SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 11, 2000
(Date of earliest event reported)
CLASSIC COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-15427 74-2630019
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
515 Congress Avenue, Suite 2626, Austin, TX 78701
(Address of Principal Offices, including zip code)
(512) 476-9095
Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
CLASSIC COMMUNICATIONS, INC. COMPLETES THE PREVIOUSLY ANNOUNCED
ACQUISITION OF STAR CABLE ASSOCIATES.
On February 16, 2000, Classic Communications, Inc. (the "Com-
pany"), through its wholly-owned subsidiary, Universal Cable Holdings, Inc.
("Universal"), completed the acquisition of substantially all of the assets
of Star Cable Associates ("Star") for approximately $110 million in cash
and 555,555 shares of Class A common stock of the Company, pursuant to an
asset purchase agreement dated October 14, 1999 by and between Star and
Universal, as amended by an Amendment No. 1 thereto, dated February 16,
2000. Star operates cable television systems in Texas, Louisiana and Ohio
and serves approximately 57,000 subscribers. The Star acquisition was
financed with available cash and a portion of the proceeds of the private
offering of $225 million of Senior Subordinated Notes due 2010 by the
Company's wholly-owned subsidiary, Classic Cable, Inc. ("Classic Cable").
Item 5. Other Events
CLASSIC COMMUNICATIONS, INC. COMPLETES THE PREVIOUSLY ANNOUNCED
ACQUISITION OF STAR CABLE ASSOCIATES AND ITS WHOLLY-OWNED SUBSIDIARY,
CLASSIC CABLE, INC., COMPLETES ITS PRIVATE OFFERING OF $225 MILLION OF
SENIOR SUBORDINATED NOTES DUE 2010.
On February 16, 2000, the Company issued a press release announc-
ing the completion of the previously announced acquisition of Star. The
Company also announced that Classic Cable completed their private offering
of $225 million of Senior Subordinated Notes due 2010. The securities
offered in the private offering will not be and have not been registered
under the Securities Act of 1933 and may not be offered or sold in the
United States without registration or an applicable exemption from regis-
tration requirements. Classic Cable used the proceeds of the offering to
fund a portion of the acquisition of Star, repay a portion of indebtedness
under its senior credit facility and repurchase approximately $33 million
of its 9 7/8% Senior Subordinated Notes due 2008. On February 11, 2000,
the Company announced that Classic Cable increased their offering of Senior
Subordinated Notes due 2010 to $225 million from $175 million and priced
them at par with a 10.50% coupon.
Copies of the aforementioned press releases are attached as
Exhibits 99.1 and 99.2 to this Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
The Company will provide the financial statements required by
paragraph (a) of Item 7 of Form 8-K, if any such information is required,
by amendment to this initial report on Form 8-K within 60 days of the date
that this initial report on Form 8-K must be filed with the Commission.
(b) Pro Forma Financial Information
The Company will provide the pro forma financial information
required by paragraph (b) of Item 7 of Form 8-K, if any such information is
required, by amendment to this initial report on Form 8-K within 60 days of
the date that this initial report on Form 8-K must be filed with the
Commission.
(c) Exhibits
2 Asset Purchase Agreement, dated as of October 14, 1999, by
and between Star Cable Associates and Universal Cable Holdings, Inc., and
Amendment No. 1 thereto, dated February 16, 2000.
99.1 Press Release, dated February 11, 2000.
99.2 Press Release, dated February 16, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CLASSIC COMMUNICATIONS, INC.
Dated: February 29, 2000 By: /s/ Mark Rowe
---------------------------
Name: Mark Rowe
Title: Corporate Controller
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2 Asset Purchase Agreement, dated as of October 14,
1999, by and between Star Cable Associates and
Universal Cable Holdings, Inc., and
Amendment No. 1 thereto, dated February 16, 2000.
99.1 Press Release, dated February 11, 2000.
99.2 Press Release, dated February 16, 2000.
EXHIBIT 2
ASSET PURCHASE AGREEMENT, DATED AS OF OCTOBER 14, 1999, BY AND BETWEEN STAR
CABLE ASSOCIATES AND UNIVERSAL CABLE HOLDINGS, INC., AND
AMENDMENT NO. 1 THERETO, DATED FEBRUARY 16, 2000.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
UNIVERSAL CABLE HOLDINGS, INC.
AND
STAR CABLE ASSOCIATES
DATED AS OF OCTOBER 14, 1999
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 AFFILIATE. . . . . . . . . . . . . . . . . . . . . -1-
1.2 ANNUALIZED EBITDA. . . . . . . . . . . . . . . . . -1-
1.3 INTENTIONALLY LEFT BLANK. . . . . . . . . . . . . -2-
1.4 ASSETS. . . . . . . . . . . . . . . . . . . . . . -2-
1.5 BASIC SERVICES. . . . . . . . . . . . . . . . . . -2-
1.6 BUSINESS. . . . . . . . . . . . . . . . . . . . . -2-
1.7 CCI. . . . . . . . . . . . . . . . . . . . . . . . -2-
1.8 BUSINESS DAY. . . . . . . . . . . . . . . . . . . -2-
1.9 CLEANUP. . . . . . . . . . . . . . . . . . . . . . -2-
1.10 CLOSING. . . . . . . . . . . . . . . . . . . . . . -2-
1.11 CLOSING DATE. . . . . . . . . . . . . . . . . . . . -2-
1.12 COMMUNICATIONS ACT. . . . . . . . . . . . . . . . . -3-
1.13 ENCUMBRANCE. . . . . . . . . . . . . . . . . . . . -3-
1.14 ENVIRONMENTAL LAW. . . . . . . . . . . . . . . . . -3-
1.15 EQUIPMENT. . . . . . . . . . . . . . . . . . . . . -3-
1.16 EQUIVALENT BASIC SUBSCRIBERS (OR EBS'S). . . . . . -3-
1.17 GOVERNMENTAL AUTHORITY. . . . . . . . . . . . . . . -4-
1.18 GOVERNMENTAL PERMITS. . . . . . . . . . . . . . . . -4-
1.19 HAZARDOUS SUBSTANCES. . . . . . . . . . . . . . . . -4-
1.20 INTANGIBLES. . . . . . . . . . . . . . . . . . . . -4-
1.21 KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . -5-
1.22 LEGAL REQUIREMENT. . . . . . . . . . . . . . . . . -5-
1.23 PAY TV. . . . . . . . . . . . . . . . . . . . . . . -5-
1.24 PAY UNIT. . . . . . . . . . . . . . . . . . . . . . -5-
1.25 PERMITTED ENCUMBRANCES. . . . . . . . . . . . . . . -5-
1.26 PERSON. . . . . . . . . . . . . . . . . . . . . . . -5-
1.27 PREFERRED STOCK. . . . . . . . . . . . . . . . . . -5-
1.28 REAL PROPERTY. . . . . . . . . . . . . . . . . . . -6-
1.29 RELEASE. . . . . . . . . . . . . . . . . . . . . . -6-
1.30 REQUIRED CONSENTS. . . . . . . . . . . . . . . . . -6-
1.31 SELLER CONTRACTS. . . . . . . . . . . . . . . . . . -6-
1.32 SERVICE AREA. . . . . . . . . . . . . . . . . . . . -6-
1.33 STOCK AGREEMENTS. . . . . . . . . . . . . . . . . . -6-
1.34 SYSTEM. . . . . . . . . . . . . . . . . . . . . . . -6-
1.35 OTHER DEFINITIONS. . . . . . . . . . . . . . . . . -7-
SECTION 2. SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . -8-
2.1 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . -8-
SECTION 3. CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . -9-
3.1 BASE PURCHASE PRICE. . . . . . . . . . . . . . . . -9-
3.2 ADJUSTMENTS TO BASE PURCHASE PRICE. . . . . . . . -9-
3.3 DETERMINATION OF ADJUSTMENTS. . . . . . . . . . . -11-
3.4 ALLOCATION OF CONSIDERATION. . . . . . . . . . . . -12-
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS . . . . . . . . . -12-
4.1 ASSIGNMENT AND ASSUMPTION . . . . . . . . . . . . -12-
4.2 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . -12-
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . -13-
5.1 ORGANIZATION AND QUALIFICATION. . . . . . . . . . -13-
5.2 AUTHORITY AND VALIDITY. . . . . . . . . . . . . . -13-
5.3 NO BREACH OR VIOLATION. . . . . . . . . . . . . . -13-
5.4 ASSETS. . . . . . . . . . . . . . . . . . . . . . -14-
5.5 REAL PROPERTY . . . . . . . . . . . . . . . . . . -14-
5.6 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . -15-
5.7 COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS . . . . -16-
5.8 PATENTS, TRADEMARKS AND COPYRIGHTS. . . . . . . . -17-
5.9 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . -17-
5.10 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . -18-
5.11 TAX RETURNS; OTHER REPORTS. . . . . . . . . . . . -18-
5.12 EMPLOYMENT MATTERS. . . . . . . . . . . . . . . . -18-
5.13 SYSTEM DATA. . . . . . . . . . . . . . . . . . . -19-
5.14 FINDERS AND BROKERS. . . . . . . . . . . . . . . -20-
5.15 INTANGIBLES. . . . . . . . . . . . . . . . . . . -20-
5.16 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . -20-
5.17 BONDS; LETTERS OF CREDIT; CERTIFICATES OF
INSURANCE. . . . . . . . . . . . . . . . . . . -20-
5.18 RIGHTS IN ASSETS. . . . . . . . . . . . . . . . . -20-
5.19 BOOKS AND RECORDS. . . . . . . . . . . . . . . . -20-
5.20 DISCLOSURE. . . . . . . . . . . . . . . . . . . . -20-
5.21 COMMITMENTS. . . . . . . . . . . . . . . . . . . -21-
5.22 TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . -21-
5.23 YEAR 2000. . . . . . . . . . . . . . . . . . . . -21-
5.24 ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . -22-
5.25 OWNERSHIP OF PREFERRED STOCK. . . . . . . . . . . -23-
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . -24-
6.1 ORGANIZATION AND QUALIFICATION. . . . . . . . . . -24-
6.2 AUTHORITY AND VALIDITY. . . . . . . . . . . . . . -24-
6.3 NO BREACH OR VIOLATION BY TRANSMISSION, L.L.C . . -24-
6.4 ORGANIZATION AND QUALIFICATION OF TRANSMISSION,
L.L.C. . . . . . . . . . . . . . . . . . . . . -24-
6.5 AUTHORITY AND VALIDITY OF TRANSMISSION, L.L.C . . -25-
6.6 NO BREACH OR VIOLATION. . . . . . . . . . . . . . -25-
6.7 FINDERS AND BROKERS . . . . . . . . . . . . . . . -25-
6.8 ORGANIZATION; GOOD STANDING; QUALIFICATION OF CCI. -25-
6.9 AUTHORIZATION OF CCI. . . . . . . . . . . . . . . -26-
6.10 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. . . -26-
6.11 CAPITALIZATION OF CCI. . . . . . . . . . . . . . -26-
SECTION 7. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . -26-
7.1 ACCESS TO PREMISES AND RECORDS. . . . . . . . . . -26-
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS;
FINANCIAL STATEMENTS . . . . . . . . . . . . . -26-
7.3 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . -28-
7.4 LEASED EQUIPMENT. . . . . . . . . . . . . . . . . -29-
7.5 REQUIRED CONSENTS, ESTOPPEL CERTIFICATES AND
FRANCHISE RENEWALS. . . . . . . . . . . . . . . -29-
7.6 MDU AGREEMENTS. . . . . . . . . . . . . . . . . . -29-
7.7 TITLE COMMITMENTS AND SURVEYS . . . . . . . . . . -29-
7.8 NO SHOPPING . . . . . . . . . . . . . . . . . . . -30-
7.9 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . -30-
7.10 RISK OF LOSS; CONDEMNATION. . . . . . . . . . . . -30-
7.11 TRANSFER TAXES. . . . . . . . . . . . . . . . . . -31-
7.12 DISTANT BROADCAST SIGNALS. . . . . . . . . . . . -31-
7.13 NON-COMPETITION AGREEMENT. . . . . . . . . . . . -31-
7.14 UPDATED SCHEDULES. . . . . . . . . . . . . . . . -31-
7.15 LIEN AND JUDGMENT. . . . . . . . . . . . . . . . -32-
7.16 USE OF SELLER'S NAME. . . . . . . . . . . . . . . -32-
7.17 SATISFACTION OF CONDITIONS. . . . . . . . . . . . -32-
7.18 CONFIDENTIALITY. . . . . . . . . . . . . . . . . -32-
7.19 MEMORANDA OF LEASE. . . . . . . . . . . . . . . . -32-
7.20 HSR NOTIFICATION. . . . . . . . . . . . . . . . . -33-
7.21 EARNEST MONEY. . . . . . . . . . . . . . . . . . -33-
7.22 LEGEND. . . . . . . . . . . . . . . . . . . . . . -33-
SECTION 8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . -33-
SECTION 9. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . -34-
9.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND SELLER. -34-
9.2 CONDITIONS TO THE OBLIGATIONS OF BUYER. . . . . . -34-
9.3 CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . -37-
9.4 WAIVER OF CONDITIONS. . . . . . . . . . . . . . . -38-
SECTION 10.TERMINATION . . . . . . . . . . . . . . . . . . . . . . . -38-
10.1 EVENTS OF TERMINATION. . . . . . . . . . . . . . -38-
10.2 LIABILITIES IN EVENT OF TERMINATION. . . . . . . -38-
10.3 PROCEDURE UPON TERMINATION. . . . . . . . . . . . -38-
SECTION 11.SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION-39-
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . -39-
11.2 INDEMNIFICATION BY SELLER. . . . . . . . . . . . -39-
11.3 INDEMNIFICATION BY BUYER. . . . . . . . . . . . . -40-
11.4 PROCEDURE FOR INDEMNIFICATION. . . . . . . . . . -40-
11.5 LIMITATIONS ON INDEMNIFICATION BY SELLER. . . . . -41-
11.6 LIMITATIONS ON INDEMNIFICATION BY BUYER. . . . . -41-
SECTION 12.MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . -42-
12.1 PARTIES OBLIGATED AND BENEFITTED. . . . . . . . . -42-
12.2 NOTICES. . . . . . . . . . . . . . . . . . . . . -42-
12.3 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . -43-
12.4 RIGHT TO SPECIFIC PERFORMANCE. . . . . . . . . . -44-
12.5 WAIVER. . . . . . . . . . . . . . . . . . . . . . -44-
12.6 CAPTIONS. . . . . . . . . . . . . . . . . . . . . -44-
12.7 CHOICE OF LAW. . . . . . . . . . . . . . . . . . -44-
12.8 VENUE. . . . . . . . . . . . . . . . . . . . . . -44-
12.9 TERMS. . . . . . . . . . . . . . . . . . . . . . -44-
12.10 RIGHTS CUMULATIVE . . . . . . . . . . . . . . . . -44-
12.11 FURTHER ACTIONS . . . . . . . . . . . . . . . . . -44-
12.12 TIME. . . . . . . . . . . . . . . . . . . . . . . -44-
12.13 COUNTERPARTS. . . . . . . . . . . . . . . . . . . -45-
12.14 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . -45-
12.15 SEVERABILITY. . . . . . . . . . . . . . . . . . . -45-
12.16 CONSTRUCTION. . . . . . . . . . . . . . . . . . . -45-
12.17 LATE PAYMENTS . . . . . . . . . . . . . . . . . . -45-
12.18 EXPENSES. . . . . . . . . . . . . . . . . . . . . -45-
12.19 BULK SALES. . . . . . . . . . . . . . . . . . . . -45-
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - Earnest Money Escrow Agreement
B - Indemnity Escrow Agreement
C - Required Consent
D - Non-Competition Agreement
E - Memorandum of Lease
F - Bill of Sale
G - Assignment and Assumption Agreement
H - Assignment of Leases
I - Consent and Joinder
J - Non-Foreign Affidavit
K - Opinion of Seller's Counsel
L - Opinion of Seller's FCC Counsel
M - Opinion of Buyer's Counsel
N - Certificate of Designation
SCHEDULES
1.6 - The Business
1.15 - Owned Equipment and Vehicles
1.28 - Real Property
1.30 - Required Consents
1.31 - Seller Contracts
4.2 - Excluded Assets
5.4 - Encumbrances
5.6 - Environmental Matters
5.7.2 - Governmental Permits
5.7.4 - Towers
5.7.6 - Rate Regulation
5.10 - Proceedings and Judgments
5.11 - Tax Matters
5.12 - Employment Matters
5.17 - Bonds; Letters of Credit; Cost of Insurance
5.18 - Rights in Assets
5.21 - Binding Commitments
5.22 - Transactions with Affiliates
5.24 - Exceptions to Ordinary Course of Business
6.11 - Capitalization of CCI
7.2.1 - Capital Expenditure Plan
7.4 - Leased Equipment
7.5.2 - Extended Franchise Renewals
7.6 - MDU Agreements
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made as of October 14,
1999, (the "Effective Date") by and between UNIVERSAL CABLE HOLDINGS, INC.,
a Delaware corporation ("Buyer"), and STAR CABLE ASSOCIATES, a Pennsylvania
general partnership ("Seller").
