<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 7, 1999
Cox Communications, Inc.
-------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
-------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
1-6590 58-2112288
-------------------------------------------------------------------------------
(Commission File Number) (I.R.S. Employer Identification Number)
1400 Lake Hearn Drive
Atlanta, Georgia 30319
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(Address of principal executive offices) (Zip Code)
(404) 843-5000
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(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired:
Not Applicable.
(b) Unaudited pro forma and as adjusted combined condensed
financial information:
Unaudited pro forma and as adjusted combined condensed
financial information which gives effect to the planned
offering of 9.2 million shares of our Class A common stock,
13 million FELINE PRIDES, 20 million Trust Originated
Preferred Securities ("TOPrS") and $1,850 million of Senior
Debt Securities and the pending acquisitions of TCA Cable TV,
Inc. for shares of Class A Common Stock and cash, of certain
cable television systems from Media General, Inc. for cash
and of certain cable television systems and other
consideration from AT&T Corp. in exchange for the AT&T common
stock held by Cox are included in this amended report
beginning on page P-1.
(c) Exhibits:
2.1 Agreement and Plan of Reorganization among Cox
Teleport Partners, Inc., TCI Holdings, Inc. and
United Cable Television Corporation, dated as of July
6, 1999.
<PAGE> 3
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA AND AS ADJUSTED COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma and as adjusted combined condensed
financial information has been derived from the historical financial statements
of Cox, Prime South Diversified, Inc., TCA, the cable television systems of
Media General, Inc. and certain cable television systems from AT&T, including
AT&T's unconsolidated investment in Peak Cablevision, LLC. Pursuant to the
purchase agreement, AT&T has agreed to acquire all of the remaining interest in
Peak prior to closing the transaction with Cox.
The unaudited pro forma and as adjusted combined condensed balance sheet as
of March 31, 1999 has been presented as if the offerings and the pending
acquisitions of TCA, the Media General cable systems and the AT&T cable systems
had been consummated on that date. The unaudited pro forma and as adjusted
combined condensed statements of operations for the year ended December 31, 1998
and for the three months ended March 31, 1999 have been presented as if the
offerings and the pending acquisitions of TCA, the Media General cable systems
and the AT&T cable systems and the acquisition of Prime South had been
consummated on January 1, 1998. Cox acquired Prime South on October 1, 1998.
The unaudited pro forma and as adjusted combined condensed financial
information gives effect to the acquisition of Prime South and the pending
acquisitions under the purchase method of accounting for business combinations
and is based upon the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma and as adjusted combined condensed financial
information presented on the following pages. A final determination of required
purchase accounting adjustments, including the allocation of the purchase price
to the assets acquired and liabilities assumed based on their respective fair
values, has not yet been made. Accordingly, the purchase accounting adjustments
made in connection with the development of the unaudited pro forma and as
adjusted combined condensed financial information are preliminary and have been
made solely for purposes of developing such unaudited pro forma and as adjusted
combined condensed financial information. Upon determination of the final fair
values of certain assets and liabilities, assuming completion of the pending
cable systems acquisitions, the actual financial position and results of
operations will differ, perhaps significantly, from the unaudited pro forma and
as adjusted combined condensed amounts reflected herein because of a variety of
factors, including availability of additional information, changes in values
not currently identified and changes in operating results between the dates of
the unaudited pro forma and as adjusted combined condensed financial
information and the date on which the acquisitions are consummated and such
final fair values are determined.
The pro forma adjustments do not reflect any operating efficiencies and
cost savings that Cox may achieve with respect to the combined companies. The
pro forma adjustments do not include any adjustments to historical revenues for
any future price changes nor any adjustments to programming, operating,
marketing and general and administrative expenses for any future operating
changes.
The unaudited pro forma and as adjusted combined condensed results are not
necessarily indicative of the financial position or operating results that would
have occurred had the transactions been consummated on the date, or at the
beginning of the period, for which such transactions have been given effect. In
addition, the unaudited pro forma and as adjusted combined condensed results are
not necessarily indicative of the combined results of future operations.
All per share amounts reflected in the unaudited pro forma and as adjusted
combined condensed financial information below have been restated to reflect
Cox's two-for-one stock split which became effective May 21, 1999.
P-1
<PAGE> 4
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA AND AS ADJUSTED COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1999
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION> PRO FORMA
MEDIA PEAK ADJUSTMENTS PRO FORMA COX
GENERAL AT&T CABLEVISION FOR THE ADJUSTMENTS PRO FORMA
COX TCA CABLE SYSTEMS CABLE SYSTEMS LLC OFFERINGS FOR ACQUISITIONS AND AS
(A) (A) (A) (A) (A) (B) (C) ADJUSTED
---------- --------- ------------- ------------- ----------- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash................. $ 90.4 $ 4.5 $ 0.1 $ 2.9 $ 0.1 $ 3,294.6 $ (0.1) $ 123.3
Accounts and notes (3,269.2)
receivable, less
allowance for
doubtful accounts.. 174.1 22.3 10.3 10.0 1.1 217.8
Net plant and
equipment.......... 2,782.4 309.4 110.8 202.3 47.5 102.4 3,724.4
167.2
2.4
Investments.......... 7,659.3 2.0 0.6 73.3 9.5 4,993.2
(2,751.5)
Intangible assets..... 3,944.2 724.2 2.6 1,252.3 32.2 4,266.2 12,064.9
1,135.5
707.7
Other assets.......... 76.6 13.2 14.5 5.4 1.0 (9.8) 90.7
(10.2)
--------- -------- ------ -------- ------ ---------- --------- ---------
Total assets.... $14,727.0 $1,075.6 $138.9 $1,546.2 $ 81.9 $ 3,294.6 $ 350.1 $21,214.3
========= ======== ====== ======== ====== ========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable &
accrued expenses.... $ 287.5 $ 52.8 $ 15.2 $ 2.8 $ 4.7 $ $ (10.0) $ 353.0
Deferred income....... 46.3 2.7 6.6 0.9 56.5
Deferred income
taxes............... 3,668.3 86.4 25.9 124.4 1,234.8 4,847.3
(25.9)
(266.6)
Other liabilities..... 372.4 4.2 12.0 (4.5) 343.5
(40.6)
Debt.................. 3,383.1 532.0 34.4 551.9 104.3 1,837.0 (220.0) 4,877.4
(34.4)
(1,310.9)
Amounts due to Cox
Enterprises, Inc.... 112.7 112.7
--------- -------- ------ -------- ------ ---------- --------- ---------
Total
liabilities. 7,870.3 678.1 94.1 680.0 109.0 1,837.0 (678.1) 10,590.4
--------- -------- ------ -------- ------ ---------- --------- ---------
Minority interest..... 193.8 (73.3) 120.5
Cox obligated preferred
and capital securities
of subsidiary trusts... 1,093.9 1,093.9
Shareholders' equity
Preferred stock..... 4.8 4.8
Class A common
stock............. 527.5 5.0 0.1 9.2 34.6 576.3
(0.1)
Class C common
stock............. 27.6 27.6
Additional paid-in
capital........... 1,879.8 55.5 28.5 866.2 (34.7) 354.5 1,605.0 3,894.7
(28.6)
(831.5)
Retained earnings... 1,601.5 151.2 16.2 7.6 (151.2)
(16.2)
946.0 2,555.1
Accumulated other
comprehensive
income............ 2,815.5 1.5 (1.5) 2,351.0
(464.5)
Less: treasury
stock............. (9.5) 9.5
--------- -------- ------ -------- ------ ---------- --------- ---------
Total
shareholders'
equity......... 6,856.7 203.7 44.8 866.2 (27.1) 363.7 1,101.5 9,409.5
--------- -------- ------ -------- ------ ---------- --------- ---------
Total liabilities
and shareholders'
equity.......... $14,727.0 $1,075.6 $138.9 $1,546.2 $ 81.9 $ 3,294.6 $ 350.1 $21,214.3
========= ======== ====== ======== ====== ========== ========= =========
</TABLE>
P-2
<PAGE> 5
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1999
(A) Represents historical amounts for Cox as of March 31, 1999, TCA as of
January 31, 1999, the Media General cable systems as of March 28, 1999 and
the AT&T cable systems as of March 31, 1999.
(B) Represents net cash proceeds of $3,294.6 million expected to be received
as a result of the concurrent offering of:
- 9.2 million shares of Class A common stock for an aggregate offering
of $357.1 million, less $12.9 million of offering costs;
- 13 million FELINE PRIDES for an aggregate offering of $650 million,
less $20.3 million of offering costs and $19.5 million allocated to the
fair value of the forward contracts embedded in these securities;
- 20 million TOPrS for an aggregate offering of $500 million, less
$16.3 million of offering costs; and
- $1,850 million senior debt securities, less offering costs of $13
million.
(C) Represents the net effect of Cox's acquisition of TCA, the Media General
cable systems and the AT&T cable systems and the preliminary adjustments
to the historical balance sheet of the respective acquisitions recorded in
conjunction with applying purchase accounting. A summary of the
assumptions for these adjustments is as follows:
<TABLE>
<CAPTION>
TCA (MILLIONS OF DOLLARS)
- --- ---------------------
<S> <C>
Purchase price plus net liabilities assumed in the
acquisition of TCA:
Cox Class A common stock to be issued to TCA shareholders
(see below)............................................ $1,700.1
Cash to be paid to TCA shareholders (funded with the proceeds
from the offerings).................................... 1,613.6
Assumption of TCA debt and accrued interest............... 542.0
Cox acquisition related costs (funded with the proceeds
from the offerings).................................... 23.5
--------
Total purchase price.............................. $3,879.2
--------
Allocation of purchase price to tangible assets:
Preliminary estimate to record acquired plant and
equipment at fair value................................ $ 411.8
Preliminary estimate of deferred taxes related to property
and equipment write-up................................. (40.4)
Preliminary estimate to record investments at fair
value.................................................. 11.5
Net working capital deficit and other assets/liabilities
of TCA assumed or acquired by Cox...................... (105.9)
Minority interest in TCA consolidated entities............ (193.8)
--------
Total allocation to tangible assets............... 83.2
--------
Excess of purchase price over tangible assets............... $3,796.0
========
</TABLE>
Cox anticipates the issuance of approximately 39.6 million shares of Cox Class A
common stock, which assumes TCA director options will be converted into Cox
Class A common stock, to TCA shareholders upon consummation of the TCA
acquisition.
In addition, the pro forma adjustments reflect:
- the elimination of TCA's equity accounts, certain intangible assets
(comprised primarily of goodwill which arose from previous acquisitions
by TCA) and $9.8 million of deferred debt issuance costs;
- the reclassification of accrued interest to debt of $10.0 million which
will be refinanced subsequent to the consummation of the TCA acquisition;
and
- deferred taxes and corresponding goodwill of $1,194.4 million related to
the excess purchase price over net tangible assets acquired.
<TABLE>
<CAPTION>
Media General (MILLIONS OF DOLLARS)
- ------------- ---------------------
<S> <C>
Purchase price plus net liabilities assumed in the
acquisition of the Media General cable systems:
Purchase price in cash (funded with the proceeds
from the offerings)....................................... $1,400.0
Cox acquisition related costs (funded with the proceeds
from the offerings)....................................... 2.0
Total purchase price.............................. $1,402.0
--------
</TABLE>
P-3
<PAGE> 6
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED BALANCE SHEET -- (CONTINUED)
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS)
---------------------
<S> <C>
Allocation of purchase price to tangible assets:
Preliminary estimate to record acquired plant and
equipment at fair value................................ $ 278.0
Preliminary estimate to record investments at fair
value.................................................. 0.6
Net working capital deficit and other assets/liabilities of
the Media General cable systems assumed or acquired by
Cox....................................................... (14.2)
--------
Total allocation to tangible assets............... 264.4
--------
Excess of purchase price over tangible assets............... $1,137.6
========
</TABLE>
In addition, the pro forma adjustments reflect:
- the elimination of the Media General cable systems' equity accounts,
certain intangible assets and certain other balances not assumed in the
acquisition including $0.1 million of cash, $10.1 million of intercompany
receivables, $5.0 million of other intercompany liabilities and $34.4
million of debt; and
- the elimination of deferred taxes.
<TABLE>
<CAPTION>
AT&T (Including Peak) (MILLIONS OF DOLLARS)
- --------------------- ---------------------
<S> <C>
Purchase price plus net liabilities assumed in the
acquisition of the AT&T cable systems:
Fair value of Cox's investment in AT&T common stock....... $2,890.1
Cash proceeds received upon exchange of Cox's investment
in AT&T's common stock which will be used to pay down
Cox's historical debt.................................. (750.0)
Cox acquisition related costs (funded with the proceeds
from the offerings).................................... 10.0
--------
Net purchase price of the AT&T cable systems...... $2,150.1
--------
Allocation of purchase price to tangible assets:
Preliminary estimate to record acquired plant and
equipment at fair value................................ $ 252.1
Preliminary estimate of deferred taxes related to property
and equipment write-up................................. (0.9)
Net working capital surplus and other assets/liabilities of
the AT&T cable systems assumed or acquired by Cox......... (112.5)
Acquisition of minority interest in TCA Cable Partners II... 73.3
--------
Total allocation to tangible assets............... 212.0
--------
Excess of purchase price over tangible assets..... $1,938.1
========
</TABLE>
In addition, the pro forma adjustments reflect:
- the adjustment to fair market value of Cox's investment in AT&T common
stock of approximately $212.0 million upon consummation of the
transaction;
- the reclassification of net unrealized gain of Cox's investment in AT&T
common stock from accumulated other comprehensive income on a net-of-tax
basis of $618.7 million to retained earnings on a pre-tax basis of
$1,005.8 million. The difference of approximately $387.1 million
represents the elimination of deferred income tax liabilities related to
the unrealized gain which was originally recorded through other
comprehensive income. The $1,005.8 million pre-tax gain will be
recognized in earnings upon consummation of the transaction with AT&T;
P-4
<PAGE> 7
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED BALANCE SHEET -- (CONTINUED)
- the elimination of $701.4 million deferred tax liabilities related to the
July 1998 exchange of Cox's equity investment in Teleport for shares of
AT&T common stock;
- the elimination of the AT&T cable systems' equity accounts, certain
intangible assets and certain other balances not assumed in the
acquisition including $104.4 million of bank debt and $551.8 million of
other intercompany debt;
- the elimination of the AT&T cable systems' equity investment in TCA Cable
Partners II;
- additional deferred taxes of $755.5 million related to the excess
purchase price over net tangible assets acquired; and
- the reclassification of net unrealized loss on Cox's four costless collar
agreements to hedge AT&T common stock from accumulated other
comprehensive loss on a net-of-tax basis of $52.4 million to retained
earnings on a pre-tax-basis of $85.3 million. The difference of
approximately $32.9 million represents the elimination of deferred income
tax assets related to the unrealized loss which was originally recorded
through other comprehensive income. The $85.3 million pre-tax loss will
be recognized in earnings upon settlement of the costless collar
agreements.
P-5
<PAGE> 8
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA AND AS ADJUSTED COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MEDIA PRO FORMA PRO FORMA
GENERAL AT&T PEAK ADJUSTMENTS ADJUSTMENTS COX
PRIME CABLE CABLE CABLEVISION FOR THE FOR PRO FORMA
COX SOUTH TCA SYSTEMS SYSTEMS LLC OFFERINGS ACQUISITIONS AND AS
(A) (A) (A) (A) (A) (A) (B) (C) ADJUSTED
------------ ------- ------ -------- ------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES................. $ 1,716.8 $ 138.2 $385.7 $157.0 $145.5 $ 40.0 $ $ $ 2,583.2
COSTS AND EXPENSES
Programming costs...... 406.8 40.9 103.7 37.3 34.9 9.8 633.4
Plant operations....... 132.8 5.8 76.7 23.6 17.2 5.1 261.2
Marketing.............. 99.5 5.7 2.5 11.9 2.8 0.2 122.6
General and
administrative........ 389.2 24.9 34.1 27.3 25.3 7.8 508.6
Satellite operating and
administrative....... 29.4 29.4
Depreciation........... 373.5 29.7 36.5 24.4 30.8 2.9 (5.6) 527.1
15.0
22.0
(2.1)
Amortization........... 84.2 10.6 19.9 0.1 12.0 1.6 15.3 313.1
104.9
28.3
36.2
------------ ------- ------ ------ ------ ------ -------- --------- ------------
OPERATING INCOME......... 201.4 20.6 112.3 32.4 22.5 12.6 (214.0) 187.8
Interest expense......... (223.3) (106.6) (34.1) (3.3) (7.6) (136.8) 60.4 (380.3)
12.7
3.3
55.0
Equity in net earnings
(losses) of affiliated
companies............... (547.2) (1.6) 5.4 41.2 (502.2)
Gain on investments, net. 2,484.2 (1,902.6) 581.6
Gain on issuance of stock
by affiliated company... 165.3 165.3
Dividend income.......... 12.2 (12.2)
Other, net............... 0.9 (8.5) (1.9) 5.4 (4.1)
------------ ------- ------ ------ ------ ------ -------- --------- ------------
INCOME (LOSS) BEFORE
TAXES AND MINORITY
INTEREST................ 2,093.5 (87.6) 69.7 29.1 26.0 5.0 (136.8) (1,950.8) 48.1
Income tax expense....... 822.8 27.2 11.0 9.9 (53.4) (10.7) (5.8)
(76.5)
(53.6)
(682.5)
------------ ------- ------ ------ ------ ------ -------- --------- ------------
INCOME (LOSS) BEFORE
MINORITY INTEREST....... 1,270.7 (87.6) $ 42.5 18.1 16.1 5.0 (83.4) (1,127.5) 53.9
Minority Interest....... 55.4 55.4
------------ ------- ------ ------ ------ ------ -------- --------- ------------
NET INCOME (LOSS) $ 1,270.7 $ (87.6) $ 42.5 $ 18.1 $ 16.1 $ 5.0 $ (138.8) $(1,127.5) $ (1.5)
============ ======= ====== ====== ====== ===== ======== ========= ============
PER SHARE DATA:
Basic income (loss)
share of Class A
common stock.......... $ 2.33 $ (0.00)
============ ============
Diluted income (loss)
per share of Class A
common stock........... $ 2.30 $ (0.00)
============ ============
Basic weighted-average
shares of Class A
common stock
outstanding........... 545,626,528 594,427,457
============ ============
Diluted weighted-average
shares of Class A common
stock outstanding....... 552,421,730 601,222,659
============ ============
</TABLE>
P-6
<PAGE> 9
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(A) Represents historical amounts for the years ended December 31, 1998 for
Cox, October 31, 1998 for TCA, December 27, 1998 for the Media General
cable systems and December 31, 1998 for the AT&T cable systems and for the
nine months ended September 30, 1998 for Prime South.
(B) Represents the effects of:
1. interest expense as a result of the $1.850 million offering of senior
debt securities using an average interest rate of 7.375%;
2. minority interest expense as a result of the $500 million TOPrS offering
and $650 million FELINE PRIDES offering using an effective rate of
8.375% and 7.625%, respectively; and
3. amortization of debt issuance costs as a result of the offering of
senior debt securities using an average period of 6.25 years.
(C) Represents the effects of:
Prime South
-----------
1. elimination of certain interest expense accrued by Prime South offset by
the incremental interest expense from new borrowings to fund the Prime
South acquisition with interest calculated using Cox's average cost of
funds rate of 6.4%;
2. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment from Prime South over the estimated average
remaining useful life of eight years;
3. amortization expense on the excess purchase price over net tangible
assets acquired from Prime South based on preliminary asset allocations,
primarily franchise value, over 40 years;
4. amortization expense on goodwill arising from the impact on deferred
taxes as a result of this the Prime South acquisition to be amortized
over 40 years;
5. the effects on Cox's income tax provision, using a statutory rate of
35%, on the adjustments reflected in items 1., 2. and 3. above and Prime
South current year operating losses for the nine months ended September
30, 1998;
TCA
---
6. elimination of TCA's historical interest expense relating to debt
refinanced by Cox;
7. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment from TCA over the estimated average remaining useful
life of eight years;
8. amortization expense on the excess purchase price over net tangible
assets acquired from TCA based on preliminary asset allocations,
primarily franchise value, over 40 years;
9. amortization expense on goodwill arising from the impact on deferred
taxes as a result of the TCA acquisition to be amortized over 40 years;
10. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 6., 7. and 8. above;
Media General
-------------
11. elimination of Media General's historical interest expense;
12. depreciation expense on the preliminary estimated fair value of
acquired plant and equipment from Media General over the estimated
average remaining useful life of six years;
13. amortization expense on the excess purchase price over net tangible
assets acquired from Media General based on preliminary asset
allocations, primarily franchise value, over 40 years;
14. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 11., 12. and 13. above;
P-7
<PAGE> 10
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
AT&T (Including Peak)
----
15. elimination of AT&T's historical interest expense;
16. reduction in interest expense as a result of the pay down in Cox's
historical debt with the net proceeds received from the exchange of
Cox's investment in AT&T common stock for the AT&T cable systems of
$740.0 million using Cox's average cost of funds rate of 6.4%;
17. adjustment to depreciation expense on the preliminary estimated fair
value of acquired from AT&T plant and equipment over the estimated
remaining average life of eight years;
18. amortization expense on the excess purchase price over net tangible
assets acquired from AT&T based on preliminary asset allocations,
primarily franchise value, over 40 years;
19. the elimination of equity in net losses from Cox's investment in
Teleport of $46.6 million, realized gains from the July 1998 exchange
of Cox's equity investment in Teleport for shares of AT&T common stock
and the subsequent sale of 3.3 million shares in December 1998
totaling $1,902.6 million and dividends received on Cox's AT&T common
stock of $12.2 million;
20. the elimination of equity in net earnings of AT&T's investment in TCA
Cable Partners II; and
21. the effects on Cox's income tax provision, using a statutory rate of
39.0%, on the adjustments reflected in items 15. through 20. above.
