensation. The Company's contribution to the Plan is limited to 50% of each
eligible employee's contribution up to 10% of his or her compensation. The
Company has the right in any year to set the amount of the Company's
contribution percentage. Company matching contributions to the Plan for the year
ended December 31, 1998 were approximately $97. All participant contributions
and earnings are fully vested upon contribution and company contributions and
earnings vest 20% per year of employment with the Company, becoming fully vested
after five years.
10. COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company had rental expense under various lease and rental agreements
primarily for offices, tower sites and warehouses of approximately $125 in 1998.
In addition, the Company rents utility poles in its operations generally under
short term arrangements, but the Company expects these arrangements to recur.
<PAGE> 91
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Total rent expense for utility poles was approximately $620 in 1998. Future
minimum annual rental payments under noncancellable leases are as follows:
<TABLE>
<S> <C>
1999................................................ $162
2000................................................ 38
2001................................................ 24
2002................................................ 20
2003 and thereafter................................. 66
----
Total.......................................... $310
====
</TABLE>
(B) EMPLOYMENT AGREEMENTS
Media has entered into employment agreements with six senior executives who
are also investors in Holdings. Under the conditions of five of the agreements
the employment term is five years, expiring in April 2003 and requires Media to
continue salary payments (including any bonus) through the term if the
executive's employment is terminated by Media without cause, as defined in the
employment agreement. Media's obligations under the employment agreements may be
reduced in certain situations based on actual operating performance relative to
the business plan, death or disability or by actions of the other senior
executives.
The employment agreement for one senior executive has a term of one year
and may be renewed annually. This agreement has been renewed through April 8,
2000.
(C) OTHER AGREEMENTS
In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996, Time
Warner agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of materials
and labor in connection with the plant upgrades up to 750 MHz) by 1999
(approximately $23 million). This agreement with the FCC has been assumed by the
Company as part of the Acquisition.
11. SUBSEQUENT EVENT
On February 23, 1999, Holdings entered into an agreement with Charter
Communications, LLC to sell 100% of its members' equity in the Company for
approximately $459,000, subject to certain closing conditions. This transaction
is expected to close during the third quarter of 1999.
12. YEAR 2000 ISSUES (UNAUDITED)
The Company relies on computer systems, related software applications and
other control devices in operating and monitoring all major aspects of its
business, including, but not limited to, its financial systems (such as general
ledger, accounts payable, payroll and fixed asset modules), subscriber billing
systems, internal networks and telecommunications equipment. The Company also
relies, directly and indirectly, on the external systems of various independent
business enterprises, such as its suppliers and financial organizations, for the
accurate exchange of data.
The Company continues to assess the likely impact of Year 2000 issues on
its business operations, including its material information technology ("IT")
and non-IT applications. These material applications
<PAGE> 92
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
include all billing and subscriber information systems, general ledger software,
payroll systems, accounting software, phone switches and certain headend
applications, all of which are third party supported.
The Company believes it has identified all systems that may be affected by
Year 2000 Issues. Concurrent with the identification phase, the Company is
securing compliance determinations relative to all identified systems. For those
systems that the Company believes are material, compliance programs have been
received or such systems have been certified by independent parities as Year
2000 compliant. For those material systems that are subject to compliance
programs, the Company expects to receive Year 2000 certifications from
independent parties by the second quarter 1999. Determinations of Year 2000
compliance requirements for less mission critical systems are in progress and
are expected to be completed in the second quarter of 1999.
With respect to third parties with which the Company has a material
relationship, the Company believes its most significant relationships are with
financial institutions, who receive subscriber monthly payments and maintain
Company bank accounts, and subscriber billing and management systems providers.
We have received compliance programs which if executed as planned should provide
a high degree of assurance that all Year 2000 issues will be addressed by mid
1999.
The Company has not incurred any material Year 2000 costs to date, and
excluding the need for contingency plans, does not expect to incur any material
Year 2000 costs in the future because most of its applications are maintained by
third parties who have borne Year 2000 compliance costs.
The Company cannot be certain that it or third parties supporting its
systems have resolved or will resolve all Year 2000 issues in a timely manner.
Failure by the Company or any such third party to successfully address the
relevant Year 2000 issues could result in disruptions of the Company's business
and the incurrence of significant expenses by the Company. Additionally, the
Company could be affected by any disruption to third parties with which the
Company does business if such third parties have not successfully addressed
their Year 2000 issues.
Failure to resolve Year 2000 issues could result in improper billing to the
Company's subscribers which could have a major impact on the recording of
revenue and the collection of cash as well as create significant customer
dissatisfaction. In addition, failure on the part of the financial institutions
with which the Company relies on for its cash collection and management services
could also have a significant impact on collections, results of operations and
the liquidity of the Company.
The Company has not yet finalized contingency plans necessary to handle the
most likely worst case scenarios. Before concluding as to possible contingency
plans, the Company must determine whether the material service providers
contemplate having such plans in place. In the event that contingency plans from
material service providers are not in place or are deemed inadequate, management
expects to have such plans in place by the third quarter of 1999.