RECITALS
Seller is engaged in the business of providing cable television
service to subscribers in the Service Area, as defined herein. Buyer
desires to purchase and Seller desires to sell substantially all assets of
Seller used or useful in connection with its cable television business in
the Service Area as more fully set forth herein.
AGREEMENTS
In consideration of the above recitals and the mutual agreements
stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the
meanings set forth below:
1.1 AFFILIATE. With respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
1.2 ANNUALIZED EBITDA. At any date of determination, the product of
(a) the sum (determined without duplication in accordance with generally
accepted accounting principles ("GAAP"), consistently applied and
consistent with Seller's financial statements) of the following: (i) the
aggregate gross operating revenue for the six (6) most recently consecutive
completed months derived in the ordinary course of business in respect of
the Systems (including revenues arising from second outlets and remotes and
advertising revenues, and including pay-per-view revenues and installation
fees, but excluding interest income, programming launch incentives and
extraordinary items) minus (ii) all operating expenses for such period,
including, without limitation, technical, programming (no credit shall be
given for launch incentives), selling and general administration expenses,
and management fees, but excluding (to the extent included in operating
expenses) interest expense, amortization, depreciation, income and
withholding taxes, other non-cash charges and extraordinary gains or losses
plus (iii) to the extent included in operating expenses, actual management
fees paid, said amount not to exceed the lesser of: (x) three and one-half
percent (3 1/2 %) of Seller's gross operating revenue for such period; or
(y) the sum of $400,000, plus (iv) to the extent included in operating
expenses, actual home office expenses for Seller's headquarters in
Pittsburgh, Pennsylvania, said amount not to exceed $100,000, times (b) two
(2).
1.3 INTENTIONALLY LEFT BLANK.
1.4 ASSETS. All properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used, useful, or held for use in
the Business or in the operations of the Systems in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date, including, without limitation,
Governmental Permits, Intangibles, Seller Contracts, Equipment and Real
Property, but excluding any Excluded Assets.
1.5 BASIC SERVICES. The basic tier of cable television programming
sold to subscribers of the Systems as a package, including broadcast and
satellite programming for which a subscriber pays a fixed monthly fee to
Seller, but not including Pay TV.
1.6 BUSINESS. The cable television business conducted by Seller
through one or more Systems in and around the Service Area, as described on
SCHEDULE 1.6, in accordance with the categories set forth in Section 5.13.
1.7 CCI. Classic Communications, Inc., a Delaware corporation.
1.8 BUSINESS DAY. Any day other than Saturday, Sunday or a day on
which banking institutions in Austin, Texas, or New York, New York, are
required or authorized to be closed.
1.9 CLEANUP. All actions required to: (1) cleanup, remove, treat or
remediate Hazardous Substances in the indoor or outdoor environment; (2)
prevent the Release of Hazardous Substances so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (3) perform pre-remedial studies and investigations
and post-remedial monitoring and care; or (4) respond to any government
requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential clean up, removal, treatment
or remediation of Hazardous Substances in the indoor or outdoor
environment.
1.10 CLOSING. The consummation of the transactions contemplated by
this Agreement, as described in Section 8, the date of which is referred to
as the Closing Date.
1.11 CLOSING DATE. The date described in Section 8 or such later date
as extended by Buyer or Seller in accordance with Section 10.1, unless
Buyer and Seller agree otherwise in writing.
1.12 COMMUNICATIONS ACT. Title VI of the Communications Act and all
other provisions of the Cable Communications Policy Act of 1984, Pub. L.
No. 98-549, the Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, and the provisions of the Telecommunications Act
of 1996 amending Title VI of the Communications Act, as such statutes may
be amended from time to time, and the rules and regulations promulgated
thereunder.
1.13 ENCUMBRANCE. Any mortgage, lien, security interest, security
agreement, conditional sale or other title retention agreement, limitation,
pledge, option, charge, assessment, restrictive agreement, restriction,
encumbrance, adverse interest, restriction on transfer or any exception to
or defect in title or other ownership interest (including reservations,
rights of way, possibilities of reverter, encroachments, easements, rights
of entry, restrictive covenants, leases and licenses).
1.14 ENVIRONMENTAL LAW. Any Legal Requirement relating to pollution
or protection of public health, safety, or welfare or the environment,
including those relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including ambient
air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
1.15 EQUIPMENT. All towers, tower equipment, antennae, electronic
devices, trunk and distribution coaxial and optical fiber cable,
amplifiers, power supplies, conduit, vaults and pedestals, grounding and
pole hardware, subscriber's devices (including converters, encoders,
transformers behind television sets and fittings), headend hardware
(including origination, earth stations, transmission and distribution
system), test equipment, office equipment, vehicles and other tangible
personal property owned, leased, used or held for use in the Business, as
described on SCHEDULE 1.15 (and with respect to leased Equipment, on
SCHEDULE 1.31).
1.16 EQUIVALENT BASIC SUBSCRIBERS (OR EBS'S). As of any date and for
each franchise area served by a System, the number derived by dividing (a)
the total monthly billings for sales of Basic Services by the System during
the most recent month ended prior to the date of calculation (including
billings to single family residences and dwelling units in multiple
dwelling unit buildings, subscribers in commercial and other buildings and
bulk subscribers, whether on a discounted or undiscounted basis, but
excluding billings in excess of a single month's charges for any account),
by (b) the standard monthly rate (without discount of any kind) charged by
Seller during such month to single family residences for Basic Services
sold by the System, which monthly rate will not be less than the amount
specified in SCHEDULE 1.6. For purposes of the foregoing, there will be
excluded (i) all billings to any subscriber who is sixty (60) days or more
past due in the payment of any amount payable to Seller, (ii) all billings
to any subscriber who has not paid at least one full month's payment for
Basic Services and all installation charges owed and due, (iii) that
portion of the billings to each subscriber representing an installation or
other non-recurring charge, a charge for equipment or for any outlet or
connection other than the first outlet or first connection in any single
family residence or, with respect to a bulk account, in any residential
unit (e.g., an individual apartment or rental unit), or a pass-through
charge for sales taxes, line-itemized franchise fees and charges and the
like, (iv) all billings to any subscriber whose service is pending
disconnection for any reason, and (v) all billings to any subscriber who
was solicited since the Effective Date of this Agreement, to purchase such
services by any non-standard promotion or by offer of a non-standard
discount. For purposes of this Agreement, payments on account of monthly
billings to a subscriber of a System will be deemed to be due on the first
day of the month during which the service to which such billings relate is
provided.
1.17 GOVERNMENTAL AUTHORITY. (i) The United States of America, (ii)
any state, commonwealth, territory or possession of the United States of
America and any political subdivision thereof (including counties,
municipalities and the like), (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof or (iv) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
1.18 GOVERNMENTAL PERMITS. All franchises, franchise applications (if
any), approvals, agreements, authorizations, ordinances, permits, licenses
(including, without limitation, television translator station licenses,
microwave licenses (including, without limitation, cable television relay
service), business radio licenses and TVRO earth station registration),
easements, registrations, qualifications, leases, variances and similar
rights issued or obtained from any Governmental Authority.
1.19 HAZARDOUS SUBSTANCES. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a
hazard or potential hazard to the Real Property or to Persons in or about
the Real Property or cause the Real Property to be in violation of any
laws, regulations or ordinances of federal, state or applicable local
governments, (b) asbestos or any asbestos-containing material of any kind
or character, (c) polychlorinated biphenyls ("PCBs"), as regulated by the
Toxic Substances Control Act, 15 U.S.C.section 2601 et seq., (d) any
materials or substances designated as "hazardous substances" pursuant to
the Clean Water Act, 33 U.S.C.section 1251 et seq., (e) "economic poison,"
as defined in the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C.section 135 et seq., (f) "chemical substance," "new chemical
substance" or "hazardous substance or mixture" pursuant to the Toxic
Substances Control Act, 15 U.S.C.section 2601 et seq., (g) "hazardous
substances" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C.section 9601 et seq., and
(h) "hazardous waste" pursuant to the Resource Conservation and Recovery
Act, 42 U.S.C.section 6901 et seq.
1.20 INTANGIBLES. All intangible assets, including subscriber lists,
accounts receivable, claims (excluding any claims relating to Excluded
Assets), patents, trademarks and trade names (as described in Section
5.15), copyrights, goodwill, going concern value, proprietary information,
technical information and data, machinery and equipment warranties, maps,
computer disks and tapes, phones, diagrams, blueprints and schematics, and
all files of correspondence, lists, records, and reports concerning
subscribers and prospective subscribers of the Systems, signal and program
carriage, and dealings with Governmental Authorities (including, without
limitation, all reports filed by or on behalf of Seller with the FCC with
respect to the Systems, all correspondence between Seller and Governmental
Authorities relating to any of the Systems, and statements of account filed
by or on behalf of Seller with the U.S. Copyright Office with respect to
the Systems), if any, owned, used or held for use in the Business.
1.21 KNOWLEDGE. With respect to any entity, actual knowledge of any
of the executive officers or of the entity specified and any of the
executive officers of its partners and its individual partners. For
Seller, the executive officers shall include, without limitation, James C.
Roddey, Thomas D. Wright, Richard Talarico, Henry Posner, Jr. and Michael
Haislip.
1.22 LEGAL REQUIREMENT. Any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Authority, including decisions,
orders, writs, awards, or injunctions of an arbitrator or a court or other
Governmental Authority.
1.23 PAY TV. Premium programming services selected by and sold to
subscribers on an a la carte basis for monthly fees in addition to the fee
for Basic Services.
1.24 PAY UNIT. Each Pay TV service subscribed for by any subscriber
of a System.
1.25 PERMITTED ENCUMBRANCES. The following Encumbrances: (a) liens
for taxes, assessments and governmental charges not yet due and payable;
(b) zoning laws and ordinances and similar Legal Requirements; (c) rights
reserved to any Governmental Authority to regulate the affected property;
and (d) as to Real Property interests, any easements, rights-of-way,
servitudes, permits, restrictions, reservations, licenses, severances of
oil, gas or other mineral estates, utilities as installed, and minor
imperfections or irregularities in title which are reflected in the public
records or are apparent from an inspection or survey of the Real Property
and which do not individually or in the aggregate materially interfere with
the right or ability to own, use or operate such parcel of Real Property
for the purposes for which it is currently being used or to convey
indefeasible title to such Real Property; provided that Permitted
Encumbrances will not include any item which could materially adversely
affect in any way the conduct of the Business.
1.26 PERSON. Any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.27 PREFERRED STOCK. CCI's Cumulative Redeemable Convertible
Preferred Stock (Series A), which shall be convertible upon an initial
public offering at $36.00 per share and at the option of CCI, two years
following the Closing Date, at $32.00 per share to Class A Common Stock of
CCI, with one (1) vote per share of such common stock ("Class A Common
Stock").
1.28 REAL PROPERTY. All Assets consisting of realty, including
appurtenances, improvements and fixtures located on such realty, and any
other interests in real property, including, without limitation, fee and
leasehold interests on which Seller's offices and headend sites are
located, as described on SCHEDULE 1.28. All interests for which
consideration includes the provision of any free cable services will be set
forth on SCHEDULE 1.28.
1.29 RELEASE. Any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including the movement
of Hazardous Substances through or in the air, soil, surface water,
groundwater or property.
1.30 REQUIRED CONSENTS. As set forth on SCHEDULE 1.30, all
franchises, licenses, authorizations, approvals and consents required under
Governmental Permits, material Seller Contracts or otherwise for (a) Seller
to transfer the Assets and the Business to Buyer as provided in this
Agreement, (b) Buyer to conduct the Business and to own, lease, use and
operate the Assets at the places and in the manner in which the Business is
conducted as of the date of this Agreement and on the Closing Date, (c)
Buyer to assume and perform the Governmental Permits and Seller Contracts,
and (d) Buyer to collaterally assign the Assets to its lenders as security
for Buyer's indebtedness. SCHEDULE 1.30 will specifically identify all FCC
television translator licenses under the heading Governmental Permits.
Such television translator licenses will be transferred in accordance with
Section 9.2.4 of this Agreement.
1.31 SELLER CONTRACTS. All contracts and agreements, other than
Governmental Permits, pertaining to the ownership, operation and
maintenance of the Assets or the Business or used or held for use in the
Business other than programming contracts except those which are to be
transferred to Buyer as set forth on SCHEDULE 1.31, and Real Property
leasehold interests and easements set forth on SCHEDULE 1.28.
1.32 SERVICE AREA. The area in which Seller operates the Business,
specifically in and around the Systems set forth on SCHEDULE 1.6.
1.33 STOCK AGREEMENTS. That certain Stockholders' Agreement dated
July 28, 1999, among CCI, Brera Classic, L.L.C., and the additional parties
named therein (the "Stockholders' Agreement"), and that certain
Registration Rights Agreement dated July 28, 1999, among CCI, Brera
Classic, L.L.C., and the additional parties named therein.
1.34 SYSTEM. A complete cable television reception and distribution
system operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment,
and which is, or is capable of being, without modification, operated as an
independent system without interconnections to other systems. Any systems
which are interconnected or which are served in whole or in part by a
common headend will be considered a single System. "Systems" means the
Systems owned and operated by Seller in the Service Area.
1.35 OTHER DEFINITIONS. The following terms are defined in the
Sections indicated:
SECTION TERM
5.9 Annual Financial Statements
4.1 Assumed Liabilities
3.1 Base Purchase Price
11.5 Buyer Damages
6.11 CCI Derivative Securities
6.11 CCI Equity Securities
3.1.4 Certificate of Designation
3.3.3 Claiming Party
1.27 Class A Common Stock
1.12 Communications Act
7.21 Deposit
3.3.3 Dispute Adjustment Amount
3.1.2 Earnest Money Escrow Agreement
5.12.1 ERISA
3.1.2 Escrow Agent
4.2 Excluded Assets
7.5.2 Extended Franchises
5.7.4 FAA
5.4 FCC
3.3.2 Final Adjustments Report
3.3.3 Final Determination
5.9 Financial Statements
1.2 GAAP
5.13 Homes passed
7.20 HSR Act
11.4 Indemnitee
11.4 Indemnitor
3.1.3 Indemnity Escrow Agreement
5.9 Interim Financial Statements
4.2 ISP Contract
5.3 Material Adverse Effect
4.2 Newton System
3.3.1 Preliminary Adjustments Report
12.17 Prime Rate
3.3.3 Responsible Party
5.25 Securities Act
11.6 Seller Damages
1.33 Stockholders' Agreement
11.1 Survival Period
7.10.2 Taking
2.1 Transmission, L.L.C.
5.23 Year 2000 Problem
SECTION 2. SALE OF ASSETS
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
set forth in this Agreement, at the Closing, Seller will sell, convey,
assign, transfer and deliver to Buyer, and Buyer will purchase from Seller,
free and clear of all Encumbrances (other than Permitted Encumbrances), and
with full warranties of title and with full substitution and subrogation to
all rights and actions of warranty against all preceding owners, all of
Seller's rights, title and interest in, to and under the Assets. All
television translator licenses identified on SCHEDULE 1.30 shall be
transferred and assigned to Classic Network Transmission, L.L.C.
("Transmission, L.L.C."). Except as otherwise specifically provided in
this Agreement, all the Assets are intended to be transferred to Buyer,
whether or not described in the Schedules.