P-8
<PAGE> 11
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA AND AS ADJUSTED COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MEDIA GENERAL AT&T PEAK ADJUSTMENTS ADJUSTMENTS COX
CABLE CABLE CABLEVISION FOR THE FOR PRO FORMA
COX TCA SYSTEMS SYSTEMS LLC OFFERINGS ACQUISITIONS AND AS
(A) (A) (A) (A) (A) (B) (C) ADJUSTED
------------ ------ -------------- ------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES..................... $ 498.5 $105.4 $ 40.4 $ 39.0 $ 10.5 $ $ $ 693.8
COSTS AND EXPENSES
Programming costs.......... 128.8 28.5 10.2 10.0 2.8 180.3
Plant operations........... 39.1 20.8 4.8 4.9 1.2 70.8
Marketing.................. 26.6 0.4 3.0 0.7 30.7
General and administrative. 115.5 8.9 8.5 6.9 1.8 141.6
Depreciation............... 96.6 9.9 6.1 8.0 0.9 3.0 129.0
5.5
(1.0)
Amortization............... 26.7 5.4 0.1 4.8 0.2 25.8 77.5
7.1
7.4
------------ ------ ------ ------ ------ ------ ------ ------------
OPERATING INCOME............. 65.2 31.5 7.7 3.7 3.6 (34.2) (47.8) 63.9
Interest expense............. (54.0) (9.2) (0.6) 0.1 (1.7) 3.9 (81.9)
0.6
13.2
Equity in net earnings
(losses) of affiliated
companies.................. (46.5) 0.4 2.4 (2.4) (46.1)
Gain on investments, net..... 419.5 419.5
Dividend income.............. 11.1 (11.1)
Other, net................... (0.1) (2.7) (0.1) 2.4 (0.5)
------------ ------ ------ ------ ------ ------ ------ ------------
INCOME BEFORE TAXES
AND MINORITY INTEREST...... 395.2 19.6 7.5 6.1 1.9 (34.2) (41.2) 354.9
Income tax expense........... 144.0 7.6 2.8 3.0 13.3 (18.1) 111.0
(13.3)
(1.7)
------------ ------ ------ ------ ------ ------ ------ ------------
INCOME BEFORE
MINORITY INTEREST.......... $ 251.2 $ 12.0 $ 4.7 $ 3.1 $ 1.9 $(20.9) $ (8.1) $ 243.9
Minority interest............ 13.8 13.8
------------ ------ ------ ------ ------ ------ ------ ------------
NET INCOME................... $ 251.2 $ 12.0 $ 4.7 $ 3.1 $ 1.9 $(34.7) $ (8.1) $ 230.1
============ ====== ====== ====== ====== ====== ====== ============
PER SHARE DATA
Basic income per share of
Class A common stock..... $ 0.45 $ 0.38
============ ============
Diluted income per share
of Class A common stock.. $ 0.45 $ 0.38
============ ============
Basic weighted-average
shares of Class A
common stock
outstanding.............. 554,896,354 603,697,283
============ ============
Diluted weighted-average
shares of Class A common
stock outstanding........ 562,837,952 611,638,881
============ ============
</TABLE>
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<PAGE> 12
================================================================================
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA AND AS ADJUSTED
COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(A) Represents historical amounts for the three months ended March 31, 1999 for
Cox, January 31, 1999 for TCA, March 28, 1999 for the Media General cable
systems and March 31, 1999 for certain cable television systems of AT&T.
(B) Represents the effects of:
1. interest expense as a result of the $1,850 million offering of senior
debt securities using an average interest rate of 7.375%;
2. minority interest expense as a result of the $500 million TOPrS offering
and $650 million FELINE PRIDES offering using an effective rate of
8.375% and 7.625%, respectively; and
3. amortization of debt issuance costs as a result of the offering of
senior debt securities using an average period of 6.25 years.
(C) Represents the effects of:
TCA
---
1. elimination of TCA's historical interest expense relating to debt
refinanced by Cox;
2. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment from TCA over the estimated average remaining useful
life of eight years;
3. amortization expense on the excess purchase price over net tangible
assets acquired from TCA based on preliminary asset allocations,
primarily franchise value, over 40 years;
4. amortization expense on goodwill arising from the impact on deferred
taxes as a result of the TCA acquisition to be amortized over 40 years;
5. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 1., 2. and 3. above;
Media General
-------------
6. elimination of Media General's historical interest expense;
7. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment from Media General over the estimated average
remaining useful life of six years;
8. amortization expense on the excess purchase price over net tangible
assets acquired from Media General based on preliminary asset
allocations, primarily franchise value, over 40 years;
9. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 6., 7. and 8. above;
AT&T (Including Peak)
----
10. elimination of AT&T's historical interest expense;
11. reduction in interest expense as a result of the pay down in Cox's
historical debt with the net proceeds received from the exchange of
Cox's investment in AT&T common stock for the AT&T cable systems of
$740.0 million using Cox's average cost of funds rate of 6.2%;
12. adjustment to depreciation expense on the preliminary estimated fair
value of acquired plant from AT&T and equipment over the estimated
remaining average life of eight years;
13. amortization expense on the excess purchase price over net tangible
assets acquired from AT&T based on preliminary asset allocations,
primarily franchise value, over 40 years;
14. the elimination of dividends received on Cox's shares of AT&T common
stock of $11.1 million;
15. the elimination of equity in net earnings of AT&T's in TCA Cable
Partners II; and
16. the effects on Cox's income tax provision, using a statutory rate of
39.0%, on the adjustments reflected in items 10. through 15. above.
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<PAGE> 13
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.
COX COMMUNICATIONS, INC.
Dated: July 27, 1999 By: /s/ Andrew A. Merdek
---------------------------------
Andrew A. Merdek
Corporate Secretary
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is dated
as of this 6th day of July, 1999, by and among COX TELEPORT PARTNERS, INC., a
Delaware corporation ("COX"), AT&T CORP., a New York corporation ("AT&T"), TCI
HOLDINGS, INC., a Delaware corporation and Subsidiary of AT&T ("TCIH") and
UNITED CABLE TELEVISION CORPORATION, a Delaware corporation and Subsidiary of
AT&T ("UCTC" and, together with TCIH, the "AT&T CABLE SUBSIDIARIES").
R E C I T A L S:
1. The Boards of Directors of AT&T, the AT&T Cable Subsidiaries and Cox
each have determined that it is in the best interests of their respective
stockholders (i) for AT&T to cause the Consolidation (as defined below) and (ii)
subsequent to the Consolidation, for AT&T to redeem all of the shares of common
stock of AT&T held by Cox in consideration of the transfer and distribution to
Cox of all of the issued and outstanding capital stock of Cable Sub (as defined
below) (the "SEPARATION" and, together with the Consolidation, the
"REORGANIZATION").
2. For federal income tax purposes, it is intended that the Separation
will qualify as tax-free to Cox and AT&T either (i) under Code (as defined
below) Sections 368(a)(1)(D) (as to Cox and AT&T) and 355(a) (as to Cox) and 361
(as to AT&T) or (ii) under Code Sections 355(a) (as to Cox) and 355(c) (as to
AT&T), and that the Consolidation will qualify as tax-free to AT&T, the
Consolidated Entities (as defined below) and each other direct or indirect
Subsidiary of AT&T under Code Sections 332, 337, 351, 354, 355, 361, 368, 1032,
or otherwise.
3. Cox, AT&T, and the AT&T Cable Subsidiaries desire to make certain
representations, warranties, covenants and agreements in connection with the
Reorganization.
A G R E E M E N T S:
In consideration of the above recitals and the covenants and agreements
contained herein, Cox, AT&T and the AT&T Cable Subsidiaries hereby agree as
follows:
1. DEFINED TERMS. The following terms shall have the following meanings in
this Agreement.
1.1. "AFFILIATE" means, 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. For purposes of this Agreement, Peak shall be deemed
an Affiliate of AT&T.
<PAGE> 2
1.2. "ARKANSAS FRANCHISE AREAS" means the Franchise Areas related to
the Arkansas Systems, as described on Exhibit B.
1.3. "ARKANSAS SYSTEMS" means the cable television systems owned and
operated by Peak providing cable television and other communications services to
customers in the Arkansas Franchise Areas.
1.4. "ASSETS" means all the properties, privileges, rights, interests
and claims, real and personal, tangible and intangible, of every type and
description that are owned or leased by any of the Consolidated Entities or
Non-Consolidated Entities and used, useful or held for use in connection with
the conduct of the business or operations of the Systems, other than the
Excluded Assets.
1.5. "AT&T PARTNER" means TCI American Cable Holdings IV, L.P., a
Colorado limited partnership and indirect Subsidiary of AT&T.
1.6. "AT&T PEAK" means TCI American Cable Holdings III, L.P., a
Colorado limited partnership and indirect Subsidiary of AT&T.
1.7. "AT&T RELATED AGREEMENTS" means all agreements, instruments and
certificates contemplated hereby or thereby to be executed by AT&T or any
Consolidated Entity or Non- Consolidated Entity, including, without limitation,
the Consolidation Outline and the Peak Acquisition Agreement.
1.8. "BASIC CABLE SERVICE" means the tier of cable television service
that includes the retransmission of local broadcast signals as defined by the
Cable Act.
1.9. "BATON ROUGE ACTIVE BUSINESS" means the business of the ownership
and operation of the Baton Rouge System.
1.10. "BATON ROUGE FRANCHISE AREAS" means the Franchise Areas related
to the Baton Rouge System, as described on EXHIBIT B.
1.11. "BATON ROUGE SYSTEM" means the cable television system owned and
operated by one or more of the Consolidated Entities and the Non-Consolidated
Entities, providing cable television and other communications services to
customers in the Baton Rouge Franchise Areas.
1.12. "BENEFIT PLAN CONVERSION DATE" means the date on which employees,
former employees and independent contractors of the Baton Rouge System and the
Tulsa System shall cease receiving benefits under the TCI System Plans and shall
begin receiving benefits under the AT&T System Plans.
2
<PAGE> 3
1.13. "BUSINESS DAY" means any day other than Saturday, Sunday or a day
on which banking institutions in New York, New York or Denver, Colorado are
required or authorized to be closed.
1.14. "CABLE ACT" means the Cable Communications Policy Act of 1984, as
amended by the Cable Television Consumer Protection and Competition Act of 1992,
as may be further amended, and the rules and regulations thereunder, as in
effect from time to time.
1.15. "CABLE SUB" means the corporation which, pursuant to the
Consolidation, will be the owner, directly or indirectly through wholly-owned
Subsidiaries, of the Required Assets as of the Closing Date pursuant to the
Consolidation.
1.16. "CLOSING" means the consummation of the transactions contemplated
by this Agreement, the date of which is referred to as the "CLOSING DATE".
1.17. "CLOSING TIME" means 12:01 a.m., Central Time, on the Closing
Date.
1.18. "CODE" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder, as in effect from time to time.
1.19. "COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
1.20. "COMPENSATION ARRANGEMENT" means any plan or compensation
arrangement other than an Employee Plan or a Multiemployer Plan, whether written
or unwritten, which provides to employees or former employees of AT&T or Peak,
or any entity related to AT&T or Peak (under the terms of Sections 414(b), (c),
(m) or (o) of the Code), any compensation or other benefits, whether deferred or
not, in excess of base salary or wages and excluding overtime pay, including,
but not limited to, any bonus (including any bonus given to motivate employees
of the Systems to work through the Closing Time), incentive plan, stock rights
plan, deferred compensation arrangement, stock purchase plan, severance pay plan
and any other perquisites and employee fringe benefit plan.
1.21. "CONSENTS" means all licenses, authorizations, approvals and
consents required under Governmental Permits, Contracts or otherwise for (i) the
consummation of the transactions contemplated by this Agreement, the AT&T
Related Agreements and the Cox Related Agreements and (ii) Cable Sub (and its
Subsidiaries) following its acquisition by Cox to conduct the business and
operations of the Systems and to own, lease, use and operate the Assets at the
places and in the manner in which the business or operations of the Systems is
conducted as of the date of this Agreement.
1.22. "CONSOLIDATED ENTITIES" means Cable Sub, any Subsidiaries of
Cable Sub as of the Closing Date (including, without limitation, Fisher
Communications and Peak) and any Subsidiaries
3
<PAGE> 4
of AT&T that, as of the Closing Time, will have been merged into Cable Sub or
any Subsidiary of Cable Sub, or to which Cable Sub or any Subsidiary of Cable
Sub is a successor under applicable law.
1.23. "CONSOLIDATED TAX RETURN" means any Tax Return that includes any
Consolidated Entity, on the one hand, and AT&T or any Subsidiary of AT&T other
than a Consolidated Entity, on the other hand, other than a Straddle
Consolidated Tax Return.
1.24. "CONTRACTS" means all pole attachment and conduit agreements,
personal property leases, wire-crossing agreements, customer agreements
(including multi-dwelling unit and commercial agreements), maintenance
agreements, retransmission consent agreements and other agreements, written or
oral (including any amendments and other modifications thereto), to which any of
the Consolidated Entities or Non-Consolidated Entities is a party and that
relate to the Assets or the business or operations of the Systems (other than
the Governmental Permits and agreements constituting Real Property) and that are
in effect on the date hereof or are entered into by any of the Consolidated
Entities or Non-Consolidated Entities in the ordinary course of business of the
Systems and as permitted by this Agreement between the date hereof and the
Closing Date, but excluding any Excluded Assets.
1.25. "COPYRIGHT ACT" means the Copyright Act of 1976, as amended, and
the rules and regulations thereunder, as in effect from time to time.
1.26. "COX RELATED AGREEMENTS" means all agreements, instruments and
certificates contemplated hereby or thereby to be executed by Cox.
1.27. "CPST" means the tier of cable television service immediately
above Basic Cable Service offered by the Systems providing for a package of
programming that includes satellite-delivered services.
1.28. "DOJ" means the Department of Justice.
1.29. "EMPLOYEE PLAN" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA (other than a Multiemployer Plan) to which AT&T or
Peak, or any entity related to AT&T or Peak (under the terms of Sections 414(b),
(c), (m) or (o) of the Code), contributes or which AT&T or Peak, or any entity
related to AT&T or Peak (under the terms of Sections 414(b), (c), (m) or (o) of
the Code), sponsors or maintains or by which AT&T or Peak, or any such entity
related to AT&T or Peak, otherwise is bound.
1.30. "ENCUMBRANCE" means 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 rights of
first refusal,
4
<PAGE> 5
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
1.31. "ENID FRANCHISE AREAS" means the Franchise Areas related to the
Enid System, as described on Exhibit B.
1.32. "ENID SYSTEM" means the cable television system owned and
operated by Peak providing cable television and other communications services to
customers in the Enid Franchise Areas.
1.33. "ENVIRONMENTAL LAW" means any Legal Requirement pertaining to
land use, air, soil, surface water, groundwater (including protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (i) Clean Air Act (42 U.S.C.
ss. 7401, et seq.), (ii) Clean Water Act (33 U.S.C. ss. 1251, et seq.), (iii)
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.), (iv)
Comprehensive Environmental Response Compensation Liability Act, as amended (42
U.S.C. ss. 9601, et seq.) ("CERCLA"), (v) Safe Drinking Water Act (42 U.S.C. ss.
300f, et seq.), (vi) Toxic Substance Control Act (15 U.S.C. ss. 2601, et seq.),
(vii) Rivers and Harbors Act (33 U.S.C. ss. 401, et seq.), (viii) Endangered
Species Act (16 U.S.C. ss. 1531, et seq.), and (ix) Occupational Safety and
Health Act (29 U.S.C. ss. 651, et seq.), together with any other applicable
federal, state or local laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance into ambient air, land, surface
water, ground water, personal property or structures, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of any Hazardous Substance.
1.34. "EQUIVALENT BILLING UNIT" means an active customer for Basic
Cable Service either in a single household, a commercial establishment or in a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis shall be determined on a System by System basis
(or if a System has more than one channel line-up, on a head-end by head-end
basis for any head-ends having a different channel line-up) by dividing the
gross bulk-rate billings for both (i) Basic Cable Service and (ii) CPST (but not
billings from a la carte tiers or premium services, installation or other
non-recurring charges, converter rental, new product tier or from any outlet or
connection other than such customer's first or from any pass-through charges for
sales taxes, line- itemized franchise fees, fees charged by the FCC and the
like) attributable to such multi-unit dwelling or commercial establishment
during the most recent billing period ended prior to the date of calculation
(but excluding billings in excess of a single month's charge) by the retail rate
charged during that billing period to individual households for combined Basic
Cable Service and CPST offered by a System (or head-end, as applicable), such
rate as of the date of this Agreement being the rate for such System (or
head-end, as applicable) set forth on SCHEDULE 1.34 (excluding a la carte tiers
or premium services, installation or other non-recurring charges, converter
rental, new product tier or from any outlet or connection other than the first
or from any pass-through charges for sales taxes, line-itemized franchise fees,
fees charged by the FCC and the like). For purposes of this definition, an
5
<PAGE> 6
"active customer" shall mean any person, commercial establishment or multi-unit
dwelling at any given time that is paying for and receiving Basic Cable Service
from a System who has an account that is not more than 60 days past due (except
for past due amounts of $5 or less, provided such account is otherwise current).
For purposes of this definition, an "active customer" does not include any
person, commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the applicable System's regular basic monthly
subscription rate for basic service (excluding installation or other
non-recurring charges) without discount (other than discounts offered pursuant
to selling or marketing campaigns or promotional activities engaged in by such
System in the ordinary course of business, consistent with past practices) for
at least one month. For purposes of this definition, the number of days past due
of a customer account shall be determined from the first day of the period for
which the applicable billing relates.
1.35. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder, as in effect from
time to time.
1.36. "EXCLUDED ASSETS" means the assets that are set forth on SCHEDULE
1.36, all of which will be transferred to or retained by AT&T, an Affiliate of
AT&T or another Person in accordance with the Peak Acquisition Agreement or this
Agreement (other than any Consolidated Entity).
1.37. "FAA" means the Federal Aviation Administration.
1.38. "FCC" means the Federal Communications Commission.
1.39. "FISHER COMMUNICATIONS" means Fisher Communications Associates,
LLC, a Colorado limited liability company, which, together with AT&T Peak, owns
all of the membership interests of Peak.
1.40. "FRANCHISE AREA" means any geographic area in which any of the
Systems is authorized to provide cable television or other communication
services pursuant to a Franchise or in which any of the Systems otherwise
provides such services for which area a franchise agreement, franchise
application, operating permit or similar governing agreement, instrument,
resolution, statute, ordinance, approval, authorization or similar right is not
required pursuant to applicable Legal Requirements, which geographic areas are
described in EXHIBIT B.
1.41. "FRANCHISES" means all franchise agreements, franchise
applications, operating permits and similar governing agreements, instruments,
resolutions, statutes, ordinances, approvals, authorizations and similar rights
obtained from any Governmental Authority that are necessary or required in order
to operate the Systems and provide cable television services thereto, including
all amendments thereto and renewals or modifications thereof.
1.42. "FTC" means the Federal Trade Commission.
6
<PAGE> 7
1.43. "GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
1.44. "GOVERNMENTAL AUTHORITY" means (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) or (iii) any agency, authority or instrumentality
of any of the foregoing, including any court, tribunal, department, bureau,
commission or board.
1.45. "GOVERNMENTAL PERMITS" means all Franchises and all other
approvals, authorizations, permits, licenses (including, without limitation,
cable television relay service and business radio), registrations (including,
without limitation, domestic satellite earth station), qualifications, leases,
variances and similar rights obtained by any Consolidated Entity or Non-
Consolidated Entity from any Governmental Authority authorizing, permitting or
governing the provision of cable television or other communications services by
the Systems or otherwise required for the ownership of the Systems.
1.46. "HAZARDOUS SUBSTANCES" means any pollutant, contaminant,
hazardous or toxic substance, material, constituent or waste or any pollutant
that is labeled or regulated as such terms are defined in any Environmental Law
or that is labeled or regulated as such by any Governmental Authority,
including, without limitation, asbestos and asbestos-containing materials and
any material or substance that is: (i) designated as a "hazardous substance"
pursuant to Section 307 of the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et seq. (33 U.S.C. ss. 1317), (ii) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Solid Waste Disposal Act, 42 U.S.C.
Section 6901, et seq. (42 U.S.C. ss. 6903), (iii) defined as a "hazardous
substance" pursuant to Section 101 of CERCLA or (iv) so designated or defined
under any other applicable Legal Requirements.
1.47. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder, as in effect from
time to time.
1.48. "INDEMNIFIED LIABILITIES" means liabilities or obligations of any
Consolidated Entity (other than Assumed Liabilities) to which the Consolidated
Entities succeed or are otherwise liable by operation of law, contract or
otherwise and with respect to all of which Cox is indemnified by the AT&T Cable
Subsidiaries pursuant to this Agreement, including, without limitation, any
liabilities or obligations: (i) related to or arising out of any legal action,
counterclaim, suit, arbitration, claim, governmental investigation, proceeding,
order, decree or judgment disclosed on SCHEDULE 5.15 or that should be disclosed
on Schedule 5.15 if the representation and warranties made in SECTION 5.15 were
made as of the Closing Date (except for any actions related to franchise-
fee-on-franchise-fee claims by Governmental Authorities with respect to the
Systems, which claims shall be Assumed Liabilities), (ii) relating to any
Excluded Assets, (iii) relating to any required capital commitments of the AT&T
Partner that relate to periods prior to the Closing Time, (iv) relating to the
AT&T Partner's Proportionate Share of any indebtedness of the Partnership that
exists as of the Closing Time other than as contemplated by item C.2.c. of
SCHEDULE 2.1, (v) relating to the AT&T Partner's
7
<PAGE> 8
Proportionate Share of any guarantees or assumptions of any indebtedness of the
Partnership that exists as of the Closing Time, (vi) that are current
liabilities determined in accordance with GAAP but that are not included in
Working Capital, if any; provided that any such current liabilities shall become
Assumed Liabilities if a claim for payment thereof is not submitted by Cox
within six months following the Closing Date, and (vii) arising out of, based on
or resulting from matters unrelated to the Assets, the Partnership Interest or
operation of the Systems. For purposes of this Section 1.48, the term "AT&T
PARTNER'S PROPORTIONATE SHARE" means the percentage interest of the AT&T Partner
in the Partnership as of the Closing Time, which percentage is 20% as of the
date of this Agreement.
1.49. "INTANGIBLES" means all intangible assets owned, used primarily
or held for use by any of the Consolidated Entities or Non-Consolidated Entities
primarily in the business or operations of the Systems, including trade secrets,
proprietary information and technical information and data, however embodied
(e.g., in the form of subscriber lists, records, customer polls and surveys,
maps, computer disks and tapes, plans, diagrams, blue prints and schematics, or
contained in filings with the Governmental Authorities and the FCC relating to
the Systems, or in books and records relating to the business or operations of
the Systems), rights or claims under Tangible Personal Property warranties,
copyrights and going concern value, if any, but excluding any Excluded Assets.
1.50. "IRS" means the Internal Revenue Service.
1.51. "LEGAL REQUIREMENT" means any statute, ordinance, code, law,
rule, regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
1.52. "MATERIAL ADVERSE EFFECT" means any of (i) a material adverse
effect on the aggregate operations, assets or financial condition of the
Systems, taken as a whole, other than matters affecting the cable television
industry generally (including, without limitation, legislative, regulatory or
litigation matters) and matters relating to or arising from national economic
conditions (including financial and capital markets), (ii) a material adverse
effect on the operations, assets or financial condition of the Baton Rouge
System, other than matters affecting the cable television industry generally
(including, without limitation, legislative, regulatory or litigation matters)
and matters relating to or arising from national economic conditions (including
financial and capital markets), (iii) a material adverse effect on the
operations, assets or financial condition of the Tulsa System, other than
matters affecting the cable television industry generally (including, without
limitation, legislative, regulatory or litigation matters) and matters relating
to or arising from national economic conditions (including financial and capital
markets), or (iv) a material adverse effect on the aggregate operations, assets
or financial condition of the Peak Systems taken as a whole, other than matters
affecting the cable television industry generally (including, without
limitation, legislative, regulatory or litigation matters) and matters relating
to or arising from national economic conditions (including financial and capital
markets).
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<PAGE> 9
1.53. "MCALESTER FRANCHISE AREAS" means the Franchise Areas related to
the McAlester System, as described on EXHIBIT B.
1.54. "MCALESTER SYSTEM" means the cable television system owned and
operated by Peak providing cable television and other communications services to
customers in the McAlester Franchise Areas.
1.55. "MULTIEMPLOYER PLAN" means a plan, as defined in ERISA Sections
3(37) or 4001(a)(3), with respect to which AT&T, the Consolidated Entities or
the Non-Consolidated Entities or any trade or business which would be considered
a single employer with AT&T, the Consolidated Entities or the Non-Consolidated
Entities under Section 4001(b)(1) of ERISA contributed, contributes or is
required to contribute.
1.56. "MUSKOGEE FRANCHISE AREAS" means the Franchise Areas related to
the Muskogee System, as described on EXHIBIT B.
1.57. "MUSKOGEE SYSTEM" means the cable television system owned and
operated by Peak providing cable television and other communications services to
customers in the Muskogee Franchise Areas.
1.58. "NEVADA/UTAH FRANCHISE AREAS" means the Franchise Areas related
to the Nevada/Utah Systems, as described on EXHIBIT B.
1.59. "NEVADA/UTAH SYSTEMS" means the cable television systems owned
and operated by Peak providing cable television and other communications
services to customers in the Nevada/Utah Franchise Areas.
1.60. "NONCOMPETITION AGREEMENT" means each of the Noncompetition
Agreements to be entered into by and between AT&T or an Affiliate of AT&T and
each of Donne F. Fisher, Blake F. Fisher, William K. Fisher and Scott M. Fisher
with respect to each of Arkansas, Oklahoma, Utah and Nevada, substantially in
the form attached hereto as EXHIBIT A.
1.61. "NON-CONSOLIDATED ENTITIES" means the Subsidiaries of AT&T that
as of the date of this Agreement own Required Assets (directly or indirectly
through interests in a partnership, limited liability company or other
pass-through entity) or pursuant to the Consolidation Outline will hold Required
Assets (directly or indirectly through interests in a partnership, limited
liability company or other pass-through entity) between the date of this
Agreement and the Closing Date but which are not included in the Consolidated
Entities.
1.62. "PARTNERSHIP" means TCA Cable Partners II, a Delaware general
partnership.
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1.63. "PARTNERSHIP AGREEMENT" means that certain General Partnership
Agreement, dated as of November 13, 1997, by and between AT&T Partner and TCA
Holdings II L.P., a Texas limited partnership.
1.64. "PARTNERSHIP CONSENTS" means the Consents that are required to
transfer the Partnership Interest to Cox under the agreements (including,
without limitation, franchise agreements), instruments, licenses and permits to
which the Partnership is a party, all of which Consents shall be listed on
SCHEDULE 6.3B.
1.65. "PARTNERSHIP INTEREST" means the interest in the Partnership held
by the AT&T Partner.
1.66. "PEAK" means Peak Cablevision, LLC, a Colorado limited liability
company, all of the membership interests of which are owned by AT&T Peak and
Fisher Communications.
1.67. "PEAK ACQUISITION AGREEMENT" means the definitive and binding
agreement, in the form approved by Cox in accordance with Section 7.27, pursuant
to which AT&T shall acquire all of the membership interests in Fisher
Communications or shall otherwise become the sole owner of the Peak Systems.
1.68. "PEAK FRANCHISE AREAS" means the Franchise Areas related to the
Enid System, the Stillwater System, the Muskogee System, the McAlester System,
the Arkansas Systems and the Nevada/Utah Systems.
1.69. "PEAK SYSTEMS" means the Enid System, the Stillwater System, the
Muskogee System, the McAlester System, the Arkansas Systems and the Nevada/Utah
Systems.
1.70. "PERMITTED ENCUMBRANCES" means the following Encumbrances: (i)
statutory landlord's liens and liens for current taxes, assessments and
governmental charges not yet due and payable (or being contested in good faith,
all of which are disclosed either in the Financial Statements or on SCHEDULE
1.70); (ii) zoning laws and ordinances and similar Legal Requirements; (iii)
statutory liens or other encumbrances that are minor or technical defects in
title that individually or in the aggregate do not materially affect the value,
marketability or utility of a given Asset as presently utilized; (iv) leased
interests and mortgagee interests in property owned by others; (v) rights
reserved to any Governmental Authority to regulate the affected property or to
acquire a Franchise or System upon default under, or termination of, any
Franchise; (vi) as to interests in Real Property, any easements, rights-of-way,
servitudes, permits, restrictions and minor imperfections or irregularities in
title whether or not reflected in the public records which do not, individually
or in the aggregate with respect to a given parcel of Real Property, materially
interfere with the right or ability to own, use or operate the Real Property as
presently utilized; (vii) liens of carriers, warehousemen, mechanics, laborers
and materialmen and other similar statutory liens incurred in the ordinary
course of business for sums not yet due or being diligently contested in good
faith and for which adequate reserves have been made in accordance with GAAP and
provided such reserves shall be taken into
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account as Current Liabilities in computing the Working Capital Adjustment
pursuant to SCHEDULE 2.1; and (viii) in the case of Real Property, any lease or
sublease in favor of a third party that is disclosed in the Schedules hereto;
provided that "Permitted Encumbrances" will not include any Encumbrance that
relates to a monetary obligation or that could prevent or inhibit in any
material way the conduct of the business of the Systems, and provided further
that classification of any Encumbrance as a Permitted Encumbrance under (i)
above will not affect any responsibility AT&T or either AT&T Cable Subsidiary
may have for such Encumbrance.
1.71. "PERSON" means any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.72. "REAL PROPERTY" means all assets of any of the Consolidated
Entities or Non- Consolidated Entities consisting of realty and that are owned,
used primarily or held for use primarily in the business or operation of the
Systems, including appurtenances, improvements and fixtures located on such
realty, and any other interests in real property, including fee interests in
offices and headend sites as well as leasehold interests and easements,
including, without limitation, those described on SCHEDULE 5.5, but excluding
(i) any right-of-way, easement or access agreements pursuant to which any of the
Systems has access to multiple dwelling units or commercial establishments (all
of which shall be treated as Contracts for purposes of this Agreement) and (ii)
any Excluded Assets.
1.73. "STILLWATER FRANCHISE AREAS" means the Franchise Areas related to
the Stillwater System, as described on EXHIBIT B.
1.74. "STILLWATER SYSTEM" means the cable television system owned and
operated by Peak providing cable television and other communications services to
customers in the Stillwater Franchise Areas.
1.75. "STRADDLE CONSOLIDATED TAX RETURN" means any Tax Return (other
than any federal Tax Return) that includes any Consolidated Entity, on the one
hand, and AT&T or any Subsidiary of AT&T other than a Consolidated Entity, on
the other hand, and which includes a taxable period for any Consolidated Entity
that ends, as to the Consolidated Entity, after the Closing Date.
1.76. "STRADDLE PERIOD" means any taxable period for which a Tax Return
is required to be filed or a payment of Tax is required to be made which as to
any Consolidated Entity includes, but does not end on, the Closing Date, but not
including any taxable period for which a Consolidated Tax Return is filed or a
Straddle Consolidated Tax Return is required to be filed.
1.77. "SUBSIDIARY" means, as to any Person, any other Person of which
at least 50% of the equity and voting interests are owned, directly or
indirectly, by such Person.
1.78. "SYSTEMS" means the Baton Rouge System, the Tulsa System and each
of the Peak Systems.
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1.79. "TANGIBLE PERSONAL PROPERTY" means all the machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, supplies and other tangible personal property that are
owned or leased by any Consolidated Entity or Non-Consolidated Entity and used
primarily or held primarily for use as of the date hereof in the conduct of the
business and operations of the Systems, but excluding any Excluded Assets.
1.80. "TAX" or "TAXES" means all taxes, fees, levies, imposts, tariffs,
duties, withholdings or other charges of any kind, including, without
limitation, income, withholding, capital, excise, employment, occupancy,
property, ad valorem, sales, use, transfer, recording, documentary,
registration, motor vehicle, franchise and gross receipts taxes (but excluding
Franchise fees), imposed by the United States or any state, county, local or
foreign government or any subdivision thereof, together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions or penalties.
1.81. "TAX PROCEEDING" shall mean any audit, examination, contest,
litigation or other proceeding relating to Taxes.
1.82. "TAX RETURN" means any return, report, information return or
other statement or document (including any related or supporting information,
any schedule or attachment thereto and any amendment thereof) filed or required
to be filed with any federal, state, local or foreign taxing authority in
connection with the determination, assessment, collection, administration or
imposition of any Tax.
1.83. "TRANSFERABLE FRANCHISE AREA" means any Franchise Area with
respect to which (i) any Consent necessary under a Franchise in connection with
the consummation of the transactions contemplated by this Agreement, the AT&T
Related Agreements and the Cox Related Agreements shall have been obtained, (ii)
no Consent is necessary under a Franchise in connection with the consummation of
the transactions contemplated by this Agreement, the AT&T Related Agreements and
the Cox Related Agreements or (iii) a franchise agreement, franchise
application, operating permit or similar governing agreement, instrument,
resolution, statute, ordinance, approval, authorization or similar right is not
required pursuant to applicable Legal Requirements.
1.84. "TULSA ACTIVE BUSINESS" means the business of the ownership and
operation of the Tulsa System, exclusive of the portion of the Tulsa System
owned by Communications Services, Inc. and serving the Bixby Franchise Area.
1.85. "TULSA FRANCHISE AREAS" means the Franchise Areas related to the
Tulsa System, as described on EXHIBIT B.
1.86. "TULSA SYSTEM" means the cable television system owned and
operated by the Consolidated Entities and the Non-Consolidated Entities,
providing cable television and other communications services to customers in and
around the Tulsa Franchise Areas.
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1.87. List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section hereof in
which such term is defined:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Additional Covenant Schedules 7.30.3
Additional Covenant Schedules Objection Notice 7.30.3
Additional Peak Liabilities 7.27.1
Additional Schedules 5.24.3
Additional Schedules Objection Notice 5.24.3
Adjustments Schedule 2.1
Assumed Liabilities 2.1
Agreement Preamble
AT&T Preamble
AT&T Cable Subsidiaries Preamble
AT&T Consents 4.4
AT&T Credited Estimated Tax Payments 7.17.2(vii)
AT&T Partner's Proportionate Share 1.48
AT&T Shares 3.1
AT&T System Plans 5.12.1
AT&T Tax Breach 7.17.2(ii)
AT&T Tax Matters Certificate 7.5.1
Billing Services Agreement 7.23
Budgets 7.3
Cable Sub Shares 3.1
Capital Expenditures Adjustment Schedule 2.1
CERCLA 1.33
Claimant 12.4.1
Closing Date 1.16
Computer and Other Systems 7.28.1
Consolidation 2.3
Consolidation Outline 2.2.1
Consolidated Straddle Period Tax Proceeding 7.17.5(iv)
Controlling Party 7.17.4(ii)
Cost of Service Election 5.19.2
Cox Preamble
Cox Consents 6.3
Cox Consolidated Tax Return 7.17.1(ii)
Cox Credited Estimated Tax Payments 7.17.5(iii)
Cox Review Condition 2.3
Cox Review Notice 2.3
Cox Tax Breach 7.17.2(i)
Cox Tax Matters Certificate 7.5.2
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Cox / TCA Merger Schedule 2.1
Current Assets Schedule 2.1
Current Liabilities Schedule 2.1
Delayed Schedules 7.31
Delayed Schedules Objection Notice 7.31
Easements 5.5
Employees 5.13
Encore/Starz Agreement 7.29.1
Final Report Schedule 2.1
Financial Statements 5.11
Indemnifying Party 12.4.1
Long-Term Leases 7.10.4
Material Computer and Other Systems 7.28.2
Nevada/Utah Systems Sale 2.2.2
Noncontrolling Party 7.17.4(ii)
Notice of Failure of Cox Review Condition 2.3
Notice of Failure of AT&T Condition 2.3
Partnership Debt Schedule 2.1
Peak Asset Disposition 2.2.2
Peak Debt Adjustment Schedule 2.1
Peak Notice 7.27.1
Peak System Plans 5.12.2
Pre-Closing Taxes 7.17.2(i)
Preliminary Report Schedule 2.1
Programming Support 7.29.3
Reorganization Recitals
Required Assets 2.1
Separation Recitals
Special AT&T Tax Proceeding 7.17.4(iii)
Special Controlling Party 7.17.4(iv)
Special Cox Tax Proceeding 7.17.4(iii)
Special Noncontrolling Party 7.17.4(iv)
Special Tax Proceeding 7.17.4(iv)
Statement of Tax Qualification of the Consolidation 2.2.1
Straddle Period Tax Proceeding 7.17.4(ii)
Survival Period 12.1.3
System Plans 5.12.2
Taking 7.15.2
Target Working Capital Schedule 2.1
TCIH Preamble
TCI System Plans 5.12.1
Transitioned Employees 7.7.1
UCTC Preamble
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
Upgrade Completion Shortfall Amount Schedule 2.1
Upgrade Completion Shortfall Mile 7.3.3
Voluntarily Discharge 7.17.4(iii)
Voluntary Discharge 7.17.4(iii)
Working Capital Schedule 2.1
Working Capital Adjustment Schedule 2.1
Year 2000 Readiness 7.28.1
Year 2000 Ready 7.28.1
Year 2000 Remediation Program 7.28.1
</TABLE>
2. THE CONSOLIDATION.
2.1. Required Assets and Assumed Liabilities. SCHEDULE 2.1 lists the
assets, properties, and rights that constitute the "REQUIRED ASSETS," and the
liabilities and obligations that are the "ASSUMED LIABILITIES." From and after
the Closing, Cox shall cause Cable Sub and Cable Sub's Subsidiaries to perform
the Assumed Liabilities, and none of AT&T, the AT&T Cable Subsidiaries or the
Non-Consolidated Entities shall have any liability with respect to the Assumed
Liabilities
2.2. Consolidation Outline.
2.2.1. AT&T shall use its commercially reasonable efforts to
deliver to Cox within 60 days following the execution of this Agreement (i) the
Consolidation Outline meeting all of the requirements of Section 2.2.2 (and
consistent with all of the other provisions of this Agreement), pursuant to
which the Required Assets shall be consolidated in Cable Sub and its
Subsidiaries (the "CONSOLIDATION OUTLINE"), (ii) a "STATEMENT OF TAX
QUALIFICATION OF THE CONSOLIDATION" setting forth for each step of the
Consolidation the section of the Code under which each transaction will be
reported by AT&T for income Tax purposes, and (iii) a list identifying the
Consolidated Entities and the Non-Consolidated Entities
2.2.2. The Consolidation Outline shall set forth in all
material detail the steps to be taken to effect the Consolidation and the
transactions to be undertaken to effect each step. The Consolidation Outline
shall present a Consolidation which AT&T in good faith believes, assuming
compliance by the parties with all of the terms, covenants and provisions of
this Agreement, and assuming satisfaction of all the conditions to Closing
(other than the condition to Closing set forth in Section 8.2.5), would result
in the condition to Closing set forth in Section 8.2.5 being able to be
satisfied on the Closing Date. The Consolidation Outline shall provide for the
Consolidation to be effected in a manner such that (i) following the
Consolidation and immediately prior to the Closing on the Closing Date, Cable
Sub will own, directly or through one or more wholly-owned Subsidiaries, all of
the Required Assets comprising the Baton Rouge Active Business and all of the
Required Assets comprising the Tulsa Active Business in a manner such that Cable
Sub will be engaged in the active conduct of a trade or business within the
meaning of Code Section 355(b)(1)(A) immediately prior to and at the time of the
Separation; (ii) as of the Closing Date, neither the Baton Rouge Active Business
nor the Tulsa Active Business will have been acquired during the five years
preceding the
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Closing Date in a transaction in which gain or loss was recognized in whole or
in part within the meaning of Code Section 355(b)(2)(C), and control of a
corporation (as defined in Code Section 368(c)) which (at the time of
acquisition of control) was conducting all or any portion of the Baton Rouge
Active Business or all or any portion of the Tulsa Active Business will not have
been acquired during the five years preceding the Closing Date other than in
transactions in which gain or loss was not recognized in whole or in part within
the meaning of Code Section 355(b)(2)(D); (iii) Cable Sub is not (and on the
Closing Date will not be) an investment company, and no two parties to any
transaction which the Statement of Tax Qualification of the Consolidation
indicates will be reported as a reorganization under Code Section 368(a)(1) are
(or immediately before such transaction will be), investment companies, in each
case as defined in Code Section 368(a)(2)(F)(iii) and (iv); (iv) immediately
prior to the Separation, Cable Sub will own, directly or through wholly-owned
Subsidiaries, all of the Required Assets and no other assets, and the
Consolidated Entities will have no liabilities other than the Assumed
Liabilities and the Indemnified Liabilities; and (v) nothing in the
Consolidation Outline or in this Agreement shall prohibit a sale or other
disposition of the Nevada/Utah Systems at any time following the Closing Date
(the "NEVADA/UTAH SYSTEMS SALE") in the form of a sale of assets by Peak or an
exchange of assets qualifying in whole or in part under Code Section 1031
(including through a qualified intermediary) by Peak (a "PEAK ASSET
DISPOSITION"), and a Peak Asset Disposition shall not constitute a breach of
this Agreement. Cox shall not and shall not permit Peak or any Affiliate of Cox
to dispose of (or enter into an agreement, understanding or arrangement to
dispose of) the Nevada/Utah Systems (other than by a Peak Asset Disposition)
within two years following the Closing Date without the prior written consent of
AT&T, which consent shall not be unreasonably withheld. If the Consolidation
Outline provides for the distribution by AT&T to Cox of all of the outstanding
stock of more than one Subsidiary of AT&T, then all references to "Cable Sub"
throughout this Agreement shall be deemed to be references to each such
Subsidiary.
2.2.3. The Consolidation Outline may be amended by AT&T after
delivery to Cox hereunder, provided that (i) AT&T delivers to Cox, not less than
45 days prior to the Closing Date, a copy of the Consolidation Outline with the
proposed amendments, together with a revised Statement of Tax Qualification of
the Consolidation setting forth for each step of the Consolidation pursuant to
the amended plan the section of the Code under which each transaction will be
reported by AT&T for income Tax purposes, and a revised list identifying the
Consolidated Entities and the Non-Consolidated Entities, (ii) the amended
Consolidation Outline meets all of the requirements set forth in Section 2.2.2
(and is consistent with all of the other provisions of this Agreement), and
(iii) such amendment would not render Franchise Consents theretofore obtained
invalid or cause any significant delay with respect to the obtainment of the
Franchise Consents pending as of the date such amendment is proposed.