SECTION 3. CONSIDERATION
3.1 BASE PURCHASE PRICE. As consideration for the Assets and for the
covenant of Seller contained in the Non-Competition Agreement attached
hereto as EXHIBIT D, Buyer will pay to Seller total consideration of One
Hundred Thirty Million Dollars ($130,000,000) (the "Base Purchase Price"),
paid at the Closing as set forth below, subject to adjustment as provided
in Sections 3.2 and 3.3, and Buyer will assume certain obligations of
Seller as provided in Section 4:
3.1.1 $102,000,000 to be paid by Buyer to Seller at the
Closing by wire transfer of immediately available funds, at the accounts
designated by Seller not less than five (5) days prior to the Closing;
3.1.2 $3,000,000 to be paid by Buyer to Norwest Bank Texas,
N.A. (the "Escrow Agent"), subject to the earnest money escrow agreement,
substantially in the form of EXHIBIT A, to be entered into on the Effective
Date of this Agreement by Seller, Buyer and the Escrow Agent (the "Earnest
Money Escrow Agreement");
3.1.3 $5,000,000 to be paid by Buyer to the Escrow Agent,
subject to the indemnity escrow agreement, substantially in the form of
EXHIBIT B, to be entered into on the Closing Date by Seller, Buyer and the
Escrow Agent (the "Indemnity Escrow Agreement"); and
3.1.4 Subject to the terms and conditions of and in reliance
upon the representations, warranties and covenants contained in this
Agreement, at the Closing Date, Buyer's corporate parent, CCI, shall issue
to Seller 20,000 shares of Preferred Stock with an initial stated value of
$1,000 per share. In the event the Closing of the transaction contemplated
by this Agreement occurs after a Qualified Initial Public Offering, as
defined in the Certificate of Designation in the form attached hereto as
EXHIBIT N (the "Certificate of Designation"), Seller shall be issued an
amount of Class A Common Stock pursuant to the Optional Conversion
provisions in the Certificate of Designation as if the Preferred Stock
referenced in the preceding sentence had been issued as of the date hereof.
3.2 ADJUSTMENTS TO BASE PURCHASE PRICE. The portion of the Base
Purchase Price payable pursuant to Section 3.1.1 will be adjusted as
follows:
3.2.1 If the Business has fewer than 56,820 EBS's as of the
Closing Date, the Base Purchase Price will be reduced by an amount equal to
$2,288 multiplied by the difference between (x) 56,820 and (y) the number
of EBS's as of the Closing Date.
3.2.2 Adjustments on a pro rata basis as of the Closing Date
will be made for all prepaid expenses (to the extent such prepayments may
accrue to Buyer's benefit), prepaid income and accounts receivable of
active subscribers, and to reflect the principle that all expenses
(including real estate taxes, stand by fees and assessment by any taxing
authority for the Real Property) and income attributable to the Business
for the period prior to the Closing Date are for the account of Seller, and
all expenses and income attributable to the Business for the period on and
after the Closing Date are for the account of Buyer; provided, however,
that Seller and Buyer shall not prorate any items or expense payables under
any Excluded Assets, all of which shall remain and be solely for the
account of Seller. Seller will receive no credit for any accounts
receivable (i) any portion of which is more than sixty (60) days past due
as of the Closing Date, or (ii) from subscribers whose accounts are
inactive or whose service is pending disconnection for any reason as of the
Closing Date.
3.2.3 All advance payments to, or funds of third parties on
deposit with, Seller as of the Closing Date, relating to the Business,
including advance payments and deposits by subscribers served by the
Business for converters, encoders, decoders, cable television service and
related sales, will be retained by Seller and will reduce the Base Purchase
Price accordingly.
3.2.4 All deposits relating to the Business that are held by
third parties as of the Closing Date for the account of Seller or as
security for Seller's performance of its obligations (other than with
respect to (i) Excluded Assets; and (ii) any other deposits the full
benefit of which will not be available to Buyer following the Closing
Date); provided, however, credit will be given for those deposits for which
partial credit can be determined, including deposits on leases and deposits
for utilities, will be credited to the account of Seller in their full
amounts to increase the Base Purchase Price and will become the property of
Buyer.
3.2.5 The Base Purchase Price payable pursuant to Section
3.1.1 will be reduced by an amount equal to the difference between (i) the
amounts of the required cumulative capital expenditures for each of the
categories designated as Items 1 through 9 as set forth on SCHEDULE 7.2.1
through the month of the Closing and (ii) the amount of the capital
expenditures actually incurred and paid in cash by Seller through the
Closing Date in connection with each such corresponding capital expenditure
categories. By way of example, SCHEDULE 7.2.1 sets forth a budgeted $5,000
per month in the year 2000 in capital expenditures for the category of New
Construction. If the Closing Date were to occur in February 2000, the
cumulative monthly capital expenditures for that category through February
2000 would total $147,000. To the extent that Seller had only expended
$142,000 in cash in this category through the Closing Date, the reduction
in the Base Purchase Price payable pursuant to Section 3.1.1 would be
$5,000. Similar adjustments would be made on a category by category basis.
3.2.6 The Base Purchase Price payable pursuant to Section
3.1.1 will be reduced by an amount equal to the difference between (i) the
amounts of the Cumulative Capital Expenditures for the category designated
as Item 10 as set forth on SCHEDULE 7.2.1 through the month of the Closing
and (ii) the amount of the capital expenditures actual incurred and paid in
cash by Seller through the Closing Date in connection with the category
designated as Item 10 of SCHEDULE 7.2.1; provided, however, to the extent
that through the date of Closing Seller has exceed the capital expenditure
budgeted amounts for any of the capital categories designated as Items 1
through 9 on SCHEDULE 7.2.1, such amounts shall be allowed as credit
against any reduction otherwise to be made pursuant to this Section 3.2.6.
3.3 DETERMINATION OF ADJUSTMENTS. Preliminary and final adjustments
to the Base Purchase Price will be determined as follows:
3.3.1 At least three (3) Business Days prior to the Closing,
Seller will deliver to Buyer a report (the "Preliminary Adjustments
Report"), certified as to completeness and accuracy by Seller, showing in
detail the preliminary determination of the adjustments referred to in
Section 3.2, which are calculated as of the Closing Date (or as of any
other date agreed to by the parties) and any documents substantiating the
adjustments proposed in the Preliminary Adjustments Report. The
Preliminary Adjustments Report will include a detailed calculation of the
number of Equivalent Basic Subscribers and a schedule setting forth advance
payments and deposits made to or by Seller, as well as accounts receivable
information relating to the Business (showing sums due and their respective
aging as of the Closing Date). Also included in the Preliminary
Adjustments Report will be a calculation of actual capital expenditures in
cash through the Closing Date on a category by category basis per SCHEDULE
7.2.1 as compared to the cumulative monthly budgets for capital
expenditures as set forth in SCHEDULE 7.2.1. Seller also will furnish to
Buyer its billing report for the most current period as of the Closing
Date. The net adjustment shown in the Preliminary Adjustments Report will
be reflected as an adjustment to the portion of the Base Purchase Price
payable at the Closing pursuant to Section 3.1.1.
3.3.2 Within sixty (60) days after the Closing, Seller will
deliver to Buyer a report (the "Final Adjustments Report"), similarly
certified by Seller, showing in detail the final determination of all
adjustments which were not calculated as of the Closing Date and containing
any corrections to the Preliminary Adjustments Report, together with any
documents substantiating the adjustments proposed in the Final Adjustments
Report. Buyer will provide Seller with reasonable access to all records
which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
3.3.3 Within thirty (30) days after receipt of the Final
Adjustments Report, Buyer will give Seller written notice of Buyer's
objections, if any, to the Final Adjustments Report. If Buyer makes any
such objection, the parties will agree on the amount, if any, which is not
in dispute within thirty (30) days after Seller's receipt of Buyer's notice
of objections to the Final Adjustments Report. Any undisputed amount will
serve as an adjustment to the portion of the Base Purchase Price payable
under Section 3.1.1. The adjustment of the Base Purchase Price payable
under Section 3.1.1, as so adjusted (but excluding any amounts disputed),
will be paid by Buyer to Seller, or paid by Seller to Buyer, whichever the
case may be, within ninety (90) days after the Closing Date or within three
(3) Business Days after agreement on the undisputed portion of the Final
Adjustments Report, if later. Any disputed amounts will be determined
within one hundred twenty (120) days after the Closing Date by the
accounting firm of Arthur Andersen, LLP, whose determination will be
conclusive. Seller and Buyer will bear the fees and expenses payable to
such firm in connection with such determination in reverse proportion to
the manner in which the disputed amounts are allocated by the accountants.
The payment required after determination of all disputed amounts (the
"Dispute Adjustment Amount") will be made by the responsible party (the
"Responsible Party") by wire transfer of immediately available funds to the
other party (the "Claiming Party") within three (3) Business Days after the
final determination (the "Final Determination").
3.4 ALLOCATION OF CONSIDERATION. Buyer and Seller will use their
best efforts to agree on an allocation of the Base Purchase Price
(excluding transaction costs incurred by each of them) within forty-five
(45) days after the Closing. Upon such agreement, each of Buyer and Seller
will complete Form 8594, Asset Acquisition Statement of Allocation,
consistent with such mutually agreed allocation and each will file a copy
of such form with its federal income tax return for the applicable tax
year, and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state
and local tax returns, on the basis of such allocation. Buyer and Seller
further agree not to take any position inconsistent with such mutually
agreed allocation for any tax purpose. If, after good-faith efforts, Buyer
and Seller are unable to agree upon an allocation within sixty (60) days
after the Closing, then each party will be free to report its own position
to the Internal Revenue Service and other taxing authorities.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS
4.1 ASSIGNMENT AND ASSUMPTION. Seller will assign, and Buyer will
assume and perform, the "Assumed Liabilities," which are defined as: (a)
Seller's obligations to subscribers of the Business for (i) subscriber
deposits held by Seller as of the Closing Date and which are refundable, in
the amount for which Buyer received credit under Section 3.3, (ii)
subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System on or after the Closing Date, in the
amount for which Buyer received credit under Section 3.3 and (iii) the
delivery of cable television service to subscribers of the Business on or
after the Closing Date; (b) obligations accruing and relating to periods
after the Closing Date under Governmental Permits and Seller Contracts; and
(c) capital expenditures actually incurred by Seller as set forth in
Section 3.2.5 through the Closing Date, but not paid in cash by Seller
prior to Closing, provided that Buyer has received a reduction in the Base
Purchase Price pursuant to Section 3.2 of an equal amount. Buyer will not
assume or have any responsibility for any liabilities or obligations of
Seller other than the Assumed Liabilities. In no event will Buyer assume
or have any responsibility for any liabilities or obligations associated
with the Excluded Assets.
4.2 EXCLUDED ASSETS. The excluded assets (the "Excluded Assets"),
which will be retained by Seller and are specifically excluded from the
Assets, will consist of the following: (a) programming contracts (other
than those listed on SCHEDULE 1.31); (b) insurance policies and rights and
claims thereunder (except as otherwise provided in Section 7.10); (c)
bonds, letters of credit, surety instruments and other similar items; (d)
cash and cash equivalents; (e) Seller's rights under any agreement
governing or evidencing an obligation of Seller for borrowed money;
(f) Seller's rights under any contract, license, authorization, agreement
or commitment other than those creating or evidencing Assumed Liabilities;
(g) billing agreements; (h) that certain ISP Channel Affiliate Agreement
dated April 30, 1999, by and between ISP Channel, Inc., a subsidiary of
Softnet Systems, Inc., and Seller (the "ISP Contract"); provided, however,
that Buyer shall accept through a partial assignment the benefits and
obligations under the ISP Contract, in a form satisfactory to Buyer's
counsel, solely as it relates to the system deployed as of the Effective
Date by ISP Channel, Inc. in Seller's Newton, Ohio system (the "Newton
System") and Buyer shall assume the obligations of Seller under the ISP
Contract solely as it relates directly to the Newton System; and (i) the
office equipment, furnishings and other personal property located at
Seller's headquarters at 100 Greentree Commons, 381 Mansfield Avenue,
Pittsburgh, Pennsylvania 15220, as set forth in SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer, as of the date of this Agreement and as of the Closing,
as follows:
5.1 ORGANIZATION AND QUALIFICATION. Seller is a general partnership
duly organized and validly existing under the laws of its jurisdiction set
forth in the forepart of this Agreement and has all requisite power and
authority to own, lease, use and operate the Assets as they are currently
owned, leased, used and operated and to conduct the Business as it is
currently conducted. Seller is duly qualified or licensed to do business
under the laws of each jurisdiction in which the character of the
properties owned, leased, used or operated by it or the nature of the
activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed would
not have a material adverse effect on Seller or on the validity, binding
effect or enforceability of this Agreement.
5.2 AUTHORITY AND VALIDITY. Seller has all requisite organizational
power and authority to execute and deliver, to perform its obligations
under, and to consummate the transactions contemplated by, this Agreement.
The execution and delivery by Seller of, the performance by Seller of its
obligations under, and the consummation by Seller of the transactions
contemplated by, this Agreement have been duly authorized by all requisite
organizational action of Seller. This Agreement has been duly executed and
delivered by Seller and is the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except insofar as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 NO BREACH OR VIOLATION. The execution, delivery and performance
of this Agreement by Seller does not and will not: (a) conflict with or
violate any provision of the partnership agreement of Seller; (b) violate
any Legal Requirement; (c) except as set forth on SCHEDULE 1.30, require
any consent, approval or authorization of, or any filing with or notice to,
any Person; or (d) (i) violate, conflict with or constitute a breach of or
default under, (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person
the right to accelerate) the performance of Seller under, or (iv) result in
the creation or imposition of any Encumbrance under, any Seller Contract or
any other instrument evidencing any of the Assets or any instrument or
other agreement to which Seller is a party or by which Seller or any of its
assets is bound or affected, except for purposes of this clause (d) such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications, and accelerations as would not, individually or in the
aggregate, have a material adverse effect on any System, the financial
condition, results of operations or prospects of the Business or Seller (a
"Material Adverse Effect"); provided, however, that such an occurrence in
fewer than five (5) Systems having fewer than 2,000 in the aggregate EBS
will not be deemed to have a Material Adverse Effect.
5.4 ASSETS. Seller has good and marketable title to (or, in the case
of Assets that are leased, valid leasehold interests in) the Assets claimed
by Seller (other than Real Property, as to which the representations and
warranties in Section 5.5 apply). The Assets are free and clear of all
Encumbrances of any kind or nature, except (a) Permitted Encumbrances, (b)
restrictions stated in the Governmental Permits and (c) Encumbrances
disclosed on SCHEDULE 5.4 which will be removed and released at or prior to
the Closing. Except as set forth on SCHEDULE 1.31, none of the Equipment
is leased by Seller from any other Person. The Assets, together with the
Excluded Assets, are all the assets and rights necessary to permit Buyer
to conduct the Business substantially as it is being conducted on the date
of this Agreement in compliance with all material Legal Requirements, and
under the rules and policies of the Federal Communications Commission (the
"FCC"), and to perform all the Assumed Liabilities. All the Equipment is
suitable and adequate for continued use in the manner it is presently used.
Except as set forth on SCHEDULE 5.4, no Person other than Seller is
operating or, to Seller's Knowledge, has proposed to operate, a cable
television system in the Service Area.
5.5 REAL PROPERTY.
5.5.1 All the Assets consisting of Real Property interests
are described on SCHEDULE 1.28. Except as otherwise disclosed on SCHEDULE
1.28, Seller holds indefeasible fee simple title to the Real Property shown
as being owned by Seller on SCHEDULE 1.28 and the valid and enforceable
right to use and possess such Real Property, subject only to the Permitted
Encumbrances. Seller has valid leasehold interests in Real Property
pursuant to the leases described on SCHEDULE 1.28 with respect to other
Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 1.28, subject
only to Permitted Encumbrances. The Real Property includes all the real
property interests necessary to permit Buyer to conduct the Business
substantially as it is being conducted on this date in compliance with all
Legal Requirements.
5.5.2 The documents delivered by Seller to Buyer as evidence
of each lease of Real Property constitute the entire agreement with the
landlord in question and are valid and in full force and effect. There are
no leases or other agreements, oral or written, granting to any Person
other than Seller the right to occupy or use any Real Property, except
Permitted Encumbrances or as described on SCHEDULE 1.28. All leases,
easements, rights-of-way and other rights appurtenant to, or which are
necessary for Seller's current use of, any Real Property are valid and in
full force and effect, and Seller has not given or received any notice with
respect to the termination or breach of any rights or obligations under
such agreements. Each parcel of Real Property, any improvements
constructed thereon and their current use conform to (a) all applicable
Legal Requirements, including zoning requirements and the Americans with
Disabilities Act, and (b) all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.6 ENVIRONMENTAL MATTERS.