2.2.4. Within 90 days following the date of this Agreement
(or, if later, within 15 days following the date AT&T delivers to Cox an amended
Consolidation Outline pursuant to Section 2.2.3), AT&T shall deliver to Cox a
schedule listing all jurisdictions where any of the Consolidated Entities has
filed an income Tax Return for any taxable period ending on or after December
31, 1996, or will file an income Tax Return pursuant to Section 7.17.1 (assuming
compliance by Cox with
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Section 7.17 with respect to such Tax Returns) for any taxable period ending on
or prior to the Closing Date, and indicating whether each such Tax Return is a
Consolidated Tax Return.
2.3. Review of the Consolidation Outline. AT&T shall keep Cox advised
with respect to the preparation of the Consolidation Outline. Cox agrees to
evaluate the Consolidation Outline in good faith to determine whether, in the
good faith judgment of Cox, assuming compliance by the parties with all of the
terms, covenants and provisions of this Agreement, and assuming satisfaction of
all of the conditions to Closing (other than the condition to Closing set forth
in Section 8.3.7), effectuation of the Consolidation pursuant to the
Consolidation Outline would result in the condition to Closing set forth in
Section 8.3.7 being able to be satisfied on the Closing Date (the "COX REVIEW
CONDITION"). AT&T agrees to make available to Cox such additional information
relating to the Consolidation Outline as Cox shall reasonably request in
connection with such evaluation by Cox. Within thirty (30) days following Cox's
receipt from AT&T of the Consolidation Outline pursuant to Section 2.2.1 (or
such later period as may be mutually agreed by AT&T and Cox), Cox shall give
written notice (the "COX REVIEW NOTICE") to AT&T stating whether the
Consolidation Outline satisfies the Cox Review Condition; if Cox notifies AT&T
that the Cox Review Condition is satisfied, then the Consolidation Outline shall
be deemed accepted by Cox. If within such period Cox notifies AT&T that the
Consolidation Outline does not satisfy the Cox Review Condition ("NOTICE OF
FAILURE OF COX REVIEW CONDITION"), then each of Cox and AT&T shall have the
right to terminate this Agreement by written notice delivered to the other
within fifteen (15) days following the date AT&T receives the Notice of Failure
of Cox Review Condition. If AT&T (i) in good faith determines within 60 days
following the date of this Agreement (or such later period as may be mutually
agreed by AT&T and Cox) that AT&T is not able to deliver to Cox a Consolidation
Outline that both (A) meets all of the requirements of Section 2.2.2 (and is
consistent with all of the other provisions of this Agreement) and (B) would not
result in AT&T and its Affiliates, in the aggregate, incurring income Tax
liabilities in excess of $100,000,000 as a result of income or gain required to
be taken into account under Treasury Regulations Section 1.1502-13 with respect
to the Reorganization (taking into account any losses required to be taken into
account by AT&T or any Subsidiary of AT&T under Treasury Regulations Section
1.1502-13 as a result of the Reorganization, but without taking into account any
net operating losses, credits, or other similar items), (ii) delivers to Cox
written notice to that effect ("NOTICE OF FAILURE OF AT&T CONDITION"), and (iii)
advises Cox in all material respects as to the basis for that conclusion, then
each of AT&T and Cox shall have the right to terminate this Agreement by written
notice delivered to the other within fifteen (15) days following the date such
notice is received by Cox. If Cox accepts the Consolidation Outline proposed by
AT&T pursuant to this Section 2.3, or if AT&T and Cox mutually agree in writing
to modify the Consolidation Outline, such acceptance (provided the Consolidation
Outline as delivered by AT&T shall not have been modified) or mutual agreement
(with respect to the Consolidation Agreement as modified) shall be deemed a
representation by AT&T and Cox, respectively, that, assuming compliance by the
parties with all the terms, covenants and provisions of this Agreement, and
assuming satisfaction of all the conditions to Closing (other than the
conditions to Closing set forth in Section 8.2.5 and Section 8.3.7,
respectively), tax counsel to AT&T and Cox, respectively, is not aware of any
reason relating to the Consolidation Outline why the condition to Closing set
forth in Section 8.2.5 and Section 8.3.7, respectively, of this Agreement would
not be satisfied. If (i) AT&T
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fails to deliver the Consolidation Outline to Cox within sixty (60) days
following the date of this Agreement (or such later period as may be mutually
agreed by AT&T and Cox), and (ii) AT&T fails to deliver a Notice of Failure of
AT&T Condition to Cox within such period, then Cox shall have the right to
terminate this Agreement by written notice delivered to AT&T at any time
following the expiration of such period. If Cox fails to deliver the Cox Review
Notice to AT&T within thirty (30) days following the date Cox receives the
Consolidation Outline (or such later period as may be mutually agreed by AT&T
and Cox), then AT&T shall have the right to terminate this Agreement by written
notice delivered to Cox at any time following the expiration of such period.
2.4. Consolidation. At or prior to the Closing, and pursuant to the
terms of this Agreement and in accordance with the Consolidation Outline, the
Required Assets, the Assumed Liabilities and the Indemnified Liabilities shall
be consolidated in Cable Sub and its Subsidiaries (the "CONSOLIDATION").
3. THE SEPARATION.
3.1. The Separation. Subject to the terms and conditions of this
Agreement, on the Closing Date, AT&T shall redeem all of the shares of common
stock, par value $1.00 per share, of AT&T held by Cox as set forth on SCHEDULE
3.1 (as may be adjusted between the date hereof and the Closing Time by reason
of the receipt of any additional shares of capital stock by Cox in respect of
such shares of common stock or by reason of the conversion of such common stock
into shares of capital stock or other securities, whether pursuant to a stock
dividend, other dividend or distribution on such common stock (other than cash
dividends), stock split, stock combination, other transaction that changes such
securities into any other securities or otherwise, the "AT&T SHARES") in
consideration of the transfer and distribution to Cox of all of the issued and
outstanding capital stock of Cable Sub (the "CABLE SUB SHARES") as follows:
3.1.1. AT&T shall assign, transfer, convey and deliver to Cox
the Cable Sub Shares, free and clear of all Encumbrances of any nature
whatsoever. Such assignment, transfer, conveyance and delivery shall be
evidenced by duly endorsed in blank share certificates or by instruments of
transfer reasonably satisfactory in form and substance to Cox and its counsel;
and
3.1.2. Cox shall assign, transfer, convey and deliver to AT&T
the AT&T Shares, free and clear of all Encumbrances of any nature whatsoever.
Such assignment, transfer, conveyance and delivery shall be evidenced by duly
endorsed in blank share certificates or by instruments of transfer reasonably
satisfactory in form and substance to AT&T and its counsel.
4. REPRESENTATIONS AND WARRANTIES OF AT&T.
AT&T represents and warrants to Cox as of the date hereof and as of the
Closing, as follows; provided, however, that in the case of the representations
and warranties set forth in Sections 4.3,
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4.4, 4.5 and 4.6, such representations and warranties are made subject to the
provisions of Section 5.24 and Section 7.31:
4.1. Organization, Standing and Authority. AT&T is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and is qualified to conduct business as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it
requires it to be so qualified, other than such exceptions as, individually or
in the aggregate, would not have a Material Adverse Effect or a material adverse
effect on the ability of AT&T to perform its obligations under this Agreement or
the AT&T Related Agreements.
4.2. Authorization and Binding Obligation. AT&T has the corporate power
and authority to execute and deliver this Agreement and the AT&T Related
Agreements to be executed and delivered by it and to carry out and perform all
of its other obligations under the terms of this Agreement and the AT&T Related
Agreements to which it is a party. All corporate action by AT&T necessary for
the authorization, execution, delivery and performance by AT&T of this Agreement
and the AT&T Related Agreements has been taken, and such action has not been
rescinded, repealed or amended. This Agreement has been duly executed and
delivered by AT&T, and this Agreement and the AT&T Related Agreements constitute
or will, when executed and delivered, constitute the valid and legally binding
obligations of AT&T, in each case enforceable against it in accordance with
their respective terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally; and
(ii) as the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
4.3. Capitalization.
4.3.1. As of the Closing, no shares of capital stock will be
held in Cable Sub's treasury.
4.3.2. AT&T (i) will own as of the Closing Time, record and
beneficial title to all of the issued and outstanding shares of capital stock of
Cable Sub and (ii) except as set forth on SCHEDULE 4.3, owns as of the date
hereof (or with respect to entities not yet formed, as of the date of formation)
and will own as of the Closing Time, direct or indirect beneficial title to all
of the issued and outstanding shares of capital stock of, or other ownership
interest in, each Consolidated Entity, in each case free and clear of all
claims, Encumbrances and preemptive or other rights or options of any nature
whatsoever. As of the Closing Time, Cable Sub or a Subsidiary of Cable Sub will
own record and beneficial title to all of the issued and outstanding shares of
capital stock of, or other ownership interest in, each of the Subsidiaries of
Cable Sub, free and clear of all claims, Encumbrances and preemptive or other
rights or options of any nature whatsoever. The authorization of no Person other
than AT&T is required in order to consummate the transactions contemplated
herein by virtue of any such Person having an equitable or beneficial interest
in any Consolidated Entity or any Non-Consolidated Entity. All of the
outstanding shares of capital stock of, or other
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ownership interest in, each of the Consolidated Entities are authorized, validly
issued, fully paid and nonassessable and not subject to any preemptive rights.
Except for the transactions contemplated by this Agreement and the AT&T Related
Agreements, there are no outstanding options, warrants, calls, subscriptions or
other rights or agreements or commitments or obligations of AT&T or any of the
Consolidated Entities to issue, transfer or sell any shares of capital stock of,
or other ownership interest in, any of the Consolidated Entities, nor are there
outstanding any securities or obligations which are convertible into or
exchangeable for any shares of capital stock of, or other ownership interest in,
any of the Consolidated Entities.
4.4. Absence of Conflicting Agreements. Except for the Consents listed
on SCHEDULE 4.4 (the "AT&T CONSENTS"), the Cox Consents (and any other consents,
authorizations or approvals required for Cox to perform its obligations under
this Agreement and the Cox Related Agreements), the Partnership Consents and
compliance with the HSR Act, no consent, approval, permit or authorization of,
or declaration to or filing with any Governmental Authority or any other third
party is required under any Legal Requirement applicable to AT&T, under AT&T's
certificate of incorporation or bylaws or other governing instrument or under
any agreement, instrument, license or permit to which AT&T is a party or by
which AT&T may be bound, in order for AT&T to execute, deliver and perform its
obligations under this Agreement and the AT&T Related Agreements, except that no
representation or warranty is given with respect to any Consents the absence of
which would not, individually or in the aggregate, have a Material Adverse
Effect. Subject to obtaining the AT&T Consents, the Cox Consents (and any other
consents, authorizations or approvals required for Cox to perform its
obligations under this Agreement and the Cox Related Agreements), and the
Partnership Consents and compliance with the HSR Act, the execution, delivery
and performance of this Agreement and the AT&T Related Agreements by AT&T will
not (i) violate the certificate of incorporation or bylaws or other governing
instruments of AT&T; (ii) violate any Legal Requirement applicable to AT&T with
respect to the Assets or the business or operations of the Systems; or (iii)
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, accelerate or permit the acceleration of any
performance required by the terms of, or result in the creation or imposition of
any Encumbrance under, any agreement, instrument, license or permit to which
AT&T is a party or by which AT&T may be bound and by which the Assets or the
business or operations of the Systems are affected; excluding from the foregoing
clause (iii) such violations, conflicts, terminations, breaches, defaults and
accelerations as would not, individually or in the aggregate, have a Material
Adverse Effect or a material adverse effect on the ability of AT&T to perform
its obligations under this Agreement or any of the AT&T Related Agreements.
4.5. Reorganization.
4.5.1. Neither AT&T nor any Affiliate of AT&T has taken any
action, or failed to take any action required under the Code to be taken, which
action or failure to take action would jeopardize the treatment of the
Separation as tax-free to Cox either (i) under Code Sections 368(a)(1)(D) and
355(a) or (ii) under Code Section 355(a). Neither AT&T nor any Affiliate of AT&T
has taken any action, or failed to take any action required under the Code to be
taken, which
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action or failure to take action would impede satisfaction of the condition to
Closing set forth in Section 8.2.5 of this Agreement.
4.5.2. AT&T did not acquire, and as of the Closing Date will
not have acquired, any of the stock of Cable Sub by reason of any transaction
which occurred within five years prior to the Closing Date in which gain or loss
was recognized in whole or in part within the meaning of Code Section
355(a)(3)(B).
4.5.3. AT&T will be engaged immediately after the Separation
in the active conduct of a trade or business within the meaning of Code Section
355(b)(1)(A).
4.5.4. Cable Sub will be engaged immediately prior to and at
the time of the Separation in the active conduct of a trade or business within
the meaning of Code Section 355(b)(1)(A). Neither the Baton Rouge Active
Business nor the Tulsa Active Business was acquired within the five years prior
to the date of this Agreement (or will have been acquired during the five years
preceding the Closing Date) in a transaction in which gain or loss was
recognized in whole or in part within the meaning of Code Section 355(b)(2)(C),
and control of a corporation (as defined in Code Section 368(c)) which (at the
time of acquisition of control) was conducting the Baton Rouge Active Business
or the Tulsa Active Business was not acquired within the five years prior to the
date of this Agreement (and will not have been acquired during the five years
preceding the Closing Date) other than in transactions in which gain or loss was
not recognized in whole or in part within the meaning of Code Section
355(b)(2)(D).
4.5.5. As of the date of this Agreement, to the knowledge of
the management of AT&T, based on public filings, no stockholder of AT&T owns 5%
or more of the stock of AT&T. To the knowledge of the management of AT&T, there
is no plan or intention on the part of any shareholder or security holder of
AT&T (other than Cox or any of its Affiliates) to sell, exchange or otherwise
dispose of any of its stock or securities in AT&T following the Separation other
than in public market transactions in the ordinary course of business and other
than in transactions unrelated to the Reorganization which would not cause the
Separation to fail to qualify as tax-free to Cox either (i) under Code Sections
368(a)(1)(D) and 355(a) or (ii) under Code Section 355(a).
4.5.6. Neither AT&T nor Cable Sub is an investment company as
defined in Code Section 368(a)(2)(F)(iii) and (iv). No two parties to any
transaction which the Statement of Tax Qualification of the Consolidation
indicates will be reported as a reorganization under Code Section 368(a)(1) are
(or immediately before such transaction will be) an investment company as
defined in Code Section 368(a)(2)(F)(iii) and (iv).
4.6. Ownership of the Required Assets; Active Business. SCHEDULE 4.6
lists the name of each Subsidiary of AT&T that holds Required Assets as of the
date of this Agreement and (a) indicates (i) the Required Assets held by such
Subsidiary; (ii) whether such Subsidiary holds Required Assets comprising the
Baton Rouge Active Business or the Tulsa Active Business (or both); (iii) the
Required Assets held by such Subsidiary other than Assets comprising the Baton
Rouge
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Active Business and the Tulsa Active Business, if any; and (iv) whether such
Subsidiary holds Excluded Assets and, if so, whether such Subsidiary holds
assets unrelated to and not used principally in the business and operations of
the Systems; and (b) contains an ownership chart setting forth in all material
detail the ownership of such Subsidiary by AT&T through one or more direct and
indirect Subsidiaries of AT&T. Each Subsidiary that is listed in SCHEDULE 4.6 as
holding Assets comprising the Baton Rouge Active Business is engaged in the
active conduct of a trade or business within the meaning of Code Section
355(b)(1)(A) assuming for purposes of this representation that such Subsidiary
owns no assets other than the Assets comprising the Baton Rouge Active Business
held by such Subsidiary, and each Subsidiary that is listed in SCHEDULE 4.6 as
holding Assets comprising the Tulsa Active Business is engaged in the active
conduct of a trade or business within the meaning of Code Section 355(b)(1)(A)
assuming for purposes of this representation that such Subsidiary owns no assets
other than the Assets comprising the Tulsa Active Business held by such
Subsidiary.
5. REPRESENTATIONS AND WARRANTIES OF THE AT&T CABLE SUBSIDIARIES.
Each of the AT&T Cable Subsidiaries jointly and severally represents
and warrants to Cox as of the date hereof and as of the Closing (or, if a
different date is specified in this Article 5, as of such date), as follows;
provided, however, that such representations and warranties are made subject to
the provisions of Section 5.24 and Section 7.31:
5.1. Organization, Standing and Authority. Each of the Consolidated
Entities and each of the Non-Consolidated Entities is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of the state of its incorporation or formation, as
applicable, and is qualified to conduct business as a foreign entity in each
jurisdiction in which the property owned, leased or operated by it requires it
to be so qualified, other than such exceptions as, individually or in the
aggregate, would not have a Material Adverse Effect. Each of the Consolidated
Entities and each of the Non-Consolidated Entities has the requisite corporate,
limited liability company or partnership power and authority (i) to own, lease
and use the Assets as presently owned, leased and used by it; and (ii) to
conduct the business and operations of the Systems as presently conducted by it.
Except as set forth on SCHEDULE 5.1, none of the Consolidated Entities or
Non-Consolidated Entities is a participant in any joint venture or partnership
with any other Person, with respect to any part of the business or operations of
the Systems or the Assets, including advertising sales joint ventures or
partnerships that relate exclusively to the Systems.
5.2. Authorization and Binding Obligation. Each of the AT&T Cable
Subsidiaries has the corporate power and authority to execute and deliver this
Agreement and each of the AT&T Related Agreements to be executed and delivered
by it and to carry out and perform all of its other obligations under the terms
of this Agreement and the AT&T Related Agreements to which it is a party. All
corporate action by each of the AT&T Cable Subsidiaries necessary for the
authorization, execution, delivery and performance by it of this Agreement and
the AT&T Related Agreements has been taken, and such action has not been
rescinded, repealed or amended. This Agreement has been duly executed and
delivered by each of the AT&T Cable Subsidiaries, and this Agreement and the
AT&T Related Agreements constitute or will, when executed and delivered,
constitute the valid and legally
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binding obligations of each party thereto, in each case enforceable against it
in accordance with their respective terms, except (i) as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally; and (ii) as the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
5.3. Absence of Conflicting Agreements. Except for the AT&T Consents,
the Cox Consents (and any other consents, authorizations or approvals required
for Cox to perform its obligations under this Agreement and the Cox Related
Agreements), the Partnership Consents and compliance with the HSR Act, no
consent, approval, permit or authorization of, or declaration to or filing with
any Governmental Authority or any other third party is required under any Legal
Requirement applicable to the Consolidated Entities or the Non-Consolidated
Entities, under the constituent documents of each such entity or under any
agreement, instrument, license or permit to which any such entity is party or by
which any of them may be bound in order for them to execute, deliver and perform
their obligations under this Agreement and the AT&T Related Agreements, except
that no representation or warranty is given with respect to any Consents the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect. Subject to obtaining the AT&T Consents, the Cox Consents (and
any other consents, authorizations or approvals required for Cox to perform its
obligations under this Agreement and the Cox Related Agreements), and the
Partnership Consents and compliance with the HSR Act, the execution, delivery
and performance of this Agreement by each of the AT&T Cable Subsidiaries and the
execution, delivery and performance of the AT&T Related Agreements by the
Consolidated Entities and the Non- Consolidated Entities will not (i) violate
the certificate of incorporation or bylaws or other governing instruments of any
of the Consolidated Entities or Non-Consolidated Entities; (ii) violate any
Legal Requirement applicable to any of the Consolidated Entities or
Non-Consolidated Entities with respect to the Assets or the business or
operations of the Systems; or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, accelerate or
permit the acceleration of any performance required by the terms of, or result
in the creation or imposition of any Encumbrance under, any agreement,
instrument, license or permit to which any of the Consolidated Entities or
Non-Consolidated Entities is a party or by which any such party may be bound and
by which the Assets or the business or operations of the Systems are affected;
excluding from the foregoing clause (iii) such violations, conflicts,
terminations, breaches, defaults and accelerations as would not, individually or
in the aggregate, have a Material Adverse Effect or a material adverse effect on
the ability of (x) either of the AT&T Cable Subsidiaries to perform its
obligations under this Agreement, (y) any of the Consolidated Entities or
Non-Consolidated Entities to perform its obligations under any of the AT&T
Related Agreements to which it is a party or (z) Peak to perform its obligations
under the Peak Acquisition Agreement.
5.4. Governmental Permits. SCHEDULE 5.4 includes a true and complete
list of all Franchises and all other material Governmental Permits. True and
complete copies of the Franchises and other Governmental Permits disclosed on
SCHEDULE 5.4 (together with any and all amendments and any proposals or material
correspondence related thereto) have been delivered to Cox. Except
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as set forth on SCHEDULE 5.4, the Franchises contain all of the commitments and
obligations of the Consolidated Entities and the Non-Consolidated Entities to
the applicable Governmental Authorities with respect to the construction,
ownership and operation of the Systems. Except as set forth on SCHEDULE 5.4, the
Governmental Permits are valid under all applicable Legal Requirements according
to their terms and are currently in full force and effect. Except as listed on
SCHEDULE 5.4, there is no legal action, governmental proceeding or investigation
pending or, to the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, threatened to terminate, suspend or modify any
Governmental Permit, and the Consolidated Entities and Non-Consolidated Entities
are and, to the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, each other party thereto is, in compliance with the
terms and conditions of all of the Governmental Permits and with other
applicable requirements of all Governmental Authorities relating to the
Governmental Permits, including all requirements for notification, filing,
reporting, posting and maintenance of logs and records, except for such
noncompliance which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth on SCHEDULE 5.4, no Person (including any
Governmental Authority) has as of the date hereof any right to acquire any
interest in the Systems, the Partnership Interest or the Assets (including any
right of first refusal or similar right), other than rights of condemnation or
eminent domain afforded by law or upon the termination of or default under any
Franchise. The Franchises marked with an asterisk on SCHEDULE 5.4 constitute all
of the communities where the local franchising or other regulatory authority has
certified to regulate rates charged to customers of the Systems pursuant to the
Cable Act or where a cable programming service rate complaint is pending before
the FCC.
5.5. Real Property. SCHEDULE 5.5 contains a list of all Real Property
owned, leased or occupied by any of the Consolidated Entities or
Non-Consolidated Entities with respect to the Systems and all easements or other
interests in Real Property to which any of the Consolidated Entities or
Non-Consolidated Entities is a party as of the date hereof with respect to the
Systems, except for easements from individual residential subscribers for the
installation of cable and equipment necessary for them to receive cable
television and other communications services and those easements and other
interests which if not held by any of the Consolidated Entities or Non-
Consolidated Entities (or Cable Sub and its Subsidiaries as of the Closing Time)
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as described on SCHEDULE 5.5, the AT&T Cable Subsidiaries have delivered
to Cox or will deliver to Cox prior to or with the Delayed Schedules, true and
complete copies of all deeds and leases (whether as lessor or lessee) pertaining
to such Real Property. All Real Property leases, if any, that are leased from or
to Affiliates of AT&T, Cable Sub or Peak are identified as such on SCHEDULE 5.5.
As to the Real Property which is designated in SCHEDULE 5.5 as being owned in
fee simple, except as set forth in SCHEDULE 5.5, as of the date hereof, such fee
owner has, or Cable Sub and its Subsidiaries as of the Closing Date will have,
fee simple title to such premises and all buildings, improvements and fixtures
thereon, free and clear of all Encumbrances, except for Permitted Encumbrances
and Encumbrances listed in EXHIBIT C (which Encumbrances listed on EXHIBIT C
will be released prior to the Closing). As to the Real Property which is
designated in SCHEDULE 5.5 as being leased, except where the failure of the
representations made in this sentence to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect, as of the date
hereof, a Consolidated Entity or Non-Consolidated Entity is, and, as
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of the Closing Date, Cable Sub and its Subsidiaries will be, the sole owner of
the leasehold interest in such Real Property, each such lease is valid and
subsisting and in full force and effect and, as of the date hereof, no other
party to such lease has given written notice to Peak or a Consolidated Entity or
Non-Consolidated Entity of or made a written claim with respect to any breach or
default thereof, and none of Peak or any Consolidated Entity or Non-Consolidated
Entity is aware of any fact giving rise to a breach or default thereof. Subject
to Permitted Encumbrances, except as otherwise disclosed in SCHEDULE 5.5 and
except where the failure of the representations made in this sentence to be true
and correct would not, individually or in the aggregate, have a Material Adverse
Effect, all Real Property listed on SCHEDULE 5.5 (including the improvements
thereon) (i) is in reasonable operating condition and repair (subject to normal
wear and tear) consistent with its present use, (ii) is available for immediate
use in the conduct of the business or operations of the Systems, (iii) complies
in all material respects with all applicable building or zoning codes or
restrictive covenants and the regulations of any Governmental Authority having
jurisdiction, and (iv) has full legal and practical access to public roads or
streets and has all utilities and services necessary for the proper and lawful
conduct and operation of the Systems as presently utilized. Except where the
failure of the representations made in this sentence to be true and correct
would not, individually or in the aggregate, have a Material Adverse Effect, all
buildings, towers, guy wires and anchors, earth-receiving dishes and related
facilities used in the operations of the Systems are located entirely on the
Real Property, and together with all pole attachments, cable plant and cable
installations, equipment and facilities used in connection with the Systems, are
maintained, placed and located in accordance with the provisions of all
applicable Legal Requirements, deeds, leases, licenses, permits or other legally
enforceable arrangements. No condemnation of any of the Real Property has
occurred, is pending or, to the knowledge of any Consolidated Entity or
Non-Consolidated Entity, threatened. Except as set forth on SCHEDULE 5.5, each
Person upon or under or across whose property any of the Assets are located,
maintained, installed or operated (other than drop lines to customer dwellings)
has granted to the Consolidated Entities or the Non-Consolidated Entities such
easements, licenses or rights of way as are necessary for the location,
maintenance, installation and operation of such Assets upon, over or under such
property (the "EASEMENTS"), and subject to Permitted Encumbrances and
Encumbrances listed on EXHIBIT C (which Encumbrances listed on EXHIBIT C will be
released prior to the Closing), as of the date of this Agreement, the
Consolidated Entities and the Non-Consolidated Entities have, and, as of the
Closing Date, Cable Sub and its Subsidiaries will have, a right to use the
Easements, except where the failure to have any such Easements would not,
individually or in the aggregate, have a Material Adverse Effect.
5.6. Tangible Personal Property. Except with respect to leased
property, as of the date hereof, the Consolidated Entities and the
Non-Consolidated Entities have (subject to Encumbrances listed on EXHIBIT C, all
of which will be released prior to the Closing), and as of the Closing Date,
Cable Sub and its Subsidiaries will have, good title to all Tangible Personal
Property, and as of the Closing Date, none of the Tangible Personal Property
will be subject to any Encumbrance, except for Permitted Encumbrances. Except as
set forth in SCHEDULE 5.6, the Tangible Personal Property is in reasonable
operating condition and repair (subject to normal wear and tear) and is
available for immediate use in the conduct of the business or operations of the
Systems, except for that which is subject to routine maintenance or repair. All
items of cable plant, earth station and headend
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equipment included in the Tangible Personal Property (i) have been maintained in
a manner consistent in all material respects with generally accepted standards
of good engineering practice and (ii) will permit the Systems to operate in all
material respects in accordance with the terms of the Governmental Permits.
5.7. Contracts. Except as described on SCHEDULE 5.7, none of the
Consolidated Entities or the Non-Consolidated Entities is a party to any of the
following that relate to the Systems (other than any of the following that are
Excluded Assets): (i) pole attachment or line agreements and joint pole or line
agreements, (ii) leases of personal property for a term exceeding one year or
requiring payments of more than $50,000, (iii) agreements pursuant to which any
of the Systems receives or provides advertising sales representation services,
(iv) agreements pursuant to which any of the Systems has constructed or agreed
to construct for third parties an institutional network or otherwise provides to
third parties telecommunications services other than one-way video, (v)
agreements with bulk-billed customers, (vi) agreements with commercial customers
(other than subscription agreements for cable television services), (vii)
construction and development agreements (other than agreements with individual
installers and agreements where the remaining amount payable thereunder will be
less than $50,000 as of the Closing Date), (viii) noncompetition agreements or
rights of first refusal that relate to the Systems, and (ix) any agreement for
the provision by one or more third parties of telephony, data or other services
through the facilities of one or more of the Systems, which is exclusive or
which cannot be terminated at the Closing without any penalty. SCHEDULE 5.7
contains a true and correct list of all other Contracts except for: (A)
subscription agreements for cable television services provided by the Systems
with customers that are not bulk-billed, (B) subscription agreements for
communications services (other than cable television services) with residential
customers, (C) access agreements for multiple dwelling units that are not
bulk-billed, (D) oral employment contracts and miscellaneous service contracts
terminable at will or on no more than 30 days' notice without penalty and (E)
any other contract not required to be listed pursuant to the first sentence of
this Section 5.7 and not involving either liabilities under such Contract
exceeding $50,000 per year or any other material nonmonetary obligation.
Notwithstanding the foregoing, SCHEDULE 5.7 contains a separate and complete
list of all retransmission consent agreements relating to the Systems that are
not Excluded Assets, showing the expiration date of each. The AT&T Cable
Subsidiaries have delivered, or will deliver prior to or contemporaneously with
the Delayed Schedules, to Cox true and complete copies of all written Contracts
listed in SCHEDULE 5.7. All of the Contracts listed in SCHEDULE 5.7 are valid
and binding and, to the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, in full force and effect and legally enforceable in
accordance with their terms upon the other parties thereto. There is not under
any Contract any default by any of the Consolidated Entities or Non-Consolidated
Entities or, to the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, any other party thereto or event which, after notice
or lapse of time, or both, would constitute such a default, except for such
defaults which, individually or in the aggregate, would not have a Material
Adverse Effect. Except as disclosed on SCHEDULE 5.7, to the knowledge of any of
the Consolidated Entities or Non-Consolidated Entities, (x) there has not been
any threatened cancellation of any Contracts (other than the cancellation of
cable or other communications service by customers at normal and customary
levels), (y) there are no outstanding disputes thereunder and (z) there is no
basis for any claim of breach or default thereunder, except for
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such occurrences under clauses (x), (y) and (z) which, individually or in the
aggregate, would not have a Material Adverse Effect. Other than where expressly
noted in SCHEDULE 5.7, no Affiliate of AT&T (other than the Consolidated
Entities or the Non-Consolidated Entities) is a party to any of the personal
property leases disclosed on SCHEDULE 5.7.
5.8. Complete Systems. Except for the Excluded Assets, the Assets
comprise all of the assets (without material exception) necessary to conduct the
business and operations of the Systems as presently conducted.
5.9. Trademarks, Trade Names and Copyrights. Except as disclosed on
SCHEDULE 5.9 or included in Excluded Assets, no Consolidated Entity or
Non-Consolidated Entity owns or uses any patent, patent right or copyright that
is material to the operation of the Systems, and none of the Consolidated
Entities or Non-Consolidated Entities is a party to any patent or copyright
license or royalty agreement that is material to its operation of the Systems,
except for software licenses, licenses in respect of program material and
obligations under the Copyright Act applicable to cable television systems
generally. Except as disclosed on SCHEDULE 5.9, the Consolidated Entities and
the Non-Consolidated Entities possess or have the right to use, and as of the
Closing Date Cable Sub and its Subsidiaries will possess or have the right to
use, all Intangibles used in the operation and conduct of the business of the
Systems without any conflicts with the rights of others that, individually or in
the aggregate, would have a Material Adverse Effect. With respect to the
Intangibles, either (i) as of the date hereof, the Consolidated Entities and the
Non-Consolidated Entities own, and, as of the Closing Date, Cable Sub and its
Subsidiaries will own, such Intangibles, free and clear of all Encumbrances,
except for Permitted Encumbrances and Encumbrances listed on EXHIBIT C (which
Encumbrances listed on EXHIBIT C will be released prior to the Closing), or (ii)
as of the date hereof, the Consolidated Entities and the Non-Consolidated
Entities have, and, as of the Closing Date, Cable Sub and its Subsidiaries will
have, the valid and enforceable right to use such Intangibles. None of the
Consolidated Entities or Non-Consolidated Entities is aware that it is
infringing upon or otherwise acting adversely to any trademarks, trade names,
copyrights, patents, patent applications, know-how, methods or processes owned
by any other Person, and there is no claim or action pending, or to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
threatened, with respect thereto, except for any infringement, claims or actions
that would not, individually or in the aggregate, have a Material Adverse
Effect.
5.10. Information on Systems.
5.10.1. SCHEDULE 5.10.1 lists for each of the Systems, as of
the date referenced in SCHEDULE 5.10.1, (i) the approximate total number of
miles of fully completed and operational trunk and distribution cable,
differentiating the approximate number of miles of aerial plant and the
approximate number of miles of underground plant, (ii) the approximate number of
dwellings (as defined below) and commercial premises passed, (iii) the total
number of Equivalent Billing Units, the number of Equivalent Billing Units that
are residential and the number of Equivalent Billing Units that are commercial
or bulk-billed, (iv) the bandwidth capacity(ies) of the System specified in MHz
(indicating the approximate number of miles of plant in such System
corresponding to each
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bandwidth), (v) the number of channels activated throughout the System
(indicating the approximate number of miles of plant in such System
corresponding to the number of channels activated), (vi) the approximate number
of fiber route miles, and (vii) the average size of nodes expressed in terms of
homes passed.
5.10.2. As used in this Section 5.10, "dwellings" means a home
or other residential unit that can be legally serviced by a System by using no
more than 300 feet of drop cable.
5.10.3. The rates charged to customers for each class of
service (including equipment, installation and late fees) for each of the
Systems as of the date of this Agreement are set forth in SCHEDULE 5.10.3.
5.10.4. Each of the Systems duly and properly carries and
delivers the channels indicated in SCHEDULE 5.10.4. The Consolidated Entities
and the Non-Consolidated Entities have obtained all required FCC clearances for
the operation of each of the Systems in all necessary aeronautical frequency
bands.
5.10.5. Except as described in SCHEDULE 5.10.5, the Assets do
not include any multi-point distribution system, multi-channel multi-point
distribution system or satellite master antenna system that is not connected to
a System headend.
5.11. Financial Statements. The AT&T Cable Subsidiaries have provided
Cox with true and complete copies of (A) unaudited financial statements of each
of the Baton Rouge System and the Tulsa System, containing balance sheets and
statements of income (i) as at and for the 12 months ended December 31, 1998 and
(ii) as at and for the five months ended May 31, 1999, (B) audited financial
statements of Peak with respect to the Peak Systems, containing balance sheets
and statements of income as at and for the 12 months ended December 31, 1998,
and (C) unaudited financial statements of Peak with respect to the Peak Systems,
containing balance sheets and statements of income as at and for the five months
ended May 31, 1999 (collectively, the "FINANCIAL STATEMENTS"), together with a
certificate attached thereto evidencing delivery of the Financial Statements by
the AT&T Cable Subsidiaries and acknowledging receipt thereof by Cox. The
Financial Statements have been prepared in accordance with GAAP consistently
applied, except, in the case of the unaudited Financial Statements, for the
absence of statements of cash flows and footnotes and, in the case of the
interim Financial Statements, changes resulting from customary and recurring
year-end adjustments, none of which, individually or in the aggregate, are
expected to be material in amount, and except as specifically described in
SCHEDULE 5.11. The Financial Statements are in accordance with the books and
records of the AT&T Cable Subsidiaries or Peak, as the case may be, and present
fairly the operating income and financial condition of each of the Systems as at
their respective dates and the results of operations for the periods then ended.
Other than as described in SCHEDULE 5.11, none of the Financial Statements
materially understates the true costs and expenses of conducting the business or
operations of the Systems or materially inflates the revenue of the Systems
because of the provision of services or the bearing of costs or expenses or the
payment of fees by any other Person or for any other reason.
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5.12. Employee Benefit Plans.
5.12.1. Written descriptions of all written or unwritten
Employee Plans and material Compensation Arrangements (and any related insurance
policies, trusts, etc.) currently providing benefits to employees, former
employees or independent contractors of the Baton Rouge System and the Tulsa
System (the "TCI SYSTEM PLANS") have been made available to Cox, along with
copies of any currently available employee handbooks and any other documents
used to describe such TCI System Plans to the covered individuals. The TCI
System Plan that provides severance benefits to employees of the Baton Rouge
System and the Tulsa System is listed on SCHEDULE 5.12.1A, and a copy of such
TCI System Plan has been made available to Cox. All Employee Plans and material
Compensation Arrangements that will, after the Benefit Plan Conversion Date,
provide benefits to employees, former employees or independent contractors of
the Baton Rouge System and the Tulsa System are listed in SCHEDULE 5.12.1B (the
"AT&T SYSTEM PLANS"), and written descriptions of all such written or unwritten
AT&T System Plans (and any related insurance policies, trusts, etc.) have
been made available to Cox, along with copies of any currently available
employee handbooks and any other documents that will be used to describe such
AT&T System Plans to the covered individuals. Other than the TCI System Plans,
there is not now in effect, and other than the AT&T System Plans, there is not
scheduled as of the date hereof to become effective after the date hereof, any
new Employee Plan or Compensation Arrangement or any amendment to a TCI System
Plan or AT&T System Plan which will materially affect the benefits of employees,
former employees or independent contractors of the Baton Rouge System and the
Tulsa System.
5.12.2. All Employee Plans and material Compensation
Arrangements currently providing benefits to employees, former employees or
independent contractors of the Peak Systems are listed in SCHEDULE 5.12.2 (the
"PEAK SYSTEM PLANS" and, together with the TCI System Plans and the AT&T System
Plans, the "SYSTEM PLANS"), and written descriptions of any such written or
unwritten Peak System Plans (and any related insurance policies, trusts, etc.),
have been made available to Cox, along with copies of any currently available
employee handbooks and any other documents used to describe such Peak System
Plans to the covered individuals. A copy of the Peak System Plan that provides
severance benefits to employees of the Peak Systems will be made available to
Cox within 15 days after the date of this Agreement. There is not now in effect
or scheduled as of the date hereof to become effective after the date hereof,
any new Employee Plan or Compensation Arrangement or any amendment to a Peak
System Plan which will materially affect the benefits of employees, former
employees or independent contractors of the Peak Systems.
5.12.3. Each System Plan has been adopted, amended and
administered in compliance with its own terms and, where applicable, ERISA, the
Code, the Age Discrimination in Employment Act and any other applicable Legal
Requirements, except for such noncompliance which would not, individually or in
the aggregate, have a Material Adverse Effect.
5.12.4. No Multiemployer Plan provides or has ever provided
benefits to any employee or former employee of the Systems.
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5.12.5. None of AT&T or any of the Consolidated Entities or
Non-Consolidated Entities or any entity under common control with any of the
Consolidated Entities or Non-Consolidated Entities (under Sections 414(b), (c)
(m) and (o) of the Code) is aware of the existence of any governmental audit or
examination of any System Plan or of any facts which would lead them to believe
that any such audit or examination is pending or threatened. There exists no
action, suit or claim (other than routine claims for benefits) with respect to
any System Plan pending or, to the knowledge of any of the Consolidated Entities
or Non-Consolidated Entities and each entity under common control with any of
the Consolidated Entities or Non-Consolidated Entities (under Sections 414(b),
(c), (m) and (o) of the Code), threatened against any System Plan.
5.12.6. As of the Closing Time, none of Cable Sub or its
Subsidiaries shall be the plan sponsor of any Employee Plan or Compensation
Arrangement.
5.13. Labor Relations. None of the Consolidated Entities or
Non-Consolidated Entities has any written or oral contracts of employment with
any person employed as of the date of this Agreement directly and principally in
connection with the operation of the Systems (the "EMPLOYEES"), other than (i)
oral employment agreements terminable at will without penalty or (ii) those
listed in SCHEDULE 5.13. Each of the Consolidated Entities and each of the
Non-Consolidated Entities, in the operation of the Systems, has complied with
all applicable Legal Requirements relating to the employment of labor, including
those related to wages, hours, collective bargaining, occupational safety,
discrimination and the payment of social security and other payroll-related
taxes, except for such noncompliance which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as described on SCHEDULE 5.13,
none of the Consolidated Entities or Non-Consolidated Entities is a party to any
collective bargaining agreement or other contract with any labor organization
regarding any of the Employees, and none of the Consolidated Entities or
Non-Consolidated Entities has recognized or agreed to recognize and is required
to recognize any union or other collective bargaining representative of the
Employees. No union or other collective bargaining representative claims to
represent or has been certified as representing any of the Employees, nor has
any of the Consolidated Entities or Non-Consolidated Entities received any
requests from any party for recognition as a representative of the Employees for
collective bargaining purposes. The Employees are not engaged in or subject to
any organizing activity with respect to any labor organization and, to the
knowledge of any of the Consolidated Entities or Non- Consolidated Entities, no
such activity is threatened. There is no strike, work slowdown, picketing or any
other labor disputes or controversies or proceedings pending or threatened
between any of the Consolidated Entities or Non-Consolidated Entities, on the
one hand, and any of the Employees or any labor union or collective bargaining
representative, on the other hand, claiming to represent any of the Employees.
None of the Consolidated Entities or Non-Consolidated Entities has an employment
agreement of any kind, oral or written, express or implied, that would require
Cox or Cable Sub and its Subsidiaries to employ any person after the Closing
Time.
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5.14. Tax Matters.
5.14.1. The Consolidated Entities and the Non-Consolidated
Entities have duly and timely filed in proper form all federal income Tax
Returns and all other material Tax Returns required to be filed with the
appropriate Governmental Authorities. All Taxes due and payable by the
Consolidated Entities and the Non-Consolidated Entities have been timely paid,
except such amounts as are being contested diligently and in good faith and are
not in the aggregate material. Peak has been classified as a partnership for
federal and state income Tax purposes throughout its entire existence.
5.14.2. Except as disclosed on SCHEDULE 5.14, none of the Tax
Returns filed by or on behalf of any of the Consolidated Entities or
Non-Consolidated Entities is currently being audited by any Governmental
Authority, and there are no other audits, examinations, claims, requests for
information or other administrative or judicial proceedings pending or
threatened in writing with respect to Taxes of the Consolidated Entities or the
Non-Consolidated Entities that could affect the Taxes of the Consolidated
Entities for periods after the Closing Date. Except as disclosed in SCHEDULE
5.14, there are no reassessments proposed in writing for any property owned by
any of the Consolidated Entities or by any of the Non-Consolidated Entities that
would affect the Taxes of the Consolidated Entities for periods after the
Closing Date. Except as disclosed on SCHEDULE 5.14, there are no outstanding
agreements or waivers by or with respect to any of the Consolidated Entities, or
any Non-Consolidated Entity, that extend the statute of limitations on the
assessment or collection of any Taxes of any such entity for any taxable period
where an adjustment to the Taxes for such taxable period could affect the Taxes
of the Consolidated Entities for periods after the Closing Date.
5.14.3. No consent under Code Section 341(f) has been filed
with respect to any of the Consolidated Entities, or by any Non-Consolidated
Entity that would be binding on the Consolidated Entities.