5.6.1 The Real Property currently complies with and, to
Seller's Knowledge, has previously been operated in compliance with, all
Environmental Laws. Seller has not generated, released, stored, used,
treated, handled, discharged or disposed of any Hazardous Substances at,
on, under, in or about, or in any other manner affecting, any Real
Property, transported any Hazardous Substances to or from any Real Property
or discharged any Hazardous Substances from any Real Property into any body
of water, directly or indirectly, and, to Seller's Knowledge, no other
present or previous owner, tenant, occupant or user of any Real Property or
any other Person has committed or suffered any of the foregoing. To
Seller's Knowledge, no release of Hazardous Substances outside the Real
Property has entered or threatens to enter any Real Property, nor is there
any pending or threatened claim based on Environmental Laws which arises
from any condition of the land surrounding any Real Property. Except as
set forth on SCHEDULE 5.6, no claim or investigation based on Environmental
Laws which relates to any Real Property or any operations on it (a) has
been asserted or conducted in the past or is currently pending against or
with respect to Seller or, to Seller's Knowledge, any other Person, or (b)
to Seller's Knowledge, is threatened or contemplated, and Seller is not
aware of any condition that could give rise to such a claim or
investigation.
5.6.2 Except as described on SCHEDULE 5.6, (a) no underground
storage tanks are currently or, to the Knowledge of Seller, have been
located on any Real Property, (b) to the Knowledge of Seller, no Real
Property has been used at any time as a gasoline service station or any
other facility for storing, pumping, dispensing or producing gasoline or
any other petroleum products or wastes, (c) to the Knowledge of Seller, no
building or other structure on any Real Property contains asbestos, (d) to
the Knowledge of Seller, no Real Property contains any equipment using
PCB's, and (e) to the knowledge of Seller, there are no incinerators,
septic tanks or cesspools on the Real Property and all sanitary waste is
discharged into a public sanitary sewer system.
5.6.3 Seller has provided Buyer with complete and correct
copies of (a) all studies, reports, surveys or other materials in Seller's
possession or to which Seller has access relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real
Property, (b) all notices or other materials in Seller's possession or to
which Seller has access that were received from any Governmental Authority
having the power to administer or enforce any Environmental Laws relating
to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's
possession or to which Seller has access relating to any claim, allegation
or action by any private third party under any Environmental Law.
5.7 COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS.
5.7.1 The ownership, leasing and use of the Assets as they
are currently owned, leased and used and the conduct of the Business as it
is currently conducted do not violate any Legal Requirement, which
violation, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect on the Systems, the Business, or Seller.
Seller has not received notice claiming a violation by the Business of any
Legal Requirement applicable to Seller or the Business as it is currently
conducted and, to Seller's Knowledge, there is no basis for any claim that
such a violation exists.
5.7.2 Complete and correct copies of the Governmental
Permits, all of which are listed on SCHEDULE 5.7.2, have been delivered by
Seller to Buyer. The Governmental Permits are currently in full force and
effect, are not in default, and are valid under all applicable Legal
Requirements according to their terms. There is no legal action,
governmental proceeding or investigation, pending or threatened, to
terminate, suspend or modify any Governmental Permit and, except as set
forth on SCHEDULE 5.7.2, Seller is in material compliance with the terms
and conditions of all the Governmental Permits and with other applicable
requirements of all Governmental Authorities relating to the Governmental
Permits, including all requirements for notifications, filing, reporting,
posting and maintenance of logs and records.
5.7.3 Without limiting the generality of the foregoing, (a)
Seller has made all required registration statement filings and annual
report filings with the FCC; (b) Seller has filed all required annual
employment reports with the FCC pursuant to the FCC's employment
opportunity rules; and (c) each System is in substantial and material
compliance with all signal leakage criteria prescribed by the FCC and all
must carry requirements and has received all necessary retransmission
consents. Seller has delivered to Buyer complete and correct copies of all
reports and filings with respect to the Business for the past three (3)
years made or filed pursuant to the Communications Act or FCC rules and
regulations, and all notices alleging non-compliance with the
Communications Act, the rules and regulations of the FCC.
5.7.4 All necessary Federal Aviation Administration ("FAA")
and FCC approvals and waivers have been obtained and all required filings
have been timely made with respect to the height and location of towers
used in connection with the operation of the Systems and such towers are
being operated in compliance in all material respects with applicable FAA
and FCC rules. True and correct information relating to all towers used in
connection with the operation of the System is set forth on SCHEDULE 5.7.4,
which will include for each tower (i) location, (ii) coordinates,
(iii) height above ground level, (iv) height above mean sea level,
(v) distance to nearest airport runway, and (vi) FAA study number, if
applicable.
5.7.5 A request for renewal has been timely filed pursuant to
Section 626(a) of the Cable Act with the proper Governmental Authority with
respect to any franchise that expires within thirty-six (36) months after
the date of this Agreement.
5.7.6 Except as set forth on SCHEDULE 5.7.6, as of the date
of this Agreement (i) to Seller's Knowledge, the rates charged by Seller to
subscribers of the Systems for the "cable programming services tier" (as
such term is defined in the FCC's rate regulations) offered by the Systems
are in compliance with FCC rules and orders, (ii) to Seller's Knowledge,
there are no rate complaints pending at the FCC with respect to the
Systems, and (iii) no Governmental Authority is presently regulating the
"basic tier" rates being charged to subscribers of the Systems nor has
Seller received from any Governmental Authority a copy of any FCC Form 328
filed by such Governmental Authority with the FCC requesting rate
regulation certification with respect to the Systems.
5.7.7 SCHEDULE 1.30 sets forth all franchises, licenses,
authorizations, approvals and consents required under Governmental Permits,
Seller Contracts or otherwise for (a) Seller to transfer the Assets and the
Business to Buyer as provided in this Agreement, (b) Buyer to conduct the
Business and to own, lease, use and operate the Assets at the places and in
the manner in which the Business is conducted as of the date of this
Agreement and on the Closing Date, (c) Buyer to assume and perform the
Governmental Permits and Seller Contracts, and (d) Buyer to collaterally
assign the Assets to its lenders as security for Buyer's indebtedness.
5.8 PATENTS, TRADEMARKS AND COPYRIGHTS. Seller has timely and
accurately made all requisite filings and payments with the Register of
Copyrights and is otherwise in substantial and material compliance with all
applicable rules and regulations of the Copyright Office. Seller has
delivered to Buyer complete and correct copies of all current reports and
filings, and all reports and filings for the past three (3) years, made or
filed pursuant to copyright rules and regulations with respect to the
Business. Seller does not possess any patent, patent right, trademark or
copyright and is not a party to any license or royalty agreement with
respect to any patent, trademark or copyright except for licenses
respecting program material and obligations under the Copyright Act of 1976
applicable to cable television systems generally. The operations of the
Business as currently conducted do not violate or infringe upon the rights
of any Person in any copyright, trademark, service mark, patent, license,
trade secret or the like, and, to the Knowledge of Seller, no such
violation or infringement is threatened
5.9 FINANCIAL STATEMENTS. Seller has delivered to Buyer correct and
complete copies of the following: (i) its audited balance sheets for the
fiscal years ended December 31, 1996, 1997 and 1998 (collectively, the
"Annual Financial Statements"), and (ii) its unaudited balance sheets as of
August 31, 1997, 1998 and 1999 and the related statements of income and
cash flows for the six-month periods then ended (collectively, the "Interim
Financial Statements," and, together with the Annual Financial Statements,
the "Financial Statements"). The Financial Statements were prepared in the
ordinary course of business and fairly present, in all material respects,
the financial condition, statements of earnings and cash flows of Seller
for the periods or as of the dates set forth therein, in each case in
accordance with GAAP applied on a consistent basis through the periods
covered, except (i) as stated therein or, where applicable, in the notes
thereto, or (ii) with respect to the Interim Financial Statements, for
normal year-end adjustments consistent with past practice.
Except as set forth on SCHEDULE 5.24 or disclosed by, or reserved
against in, the most recent balance sheet included in the Financial
Statements, Seller did not have, as of the date of such balance sheet, any
liability or obligation, whether accrued or unaccrued, absolute, fixed or
contingent (including liabilities for taxes or unusual forward or long-term
commitments), which was or would be material to the Business or the results
of operations or financial condition of the Business, nor to Seller's
Knowledge does any aspect of the Business form a basis for any claim by a
third party which, if asserted, could result in a liability not set forth
on SCHEDULE 5.24 or disclosed by or reserved against in such balance sheet.
5.10 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 5.10, there
is no judgment or order outstanding, or any claim, action, suit, complaint,
proceeding or investigation by or before any Governmental Authority or any
arbitrator pending, or, to Seller's Knowledge, threatened, involving or
affecting all or any part of the Business.
5.11 TAX RETURNS; OTHER REPORTS. Seller has duly and timely filed in
proper form all income, franchise, sales, use, occupation, service,
transfer, property, excise, payroll, withholding, and other tax returns and
all information and other reports (whether or not relating to taxes)
required to be filed with the appropriate Governmental Authority. All such
tax returns and information and other reports were or will be true, correct
and complete when filed. All taxes, fees and assessment of whatever nature
due and payable by Seller to any Governmental Authority (including, without
limitation, interest additions and penalties) have been paid, except such
amounts as are being contested diligently and in good faith and are not in
the aggregate material. There are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any federal,
state, local or foreign income tax return for any period, and except as set
forth on SCHEDULE 5.11, there are no tax audits pending.
5.12 EMPLOYMENT MATTERS.
5.12.1 SCHEDULE 5.12 includes a complete and correct list of
names and positions of all employees of Seller directly engaged in the
Business, their dates of hire and their current hourly wages or monthly
salaries and other compensation. Seller has complied in all material
respects with all Legal Requirements relating to the employment of labor,
including the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining,
unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control and the
payment and withholding of taxes. No reportable event, within the meaning
of Title IV of ERISA, has occurred and is continuing with respect to any
"employee benefit plan" or "multiemployer plan" (as those terms are defined
in ERISA) maintained by Seller or any Affiliate of Seller. No prohibited
transaction, within the meaning of Title I of ERISA, has occurred with
respect to any such employee benefit plan or multiemployer plan, and no
material accumulated funding deficiency (as defined in Title I of ERISA) or
withdrawal liability (as defined in Title IV of ERISA) exists with respect
to any such employee benefit plan or multiemployer plan.
5.12.2 Seller is not a party to any contract with any labor
organization, and Seller has not recognized or agreed to recognize or is
required to recognize any union or other collective bargaining unit with
respect to the Business. No union or other collective bargaining unit been
certified as representing any of its employees, nor has Seller received any
requests from any party for recognition as a representative of employees
for collective bargaining purposes. To Seller's Knowledge, employees are
not engaged in organizing activity with respect to any labor organization.
Seller has no employment agreement of any kind, oral or written, express or
implied, that would require Buyer to employ any Person after the Closing
Date.
5.13 SYSTEM DATA. As of August 31, 1999, the Systems consisted of
approximately 3,215 miles of trunk and distribution plant and approximately
97,600 "homes passed" and have approximately 58,395 EBS's. As used in this
Agreement, "homes passed" means each single family residence or dwelling
unit within a building containing multiple dwelling units plus commercial
and other buildings actually served by the Systems, but does not include
dwelling units within multiple dwelling unit buildings to which the Company
has been denied a right of access to the building by an owner or manager.
SCHEDULE 1.6 sets forth as to each System, as of August 31, 1999:
(i) the approximate number of miles of plant that will be
included in the Assets:
(ii) for the eight-month period ended August 31, 1999, the number
of subscribers of each of the Systems as reflected in Seller's billing
reports;
(iii) for the eight-month period ended August 31, 1999, a
description of basic and optional or tier services available from the
Systems and the rates charged by Seller for each, the number of
subscribers receiving each basic and optional or tier service and the rates
charged for each, the date and amount of the last rate increase for System
service, and an explanation of how subscribers are counted (e.g. does a
subscriber with an HBO multiplex count as one or multiple subscribers?);
(iv) for each of the years ended December 31, 1997 and 1998, the
number of subscribers of each of the Systems and the number of subscribers
receiving basic or optional tier services and the rates charged for each;
(v) the stations and signals carried by the Systems and the
channel position of each such signal and station;
(vi) the MHZ of visual and aural signal that such System is
capable of delivering to substantially all of such System's subscriber
terminals such that the delivered signal meets or exceeds the requirements
of part 76, Paragraph 76.605 of the FCC's rules and regulations;
(vii) the channel capacity for each of the Systems (including
a breakdown of channels utilized and channels available);
(viii) the disconnection policies of the Systems; and
(ix) the cities, towns, townships, villages and boroughs served
by each System.
5.14 FINDERS AND BROKERS. Other than Morgan Keegan & Company, Inc.,
and as disclosed on SCHEDULE 5.10, Seller has not employed, directly or
indirectly, any financial advisor, broker or finder or incurred any
liability for any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by this
Agreement. Seller will pay all amounts due and owing to Morgan Keegan &
Company, Inc.
5.15 INTANGIBLES. Seller neither uses nor holds any copyrights,
trademarks, trade names, service marks, service names, logos, licenses,
permits or other similar intangible property rights and interest in the
operations of the Systems that do not incorporate the name "Star Cable,"
"Star Cable Company," "Star," or variations thereof. In the operation of
the Systems, Seller has no Knowledge that it is infringing upon or
otherwise acting adversely to any such intangible property rights and
interests owned by any other Person or Persons, and there is no claim or
action pending, or to Seller's Knowledge threatened, with respect thereto.
5.16 ACCOUNTS RECEIVABLE. The accounts receivable relating to the
Systems are actual and bona fide receivables representing obligations for
the total dollar amount thereof shown on the books of Seller which resulted
from the regular course of Seller's business. The accounts receivable for
which Seller will receive credit pursuant to Section 3.2.2 will be fully
collectible in accordance with their terms, subject to no offset or
reduction of any nature.
5.17 BONDS; LETTERS OF CREDIT; CERTIFICATES OF INSURANCE. Except as
set forth on SCHEDULE 5.17, there are no franchise, construction, fidelity,
performance, or other bonds or letters of credit posted, or certificates of
insurance issued, by Seller in connection with the Systems or the Assets.
5.18 RIGHTS IN ASSETS. Except as set forth in SCHEDULE 5.18, no
Person (including any Governmental Authority) has any right to acquire an
interest in the Systems or any material Asset (including any right of first
refusal or similar right), other than rights of condemnation or eminent
domain afforded by law (none of which have been exercised and no
proceedings therefor have been commenced).
5.19 BOOKS AND RECORDS. All of the books, records, and accounts of
the Business are in all material respects true and complete, are maintained
in accordance with good business practice and all applicable Legal
Requirements, accurately present and reflect in all material respects all
of the transactions therein described, and are reflected accurately in the
Financial Statements.
5.20 DISCLOSURE. To Seller's Knowledge, all material facts relating
to the condition of the Systems have been disclosed to Buyer in or in
connection with this Agreement. No representation or warranty by Seller in
this Agreement or in any Schedule or Exhibit to this Agreement, or any
certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material fact,
or omits or will omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which made. Without limiting
the generality of the foregoing, the information set forth in SCHEDULE 1.6
concerning the Business is accurate and complete in all material respects.
5.21 COMMITMENTS. Except as described in SCHEDULE 5.21, there are no
unfulfilled binding commitments for capital improvements which Seller is
obligated to make in connection with the Systems. There are no liabilities
to subscribers or to other users of Seller's services which are material to
the Business, except: (i) with respect to deposits made by such
subscribers or such other users; and (ii) the obligation to supply services
to subscribers in the ordinary course of business, pursuant to any
franchises. There are no complaints by subscribers or other users of
Seller's services that, individually or in the aggregate, could materially
and adversely affect the financial condition, Assets, liabilities,
operations or prospects for the Systems. Except with respect to the
Persons listed on SCHEDULE 5.21, there is no free service liability to
subscribers existing with respect to the Systems. Except with respect to
deposits for converters, encoders, decoders and related equipment, and any
other item which is to be adjusted pursuant to Section 3.2 hereof, Seller
has no obligations or liability for the refund of monies or for the
provision of rebates to its subscribers. Except as set forth in any
franchises set forth in SCHEDULE 5.7.2, with respect to the Systems, Seller
has not made a commitment to any franchising authority to maintain a local
office in any location. Seller has not made any commitment to any of the
municipalities served by the Systems to pay franchise fees to any such
municipalities in excess of the amounts set forth in the franchises as
described in SCHEDULE 5.7.2.
5.22 TRANSACTIONS WITH AFFILIATES. Except as set forth in
SCHEDULE 5.22, none of Seller's partners, their relatives nor any of their
respective Affiliates is involved in any business arrangement or
relationship with Seller, and none of Seller's partners, their relatives
nor any of their respective Affiliates owns any property or right, tangible
or intangible, which is used by Seller in connection with the Business.
5.23 YEAR 2000. Seller has (a) completed a review and assessment of
all areas within the Business and the Systems that could reasonably be
expected to be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by the Business may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999), (b) developed a plan
for addressing the Year 2000 Problem on a timely basis, which plan has been
made available to Buyer, and (c) to date, implemented the plan. All of
Seller's computer applications that are material to the Business and the
Systems will on a timely basis be able to perform date-sensitive functions
for all dates before and after January 1, 2000, except to the extent that a
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
5.24 ABSENCE OF CERTAIN CHANGES. Except as described in SCHEDULE 5.22
or SCHEDULE 5.24, since December 31, 1998, Seller has conducted the
Business in the ordinary and usual course, and there has not been any of
the following:
(a) any material damage, destruction or loss (whether or
not covered by insurance) with respect to any material Assets of Seller;
(b) any change by Seller of its accounting methods,
principles or practices;
(c) any declaration, setting aside or payment of any
dividends or distributions in respect of partnership interests in Seller,
or any redemption, purchase or other acquisition by Seller of its
partnership interests;
(d) any entry into or amendment of any material employment
or severance compensation agreement or consulting or similar agreement
with, or any material increase in the compensation or benefits payable or
the establishment or amendment of any plans to, any employee of Seller;
(e) any re-evaluation by Seller of any of its Assets,
including the writing down or off of Assets, other than in the ordinary
course of business;
(f) any material commitment, agreement or transaction
entered into, amended or terminated (or any waiver of any rights or
remedies under any of the foregoing) by Seller (including any agreement
with respect to any ongoing or threatened litigation), other than in the
ordinary course of business;
(g) any amendment to the partnership agreement of Seller;
(h) any acquisition or disposition of Assets by Seller,
other than acquisitions or dispositions made in the ordinary course of
business;
(i) any material amendment of any instrument of
indebtedness, or any Encumbrance, material lease or consent;
(j) any default, event of default or breach (or any event
which, with notice or the passage of time or both, would constitute a
default, event of default or breach) by Seller of any credit, financing or
other agreement or instrument relating to any material indebtedness;
(k) any sale, payment, loan or advance of any amount or any
transfer or lease of any properties or Assets to, or any agreement or
arrangement with any of Seller's officers or directors, except for
directors' fees and compensation to officers at rates not exceeding the
rates of compensation paid during the year ended December 31, 1998;
(l) any adoption of a plan of or any agreement or
arrangement with respect to resolutions providing for the liquidation,
dissolution, merger, consolidation or other reorganization of Seller;
(m) any settlement or compromise of any claim, other than
those in which the amount paid does not exceed $25,000 individually or in
the aggregate;
(n) any change, condition, occurrence, circumstance or
other event that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect; or
(o) any commitment or agreement to do any of the foregoing,
except as otherwise required or expressly permitted by this Agreement.
5.25 OWNERSHIP OF PREFERRED STOCK. Seller does not own more than one
percent (1%) of the outstanding voting stock of CCI (each of "own" and
"voting stock" as defined for purposes of Section 203 of the Delaware
General Corporation Law). Seller is acquiring the Preferred Stock under
this Agreement for its own account solely for the purpose of investment and
not with a view to, or for sale in connection with, any distribution
thereof in violation of the U.S. Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act").
Seller acknowledges that the Preferred Stock has not been registered under
the Securities Act and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from the registration
requirements of the Securities Act. Seller and each of its members is an
accredited investor as defined in Rule 501 of Regulation D under the
Securities Act. Except for the express representations and warranties set
forth in Section 6, Seller agrees that (i) no representation or warranty,
either express or implied, has been made or deemed to have been made and
(ii) it is not relying on any representation or warranty, either express or
implied, made or deemed to have been made, in each case, by Buyer or any of
its representatives, with respect to the Preferred Stock as to the
accuracy or completeness of any of the information (including, without
limitation, any reserve estimates, projections, forecasts or other forward-
looking information) provided or otherwise made available to Seller or any
of its representatives with respect to (w) the appropriateness of the
conversion price of the Preferred Stock, (x) the value of the Preferred
Stock, (y) the length of time that Seller will be required to hold the
Preferred Stock, or (z) the business, assets or condition (financial or
otherwise) of Buyer or its subsidiaries. Seller agrees that it shall not
be entitled to any recission rights with respect to the Preferred Stock or
to any further indemnification rights or claims of any nature whatsoever in
respect thereof (whether by contract, common law, statute, law, regulation
or otherwise), other than indemnification rights related to the
representations and warranties made pursuant to Section 6 hereof, all of
which Seller hereby waives; provided, however, that nothing herein is
intended to waive any claims for intentional fraud.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller as of the date of this Agreement and as of the Closing,
as follows:
6.1 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate power and authority to carry on its
business as currently conducted and to own, lease, use and operate its
assets. Buyer is duly qualified or licensed to do business and is in good
standing under the laws of each jurisdiction in which the character of the
properties owned, leased used or operated by it or the nature of the
activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed and in
good standing would not have a Material Adverse Effect on Buyer or on the
validity, binding effect or enforceability of this Agreement.
6.2 AUTHORITY AND VALIDITY. Buyer has all requisite corporate power
and authority to execute and deliver, to perform its obligations under, and
to consummate the transactions contemplated by, this Agreement. The
execution and delivery by Buyer of, the performance by Buyer of its
obligations under, and the consummation by Buyer of the transactions
contemplated by, this Agreement have been duly authorized by all requisite
corporate action of Buyer and this Agreement constitutes the valid and
binding obligation of Buyer, enforceable against Buyer in accordance with
its terms, except insofar as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
6.3 NO BREACH OR VIOLATION BY TRANSMISSION, L.L.C. The assumption of
the television translator licenses by Transmission, L.L.C. will not: (a)
violate any provision of the charter or regulations of Transmission,
L.L.C.; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or any filing with or notice to, any Person;
or (d) (i) violate, conflict with or constitute a breach of or default
under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of Transmission, L.L.C.
under, or (iv) result in the creation or imposition of any Encumbrance
under, any instrument or other agreement to which Transmission, L.L.C. is a
party or by which Transmission, L.L.C. or any of its assets is bound or
affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications,
and accelerations as would not, individually or in the aggregate, have a
Material Adverse Effect on Transmission, L.L.C. or on the validity, binding
effect or enforceability of this Agreement.
6.4 ORGANIZATION AND QUALIFICATION OF TRANSMISSION, L.L.C.
Transmission, L.L.C. is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware and has all
requisite organizational power and authority to carry on its business as
currently conducted and to own, lease, use and operate its assets.
Transmission, L.L.C. is duly qualified or licensed to do business and is in
good standing under the laws of each jurisdiction in which the character of
the properties owned, leased used or operated by it or the nature of the
activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed and in
good standing would not have a Material Adverse Effect on Transmission,
L.L.C. or on the validity, binding effect or enforceability of this
Agreement.
6.5 AUTHORITY AND VALIDITY OF TRANSMISSION, L.L.C. Transmission,
L.L.C. has all requisite organizational power and authority to assume the
television translator licenses as contemplated by this Agreement. The
assumption of the television translator licenses by Transmission, L.L.C.
and any related transactions contemplated by this Agreement have been duly
authorized by all requisite organizational action of Transmission, L.L.C.
and the assumption of the televison translator licenses under this
Agreement constitutes the valid and binding obligation of Transmission,
L.L.C., enforceable against Transmission, L.L.C. in accordance with its
terms, except insofar as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
6.6 NO BREACH OR VIOLATION. Subject to obtaining the Required
Consents, all of which are listed on SCHEDULE 1.30, the execution, delivery
and performance of this Agreement by Buyer will not: (a) violate any
provision of the charter or bylaws of Buyer; (b) violate any Legal
Requirement; (c) require any consent, approval or authorization of, or any
filing with or notice to, any Person; or (d) (i) violate, conflict with or
constitute a breach of or default under (without regard to requirements of
notice, passage of time or elections of any Person), (ii) permit or result
in the termination, suspension or modification of, (iii) result in the
acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of
any Encumbrance under, any instrument or other agreement to which Buyer is
a party or by which Buyer or any of its assets is bound or affected, except
for purposes of this clause (d) such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications, and accelerations as
would not, individually or in the aggregate, have a Material Adverse Effect
on Buyer or on the validity, binding effect or enforceability of this
Agreement.
6.7 FINDERS AND BROKERS. Other than Communications Equity
Associates, Inc., Buyer has not employed any financial advisor, broker or
finder or incurred any liability for any financial advisory, brokerage,
finder's or similar fee or commission in connection with the transactions
contemplated by this Agreement. Buyer's obligation to Communications
Equity Associates, Inc. is limited to $400,000.
6.8 ORGANIZATION; GOOD STANDING; QUALIFICATION OF CCI. CCI is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware, has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as now conducted and to issue and deliver the Preferred Stock and
the Class A Common Stock issuable upon conversion thereof, and to carry out
the provisions in the Certificate of Designation in the form attached
hereto as EXHIBIT N. CCI is duly qualified and is authorized to transact
business and is in good standing as a foreign corporation in each
jurisdiction in which the failure so to qualify would have a material
adverse effect on its business, properties, prospects, or financial
condition.
6.9 AUTHORIZATION OF CCI. All corporate action on the part of CCI,
its officers, directors and stockholders necessary for the authorization,
issuance (or reservation for issuance), and delivery of the Preferred Stock
being issued hereunder and the Class A Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the Closing.
6.10 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Preferred
Stock that is being issued to Seller hereunder, when issued and delivered
in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Stockholders'
Agreement and under applicable state and federal securities laws. The
Class A Common Stock issuable upon conversion of the Preferred Stock under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Certificate of Designation in
the form attached hereto as EXHIBIT N, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
6.11 CAPITALIZATION OF CCI. SCHEDULE 6.11 contains a complete and
correct list of the authorized, issued and outstanding common stock,
preferred stock and any other class of capital stock of CCI ("CCI Equity
Securities") and any subscriptions, options, conversion rights, warrants,
or other agreements, securities or commitments of any kind obligating CCI
to issue, grant, deliver or sell, or cause to be issued, granted, delivered
or sold, any CCI Equity Securities, or securities convertible into or
exchangeable for CCI Equity Securities ("CCI Derivative Securities") as of
the date hereof.
SECTION 7. ADDITIONAL COVENANTS
7.1 ACCESS TO PREMISES AND RECORDS. Between the date of execution
and delivery of this Agreement and the Closing Date, and upon not less than
forty-eight (48) hours' notice, Seller will give Buyer and its
representatives full access at reasonable times to all the premises and
books and records of the Business and to all the Assets and will furnish to
Buyer and its representatives all information regarding the Business and
the Assets as Buyer may from time to time reasonably request.
Notwithstanding any investigation that Buyer may conduct of the Business
and the Assets, Buyer may fully rely on Seller's representations,
warranties, covenants and indemnities, which will not be waived or affected
by or as a result of such investigation; provided, however, that Buyer has
a good faith obligation to provide Seller with written notification of any
actual knowledge of any material variation related to any representation or
warranty discovered prior to the Closing Date.
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL STATEMENTS.
Except as Buyer may otherwise agree in writing, until the Closing:
7.2.1 Seller will continue to operate the Business in the
ordinary course consistent with past practices and will use its best
efforts to keep available the services of its employees employed in
connection with the Systems and to preserve any beneficial business
relationships with customers, suppliers and others having business dealings
with Seller relating to the Business. Seller will continue to construct
line extensions required by the Systems and Governmental Permits in the
ordinary course of business and make capital expenditures to the Systems
substantially in accordance with past practice and as agreed to in the
Capital Expenditure Plan set forth on SCHEDULE 7.2.1. Without limiting the
generality of the foregoing, Seller will maintain the Assets in existing
condition and repair, will make reasonable efforts to maintain appropriate
staff and management personnel at the Systems, consistent with past
practices, will maintain adequate inventories of spare Equipment consistent
with past practice, will maintain insurance as in effect on the date of
this Agreement and will keep all of the Business' books, records and files
in the ordinary course of business in accordance with past practices.
Seller shall duly comply in all material respects with all applicable
material Legal Requirements and perform all its material obligations under
all of the Governmental Permits and material Seller Contracts without
default. Seller will not itself, and nor will it permit any of its
officers, directors, shareholders, agents or employees to, pay any of the
Systems' subscriber accounts receivable (other than for their own
residences) prior to the Closing Date. Seller will continue to implement
its procedures with respect to the Business for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement.
7.2.2 Except as set forth on SCHEDULE 7.2.1, Seller will not,
without the prior written consent of Buyer, (a) change the rate charged for
Basic Services, Pay TV or other services or goods charged to subscribers
and will not add or delete any program services, in either case, unless
required to do so by law, including, without limitation, the Rate
Regulation Act or the Rate Regulation Rules; (b) sell, transfer or assign
any of the Assets (other than in the ordinary course of business) or permit
the creation of or fail to take any action that would result in any
material Encumbrance on any Asset; (c) permit the amendment or cancellation
of any of the Governmental Permits, Seller Contracts or any other material
contract or agreement (other than those constituting Excluded Assets) which
affects or is applicable to any System or the Business; (d) enter into any
contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $10,000, if such contract, commitment,
indebtedness, liability or obligation, by its terms, will survive the
Closing; (e) implement any extraordinary promotions or discounts the terms
of which are materially inconsistent with past practice; or (f) take or
omit to take any action that would cause Seller to be in breach of any of
its representations or warranties in this Agreement. Notwithstanding the
foregoing, Seller may, at any time prior to or at the Closing, transfer,
distribute, assign or sell, the Excluded Assets. No adjustment will be
made to the Base Purchase Price by reason of the distribution, transfer,
assignment or sale or retention by Seller of the Excluded Assets, unless
such action results in an adjustment under Section 3.3.
7.2.3 Seller will deliver to Buyer copies of unaudited
monthly balance sheets and statements of operating cash flow for the
Business and any reports with respect to the operations of each System
within twenty (20) days after each month end, which are true and correct in
all material respects, regularly prepared by or for Seller at any time
between the date of this Agreement and the Closing. Seller represents and
warrants that all financial statements so delivered will fairly present, in
all material respects, the financial position, statements of earnings and
cash flow for Seller for the periods or as of the dates set forth therein,
in each case in accordance with federal income tax basis of accounting
applied on a consistent basis through the periods covered, consistent with
past practice, subject to normal year end adjustments, none of which shall
materially affect Annualized EBITDA. Seller covenants to cooperate with
Buyer and Buyer's accountants to convert such financial statements to GAAP
basis, and to allow Buyer and Buyer's accountants access to Seller's books,
records and accounting data to facilitate such conversion.
7.3 EMPLOYEE MATTERS.
7.3.1 Seller will pay to employees employed in the Business
all compensation, including salaries, commissions, bonuses, deferred
compensation, severance, insurance, pensions, profit sharing, vacation,
sick pay and other compensation or benefits to which they are entitled for
periods prior to the Closing. Seller will not, without the prior written
consent of Buyer, change the compensation or benefits of any employees of
the Business; provided, however, that Seller may provide salary increases
upon employee anniversary dates which are consistent with Seller's past
practice. Buyer may, but will have no obligation to, offer employment to
any of the current employees of the Business as Buyer may desire. Buyer
anticipates that it will offer employment to Seller field personnel, but
will not retain Seller corporate employees.
7.3.2 Seller will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as
defined in ERISA) maintained by Seller pursuant to the provisions of such
plans. Buyer will assume neither any liability or any such accrued
benefits nor any fiduciary or administrative responsibility to account for
or dispose of any such accrued benefits under any employee benefit plans
maintained by Seller.