5.14.4. As of the Closing Date, none of the Consolidated
Entities will have any liability for the Taxes of any Person pursuant to
Treasury Regulations Section 1.1502-6 or by contract, except: (i) with respect
to taxable periods ending on or prior to March 9, 1999, liability for federal
income Taxes of the members of the affiliated group of corporations of which
TeleCommunications, Inc. was the common parent, and (ii) with respect to taxable
periods ending after March 9, 1999, liability for federal income Taxes of the
members of the affiliated group of corporations of which AT&T is the common
parent. As of the Closing Date, there will be no Tax sharing agreements or
similar arrangements in effect to which any of the Consolidated Entities is a
party or by which any of the Consolidated Entities is otherwise bound.
5.14.5. None of the Consolidated Entities has or will have any
income reportable for a taxable period ending after the Closing Date but
attributable to a transaction (for example, an installment sale) occurring in,
or a change in accounting method made with respect to, a taxable period ending
on or prior to the Closing Date.
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5.15. Claims and Legal Actions. Except as set forth in SCHEDULE 5.15,
except as may affect the cable industry generally, except for suits being
defended by insurance carriers of the Consolidated Entities or the
Non-Consolidated Entities for which there is adequate insurance coverage, and
except for matters related to Taxes (which matters are governed by Section
5.14), there is (i) no legal action, counterclaim, suit, arbitration, (ii) to
the knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
no claim or governmental investigation or (iii) no other legal or administrative
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
threatened against any of the Consolidated Entities or Non-Consolidated Entities
relating to the Assets or business or operations of the Systems.
5.16. Environmental Matters.
5.16.1. The Real Property is in compliance with and, to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities, has
previously been operated in compliance with, all Environmental Laws, except for
such noncompliance which, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth in SCHEDULE 5.16 and except where
the failure of the representations made in this sentence to be true and correct
would not, individually or in the aggregate, have a Material Adverse Effect,
none of the Consolidated Entities or Non-Consolidated Entities has 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, or undertaken or caused to be
undertaken any other activities relating to the Real Property, which would
support a claim or cause of action under any Environmental Law, and, to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities, 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. Except where
the failure of the representations made in this sentence to be true and correct
would not, individually or in the aggregate, have a Material Adverse Effect, to
the knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
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 that arises from any condition of the land
surrounding any Real Property. No claim or investigation based on Environmental
Laws which relates to any Real Property or any operations or conditions on it
(i) has been asserted or conducted in the past or is currently pending against
or with respect to any of the Consolidated Entities or Non-Consolidated Entities
or, to the knowledge of any of the Consolidated Entities or Non-Consolidated
Entities, any other Person or (ii) to the knowledge of any of the Consolidated
Entities or Non-Consolidated Entities, is threatened or contemplated.
5.16.2. Except as set forth in SCHEDULE 5.16 and except where
the failure of the representations made in this sentence to be true and correct
would not, individually or in the aggregate, have a Material Adverse Effect, to
the knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
(i) no underground storage tanks are currently or have been located on any Real
Property, (ii) no Real Property has been used at any time as a gasoline service
station or any
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other facility for storing, pumping, dispensing or producing gasoline or any
other petroleum products or wastes, (iii) no building or other structure on any
Real Property contains friable asbestos, and (iv) there are no incinerators or
cesspools on the Real Property and all domestic waste is discharged into a
public sanitary sewer system.
5.16.3. The AT&T Cable Subsidiaries have provided Cox with
complete and correct copies of (i) all studies, reports, surveys or other
materials in the possession of any of the Consolidated Entities or
Non-Consolidated Entities relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the Real Property, (ii) all notices or
other materials in the possession of any of the Consolidated Entities or
Non-Consolidated Entities that were received during the past two years 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 (iii) all materials in
the possession of any of the Consolidated Entities or Non-Consolidated Entities
relating to any claim, allegation or action by any private third party under any
Environmental Law.
5.17. Compliance with Laws. Each of the Consolidated Entities and each
of the Non-Consolidated Entities has complied and is in compliance with all
Legal Requirements applicable to the Systems in the operation of the business
and the ownership of the Assets, except for such noncompliance which would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in SCHEDULE 5.17, none of the Consolidated Entities or Non-Consolidated
Entities has received notice claiming a violation by any of such entities of any
Legal Requirement applicable to the Systems as currently conducted, and to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
there is no basis for any claim that such a violation exists. The
representations and warranties in this Section 5.17 do not apply to compliance
with, or notices with respect to, the Communications Act and the rules and
regulations of the FCC, as to which the representations and warranties in
Section 5.19 will apply.
5.18. Conduct of Business in Ordinary Course. Except as set forth on
SCHEDULE 5.18, since December 31, 1998, (i) each of the Consolidated Entities
and each of the Non-Consolidated Entities has conducted the business and
operations of the Systems only in the ordinary and usual course substantially in
the same manner as previously conducted (including taking budgeted or planned
rate increases, continuing to make budgeted marketing, advertising and
promotional expenditures with respect to the Systems and including completing
line extensions, placing conduit or cable in new developments, fulfilling
installation requests, continuing work on existing construction projects and
implementing capital expenditures required in connection with maintaining the
Assets in good operating condition and repair), (ii) the liabilities incurred or
accrued in the ordinary course of business do not, individually or in the
aggregate, have a Material Adverse Effect, and (iii) none of the Consolidated
Entities or Non-Consolidated Entities has suffered any changes, events or
conditions that have had, individually or in the aggregate, a Material Adverse
Effect.
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5.19. FCC and Copyright Compliance.
5.19.1. The operation of each of the Systems has been, and is,
in compliance with the Communications Act and the rules and regulations of the
FCC, except for such noncompliance which would not, individually or in the
aggregate, have a Material Adverse Effect and except for Legal Requirements with
respect to rates charged to customers of the Systems as to which the
representations set forth in Section 5.19.2 shall apply. The Consolidated
Entities and the Non-Consolidated Entities have made all material filings
required to be made with the FCC (including cable television registration
statements, annual reports and aeronautical frequency usage notices) in
connection with the Systems and have provided all material notices to customers
of the Systems required under the Communications Act and the FCC's rules and
regulations. Since 1992, the FCC employment units covering the Systems have been
certified as in compliance with the FCC's equal employment opportunity rules,
and each of the Systems is in material compliance with all signal leakage
regulations prescribed by the FCC. With respect to the Systems, the Consolidated
Entities and the Non-Consolidated Entities have complied in all material
respects with the specifications set forth in Part 76, Subpart K of the rules
and regulations of the FCC and other provisions of the Communications Act or the
rules and regulations of the FCC pertaining to signal leakage, to utility pole
make ready and to grounding and bonding of cable television systems (in each
case as the same is currently in effect).
5.19.2. The Consolidated Entities and the Non-Consolidated
Entities have complied in all material respects with the must carry and
retransmission consent provisions of the Cable Act and the FCC rules and
regulations promulgated thereunder as such provisions relate to the Systems.
Except as disclosed on SCHEDULE 5.19, no written notices or demands have been
received from the FCC, from any television station, or from any other Person,
station, Governmental Authority or unit challenging the right of the Systems to
carry any signal or deliver the same. The Consolidated Entities and the
Non-Consolidated Entities have used commercially reasonable efforts to establish
rates charged to customers of the Systems, effective since September 1, 1993,
that would be allowable under rules and regulations promulgated by the FCC under
the Cable Act, and any authoritative interpretation thereof for those systems
whose rates are regulated by any local franchising authority, and such rates as
computed under the FCC's rules and regulations are permitted rates except as set
forth in SCHEDULE 5.19. The AT&T Cable Subsidiaries have delivered to Cox
complete and correct copies of all FCC 1200 Series Forms provided to local
franchising authorities with respect to the Systems and copies of all material
correspondence with any Governmental Authority relating to rate regulation
generally or specific rates charged to customers with respect to any of the
Systems. The AT&T Cable Subsidiaries make no representation or warranty with
respect to the effect of the cable television industry-wide dispute concerning
music licensing fees. Except as set forth on SCHEDULE 5.19, none of the
Consolidated Entities or Non-Consolidated Entities has received notice from any
Governmental Authority with respect to an intention to enforce customer service
standards pursuant to the Cable Act with respect to the Systems, and none of the
Consolidated Entities or Non-Consolidated Entities has agreed with any
Governmental Authority to establish customer service standards for the Systems
that exceed the standards in the Cable Act. None of the Consolidated Entities or
Non-Consolidated Entities has made any election with respect
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to any cost of service proceeding conducted in accordance with Part 76.922 of
Title 47 of the Code of Federal Regulations or any similar proceeding (a "COST
OF SERVICE ELECTION") with respect to any of the Systems.
5.19.3. The Consolidated Entities and the Non-Consolidated
Entities have deposited on a timely basis with the U.S. Copyright Office all
statements of account and other documents and instruments and paid all
royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act, with respect to the business and operations of
the Systems as are required to obtain, hold and maintain the compulsory license
for cable television systems prescribed in Section 111 of the Copyright Act. The
Consolidated Entities, the Non-Consolidated Entities and the Systems are in
compliance with the Copyright Act and the rules and regulations of the U.S.
Copyright Office, except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems, and except for
such noncompliance which would not, individually or in the aggregate, have a
Material Adverse Effect. To the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, there is no inquiry, claim, action or demand pending
before the U.S. Copyright Office or from any other Person which questions the
copyright filings or payments made by the Consolidated Entities or the
Non-Consolidated Entities with respect to the Systems.
5.19.4. All necessary FAA approvals and FCC tower
registrations have been obtained or made, as the case may be, with respect to
the height and location of towers used in connection with the operation of the
Systems. The towers are being operated in compliance in all material respects
with applicable FCC and FAA rules.
5.19.5. A valid 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 expiring within 30 months after the date
of this Agreement.
5.20. Partnership. Immediately prior to the Closing, one or more
of the Consolidated Entities will be the sole owner of the Partnership Interest,
free and clear of all Encumbrances and all agreements, warrants, options, puts,
calls, rights or other commitments relating to the issuance, sale, purchase,
redemption, conversion, exchange or other transfer of the Partnership Interest,
except for Encumbrances or rights arising under the Partnership Agreement. The
AT&T Partner is in material compliance with the provisions of the Partnership
Agreement, and except as disclosed in SCHEDULE 5.20, the AT&T Partner is not
obligated to make any additional capital contributions or other commitments to
or on behalf of the Partnership.
5.21. Competitive Activity. To the knowledge of any of the
Consolidated Entities or Non-Consolidated Entities, as of the date of this
Agreement, except as set forth on SCHEDULE 5.21, (i) there are no third parties
(as to AT&T and Cox and their respective Affiliates) operating cable television
systems or overbuilds in the Franchise Areas, and (ii) no franchise or other
operating authority for a cable television system has been granted to any third
party (as to AT&T and Cox and their respective Affiliates) by the appropriate
Governmental Authority in the Franchise Areas, and,
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to the knowledge of any of the Consolidated Entities or Non-Consolidated
Entities, no third party (as to AT&T and Cox and their respective Affiliates) is
seeking such a franchise or other operating authority. To the knowledge of any
of the Consolidated Entities or Non-Consolidated Entities, no third party (as to
AT&T and Cox and their respective Affiliates) intends to construct or operate
any of the foregoing or is seeking to construct or operate any of the foregoing.
With respect to any cable television system overbuilds or cobuilds required by
clause (i) of this Section 5.21 to be disclosed on SCHEDULE 5.21 as well as for
MMDS operations in the Tulsa Franchise Areas, SCHEDULE 5.21 also describes for
the Tulsa System, to the knowledge of any of the Consolidated Entities or
Non-Consolidated Entities, the approximate number of dwellings passed and the
approximate number of customers served by the Tulsa System in the overbuilt,
cobuilt and MMDS active areas.
5.22. No Injunction, Etc. No action, suit or proceeding is pending
against any of the Consolidated Entities or Non-Consolidated Entities or, to the
knowledge of any of the Consolidated Entities or Non-Consolidated Entities,
threatened against any of the Consolidated Entities or Non-Consolidated
Entities by or before any Governmental Authority and no Legal Requirement
applicable to any of the Consolidated Entities or Non-Consolidated Entities has
been enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement, the AT&T Related Agreements or the
Cox Related Agreements, the result of which is to enjoin, restrain, prohibit or
obtain substantial damages in respect of any of the transactions contemplated by
this Agreement, the AT&T Related Agreements or the Cox Related Agreements, or
which would (i) prohibit Cox's ownership or operation of all or a material
portion of the business or operations of the Systems or the Assets, (ii) compel
Cox to dispose of or hold separate all or a material portion of the Systems, the
business or operations of the Systems or the Assets as a result of any of the
transactions contemplated by this Agreement, the AT&T Related Agreements or the
Cox Related Agreements, or (iii) otherwise prevent or make illegal the
consummation of any transactions contemplated by this Agreement, the AT&T
Related Agreements or the Cox Related Agreements.
5.23. Transactions with Affiliates. Except to the extent set forth in
SCHEDULE 5.23 or included in Excluded Assets and except with respect to
customary corporate overhead services provided by the corporate, division or
regional offices of AT&T or Peak, none of the Consolidated Entities or
Non-Consolidated Entities is a party to any business arrangement or business
relationship with any of its Affiliates, and none of its Affiliates owns any
property or right, tangible or intangible, that is used principally in the
business or operations of the Systems.
5.24. Application of Representations and Warranties to Consolidated
Entities and Non-Consolidated Entities.
5.24.1. The representations and warranties made on the date of
this Agreement by AT&T and the AT&T Cable Subsidiaries with respect to the
Consolidated Entities and the Non-Consolidated Entities will be deemed made
solely with respect to the Consolidated Entities and the Non-Consolidated
Entities that are the Subsidiaries owning the Required Assets (directly or
indirectly through interests in a partnership, limited liability company or
other pass-through entity) as of the date of this Agreement and that are listed
on SCHEDULE 5.24.
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5.24.2. As of the date the Consolidation Outline is delivered
pursuant to Section 2.2.1 of this Agreement, and as of the Closing, the
representations and warranties referencing the Consolidated Entities and the
Non-Consolidated Entities will be deemed made as of such date of delivery and as
of the Closing with respect to the Consolidated Entities and the Non-
Consolidated Entities identified in the Consolidation Outline; provided that if
an amendment to the Consolidation Outline is delivered pursuant to Section 2.2.3
of this Agreement, the representations and warranties referencing the
Consolidated Entities and the Non-Consolidated Entities will be deemed made as
of the date of delivery and as of the Closing of such amendment with respect to
any additional Consolidated Entities and Non-Consolidated Entities identified in
said amendment.
5.24.3. In the event a Consolidated Entity or Non-Consolidated
Entity, which is not an entity listed on SCHEDULE 5.24, is identified in the
Consolidation Outline or any amendment thereto, and results in any exception to
a representation or warranty, or failure of a representation or warranty to be
true and correct, such exception or failure shall be disclosed to Cox on a
revised or additional schedule (the "ADDITIONAL SCHEDULES") to this Agreement as
of the date of delivery of the Consolidation Outline or any such amendment. If
in Cox's reasonable determination the disclosures or exceptions to the
representations and warranties contained in, and the information otherwise
disclosed in, such Additional Schedules individually or in the aggregate (when
considered together with the matters disclosed in the Schedules delivered at the
time of this Agreement and in the Delayed Schedules) would have a Material
Adverse Effect, then Cox shall so notify AT&T in writing (the "ADDITIONAL
SCHEDULES OBJECTION NOTICE") within five days. In the event the Additional
Schedules Objection Notice is given, Cox and AT&T agree to negotiate in good
faith to reach agreement as to a mutually satisfactory procedure for addressing
the exceptions and other information disclosed in such Additional Schedules
(including, by way of example, agreeing to treat objectionable matters as
Excluded Assets or Indemnified Liabilities.) If Cox and AT&T are unable to reach
such agreement within five days after delivery of the Additional Schedules
Objection Notice, then Cox shall have the right to terminate this Agreement upon
written notice to AT&T, which notice of termination shall be given to AT&T no
later than 2 days following the expiration of such five-day period. Once Cox and
AT&T reach agreement in writing on the Additional Schedules, such Additional
Schedules will be deemed to have been part of this Agreement effective as of the
date hereof.
5.25. Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances (including, without limitation, the
identification of any Consolidated Entity or Non-Consolidated Entity pursuant to
Section 5.24.2) that constitute or cause a breach of a representation or
warranty of AT&T or either of the AT&T Cable Subsidiaries made in this Agreement
(including, without limitation, the Schedules hereto) on the date such
representation or warranty is made shall not constitute a breach of such
representation or warranty if such event or circumstance is cured within 30 days
of its existence or occurrence, but in no event later than ten days prior to the
date scheduled for the Closing.
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6. REPRESENTATIONS AND WARRANTIES OF COX.
Cox represents and warrants to AT&T and the AT&T Cable Subsidiaries as
of the date hereof and as of the Closing, as follows:
6.1. Organization, Standing and Authority. Cox is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
6.2. Authorization and Binding Obligation. Cox has the corporate power
and authority to execute and deliver this Agreement and the Cox Related
Agreements and to carry out and perform all of its other obligations under the
terms of this Agreement and the Cox Related Agreements. All corporate action by
Cox necessary for the authorization, execution, delivery and performance by Cox
of this Agreement and the Cox Related Agreements has been taken, and such action
has not been rescinded, repealed or amended. This Agreement has been duly
executed and delivered by Cox, and this Agreement and the Cox Related Agreements
constitute or will, when executed and delivered, constitute the valid and
legally binding obligations of Cox, enforceable against it in accordance with
their respective terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally; and
(ii) as the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
6.3. Absence of Conflicting Agreements. Except for the Consents listed
on SCHEDULE 6.3A (the "COX CONSENTS"), the AT&T Consents, the Partnership
Consents and compliance with the HSR Act, no consent, approval, permit or
authorization of, or declaration to or filing with any Governmental Authority or
any other third party is required under any Legal Requirement applicable to Cox,
under Cox's Certificate of Incorporation or Bylaws or under any material
agreement, instrument, license or permit to which Cox is a party or by which Cox
may be bound, in order for Cox to execute, deliver and perform its obligations
under this Agreement and the Cox Related Agreements. Subject to obtaining the
AT&T Consents, the Partnership Consents and the Cox Consents and compliance with
the HSR Act, the execution, delivery and performance of this Agreement and the
Cox Related Agreements by Cox will not (i) violate the Certificate of
Incorporation or Bylaws of Cox; (ii) violate any material Legal Requirement
applicable to Cox; or (iii) conflict with, constitute grounds for termination
of, result in a breach of, constitute a default under, accelerate or permit the
acceleration of any performance required by the terms of, or result in the
creation or imposition of any Encumbrance under, any material agreement,
instrument, license or permit to which Cox is a party or by which Cox may be
bound, such that Cox could not perform under this Agreement or the Cox Related
Agreements.
6.4. Ownership of AT&T Shares. Cox owns record and beneficial title to
all of the AT&T Shares, free and clear of all claims, Encumbrances and
preemptive or other rights or options of any nature whatsoever, except for
Encumbrances listed on SCHEDULE 6.4 (which Encumbrances listed on SCHEDULE 6.4
will be released prior to Closing).
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6.5. No Injunction, Etc. No action, suit or proceeding is pending
against Cox or, to the knowledge of Cox, threatened against Cox by or before any
Governmental Authority and no Legal Requirement applicable to Cox has been
enacted, promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement, the AT&T Related Agreements or the Cox Related
Agreements, the result of which is to enjoin, restrain, prohibit or obtain
substantial damages in respect of any of the transactions contemplated by this
Agreement, the AT&T Related Agreements or the Cox Related Agreements, or which
would (i) prohibit Cox's ownership or operation of all or a material portion of
the business or operations of the Systems or the Assets, (ii) compel Cox to
dispose of or hold separate all or a material portion of the Systems, the
business or operations of the Systems or the Assets as a result of any of the
transactions contemplated by this Agreement, the AT&T Related Agreements or the
Cox Related Agreements, or (iii) otherwise prevent or make illegal the
consummation of any transactions contemplated by this Agreement, the AT&T
Related Agreements or the Cox Related Agreements.
6.6. Reorganization.
6.6.1. Neither Cox nor any Affiliate of Cox has taken any
action, or failed to take any action required under the Code to be taken, which
action or failure to take action would jeopardize the treatment of the
Separation as tax-free to AT&T either (i) under Code Sections 368(a)(1)(D) and
361 or (ii) under Code Section 355(c). Neither Cox nor any Affiliate of Cox has
taken any action, or failed to take any action required under the Code to be
taken, which action or failure to take action would impede satisfaction of the
condition to Closing set forth in Section 8.3.7 of this Agreement. As of the
Closing Date, from the date of delivery of the Consolidation Outline and the
Statement of Tax Qualification of the Consolidation in accordance with Section
2.2 up to and including the Closing Date, Cox will not have taken any action
(and will not have failed to take any action required under the Code to be
taken), and will not have caused or permitted any of its Affiliates to take any
action (and will not have caused or permitted any of its Affiliates to fail to
take any action required under the Code to be taken), that Cox would reasonably
be expected to know, based on the Consolidation Outline and the Statement of Tax
Qualification of the Consolidation, or as advised in writing by AT&T, would
cause the Consolidation to fail to be treated for income Tax purposes in the
manner set forth in the Statement of Tax Qualification of the Consolidation;
provided, however, that nothing in this Agreement shall be deemed to prohibit,
or cause the imposition of any liability on Cox or any Affiliate of Cox as a
result of, the Nevada/Utah Systems Sale if effected in the form of a Peak Asset
Disposition following the Closing Date.
6.6.2. At the time of and immediately following the
Separation, Cox will not hold "disqualified stock" of Cable Sub, within the
meaning of Code Section 355(d)(3), constituting a fifty percent (50%) or greater
interest in Cable Sub.