7.3.3 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other
employee benefit plans of Seller or arising under any Legal Requirement
affecting employees of Seller incurred before the Closing Date or resulting
or arising from events or occurrences occurring or commencing prior to the
Closing Date will remain the responsibility of Seller, whether or not such
employees are hired by Buyer after the Closing. Buyer will have and assume
no obligations or liability under or in connection with any such plan and
will assume no obligation of Seller with respect to any pre-existing
condition of any employee of Seller who is hired as an employee of Buyer.
Nothing in this Section 7.3 or in any other provision of this Agreement is
intended to confer upon any employee of Seller or such employee's legal
representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any kind whatsoever under or by reason of this
Agreement, or the transactions contemplated hereby, including, without
limitation, any rights of employment or continued employment. All rights
and obligations created by this Agreement are solely between the parties.
7.4 LEASED EQUIPMENT. Except as set forth on SCHEDULE 7.4, Seller
will pay the remaining balances on any leases for Equipment used in the
Business and deliver title to such Equipment free and clear of all
Encumbrances (other than Permitted Encumbrances) to Buyer at the Closing.
7.5 REQUIRED CONSENTS, ESTOPPEL CERTIFICATES AND FRANCHISE RENEWALS.
7.5.1 Seller will use commercially reasonable efforts to
obtain, as soon as possible and, except as otherwise expressly provided in
this Agreement, at its expense, the Required Consents, in form and
substance reasonably satisfactory to Buyer. Any Required Consent will be
deemed to be satisfactory to Buyer if it is identical in all material
respects to the applicable form attached as EXHIBIT C. Buyer will
cooperate with Seller to obtain the Required Consents, but Buyer will not
be required to agree to any adverse changes in, or the imposition of any
condition to the transfer to Buyer of, any Seller Contract or Governmental
Permit as a condition to obtaining any Required Consent. Seller also will
use commercially reasonable efforts to obtain, at its expense, such
estoppel certificates, landlord waivers, non-disturbance agreements or
similar documents from lessors and other Persons who are parties to Seller
Contracts as Buyer may reasonably request.
7.5.2 Seller will use commercially reasonable efforts to
obtain, and Buyer will use commercially reasonable efforts in cooperation
with Seller to obtain, renewals or extensions, at the option of Buyer, of
those franchises (the "Extended Franchises"), set forth on SCHEDULE 7.5.2
for the required renewal or extension period set forth on SCHEDULE 7.5.2
measured from or after the expiration date as set forth on SCHEDULE 7.5.2,
and upon other terms and conditions satisfactory to Buyer.
7.6 MDU AGREEMENTS. A list of all multiple dwelling unit projects
that are subject to common ownership which currently receive cable
television service from the Business, including the rates and terms of the
agreements under which services are provided, is provided on SCHEDULE 7.6,
has been delivered to Buyer and all such agreements are transferable to
Buyer without consent of any other party, except for Required Consents set
forth on SCHEDULE 1.30.
7.7 TITLE COMMITMENTS AND SURVEYS.
7.7.1 Within thirty (30) days after the execution of this
Agreement, Seller will order (a) commitments for owner's title insurance
policies on all Real Property owned by Seller and on easements which
provide access to headend or tower sites, (b) commitments for lessee's
title insurance policies for the Real Property leased by Seller which is
used for headend or tower sites and which are designated by Buyer within
ten (10) days after the execution of this agreement, and (c) to the extent
necessary to obtain a clean title commitment, a perimeter survey on each
parcel of Real Property for which a title insurance policy is to be
obtained. Costs for such commitments and surveys will be shared equally by
Buyer and Seller. The title commitments will evidence a commitment to
issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple (or easement or leasehold, if applicable) title to
each parcel of the Real Property for such amount as Buyer directs and will
contain no exceptions except for items which in Buyer's reasonable opinion
do not adversely affect (other than in an immaterial way as to any
individual parcel) the good, marketable and indefeasible title to or
Buyer's access or quiet use or enjoyment of such Real Property in the
manner the Real Property is presently used or in the normal conduct of the
Business. At the Closing, Seller will deliver to Buyer such title
commitments updated to a date and time near Closing from title companies
acceptable to Buyer. In the event Seller has not eliminated or caused to
be eliminated all unacceptable exceptions from such policies or commitments
prior to Closing, and Buyer elects to proceed with the Closing, Buyer will
be entitled to indemnification with respect to such exceptions as provided
in Section 11.2.
7.7.2 Title insurance policies on all Real Property in such
amounts as Buyer directs (but not to exceed one hundred fifty percent
(150%) of the fair market value thereof) will be delivered to Buyer within
thirty (30) days after the Closing Date, evidencing title to the Real
Property vested in Buyer consistent with the commitments delivered at the
Closing pursuant to Section 7.7.1. Costs for such title insurance policies
will be shared equally by Buyer and Seller.
7.8 NO SHOPPING. Neither Seller nor any agent or representative of
it will, during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Closing or the termination of this
Agreement, directly or indirectly (a) solicit or initiate the submission of
proposals or offers from any Person for, (b) participate in any discussions
pertaining to, or (c) furnish any information to any Person other than
Buyer relating to, any direct or indirect acquisitions or purchase of all
or any portion of the Assets, the Systems or the Business. If Seller or
any agent or representative of it receives from any Person, directly or
indirectly, such solicitation or informational request, Seller will
promptly advise such Person, by written notice, of the terms of this
Section 7.8 and will promptly, orally and in writing, advise Buyer of such
solicitation or informational request and deliver a copy of such notice to
Buyer.
7.9 NOTIFICATION OF CERTAIN MATTERS. Seller will promptly notify
Buyer of any material fact, event, circumstance or action (a) which, if
known on the date of this Agreement, would have been required to be
disclosed to Buyer pursuant to this Agreement or (b) the existence or
occurrence of which would cause any of Seller's representations or
warranties under this Agreement not to be correct and complete.
7.10 RISK OF LOSS; CONDEMNATION.
7.10.1 Seller will bear the risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear
and tear) at all times prior to the Closing. If any such loss or damage is
so substantial as to prevent normal operation of any material portion of a
System or the replacement or restoration of the lost or damaged property
within twenty (20) days after the occurrence of the event resulting in such
loss or damage, Seller will immediately notify Buyer of that fact and
Buyer, at any time within ten (10) days after receipt of such notice, may
elect by written notice to Seller either (i) to waive such defect and
proceed toward consummation of the acquisition of the Assets in accordance
with terms of this Agreement, in which event Seller shall assign to Buyer
all insurance proceeds and insurance policies relating thereto, or (ii) to
adjust the Base Purchase Price commensurate with such loss or damage on a
replacement cost basis.
7.10.2 If, prior to the Closing, any material part of or
interest in the Assets is taken or condemned as a result of the exercise of
the power of eminent domain, or if a Governmental Authority having such
power informs the affected Seller or Buyer that it intends to take or
condemn all or any part of the Assets (such event being called, in either
case, a "Taking"), then (a) Buyer will have the sole right, in the name of
Seller, if Buyer so elects, to negotiate for, claim, contest and receive
all damages with respect to the Taking, (b) Seller will be relieved of its
obligation to convey to Buyer the Assets or interests that are the subject
of the Taking, (c) at the Closing, Seller will assign to Buyer all of
Seller's rights to all damages and costs payable with respect to such
Taking and will pay to Buyer all damages and costs previously paid to
Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the Taking as Buyer may from time to time reasonably request.
To the extent damages for such taking do not equal replacement cost, a
further adjustment to the Base Purchase Price will be made equal to the
difference between the two values.
7.11 TRANSFER TAXES. Seller will be responsible for the payment of
any state or local sales, use, transfer, excise, documentary or license
taxes or fees or any other charge (including filing fees) imposed by any
Governmental Authority with respect to the transfer of any of the Assets
pursuant to this Agreement; provided, however that Buyer and Seller will
equally share fees related directly to transfer of Seller's motor vehicles.
7.12 DISTANT BROADCAST SIGNALS. If requested by Buyer, at no cost to
Buyer, Seller will delete on or prior to the Closing Date, any distant
broadcast signals which Buyer determines will result in unacceptable
liability on the part of Buyer for copyright payments after Closing in
excess of those payable by Seller with respect to carriage of such signals,
provided, however, that Seller will not be required to delete any distant
broadcast signals if Seller is bound by a retransmission agreement or
similar contract to carry such signal.
7.13 NON-COMPETITION AGREEMENT. At the Closing, Seller will, and will
cause James C. Roddey, Thomas D. Wright, Richard Talarico and Henry
Posner, Jr., to, sign and deliver Non-Competition Agreements to Buyer in
the form of EXHIBIT D.
7.14 UPDATED SCHEDULES. Not less than three (3) days prior to
Closing, Seller will deliver to Buyer revised copies of SCHEDULES 1.6
through 7.6 which shall have been updated to show any changes occurring
between the Effective Date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and
warranties and covenants in this Agreement, all references to the Schedules
will mean the version of the Schedules attached to this Agreement on the
date of signing, and provided further that if the effect of any such
updates to Schedules is to disclose any one or more additional properties,
privileges, rights, interests or claims as Assets, Buyer, at or before
Closing, will have the right (to be exercised by written notice to Seller)
to cause any one or more of such items to be designated as and deemed to
constitute Excluded Assets for all purposes under this Agreement.
7.15 LIEN AND JUDGMENT. Seller will deliver to Buyer, not more than
thirty (30) days after the date of this Agreement, (a) the results of a
lien search conducted by a professional search company of records in the
offices of the secretaries of state in each state and county clerks in each
county where there exist tangible Assets, and in the state and county where
Seller's principal offices are located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company and (b) the results of a search of the
dockets of the clerk of each federal and state court of general
jurisdiction sitting in the city, county or other applicable political
subdivision where such principal offices or any material Assets of Seller
may be located, with respect to judgments, orders, writs or decrees against
or affecting Seller or any of the Assets. Buyer and Seller will equally
share the costs for such searches under this Section 7.15.
7.16 USE OF SELLER'S NAME. Buyer may continue to operate the Systems
using Seller's tradenames and all derivations and abbreviations of such
name and related marks.
7.17 SATISFACTION OF CONDITIONS. Each party will use its best efforts
to satisfy, or to cause to be satisfied, the conditions to the obligations
of the other party to consummate the transactions contemplated by this
Agreement, as set forth in Section 9, provided that Buyer will not be
required to agree to any increase in the amount payable with respect to, or
any modification that makes more burdensome in any material respect, any of
the Assumed Liabilities.
7.18 CONFIDENTIALITY. Neither party will issue any press release or
make any other public announcement regarding this Agreement or the
transactions contemplated hereby without the consent of the other party.
Each party will hold, and will cause its employees, consultants, advisors
and agents to hold, in confidence, the terms of this Agreement and any non-
public information concerning the other party obtained pursuant to this
Agreement. Notwithstanding the preceding, a party may disclose such
information to the extent required by any Legal Requirement (including
disclosure requirements under federal and state securities laws), but the
party proposing to disclose such information will first notify and consult
with the other party concerning the proposed disclosure, to the extent
reasonably feasible. Each party also may disclose such information to
employees, consultants, advisors, agents and actual or potential lenders
whose knowledge is necessary to facilitate the consummation of the
transactions contemplated by this Agreement. Each party's obligation to
hold information in confidence will be satisfied if it exercises the same
care with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
7.19 MEMORANDA OF LEASE. Seller will use commercially reasonable
efforts to provide Buyer with recorded documentation of each headend site
lease or easement, by recording the lease or easement or by obtaining from
the appropriate lessor and recording a Memorandum of Lease in substantially
the form set forth on EXHIBIT E.
7.20 HSR NOTIFICATION. As soon as practicable after the execution of
this Agreement, but in any event no later than ten (10) Business Days after
such execution, Seller and Buyer will each complete and file, or cause to
be completed and filed, any notification and report required to be filed
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"). Seller and Buyer will take any additional action that may
be necessary, proper or advisable, will cooperate to prevent
inconsistencies between their respective filings and will furnish to each
other such necessary information and reasonable assistance as the other may
reasonably request in connection with its preparation of necessary filings
or submissions under the HSR Act. Buyer and Seller will equally share the
cost of any filing fee applicable to any notification or report under the
HSR Act.
7.21 EARNEST MONEY. To secure Buyer's obligations under this
Agreement, within five (5) Business Days from the Effective Date of this
Agreement, Buyer will deposit either (a) an irrevocable letter of credit
payable for the amount of $3,000,000, or (b) the amount of $3,000,000 in
immediately available funds, or (c) a combination thereof totaling
$3,000,000 (the "Deposit") into an escrow account pursuant to the Earnest
Money Escrow Agreement.
7.22 LEGEND. Seller agrees to the placement on (i) certificates
representing the Preferred Stock issued to Seller hereunder, and (ii) any
certificate issued at any time in exchange or substitution for any
certificate bearing such legend, of a legend substantially as set forth
below:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE COMPANY
HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS BEING MADE
IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE TRANSFER OF SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO FURTHER RESTRICTIONS, OBLIGATIONS AND OTHER CONDITIONS SPECIFIED IN
THE STOCKHOLDERS' AGREEMENT DATED AS OF JULY 28, 1999 AMONG THE
COMPANY AND CERTAIN STOCKHOLDERS."
SECTION 8. CLOSING
Seller shall provide Buyer with notice of the later to occur of (i)
the expiration of any applicable waiting period occurs or clearance under
the HSR Act has been received, and (ii) Required Consents have been
received. The Closing will be held on the last day of the month which is
ten (10) Business Days after receipt of said notice, or on such date as the
parties may agree upon as soon as both parties are ready to proceed to
Closing. The Closing will take place at the offices of Winstead Sechrest &
Minick P.C., 100 Congress Avenue, Suite 800, Austin, Texas 78701, or such
other place as Buyer and Seller may agree, or by courier and telecopier
service.
SECTION 9. CONDITIONS TO CLOSING
9.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND SELLER. The
obligations of each party to consummate the transactions contemplated by
this Agreement to take place at the Closing are subject to the satisfaction
or waiver, to the extent permitted by applicable Legal Requirements, at or
prior to the Closing Date, of each of the following conditions:
9.1.1 No action, suit or proceeding is pending or threatened
by or before any Governmental Authority and no Legal Requirement has been
enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority,
which would (a) prohibit Buyer's ownership or operation of all or a
material portion of any System, the Business or the Assets, (b) compel
Buyer to dispose of or hold separate all or a material portion of any
Systems, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement or (c) prevent or make illegal the
consummation of any transactions contemplated by this Agreement.
9.1.2 All filings required under the HSR Act, if any, have
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or
threat of any litigation by a Governmental Authority of competent
jurisdiction to restrain the consummation of the transactions contemplated
by this Agreement.
9.2 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of Buyer
to consummate the transactions contemplated by this Agreement to take place
at the Closing are subject to the satisfaction or waiver, to the extent
permitted by applicable Legal Requirements, at or prior to the Closing
Date, of each of the following conditions:
9.2.1 All representations and warranties of Seller contained
in this Agreement are, if not specifically qualified by materiality, true
and correct in all respects and, if so qualified, are true and correct in
all material respects, in each case on and as of the Closing Date with the
same effect as if made on and as of the Closing Date, except for changes
contemplated or permitted by this Agreement.
9.2.2 Seller has in all material respects performed and
complied with each obligation, agreement, covenant and condition required
by this Agreement to be performed or complied with by Seller at or prior to
the Closing.
9.2.3 Seller has executed (or caused to be executed) and
delivered to Buyer each of the following items:
(a) an Earnest Money Escrow Agreement in the form attached
as EXHIBIT A;
(b) a Bill of Sale in the form attached as EXHIBIT F;
(c) an Assignment and Assumption Agreement in the form
attached as EXHIBIT G;
(d) an Assignment of Leases in the form attached as
EXHIBIT H and, if requested by Buyer, short forms or memoranda of such
Assignments in recordable form, as to each leasehold interest of Seller;
(e) Non-Competition Agreements in the form attached as
EXHIBIT D;
(f) motor vehicle title certificates endorsed for transfer;
(g) General Warranty Deeds in form reasonably acceptable to
Buyer for each parcel of Real Property owned in fee by Seller;
(h) the Consent to and Joinder in Stock Agreements in the
forms attached as EXHIBIT I;
(i) an affidavit of Seller, under penalty of perjury, that
Seller is not a "foreign person" (as defined in the Foreign Investment in
Real Property Tax Act and applicable regulations) and that Buyer is not
required to withhold any portion of the consideration payable under this
Agreement under the provisions of such Act in the form attached as EXHIBIT
J; and
(j) such other transfer instruments as Buyer may deem
necessary or advisable to transfer the Assets to Buyer and to perfect
Buyer's rights in the Assets, including, without limitation, such
affidavits, indemnities and other documents that the title company may
require in connection with the issuance of the title policies and
commitments described in Section 7.7.