6.6.3. Cox has no plan or intention to sell, exchange or
otherwise dispose of any of the Cable Sub Shares after the Separation.
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6.6.4. Cox has no plan or intention to sell, exchange, or
otherwise dispose of the Assets of the Systems held by any of the Consolidated
Entities as of the Closing Date other than dispositions in the ordinary course
of business and other than a Nevada/Utah Systems Sale in the form of a Peak
Asset Disposition.
6.6.5. Cox has no plan or intention to take any action, or to
cause Cable Sub or any Subsidiary thereof to take any action, which would cause
Cable Sub to fail to be engaged immediately after the Separation in the active
conduct of a trade or business within the meaning of Code Section 355(b)(1)(A).
6.6.6. The Separation is not part of a plan (or series of
related transactions), within the meaning of Code Section 355(e)(2)(A)(ii), on
the part of Cox (or any Affiliate of Cox) that would cause the Separation to
constitute a distribution to which Code Section 355(e) would apply.
7. COVENANTS OF THE PARTIES. Subject to the provisions of Section 7.30 and
Section 7.31, AT&T, on the one hand, and the AT&T Cable Subsidiaries, on the
other hand, make the following covenants on a several basis; provided, however,
that between the AT&T Cable Subsidiaries, such covenants are made on a joint and
several basis. Prior to the Closing, AT&T shall have no liability with respect
to the breach of any covenant set forth in this Article 7 by either of the AT&T
Cable Subsidiaries, and prior to the Closing, neither of the AT&T Cable
Subsidiaries shall have any liability with respect to the breach of any covenant
set forth in this Article 7 by AT&T. The parties acknowledge that once the
Closing has occurred, the provisions of Section 7.17 and Article 12 shall govern
the liability, if any, of the parties hereto with respect to breaches of the
covenants set forth in this Agreement.
7.1. Access to Premises and Records. Between the date of execution
and delivery of this Agreement and the Closing Date, the AT&T Cable Subsidiaries
will provide, and will cause the Consolidated Entities and the Non-Consolidated
Entities to provide, to Cox and its representatives full access at reasonable
times to all the premises, employees and books and records of the Consolidated
Entities and the Non-Consolidated Entities, the business and operations of the
Systems and to all the Assets and will furnish, and will cause the Consolidated
Entities and the Non-Consolidated Entities to furnish, to Cox and its
representatives all information regarding the business and operations of the
Systems, including, without limitation, the personnel records of the employees
engaged in the operations of the Systems and the Assets as Cox may from time to
time reasonably request. Notwithstanding any investigation that Cox may conduct
of the business and operations of the Systems and the Assets, Cox may fully rely
on the representations, warranties, covenants and indemnities of AT&T and the
AT&T Cable Subsidiaries, which will not be waived or affected by or as a result
of such investigation.
7.2. Continuity and Maintenance of Operations. Except as disclosed
in SCHEDULE 7.2 and except for the Peak Systems located in and around Rogers,
Arkansas and Pecola, Oklahoma which are managed by TCA Cable TV, Inc., or as Cox
may otherwise agree in writing, during the period from the date of this
Agreement until the Closing:
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7.2.1. Each of the AT&T Cable Subsidiaries shall, and shall
cause each of the Consolidated Entities and Non-Consolidated Entities to,
continue to operate the Systems owned by it in the ordinary course consistent
with past practices (including taking budgeted or planned rate increases,
continuing to make budgeted marketing, advertising and promotional expenditures
with respect to the Systems and including completing line extensions, placing
conduit or cable in new developments, fulfilling installation requests and
continuing work on existing construction projects) and to use its commercially
reasonable efforts to keep available the services of its employees employed in
connection with the Systems and to preserve any beneficial business
relationships with franchising authorities, customers, suppliers and others
having business dealings with it relating to the Systems. Without limiting the
generality of the foregoing, each AT&T Cable Subsidiary shall, and shall cause
each of the Consolidated Entities and Non-Consolidated Entities to, (i) maintain
the Assets of the Systems in reasonable operating condition and repair, (ii)
maintain insurance with respect to the Assets and the Systems as in effect on
the date of this Agreement, (iii) maintain inventories of equipment and supplies
at levels substantially consistent with the level of inventory maintained at
each System during the 12 months preceding the date hereof, as adjusted in
connection with any construction upgrade in progress at such System, (iv)
maintain all of its business books, records and files related to the Systems in
the ordinary course of business in accordance with past practices and (v) pay,
in the ordinary course of business consistent with past practices, all accounts
payable of the Systems. Each AT&T Cable Subsidiary shall not itself, and shall
not permit any of its officers, directors, shareholders, agents or employees or
Affiliates to, and shall cause each of the Consolidated Entities and
Non-Consolidated Entities not to and not to permit any of their officers,
directors, members, agents or employees or Affiliates to, pay any of its
customer accounts receivable related to the Systems (other than for their own
residences) prior to the Closing Date. Each AT&T Cable Subsidiary shall, and
shall cause each of the Consolidated Entities and Non-Consolidated Entities to,
continue to implement its procedures for disconnection and discontinuance of
service to customers of the Systems whose accounts are delinquent in accordance
with those procedures in effect on the date of this Agreement.
7.2.2. Except to the extent required by law (of which the AT&T
Cable Subsidiaries shall give notice to Cox) after the date of this Agreement,
each AT&T Cable Subsidiary shall not, and shall cause each of the Consolidated
Entities and Non-Consolidated Entities not to, without the prior written consent
of Cox (which will not be unreasonably withheld or delayed): (i) change customer
rates of any of the Systems (other than budgeted or planned rate increases taken
pursuant to Section 7.2.1) for any tier of service or charges for remotes or
installation except to the extent required under the Cable Act or any other
Legal Requirement; provided, however, that if it changes such rates in order to
so comply, it will provide Cox with copies of any FCC forms used to determine
the new rates; (ii) make channel additions (other than channel additions
associated with initial upgraded plant activation made in conjunction with
budgeted or planned rate increases permitted by clause (i) above), channel
substitutions, change the channel lineups or implement any retiering or
repackaging of cable television programming offered by any of the Systems other
than as required by "Headend in the Sky"; (iii) make any Cost of Service
Election or filing based on the "effective competition" provisions of the Cable
Act with respect to any of the Systems or change billing, collection,
installation, disconnection, marketing or promotional practices; (iv) sell,
transfer, lease, assign or otherwise
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dispose of any of the Assets (except for assets consumed in the ordinary course
of business or in conjunction with the acquisition of replacement property of
equivalent kind and value); (v) create, assume or permit to exist any
Encumbrance on any Asset, except for Permitted Encumbrances and those
Encumbrances listed on EXHIBIT C (which Encumbrances listed on EXHIBIT C will be
released prior to the Closing); (vi) amend, terminate or renew (other than on
the same or substantially similar terms and conditions) any of the Governmental
Permits, Contracts, Real Property interests or any other material contract or
agreement which affects or is related to the Systems; (vii) enter into any
contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to the Systems involving an expenditure in
excess of $50,000; (viii) engage in any selling or marketing campaigns or
promotional activities with respect to any of the Systems not in the ordinary
course of business, consistent with past practice; (ix) take or omit to take any
commercially reasonable action that would cause it to be in breach of any of its
representations or warranties in this Agreement; (x) make any material increase
in compensation payable or to become payable to its employees employed at the
Systems or make any material change in personnel policies with respect to any of
the Systems other than as a result of (A) increases or changes affecting AT&T
Broadband and Internet Services on a company-wide basis or (B) regularly
scheduled increases in accordance with the Budgets of the Systems; (xi) enter
into any agreement with or commitment to any competitive access provider with
respect to the Systems; (xii) enter into any proposed resolution with the FCC
regarding or relating to rates charged or chargeable for cable television
services on the Systems; and (xiii) enter into any agreement for the provision
by one or more third parties, or by Affiliates of AT&T or Peak, of telephony,
data or other services through the facilities of one of more of the Systems,
which is exclusive or which cannot be terminated at the Closing without any
penalty.
7.2.3. Each AT&T Cable Subsidiary shall not, and shall cause
each of the Consolidated Entities and Non-Consolidated Entities not to, without
the prior written consent of Cox (which shall not be unreasonably withheld or
delayed), enter into any new contract or amendment or renewal of any existing
contract with any broadcaster concerning retransmission consents relating to the
Systems; provided, however, that Cox's consent shall not be required for
retransmission consent agreements that (i) Cox will not be obligated or required
for operational reasons to assume at the Closing, or (ii) are on substantially
the same terms as the expiring retransmission consent agreement being replaced
or renewed.
7.2.4. For purposes of this Section 7.2, in each case where
the AT&T Cable Subsidiaries request Cox's consent for a proposed action, Cox
shall respond as soon as practicable, but in any event within five Business Days
of Cox's receipt of the request for consent; provided, however, if the action
proposed by the AT&T Cable Subsidiaries requiring Cox's consent requires a
quicker decision by Cox, then Cox shall use commercially reasonable efforts to
reach a decision on the proposed action within the time frame required for such
action.
7.3. Capital Expenditures.
7.3.1. The AT&T Cable Subsidiaries have delivered to Cox true
and complete copies of the 1999 annual operating and capital budgets for each
of the Systems and the rebuild plans
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for each of the Systems in which an upgrade is in progress or is planned
(collectively, the "BUDGETS").
7.3.2. For the 12-month period ending December 31, 1999, each
of the AT&T Cable Subsidiaries agrees to make, or to cause Peak to make, capital
expenditures for purposes of upgrading cable plant in each of the Systems in
such amounts as are set forth on SCHEDULE 7.3, and in the event the AT&T Cable
Subsidiaries and Peak fail to make expenditures in such amounts, any such
shortfall shall be credited to Cox for purposes of determining the Capital
Expenditures Adjustment in accordance with SCHEDULE 2.1. Cox may request that
the AT&T Cable Subsidiaries and Peak make capital expenditures for such purposes
in excess of the amounts set forth on SCHEDULE 7.3, and each of the AT&T Cable
Subsidiaries agrees to use commercially reasonable efforts to make, or to cause
Peak to make, such excess capital expenditures; provided, however, that any such
capital expenditures that the AT&T Cable Subsidiaries and Peak make at Cox's
request prior to the Closing in excess of the amounts set forth on SCHEDULE 7.3
shall be credited to AT&T for purposes of determining the Capital Expenditures
Adjustment in accordance with SCHEDULE 2.1. In the event the AT&T Cable
Subsidiaries and Peak make capital expenditures in excess of the amounts set
forth on SCHEDULE 7.3, AT&T shall not receive credit for such excess capital
expenditures for purposes of determining the Capital Expenditures Adjustment in
accordance with SCHEDULE 2.1 unless Cox shall have given its prior written
consent to such excess capital expenditures.
7.3.3. Notwithstanding the foregoing, the AT&T Cable
Subsidiaries shall make capital expenditures for purposes of upgrading cable
plant in the Baton Rouge System and the Tulsa System such that (i) the number of
plant miles of the Baton Rouge System as of the Closing Date that both (A) have
a bandwidth capacity of 750 MHz and (B) are two-way active, shall equal 2,903
miles, and (ii) the number of plant miles of the Tulsa System as of the Closing
Date that have a bandwidth capacity of 750 MHz shall equal 2,110 miles, 1,980
miles of which shall be two-way active and 130 miles of which shall be one-way
active. In the event the number of plant miles of the Baton Rouge System or the
Tulsa System that as of the Closing both have a bandwidth capacity of 750 MHz
and are two-way active is less than the number of miles required by this Section
7.3.3 (each such mile referred to as an "UPGRADE COMPLETION SHORTFALL MILE"),
then Cox shall receive a credit for purposes of determining the Capital
Expenditures Adjustment in accordance with SCHEDULE 2.1.
7.4. Reorganization.
7.4.1. Cox shall use all commercially reasonable efforts to
cause the Separation to be tax-free to AT&T either (i) under Code Sections
368(a)(1)(D) and 361 or (ii) under Code Section 355(c), and Cox shall not take
any action (and shall not fail to take any action required under the Code to be
taken), and shall not cause or permit any of its Affiliates to take any action
(or cause or permit any of its Affiliates to fail to take any action required
under the Code to be taken), that would cause the Separation to fail to qualify
as tax-free to AT&T either (i) under Code Sections 368(a)(1)(D) and 361 or (ii)
under Code Section 355(c). Following the delivery of the Consolidation Outline
and the Statement of Tax Qualification of the Consolidation in accordance with
Section 2.2, Cox shall not take any action (and shall not fail to take any
action required under the Code to be taken), and shall not cause or permit any
of its Affiliates to take any action (or cause or permit any
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of its Affiliates to fail to take any action required under the Code to be
taken), that Cox would reasonably be expected to know, based on the
Consolidation Outline and the Statement of Tax Qualification of the
Consolidation, or as advised in writing by AT&T, would cause the Consolidation
to fail to be treated for income Tax purposes in the manner set forth in the
Statement of Tax Qualification of the Consolidation; provided, however, that
nothing in this Agreement shall be deemed to prohibit, or cause the imposition
of any liability on Cox or any Affiliate of Cox as a result of, the Nevada/Utah
Systems Sale if effected in the form of a Peak Asset Disposition following the
Closing Date.
7.4.2. AT&T shall use all commercially reasonable efforts to
cause the Separation to be tax-free to Cox either (i) under Code Sections
368(a)(1)(D) and 355(a) or (ii) under Code Section 355(a), and AT&T shall not
take any action (and shall not fail to take any action required under the Code
to be taken), and shall not cause or permit any of its Affiliates to take any
action (or cause or permit any of its Affiliates to fail to take any action
required under the Code to be taken), that would cause the Separation to fail to
qualify as tax-free to Cox either (i) under Code Sections 368(a)(1)(D) and
355(a) or (ii) under Code Section 355(a). AT&T shall not take any action (and
shall not fail to take any action required under the Code to be taken), and
shall not cause or permit any of its Affiliates to take any action (or cause or
permit any of its Affiliates to fail to take any action required under the Code
to be taken), that would cause the Consolidation to fail to be treated for
income Tax purposes in the manner set forth in the Statement of Tax
Qualification of the Consolidation unless (x) such action would not cause the
Separation to fail to qualify as tax-free to Cox either (i) under Code Sections
368(a)(1)(D) and 355(a) or (ii) under Code Section 355(a), and (y) AT&T delivers
to Cox an amended Statement of Tax Qualification of the Consolidation within
twenty (20) days after such action (or failure to act).
7.4.3. Unless otherwise required by a "determination" within
the meaning of Code Section 1313(a), AT&T and Cox shall report (and, shall take
no action or position inconsistent with the treatment of) the Separation for
income Tax purposes as tax-free to Cox and to AT&T either (i) under Code
Sections 368(a)(1)(D) (as to Cox and AT&T), 355(a) (as to Cox) and 361 (as to
AT&T) or (ii) under Code Sections 355(a) (as to Cox) and 355(c) (as to AT&T)
(other than with respect to income or gain, if any, required to be taken into
account by AT&T or any Subsidiary of AT&T under Treasury Regulations Sections
1.1502-13 or 1.1502-19 as a result of the Reorganization). Unless otherwise
required by a "determination" within the meaning of Code Section 1313(a), AT&T
shall report (and shall take no action or position inconsistent with the
treatment of) the Consolidation in the manner set forth in the Statement of Tax
Qualification of the Consolidation. Unless otherwise required by a
"determination" within the meaning of Code Section 1313(a), Cox shall report
(and, shall take no action or position inconsistent with the treatment of) the
Consolidation in the manner set forth in the Statement of Tax Qualification of
the Consolidation, including with respect to income or gain, if any, required to
be taken into account by AT&T or any Affiliate of AT&T under Treasury
Regulations Sections 1.1502-13 or 1.1502-19 as a result of the Reorganization.
7.4.4. AT&T may amend the Statement of Tax Qualification of
the Consolidation by written notice delivered to Cox not less than thirty (30)
days prior to the due date for filing the
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respective Tax Returns (it being agreed that AT&T shall use its commercially
reasonable efforts to deliver such written notice to Cox not less than sixty
(60) days prior to the due date for filing the respective Tax Returns), provided
that such amendment (x) is not inconsistent with the provisions of Section 2.2.2
of this Agreement, and (y) would not cause the Separation to fail to qualify as
tax-free to Cox either (i) under Code Sections 368(a)(1)(D) and 355(a) or (ii)
under Code Section 355(a).
7.5. Tax Opinion Certification.
7.5.1. AT&T shall execute and deliver a certificate, in a form
reasonably satisfactory to the counsel of both AT&T and Cox, signed by an
officer of AT&T, setting forth factual representations that will serve as a
basis for the tax opinions required pursuant to Sections 8.2.5 and 8.3.7 (the
"AT&T TAX MATTERS CERTIFICATE").
7.5.2. Cox shall execute and deliver a certificate, in a form
reasonably satisfactory to the counsel of both Cox and AT&T, signed by an
officer of Cox, setting forth factual representations that will serve as a basis
for the tax opinions required pursuant to Sections 8.2.5 and 8.3.7 (the "COX TAX
MATTERS CERTIFICATE").
7.6. Intercompany Accounts. On or before the Closing Date, AT&T shall
pay or otherwise settle, or cause to be paid or otherwise settled, all
intercompany loans, payables, receivables and accounts between AT&T or any
Affiliate of AT&T (other than Cable Sub and its Subsidiaries), on the one hand,
and Cable Sub and its Subsidiaries, on the other.
7.7. Employee Benefit Matters.
7.7.1. At and after the Closing Time, Cox will have no
obligation to employ or to cause Cable Sub and its Subsidiaries to continue to
employ any of the employees of the Systems as of the Closing Time. Not more than
30 days after the date of this Agreement, the AT&T Cable Subsidiaries will
provide Cox with a list of all employees of the Systems as of the most recent
practicable date, indicating hire dates, then-current positions, rates of
compensation and indicating which employees of the Systems are available for
employment by Cable Sub and its Subsidiaries immediately following the Closing
Time. Within 60 days after its receipt of such list, Cox shall provide to AT&T a
list of the employees of the Systems whom Cox intends to employ or to cause
Cable Sub and its Subsidiaries to employ as of the Closing Time (referred to
herein as "TRANSITIONED EMPLOYEES"). All employment offers shall include base
compensation at least equal to the Transitioned Employee's rate of base
compensation as of the Closing Time. AT&T agrees that as of the Closing Time,
the only employees of Cable Sub and its Subsidiaries shall be the Transitioned
Employees (or their direct replacements). Notwithstanding the foregoing, the
parties acknowledge and agree that none of the corporate-level employees of Peak
shall become Transitioned Employees.
7.7.2. Prior to the Closing, AT&T or the AT&T Cable
Subsidiaries shall cause to be discharged and satisfied in full all amounts due
and owing to each Transitioned Employee with
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respect to and in accordance with the terms of all Compensation Arrangements or
Employee Plans, including without limitation any wages, sick pay, accrued and
unused vacation in excess of the amount Cox assumes pursuant to Section 7.7.4
below, and payments under any incentive compensation or bonus agreement, in each
case which has accrued prior to the Closing Time. AT&T shall promptly assume and
satisfy, or cause TCIH or UCTC to assume and satisfy the legal obligation with
respect to continuation of group health coverage required pursuant to Section
4980B of the Code or Section 601, et seq., of ERISA with respect to former
employees of the Systems and employees who are currently employed at the Systems
or are employed at the Systems between the date of this Agreement and Closing,
but in each case, who are not Transitioned Employees.
7.7.3. Cox shall offer health plan coverage to all
Transitioned Employees, and except as otherwise provided below, on the same
basis as all other similarly situated employees of Cox. For purposes of
providing such coverage, Cox shall waive all preexisting condition limitations
for all Transitioned Employees that are covered by AT&T's or Peak's health care
plans as of the Closing Time (other than known preexisting conditions which were
excluded by AT&T's or Peak's health care plans) and shall provide such health
care coverage effective as of the Closing Time without the application of any
eligibility period for coverage. In addition, Cox shall credit all payments made
by Transitioned Employees toward deductible, co-payment and out-of-pocket limits
under AT&T's or Peak's health care plans for the plan year which includes the
Closing Date as if such payments had been made for similar purposes under Cox's
health care plans during the plan year which includes the Closing Date, with
respect to Transitioned Employees.
7.7.4. For each Transitioned Employee, Cox shall (i) provide
to such employee the same amount of paid vacation as that employee had accrued
but not taken as an employee of the Systems as of the Closing Time; provided
that the amount of accrued vacation provided to such employee by Cox under this
Section 7.7 shall be limited to the maximum amount of vacation permitted to be
accrued by employees of Cox in accordance with Cox's standard practices; (ii)
permit such employee to participate in Cox's employee benefit plans to the same
extent as similarly situated employees of Cox and their dependents; and (iii)
give each Transitioned Employee credit for his or her past service with AT&T or
any of the Consolidated Entities or Non-Consolidated Entities as of the Closing
Time (including past service with any prior owner or operator of the Systems to
the same extent AT&T or the Consolidated Entities or Non-Consolidated Entities
gave such past service credit) for purposes of eligibility to participate,
vesting, and the schedule of benefits under Cox's employee plans and
compensation arrangements in accordance with Cox's standard practices including
but not limited to vacation, short term disability or sick leave or sick pay,
long term disability and severance, but not for eligibility for post-retirement
health benefits or for benefit accrual purposes under any defined benefit
pension plan.
7.7.5. If the parties mutually agree to an asset transfer,
AT&T shall cooperate with Cox in arranging transfers from AT&T's 401(k) plan and
Peak's 401(k) plan to Cox's 401(k) plan with respect to the Transitioned
Employees as of the effective date of such asset transfer.