9.2.4 Seller has delivered to Buyer: (a) evidence, in form
and substance satisfactory to Buyer, that the Required Consents have been
obtained or given and are in full force and effect; and (b) to the extent
obtained, the estoppel certificates or similar documents described in
Section 7.5. Seller will deliver to Buyer evidence that with respect to
all television translator licenses identified on SCHEDULE 1.30 that
Required Consents to transfer such licenses to Transmission, L.L.C., or a
related entity as may be identified by Buyer, have been obtained or given
and are in full force and effect.
9.2.5 Buyer has received the opinion of Eckert Seamans Cherin
& Mellott, LLC, counsel for Seller, dated the Closing Date, in the form
set forth in EXHIBIT K.
9.2.6 Buyer has received the opinion of Wiley, Rein &
Fielding, FCC counsel for Seller, dated the Closing Date, in the form set
forth in EXHIBIT L.
9.2.7 Except for those agreements which are to be transferred
to Buyer, Buyer has received documentation satisfactory to it of the
termination of all agreements as they relate to the Systems or deletion of
the Systems from Seller's ongoing agreements which are not being assumed by
Buyer, without obligation for payment of any amounts under such agreements
to Buyer.
9.2.8 No action, proceeding or investigation has been
instituted or threatened prior to Closing which would, if determined
adversely to Buyer's interest, materially impair the ability of Buyer to
realize the benefits of the transactions contemplated by this Agreement.
9.2.9 Seller has delivered releases, in form satisfactory to
Buyer, of all Encumbrances affecting any of the Assets (other than
Permitted Encumbrances) and, to the extent that the relevant jurisdictions
provide them, a certificate of no taxes due with respect to the Assets
issued by appropriate state taxing authorities as of a date no earlier than
ten (10) days prior to the Closing.
9.2.10 Seller has delivered to Buyer: (a) a certificate, dated
the Closing Date, signed by Seller's chief executive officer, stating that,
to his or her Knowledge, the conditions set forth in Sections 9.2.1 and
9.2.2 are satisfied; and (b) a copy of the partnership resolutions of
Seller authorizing the execution, delivery and performance of this
Agreement by Seller, and a certificate of Seller, dated as of the Closing,
that such resolutions were duly adopted and are in full force and effect as
of the date of Closing, and (c) such other documents as Buyer may
reasonably request in connection with the transactions contemplated by this
Agreement.
9.2.11 Buyer has received title insurance commitments referred
to in Section 7.7.1.
9.2.12 The Extended Franchises have been obtained on terms and
conditions reasonably satisfactory to Buyer.
9.2.13 The Business has no fewer than (a) 56,000 EBS's and (b)
Annualized EBITDA of no less than $12,400,000.
9.2.14 Seller will have terminated the management agreements,
if any, relating to the Assets and will provide a certificate indicating
that all amounts due and owing under the management agreements, if any,
have been paid in full. In addition, Seller and its Affiliates will have
terminated all affiliated management agreements, if any, relating to the
Assets, and will provide a certificate indicating that all amounts due and
owing under the management agreements, if any, have been paid in full.
9.2.15 Between December 31, 1998 and the Closing Date, there
will have been (i) no material adverse change in the financial conditions
of the Assets, the Assumed Liabilities, operations or prospects of the
Systems, whether or not caused by conditions beyond the control of Seller,
other than any change caused by any adjustment to rates or rate rollbacks
required in connection with rate regulation of the Systems or by
legislation, rule making or regulation affecting the cable television
industry generally, and (ii) no material loss, damage, impairment,
confiscation or condemnation of any of the Assets that has not been
repaired or replaced.
9.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
to consummate the transactions contemplated by this Agreement to take place
at the Closing are subject to the satisfaction or waiver by Seller, to the
extent permitted by applicable law, at or prior to the Closing Date, of
each of the following conditions:
9.3.1 Buyer has paid the Base Purchase Price required to be
paid at the Closing, as adjusted in accordance with this Agreement and has
delivered to Seller certificates representing the Preferred Stock.
9.3.2 All representations and warranties of Buyer contained
in this Agreement are, if not specifically qualified by materiality, true
and correct in all respects and, if so qualified, are true and correct in
all material respects, in each case on and as of the Closing Date with the
same effect as if made on and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
9.3.3 Buyer has in all material respects performed and
complied with each obligation, agreement, covenant and condition required
by this Agreement to be performed or complied with by Buyer at or prior to
the Closing.
9.3.4 Buyer has executed and delivered to Seller an
Assignment and Assumption Agreement in the form attached as EXHIBIT G.
9.3.5 Buyer has delivered to Seller: (a) a certificate,
dated the Closing Date, signed by the chief executive officer of Buyer,
stating that, to his or her Knowledge, the conditions set forth in Sections
9.3.2 and 9.3.3, are satisfied; (b) a copy of the resolutions of the board
of directors of Buyer authorizing the execution, delivery and performance
of this Agreement, and a certificate of Buyer, dated as of the Closing,
that such resolutions were duly adopted and are in full force and effect as
of the date of Closing; and (c) such other documents as Seller may
reasonably request in connection with the transactions contemplated by this
Agreement.
9.3.6 Seller has received the opinion of Winstead Sechrest &
Minick P.C., counsel for Buyer, dated the Closing Date, in the form of
EXHIBIT M.
9.3.7 A Certificate of Designation in the form attached as
EXHIBIT N as well as all other required charter amendments shall have been
filed by CCI with the Delaware Secretary of State and shall have become and
remain effective.
9.3.8 Buyer has delivered to Seller the fully-executed
(except as to Seller) Consent to and Joinder in Stock Agreements in the
forms attached as EXHIBIT I.
9.4 WAIVER OF CONDITIONS. Any party may waive in writing any or all
of the conditions to its obligations under this Agreement.
SECTION 10. TERMINATION
10.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time
prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Buyer if (i) the conditions to Buyer's obligation to
close set forth in Section 9.2 have not been met by Seller, or waived by
Buyer, on or before March 31, 2000, (ii) the failure of such conditions to
be met is not the result of a material breach of any provision of this
Agreement by Buyer; provided, that, in such instance, Buyer may, in its
sole and absolute discretion, extend such date to a later date, but in no
event later than July 31, 2000;
(c) by Seller if (i) the conditions to Seller's obligation
to close set forth in Section 9.3 have not been met by Buyer, or waived by
Seller, on or before March 31, 2000, (ii) the failure of such conditions to
be met is not the result of a material breach of any provision of this
Agreement by Seller; provided, that, in such instance, Seller may, in its
sole and absolute discretion, extend such date to a later date but in no
event later than July 31, 2000;
(d) by Seller at any time after Buyer breaches its covenant
set forth in Section 7.21; or
(e) by either Buyer or Seller if the Closing has not
occurred before July 31, 2000.
10.2 LIABILITIES IN EVENT OF TERMINATION. The termination of this
Agreement will in no way limit any obligation or liability of any party
based on or arising from a breach or default by such party with respect to
any of its representations, warranties, covenants or agreements contained
in this Agreement, except that Buyer will have no liability in any event
upon exercise of its right to terminate pursuant to Section 10.1(b) or (e);
and provided that (i) Buyer's liability in the event of termination by
Seller pursuant to Section 10.1(c) and 10.1(d) shall be limited to the
amount deposited with the Escrow Agent under the Earnest Money Escrow
Agreement; and (ii) Seller shall have no liability if Seller terminates the
Agreement pursuant to Section 10.1(c) or Section 10.1(e).
10.3 PROCEDURE UPON TERMINATION. In the event of the termination of
this Agreement by Buyer or Seller pursuant to this Section 10, notice of
such termination will promptly be given by the terminating party to the
other.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller and Buyer in this Agreement and in the documents
and instruments to be delivered pursuant to this agreement will survive the
Closing without limitation until eighteen (18) months after the Closing
Date, except that (a) all such representations and warranties with respect
to any Environmental Law will survive until sixty (60) days after the
expiration of the applicable statute of limitations (including any
extensions) for such Environmental Law (b) all representations and
warranties with respect to any federal, state or local taxes will survive
until three (3) years after the Closing, and (c) the representations and
warranties as to ownership of Real Property set forth in Section 5.5 will
survive the Closing and will continue in full force and effect without
limitation. The periods of survival of the representations and warranties
prescribed by this Section 11.1 are referred to as the "Survival Period."
The liabilities of the parties under their respective representations and
warranties will expire as of the expiration of the applicable Survival
Period, provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been
asserted by either party in written notice to the other before such
expiration or about which either party has given the other written notice
before such expiration indicating the facts or conditions existing that,
with the passage of time or otherwise, can reasonably be expected to result
in a breach (and describing such potential breach in reasonable detail).
The covenants and agreements of the parties in this Agreement and in the
other documents and instruments to be delivered by Seller or Buyer pursuant
to this Agreement will survive the Closing and will continue in full force
and effect without limitation.
11.2 INDEMNIFICATION BY SELLER. Seller will indemnify, defend and
hold harmless Buyer and its shareholders and its and their respective
Affiliates, and the shareholders, directors, officers, employees, agents,
successors and assigns of any of such Persons, from and against:
(a) all losses, damages, liabilities, deficiencies or
obligations of or to Buyer or any such other indemnified Person resulting
from or arising out of (i) any breach of any representation or warranty
made by Seller in this Agreement, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement, (iii) any
claim with respect to, or any event or circumstance related to, the
ownership or operation of the Assets or the conduct of the Business, if
such claim arises from or is asserted in connection with any act, omission,
event, or circumstance which occurred or existed prior to or at the Closing
Date, without regard to whether a claim with respect to such matter is
asserted before or after the Closing Date, including any matter described
on SCHEDULE 5.10, (iv) any liability or obligation of Seller not included
in the Assumed Liabilities, (v) any title defect Seller fails to eliminate
as an exception from a title insurance commitment referred to in Section
7.7.1, (vi) any claim that the transactions contemplated by this Agreement
violate the Worker Adjustment and Retraining Notification Act, as amended,
or any similar state or local law or any bulk transfer or fraudulent
conveyance laws of any jurisdiction, (vii) the presence, generation,
removal, Release or transportation of a Hazardous Substance on or from any
of the Real Property prior to the Closing Date, or non-compliance with any
Environmental Law prior to the Closing Date, including the costs of Clean-
up of such Hazardous Substance and other compliance with the provisions of
any Environmental Laws (whether before or after Closing), or (viii) any
rate refund ordered by a governmental authority for periods prior to the
Closing Date; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and
other fees, costs and expenses) incident or relating to or resulting from
any of the foregoing.
In the event that an indemnified item arises under both clause (a)(i) and
under one or more of clauses (a)(ii) through (a)(viii) of this Section
11.2, Buyer's rights to pursue its claim under clauses (a)(ii) through
(a)(viii), as applicable, will exist notwithstanding the expiration of the
Survival Period applicable to such claim under clause (a)(i).
11.3 INDEMNIFICATION BY BUYER. Buyer will indemnify, defend and hold
harmless Seller and Seller's officers, employees, agents, successors and
assigns, from and against:
(a) all losses, damages, liabilities, deficiencies or
obligations of or to Seller or any such other indemnified Person resulting
from or arising out of (i) any breach of any representation or warranty
made by Buyer in this Agreement, (ii) any breach of any covenant, agreement
or obligation of Buyer contained in this Agreement, (iii) the failure by
Buyer to perform any of its obligations in respect of the Assumed
Liabilities, or (iv) any claim with respect to, or any event or
circumstance related to, the ownership or operation of the Assets or the
conduct of the Business, if such claim arises from or is asserted in
connection with any act, omission, event, or circumstance which occurs or
exists after the Closing Date; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including, without limitation, settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or
relating to or resulting from any of the foregoing.
In the event that an indemnified item arises under both clause (a)(i) and
under one or more of clauses (a)(ii) or (a)(iii) of this Section 11.3,
Seller's rights to pursue its claim under clauses (a)(ii) or (a)(iii), as
applicable, will exist notwithstanding the expiration of the Survival
Period applicable to such claim under clause (a)(i).
11.4 PROCEDURE FOR INDEMNIFICATION. In the event that either party to
this Agreement shall incur any damages in respect of which indemnity may be
sought by such party pursuant to this Section 11 or any other provision of
this Agreement, the party indemnified hereunder (the "Indemnitee") shall
notify the party providing indemnification (the "Indemnitor") promptly. In
the case of third party claims, such notice shall in any event be given as
soon as possible of the filing or assertion of any claim against the
Indemnitee stating the nature and basis of such claim; provided, however,
that any delay or failure to notify any Indemnitor of any claim shall not
relieve it from any liability except to the extent that the Indemnitor
demonstrates that the defense of such action has been materially prejudiced
by such delay or failure to notify. In the case of third party claims, the
Indemnitor shall, within 10 days of receipt of notice of such claim, notify
the Indemnitee of its intention to assume the defense of such claim if the
Indemnitor concurrently assumes the obligation to indemnify the Indemnitee.
If the Indemnitor assumes the defense of the claim, the Indemnitor shall
have the right and obligation (a) to conduct any proceedings or
negotiations in connection therewith and necessary or appropriate to defend
the Indemnitee, (b) to take all other required steps or proceedings to
settle or defend any such claims, and (c) to employ counsel to contest any
such claim or liability in the name of the Indemnitee or otherwise. If the
Indemnitor shall not assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against any such claim or
litigation in such manner as it may deem appropriate and the Indemnitee may
settle such claim or litigation on such terms as it may deem appropriate,
and assert against the Indemnitor any rights or claims to which the
Indemnitee is entitled. Payment of Seller or Buyer damages, as the case
may be, shall be made within ten (10) days of a final determination of a
claim. A final determination of a disputed claim shall be (v) a judgment
of any court determining the validity of the disputed claim, if no appeal
is pending from such judgment or if the time to appeal therefrom has
elapsed, (w) an award of any arbitration determining the validity of such
disputed claim, if there is not pending any motion to set aside such award
or if the time within to move to set such award aside has elapsed, (x) a
written termination of the dispute with respect to such claim signed by all
of the parties thereto or their attorneys, (y) a written acknowledgment of
the Indemnitor that it no longer disputes the validity of such claim, or
(z) such other evidence of final determination of a disputed claim as shall
be acceptable to the parties.
11.5 LIMITATIONS ON INDEMNIFICATION BY SELLER. Seller will not be
liable for indemnification arising solely under Section 11.2(a)(i) for (a)
any losses, damages, liabilities, deficiencies or obligations of or to
Buyer or any other person entitled to indemnification from Seller or (b)
any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs
and reasonable legal, accounting, experts' and other fees, costs and
expenses) incident or relating to or resulting from any of the foregoing
(the items described in clauses (a) and (b) collectively being referred to
for purposes of this Section 11.5 as "Buyer Damages") unless the amount of
Buyer Damages for which Seller would, but for the provisions of this
Section 11.5, be liable exceeds, on an aggregate basis, $100,000, in which
case Seller will be liable for all such Buyer Damages, which will be due
and payable within thirty (30) days after Seller's receipt of a statement
therefor. In no event will Seller be liable for Buyer Damages in excess of
$37,000,000.
11.6 LIMITATIONS ON INDEMNIFICATION BY BUYER. Buyer will not be
liable for indemnification arising solely under Section 11.3(a)(i) for (a)
any losses, damages, liabilities, deficiencies or obligations of or to
Seller or any other person entitled to indemnification from Buyer or (b)
any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs
and reasonable legal, accounting, experts' and other fees, costs and
expenses) incident or relating to or resulting from any of the foregoing
(the items described in clauses (a) and (b) collectively being referred to
for purposes of this Section 11.6 as "Seller Damages") unless the amount of
Seller Damages for which Buyer would, but for the provisions of this
Section 11.6, be liable exceeds, on an aggregate basis, $100,000, in which
case Buyer will be liable for all such Seller Damages, which will be due
and payable within thirty (30) days after Buyer's receipt of a statement
therefor. In no event will Buyer be liable for damages in excess of
$37,000,000.
SECTION 12. MISCELLANEOUS
12.1 PARTIES OBLIGATED AND BENEFITTED. Subject to the limitations set
forth below, this Agreement will be binding upon the parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and successors in
interest, and no other Person will be entitled to any of the benefits
conferred by this Agreement. Without the prior written consent of the
other party, neither party will assign any of its rights under this
Agreement or delegate any of its duties under this Agreement, provided that
Buyer may, without the consent of Seller, (i) assign or delegate its rights
or obligations under this Agreement to any Affiliate of Buyer, and such
assignee will be substituted for Buyer under this Agreement as though it
were the original party to this Agreement and Buyer will be released from
all obligations under this Agreement, (ii) make a collateral assignment of
its rights hereunder to Buyer's or such assignee's secured lenders, and
(iii) assign or delegate its rights or obligations under this Agreement to
any successor of Buyer in the event of a merger, consolidation or sale of
stock or to any purchaser of all or substantially all of the Assets, and to
any transferee of all or a substantial part of any of Buyer's assets or
business and any such transferee shall be entitled to enforce Buyer's
rights on an individual basis.
12.2 NOTICES. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will
be in writing and will be deemed to have been duly given only if delivered
in person or by first class, prepaid, registered or certified mail, or sent
by courier or, if receipt is confirmed, by telecopier:
To Buyer at:
Universal Cable Holdings, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Attention: J. Merritt Belisle
Telecopy: (512) 476-5204
With a copy (which will not constitute notice) to:
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Attention: Timothy E. Young, Esq.
Telecopy: (512) 370-2850
With a further copy (which will not constitute notice) to:
Alberto Cribiore,
Chairman of the Board
Classic Communications, Inc.
712 Fifth Avenue, 34th Floor
New York, New York 10019
Telecopy: (212) 835-1399
With a further copy (which will not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Drive, Suite 2300
Chicago, Illinois 60606
Attention: Peter C. Krupp, Esq.
Telecopy: (312) 407-0411
To Seller at:
Star Cable Associates
100 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220
Attention: Michael R. Haislip, President
Telecopy: (412) 928-0225
With a copy (which will not constitute notice) to:
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street, 44th Floor
Pittsburgh, Pennsylvania 15219
Attention: Louis J. Moraytis, Esq.
Telecopy: (412) 566-6099
Any party may change the address to which notices are required to be sent
by giving notice of such change in the manner provided in this Section
12.2. All notices will be deemed to have been received on the date of
delivery or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective
only upon actual receipt.
12.3 ATTORNEYS' FEES. In the event of any action or suit based upon
or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled, subject to the provisions of Sections 11.5 and
11.6, to recover reasonable attorneys' fees and other costs of such action
or suit from the other party.
12.4 RIGHT TO SPECIFIC PERFORMANCE. Both parties acknowledge that the
unique nature of the Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by
either of its obligations under this Agreement, and both parties agree that
in the event of such breach, either party will, upon proper action
instituted by it, be entitled to a decree of specific performance of this
Agreement.
12.5 WAIVER. This Agreement or any of its provisions may not be
waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
12.6 CAPTIONS. The article and section captions of this Agreement are
for convenience only and do not constitute a part of this Agreement.
12.7 CHOICE OF LAW. This agreement and the rights of the parties
under it will be governed by and construed in all respects in accordance
with the laws of the State of Delaware, without regard to the conflicts of
laws rules of the State of Delaware.
12.8 VENUE. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement shall be brought
by or against any of the parties to this Agreement in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Delaware, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
12.9 TERMS. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that
word are used in this Agreement in an illustrative sense rather than a
limiting sense.
12.10 RIGHTS CUMULATIVE. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any other right
or remedy available under this Agreement or applicable law.
12.11 FURTHER ACTIONS. Seller and Buyer will execute and deliver
to the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such
further assignments, certificates, instruments, records, or other
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
12.12 TIME. Time is of the essence under this Agreement. If the
last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not
a Business Day, the time for the giving of such notice or the performance
of such act will be extended to the next succeeding Business Day.
12.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original.
12.14 ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits referred to in this Agreement, which are incorporated in and
constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not
be amended or modified except by a writing signed by the parties.
12.15 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable
the remaining rights of the Person intended to be benefitted by such
provision or any other provisions of this Agreement.
12.16 CONSTRUCTION. This Agreement has been negotiated by Buyer
and Seller and its respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will
not apply in any construction or interpretation of this Agreement.
12.17 LATE PAYMENTS. If either party fails to pay the other any
amounts when due under this Agreement, the amounts due will bear interest
from the due date to the date of payment at the annual rate publicly
announced from time to time by Citibank, N.A. at its prime rate (the "Prime
Rate") plus three percent (3%), adjusted as and when changes in the Prime
Rate are made.
12.18 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys'
and accountants' fees, in connection with the negotiation of this
Agreement, the performance of its obligations and the consummation of the
transactions contemplated by this Agreement.
12.19 BULK SALES. Buyer and Seller agree to waive compliance with
any "Bulk Sales," "Bulk Transfers," or other similar provision of the Legal
Requirements of any state or political subdivision thereof. Seller hereby
agrees to indemnify and hold harmless Buyer, its Affiliates or any
institution providing financing to Buyer from any liabilities arising out
of or resulting from the failure of Seller and/or Buyer to comply with any
such "Bulk Sales," "Bulk Transfers," or other similar provision of the
Legal Requirements of any state or political subdivision thereof.
* * * *
The parties have executed this Agreement as of the day and year first
written above.
BUYER:
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/Steven E. Seach
----------------------------
Steven E. Seach
President and Chief Financial Officer
SELLER:
STAR CABLE ASSOCIATES
By: /s/Richard W. Talarico
----------------------------
Name: Richard W. Talarico
Title: Executive Vice President &
Chief Financial Officer
AMENDMENT NO. 1 THERETO, DATED FEBRUARY 16, 2000.
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT ("Amendment"), dated
as of February 16, 2000, by and between UNIVERSAL CABLE HOLDINGS, INC., a
Delaware corporation ("Buyer") and STAR CABLE ASSOCIATES, a Pennsylvania
general partnership ("Seller").
RECITALS
WHEREAS, On October 14, 1999, the parties hereto entered into an Asset
Purchase Agreement (the "Initial Agreement"); and
WHEREAS, the Initial Agreement is being amended hereby.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. AMENDMENT TO SECTION 3.1.4 OF THE INITIAL AGREEMENT.
Section 3.1.4 of the Initial Agreement is hereby amended and restated in
its entirety as follows:
"Subject to the terms and conditions of and in reliance upon the
representations, warranties and covenants contained in this Agreement,
at the Closing Date, Buyer's corporate parent, CCI, shall issue to
Seller 555,555 shares of Class A Common Stock."
2. AMENDMENTS TO SECTION 3.2.1 OF THE INITIAL AGREEMENT.
Section 3.2.1 of the Initial Agreement is hereby amended by deleting the
two occurrences of the number "56,820" and replacing both occurrences with
the number "56,810," and by deleting the two occurrences of the words
"Closing Date" and replacing both occurrences with "January 31, 2000."
3. AMENDMENT TO SECTION 3.2.5 OF THE INITIAL AGREEMENT. The
following new section shall be added to Section 3.2.:
"3.2.7 Notwithstanding the provisions of Sections 3.2.5 and 3.2.6,
no adjustment will be made to the Base Purchase Price unless
the adjustment to the Base Purchase Price pursuant to
Sections 3.2.5 and 3.2.6 exceeds the sum of $760,000 (the
"Threshold Adjustment Factor"). In the event that the
adjustment to the Base Purchase Price pursuant to Sections
3.2.5 and 3.2.6 exceeds the Threshold Adjustment Factor, the
Base Purchase Price payable pursuant to Section 3.1.1 hereof
shall only be reduced by the amount equal to the difference
between (i) the adjustment calculated pursuant to the
provisions of Sections 3.2.5 and 3.2.6 and (ii) the
Threshold Adjustment Factor."
4. AMENDMENT TO SECTION 4.1 OF THE INITIAL AGREEMENT.
Section 4.1 of the Initial Agreement is hereby amended by: (a) deleting the
following from the first sentence:
"provided that Buyer has received a reduction in the Base Purchase
Price pursuant to Section 3.2 of an equal amount."
and (b) substituting the following language for the deletion provided in 4
(a) above:
"provided that the Threshold Adjustment Factor is reduced dollar for
dollar by an equal amount. The resulting reduced Threshold Adjustment
Factor shall be the new Threshold Adjustment Factor for the purposes of
Section 3.2.7."
5. AMENDMENT TO SECTION 7.19 OF THE INITIAL AGREEMENT.
Section 7.19 of the Initial Agreement is hereby amended and restated in its
entirety as follows:
"Seller will have requested from and delivered to each appropriate
lessor a Memorandum of Lease, in recordable form for the state in which the
particular property is located, in substantially the form as set forth on
EXHIBIT "E", for each headend site listed on Schedule 7.19. Seller and
Buyer will cooperate with each other pursuant to the provisions of
Section 12.11 hereof, in obtaining and recording these memoranda of lease
after Closing."
6. AMENDMENT TO SECTION 11.2. The following Section 11.2(c)
shall be added to Section 11.2.:
"(c) Buyer hereby waives any and all losses, damages, liabilities,
deficiencies or obligations of or to Buyer for indemnification pursuant to
Section 11.2 resulting from the failure to make a reduction in the Base
Purchase Price at Closing pursuant to Section 3.2.1 to the extent that such
reduction would have been made as a result of a shortfall of up to 50 EBS's
caused by the exclusion of billings pursuant to the penultimate sentence of
Section 1.16 hereof. To the extent that any such shortfall exceeds 50
EBS's, Seller shall be responsible only for such excess."
7. CONSENT TO CREDIT. Buyer hereby consents to the granting of
a credit against the rate charged for Basic Services, Pay TV or other
services charged to subscribers in Seller's East Texas System due to the
January 27, 2000 ice storm, said credit not to exceed the sum of three
thousand dollars ($3,000.00), and said credit not to be included in the
calculation of EBS's as of January 31, 2000, or in the calculation of
EBITDA as of January 31, 2000.
8. CLOSING. Buyer hereby waives the notice requirement of
Section 8 of the Agreement, and Buyer and Seller mutually agree to conduct
the Closing on February 16, 2000.
9. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined shall have the same meanings attributed to them in the
Initial Agreement.
10. CHOICE OF LAW. This Amendment and the rights of the parties
under it will be governed by and construed in all respects in accordance
with the laws of the State of Delaware, without regard to conflicts of laws
rules of the State of Delaware.
11. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which will be deemed an original.
12. CAPTIONS. The headings and section captions of this
Amendment are for convenience only and do not constitute a part of this
Amendment.
13. SEVERABILITY. Any term or provision of this Amendment which
is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable
the remaining rights of the Person intended to be benefitted by such
provision or any other provisions of this Amendment.
14. CONSTRUCTION. This Amendment has been negotiated by Buyer
and Seller and its respective legal counsel, and legal or equitable
principles that might require the construction of this Amendment or any
provision of this Amendment against the party drafting this Amendment will
not apply in any construction or interpretation of this Amendment.
15. ENTIRE AGREEMENT. This Amendment contains the entire
agreement of the parties with respect to the amendment of the provisions of
the Initial Agreement and supercedes all prior oral or written agreements
and understandings with respect to the subject matter, including, without
limitation, that certain letter from the Buyer to the Seller dated as of
February 10, 2000.
16. CONTINUING EFFECT. Except as expressly amended by this
Amendment, the Initial Agreement shall continue unamended and in full force
and effect in accordance with the terms thereof.
* * *
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the day and year first written above.
BUYER:
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/J. Merritt Belisle
----------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
SELLER:
STAR CABLE ASSOCIATES
By: Star Cable Management, Inc.
By: /s/Richard W. Talarico
----------------------------
Name: Richard W. Talarico
Title: Executive Vice President &
Chief Financial Officer
EXHIBIT 99.1
CLASSIC CABLE, INC. PRICES OFFERING OF $225 MILLION IN SENIOR SUBORDINATED
NOTES
AUSTIN, TEXAS, FEB. 11 /PRNEWSWIRE/ -- Classic Communications, Inc.
(Nasdaq: CLSC), announced today that its wholly owned subsidiary, Classic
Cable, Inc., priced $225 million of Senior Subordinated Notes due 2010.
The Senior Subordinated Notes were priced at par with a 10.50% coupon.
The debt issue, the size of which was increased to $225 million from $175
million, is being offered to qualified institutional investors through a
private placement. The securities being offered in the private offering
will not be and have not been registered under the Securities Act of 1933
and may not be offered or sold in the United States without registration or
an applicable exemption from registration requirements. Classic intends to
use the proceeds of the offering to fund a portion of the acquisition of
Star Cable Associates ("Star"), to repay a portion of indebtedness under
its senior credit facility, and repurchase approximately $36 million of the
9-7/8% Senior Subordinated Notes due 2008.
Classic Communications, Inc., based in Austin, Texas, has approximately
413,000 subscribers, pro forma for the Star acquisition, in
non-metropolitan markets in Texas, Kansas, Oklahoma, Nebraska, Missouri,
Arkansas, Louisiana, Colorado, and New Mexico. Classic trades on the Nasdaq
under the trading symbol "CLSC."
This release contains statements that constitute forward-looking statements
within the meaning of section 27A of the Securities Act of 1933 and Section
21 of the Securities Exchange Act of 1934 and are subject to the safe
harbor provisions of those sections and the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk
uncertainties including those described in our filings with the SEC, and
that the actual results or developments may differ materially from those in
the forward-looking statements as a result of various factors. We have
based these forward-looking statements on information currently available
and disclaim any intention or obligation to update or revise any
forward-looking statement.
SOURCE Classic Cable, Inc.
CONTACT: Bryan D. Noteboom of Classic Communications, 512-476-9095,
[email protected]; or Ryan Barr, [email protected], or Ann
Travers, [email protected], both of Brainerd Communicators, for Classic
Cable
EXHIBIT 99.2
CLASSIC COMMUNICATIONS, INC. COMPLETES STAR CABLE ACQUISITION; CLOSES $225
MILLION SENIOR SUBORDINATED DEBT OFFERING
AUSTIN, Tex., Feb. 16 /PRNewswire/ -- Classic Communications, Inc. (Nasdaq:
CLSC), announced today that it has completed the previously announced
acquisition of Star Cable Associates ("Star") for approximately $110
million in cash and 555,555 shares of Class A common stock. Star owns and
operates cable television systems serving approximately 57,000 subscribers
in Texas, Louisiana and Ohio.
Additionally, the Company announced today that its wholly-owned subsidiary,
Classic Cable, Inc., has completed a private offering under Rule 144A of
$225 million of Senior Subordinated Notes due 2010. The notes were priced
at par with a 10.50% coupon.
The new debt issue, the size of which was increased to $225 million from
$175 million, will not be and has not been registered under the Securities
Act of 1933 and may not be offered or sold in the United States without
registration or an applicable exemption from registration requirements.
Classic used the proceeds of the offering to fund a portion of the
acquisition of Star, to repay a portion of indebtedness under its senior
credit facility, and repurchase approximately $33 million of Classic
Cable's 9 7/8% Senior Subordinated Notes due 2008.
Classic Communications, Inc., based in Austin, Texas, has approximately
413,000 subscribers, pro forma for the Star acquisition, in
non-metropolitan markets in Texas, Kansas, Oklahoma, Nebraska, Missouri,
Arkansas, Louisiana, Colorado, Ohio and New Mexico. Classic trades on the
Nasdaq under the trading symbol "CLSC."
This release contains statements that constitute forward-looking statements
within the meaning of section 27A of the Securities Act of 1933 and Section
21 of the Securities Exchange Act of 1934 and are subject to the safe
harbor provisions of those sections and the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk
uncertainties including those described in our filings with the SEC, and
that the actual results or developments may differ materially from those in
the forward-looking statements as a result of various factors. We have
based these forward-looking statements on information currently available
and disclaim any intention or obligation to update or revise any
forward-looking statement.
SOURCE Classic Communications, Inc.
CONTACT: Bryan D. Noteboom of Classic Communications, Inc., 512-476-9095,
[email protected]; or Ryan Barr, [email protected] or Ann
Travers, [email protected], both of Brainerd Communicators, Inc.,
212-986-6667.