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7.7.6. If Cox discharges without cause within 90 days after
the Closing any Transitioned Employees, and such employees would have been
entitled to severance payments pursuant to the severance benefits plan of any of
the Consolidated Entities or Non-Consolidated Entities in effect as of the date
hereof, if such employees had been discharged without cause by any of the
Consolidated Entities or Non-Consolidated Entities prior to the Closing Time,
then Cox shall pay severance benefits to such employees in accordance with the
terms of the severance benefit plan in effect for the applicable System as of
the date hereof, which plans are listed on SCHEDULE 5.12.1A and SCHEDULE 5.12.2;
provided, that the amount of severance payments that Cox shall be obligated to
pay hereunder to the Transitioned Employees who were employed at the Peak
Systems prior to the Closing Time shall be equal to the lesser of the maximum
amount of severance payments set forth under the plan listed in SCHEDULE 5.12.1A
or the maximum amount of severance payments set forth under the plan listed in
SCHEDULE 5.12.2.
7.7.7. This Section 7.7 shall operate exclusively for the
benefit of AT&T, the Consolidated Entities, the Non-Consolidated Entities and
Cox and not for the benefit of any other person, including, without limitation,
any current, former or retired employee of the Systems or Cox or any of the
Transitioned Employees.
7.8. Broker's Fees. Each party hereto represents and warrants to
the other parties that neither it nor any Person acting on its behalf has
incurred any liability for any finders' or brokers' fees or commissions in
connection with the transaction contemplated by this Agreement, the AT&T Related
Agreements or the Cox Related Agreements. Each party agrees to indemnify and
hold harmless the other parties against any fee, commission, loss or expense
arising out of any claim by any other broker or finder employed or alleged to
have been employed by it.
7.9. Consents and Estoppel Certificates.
7.9.1. Each of AT&T (with respect to AT&T Consents described
in Section 4.4) and the AT&T Cable Subsidiaries will, and will cause each of the
Consolidated Entities and Non-Consolidated Entities to, use its commercially
reasonable efforts to obtain, as soon as possible, all of the AT&T Consents, in
form and substance reasonably satisfactory to Cox; provided that such
commercially reasonable efforts shall not require any of AT&T, the Consolidated
Entities or the Non-Consolidated Entities to make any payments to any Person
from whom such AT&T Consents are sought (other than normal or customary filing
fees, administrative costs or professional fees and expenses related to
obtaining such AT&T Consents and except as may be required to cure any default
by any of the Consolidated Entities or Non-Consolidated Entities under any
Contract or Governmental Permit). Notwithstanding the foregoing, none of AT&T or
any of the Consolidated Entities or Non-Consolidated Entities shall have any
obligation to obtain the Partnership Consents, it being agreed that Cox will be
responsible for obtaining any such Partnership Consents. Cox will cooperate in
all reasonable respects with AT&T and each of the Consolidated Entities and Non-
Consolidated Entities to obtain all AT&T Consents, but Cox will not be required
to (i) make any payment to any Person from whom such AT&T Consent is sought, or
(ii) accept any changes in, or the imposition of any adverse condition to, any
Contract or Governmental Permit as a condition to
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obtaining any AT&T Consent, other than changes to any Contract or Governmental
Permit that do not impose any (A) monetary obligations (except for increased
Franchise fee payments to the maximum extent permitted by applicable law), (B)
material nonmonetary obligations upon Cox or (C) significant expansion of the
rights of the other contracting party or the franchising authority from whom
such AT&T Consent is sought. Cox agrees that it will not, without the prior
written consent of the AT&T Cable Subsidiaries (which may be withheld in the
sole discretion of the AT&T Cable Subsidiaries), seek amendments or
modifications to existing Franchises or Contracts. Cox will, at the request of
the AT&T Cable Subsidiaries, promptly furnish the AT&T Cable Subsidiaries with
copies of such documents and information with respect to Cox, including
financial information and information relating to the cable and other operations
of Cox and any of its Affiliates or related companies, as the AT&T Cable
Subsidiaries may reasonably request in connection with the obtaining of any
consents to the transactions contemplated by this Agreement, the AT&T Related
Agreements or the Cox Related Agreements or as may be reasonably requested by
any Person in connection with any consent or approval of such Person to the
transactions contemplated by this Agreement, the AT&T Related Agreements or the
Cox Related Agreements. Each of the AT&T Cable Subsidiaries also will, and will
cause each of the Consolidated Entities and Non-Consolidated Entities to, use
its commercially reasonable efforts to obtain such estoppel certificates or
similar documents from lessors who are parties to Contracts as Cox may
reasonably request, provided such lessor's Consent is otherwise necessary to
effect the transactions contemplated herein.
7.9.2. Cox will use its commercially reasonable efforts to
obtain, as soon as possible, all of the Cox Consents, in form and substance
reasonably satisfactory to the AT&T Cable Subsidiaries; provided that Cox's
commercially reasonable efforts shall not require it to make any payments to any
Person from whom such Cox Consents are sought (other than normal or customary
filing fees, administrative costs or professional fees and expenses relating to
obtaining such Cox Consents and except as may be required to cure any default by
Cox under any agreement to which any Cox Consent relates). Each of the AT&T
Cable Subsidiaries will, and will cause each of the Consolidated Entities and
Non-Consolidated Entities to, cooperate in all reasonable respects with Cox to
obtain all Cox Consents, but none of the Consolidated Entities or
Non-Consolidated Entities will be required to make any payment to any Person
from whom such Cox Consent is sought.
7.9.3. Cox will use its commercially reasonable efforts to
obtain, as soon as possible, all of the Partnership Consents, in form and
substance reasonably satisfactory to the AT&T Cable Subsidiaries; provided that
Cox's commercially reasonable efforts shall not require Cox to (i) make any
payments to any Person from whom such Partnership Consents are sought (other
than normal or customary filing fees, administrative costs or professional fees
and expenses related to obtaining such Partnership Consents), or (ii) accept any
changes in, or the imposition of any adverse condition to, any contract,
agreement, lease, instrument, franchise, permit or other understanding to which
such Partnership Consent relates, as a condition to obtaining any Partnership
Consent, other than changes to such contract, agreement, lease, instrument,
franchise, permit or other understanding that do not impose any (A) monetary
obligations (except for increased franchise fee payments to the maximum extent
permitted by applicable law), (B) material nonmonetary obligations upon Cox or
(C) significant expansion of the rights of the other contracting party or the
franchising authority from whom such
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Partnership Consent is sought. Cox agrees that it will not, without the prior
written consent of the AT&T Cable Subsidiaries (which may be withheld in the
sole discretion of the AT&T Cable Subsidiaries), seek amendments or
modifications to existing franchise agreements to which such Partnership
Consents relate. Each of the AT&T Cable Subsidiaries will, and will cause each
of the Consolidated Entities and Non-Consolidated Entities to, cooperate in all
reasonable respects with Cox to obtain all Partnership Consents, but none of the
Consolidated Entities or Non-Consolidated Entities will be required to make any
payment to any Person from whom such Partnership Consent is sought (other than
as may be required to cure any default by the AT&T Partner under any contract,
agreement, lease, instrument, franchise, permit or other understanding to which
such Partnership Consent relates).
7.9.4. Notwithstanding the foregoing, the AT&T Cable
Subsidiaries will have no further obligation to obtain AT&T Consents with
respect to (i) license agreements relating to pole attachments where the
licensing party will not, after the exercise of commercially reasonable efforts
by the AT&T Cable Subsidiaries, consent to an assignment of such license
agreement but requires that Cox enter into a new agreement with such licensing
authority, in which case Cox shall use its commercially reasonable efforts to
enter into such agreement as soon as possible and the AT&T Cable Subsidiaries
will, and will cause each of the Consolidated Entities and Non-Consolidated
Entities to, cooperate with and assist Cox in obtaining such agreements;
provided, however, that Cox's commercially reasonable efforts shall not require
Cox to take any action of the type that the AT&T Cable Subsidiaries are not
required to take pursuant to Section 7.9.1 hereof and (ii) any business radio
license which the AT&T Cable Subsidiaries and Cox reasonably expect can be
obtained within 120 days after the Closing and so long as a temporary
authorization is available to Cox under FCC rules with respect thereto.
7.9.5. As soon as practicable after the date of this
Agreement, but in any event not later than 60 days after the date of this
Agreement, the parties will cooperate with each other to assist in completing
and will complete and file or cause to be completed and filed with the
appropriate Governmental Authority an FCC Form 394 or such other request for
consent with respect to each Franchise as to which consent to transfer is
required.
7.9.6. Cox shall take all commercially reasonable action and
execute and deliver all reasonably necessary documents to ensure that on the
Closing Date or as soon as reasonably practicable thereafter, Cox has delivered
such bonds, letters of credit, indemnity agreements and similar instruments in
such amounts and in favor of such franchisors or other Persons requiring the
same in connection with the Franchises and Contracts held by Cable Sub and its
Subsidiaries at the Closing. The AT&T Cable Subsidiaries shall use commercially
reasonable efforts to provide a true and complete list of all such instruments
to Cox at least 45 days prior to Closing.
7.10. Title Commitments and Surveys.
7.10.1. Within 60 days after the date on which Cox and AT&T
agree in writing on the Delayed Schedules, at Cox's election, Cox will use
commercially reasonable efforts to obtain (i)
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commitments for owner's title insurance policies on all Real Property owned by
any of the Consolidated Entities or Non-Consolidated Entities with respect to
the Systems and (ii) an ALTA survey on each parcel of owned Real Property for
which a title insurance policy is to be obtained. The title commitment will
evidence a commitment to issue an ALTA title insurance policy from a nationally
recognized title insurance company such as First American Title Company or
Chicago Title Insurance Company, insuring fee simple title in Cable Sub or a
Subsidiary of Cable Sub, as the case may be, to each parcel of the Real Property
contemplated above for such amount as Cox directs and will contain no exceptions
except for Permitted Encumbrances. Each of the AT&T Cable Subsidiaries shall,
and shall cause each of the Consolidated Entities and Non-Consolidated Entities
to, cooperate with Cox in obtaining such title commitments and surveys.
7.10.2. If Cox notifies the AT&T Cable Subsidiaries within 90
days following the date on which Cox and AT&T agree in writing on the Delayed
Schedules of any Encumbrance (other than a Permitted Encumbrance) that could
prevent or impede in any material way the use or operation by Cable Sub
following the Closing of any parcel of owned Real Property, each of the AT&T
Cable Subsidiaries will, and will cause each of the Consolidated Entities and
Non-Consolidated Entities to, use commercially reasonable efforts to remove
such Encumbrance or cause the title insurance company to insure over such
Encumbrance. If the Consolidated Entities and Non- Consolidated Entities are
unable to remove or cause the title insurance company to insure over such
Encumbrance despite the exercise of their commercially reasonable efforts, then
Cox may elect either (i) to terminate this Agreement if such Encumbrance would
have a Material Adverse Effect or (ii) to consummate the transactions
contemplated by this Agreement notwithstanding such Encumbrance.
7.10.3. At the Closing, the AT&T Cable Subsidiaries will cause
Cox to receive title commitments with respect to owned Real Property redated to
the date and time of the Closing.
7.10.4. The parties agree that in the event SCHEDULE 5.5
discloses any long-term Real Property leases for headend or tower sites with
respect to which five years or more remain on the term of such lease as of the
Closing Date (the "LONG-TERM LEASES"), Cox shall have the right to obtain
commitments for leasehold title insurance policies on any such Long-Term Leases
as Cox elects. Cox agrees to notify AT&T, within 10 days after the date on which
Cox and AT&T agree in writing on the Delayed Schedules, of the Long-Term Leases,
if any, on which Cox elects to obtain commitments for leasehold title insurance.
In the event Cox elects to obtain any commitments for leasehold title insurance,
the parties agree that the provisions of this Section 7.10 shall be deemed to be
modified to provide for Cox's right to obtain such commitments, and that all
references in this Section 7.10 to the concepts of "title" commitments and
insurance and to "owned" property shall be deemed to include references to
"leasehold" commitments and insurance and to "leased" property.
7.11. Environmental Investigations.
7.11.1. As soon as practicable after the date of this
Agreement (but in no event more than 60 days after the date on which Cox and
AT&T agree in writing on the Delayed Schedules), Cox will obtain a Phase I
environmental audit of the Real Property (which shall include a limited asbestos
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survey) to be owned by Cable Sub and its Subsidiaries at the Closing, or on such
parcels of the Real Property as Cox may determine. Cox shall engage a nationally
known environmental auditing company to perform the aforesaid audit. Each of the
AT&T Cable Subsidiaries will, and will cause the Consolidated Entities and
Non-Consolidated Entities to, comply with any reasonable request for information
made by Cox or its agents in connection with any such investigation and shall
afford Cox and its agents access to all operations of the Systems, including,
without limitation, all areas of the Real Property, at reasonable times and in a
reasonable manner in connection with any such investigation.
7.11.2. In the event that as a result of any of the
environmental investigations, a nationally known environmental auditing company
determines that remedial action is required by law, Cox shall promptly notify
AT&T. If Cox's environmental expert determines that remedial action is required,
AT&T shall have the right to engage a nationally known environmental auditing
company to provide a second opinion, in which case the parties agree to use an
average of the two estimates for purposes of this Section 7.11.
7.11.3. In the event that as a result of such environmental
investigations, Cox's environmental expert determines that remedial action is
required by applicable Legal Requirements and the estimated remediation cost for
all parcels of Real Property in the aggregate is less than $4,000,000, then Cox
shall not be entitled to terminate this Agreement pursuant to this Section 7.11
but shall be obligated to consummate the transactions contemplated hereby
without such remedial action having been taken, and none of AT&T or either of
the AT&T Cable Subsidiaries shall have any obligation to make any payment to Cox
relating to the cost of such remedial action.
7.11.4. In the event that as a result of such environmental
investigations, Cox's environmental expert determines that remedial action is
required by applicable Legal Requirements and the estimated remediation cost for
all parcels of Real Property in the aggregate is equal to or greater than
$4,000,000 but less than $11,000,000, then AT&T shall elect to either (i)
perform remedial action to the reasonable satisfaction of Cox's environmental
consultant and in accordance with all applicable Legal Requirements, or (ii)
consummate the transactions contemplated hereby without such remedial action
having been taken, subject to payment by AT&T to Cox at the Closing of cash in
an amount equal to the difference between $4,000,000 and the required
remediation costs estimated as provided in Section 7.11.2.
7.11.5. In the event that as a result of such environmental
investigations, Cox's environmental expert determines that remedial action is
required by applicable Legal Requirements and the estimated remediation cost for
all parcels of Real Property in the aggregate is equal to or greater than
$11,000,000 and AT&T does not elect to cause remedial action to be performed to
the reasonable satisfaction of Cox's environmental consultant and in accordance
with applicable Legal Requirements, then Cox shall elect to either (i) terminate
this Agreement, or (ii) consummate the transactions contemplated hereby without
such remedial action having been taken, subject to payment by AT&T to Cox at the
Closing of cash in an amount equal to $7,000,000.
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7.12. HSR Notification. As soon as practicable, but not later than 30
days after the date of this Agreement, each party will complete and file, or
cause to be completed and filed, any notification and report required to be
filed under the HSR Act with respect to the transactions contemplated hereby.
Each of the parties will cooperate to prevent inconsistencies between their
respective filings and will furnish to each other party such necessary
information and reasonable assistance as such other party may reasonably request
in connection with its preparation of necessary filings or submissions under the
HSR Act. The parties shall use commercially reasonable efforts to respond as
promptly as reasonably practicable to any inquiries received from the FTC and
the DOJ for additional information or documentation and to respond as promptly
as reasonably practicable to all inquiries and requests received from any other
Governmental Authority in connection with antitrust matters. The parties shall
use their respective commercially reasonable efforts to overcome any objections
which may be raised by the FTC, DOJ or any other Governmental Authority having
jurisdiction over antitrust matters. Notwithstanding anything to the contrary in
this Agreement, if any party, in its reasonable business judgment, considers the
imposition of a condition upon the transactions by a governmental agency to be
materially adverse to such party or any of its Affiliates, such party may
terminate this Agreement.
7.13. No Shop. Neither AT&T nor any of its Affiliates or any agent or
representative of any of them 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 (i) solicit or initiate
the submission of proposals or offers from any Person for, (ii) participate in
any discussions pertaining to or (iii) furnish any information to any Person
other than Cox relating to, any direct or indirect acquisition or purchase of
all or any portion of the Assets, the Systems, Peak or the Partnership Interest.
7.14. Notification of Certain Matters. Each party will promptly notify
the other parties of any fact, event, circumstance or action (i) which, if known
on the date of this Agreement or, pursuant to Section 5.24.2, on the date or
dates the Consolidation Outline or any amendment thereto is delivered, would
have been required to be disclosed to any other party pursuant to this Agreement
or (ii) the existence or occurrence of which would cause any of such party's
representations or warranties under this Agreement not to be correct and
complete, including, without limitation, any fact, event, circumstance or action
that would have been required to be disclosed on SCHEDULE 5.15.
7.15. Risk of Loss; Condemnation.
7.15.1. The AT&T Cable Subsidiaries 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 Time. If any
such loss or damage is so substantial as to prevent normal operation of any
material portion of the Tulsa System, the Baton Rouge System or the Peak Systems
or the replacement or restoration of the lost or damaged property prior to the
Closing Time, the AT&T Cable Subsidiaries will immediately notify Cox of that
fact and Cox, at any time within 10 days after receipt of such notice, may elect
by written notice to the AT&T Cable Subsidiaries either to (i) waive such defect
and proceed toward consummation of the acquisition of the Assets in accordance
with
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the terms of this Agreement or (ii) terminate this Agreement. If Cox elects so
to terminate this Agreement, Cox, AT&T and the AT&T Cable Subsidiaries will be
discharged of any and all obligations hereunder. If Cox elects to consummate
the transactions contemplated by this Agreement notwithstanding such loss or
damage and does so, all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
the AT&T Cable Subsidiaries to Cox, or the rights to such proceeds will be
assigned by the AT&T Cable Subsidiaries to Cox if not yet paid over to the AT&T
Cable Subsidiaries, and the AT&T Cable Subsidiaries will pay to Cox an amount
equal to the difference between the amount of such insurance proceeds and the
full replacement cost of the damaged or lost Assets as reasonably agreed to by
the parties.
7.15.2. If, prior to the Closing Time, all or any 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 AT&T, any of the Consolidated Entities or Non-Consolidated Entities or
Cox that it intends to condemn all or any part of or interest in the Assets and
such taking is so substantial as to prevent normal operation of any material
portion of any of the Tulsa System, the Baton Rouge System or the Peak Systems
(such event being called, in either case, a "TAKING"), then subject to Cox's
prior written consent (which consent shall not be unreasonably withheld), the
AT&T Cable Subsidiaries may acquire or lease (as applicable) substantially
similar property to substitute for the Assets that are subject to the Taking,
in which case the AT&T Cable Subsidiaries shall bear all costs and expenses
(direct, indirect and consequential) in any way related to the identification
and acquisition of such Assets, and any construction and/or relocation of
System plant and facilities resulting from the substitution of the property. If
the AT&T Cable Subsidiaries do not promptly propose such a substitution, or the
AT&T Cable Subsidiaries and Cox do not reach agreement on any material aspect
of such substitution of the Assets subject to a Taking, then (i) Cox may
terminate this Agreement or (ii) if Cox does not elect to terminate this
Agreement, then (A) Cox will have the sole right, in the name of AT&T or such
Consolidated Entity or Non-Consolidated Entity, as the case may be, if Cox so
elects, to negotiate for, claim, contest and receive all damages with respect
to the Taking, (B) AT&T will be relieved of its obligation to convey to Cox the
Assets or interests that are the subject of the Taking, (C) at the Closing,
Cable Sub and its Subsidiaries shall have all rights to all damages payable
with respect to such Taking and AT&T will pay to Cox all damages previously
paid to AT&T or such Consolidated Entity or Non-Consolidated Entity, as the
case may be, with respect to the Taking and (iv) following the Closing, the
AT&T Cable Subsidiaries will give Cox such further assurances of such rights
and assignment with respect to the Taking as Cox may from time to time
reasonably request.
7.16. Lien and Judgment Searches. The AT&T Cable Subsidiaries will
deliver to Cox, not more than 60 days after the date of this Agreement (or with
respect to any Consolidated Entities or Non-Consolidated Entities identified in
the Consolidation Outline, 45 days after the date of such identification), 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 exists tangible Assets, and in the state and county
where the principal offices of each of the Consolidated Entities and
Non-Consolidated Entities are located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company.
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7.17. Tax Matters.
7.17.1. Filing of Tax Returns.
(i) AT&T shall be responsible for the
preparation and filing of all Tax Returns of the Consolidated Entities for all
taxable periods that end as to the Consolidated Entities on or before the
Closing Date, including Tax Returns of the Consolidated Entities for taxable
periods that end as to the Consolidated Entities on or before the Closing Date
but are due after the Closing Date, and AT&T shall be responsible for the
contents of such Tax Returns and for the payment of all Taxes due with respect
thereto (subject to indemnification by Cox to the extent provided in Section
7.17.2). AT&T shall file or cause to be filed all such Tax Returns when due,
and shall remit or cause to be remitted any Taxes due in respect of such
returns. All such Tax Returns shall be prepared and filed in a manner
consistent with past practice of the Consolidated Entities (and the
Non-Consolidated Entities with respect to the Systems) and, on such Tax
Returns, no position shall be taken, election made or method adopted that is
inconsistent with positions taken, elections made or methods used in preparing
similar Tax Returns for prior periods (including, but not limited to, positions
which would have the effect of deferring income to periods for which Cox is
liable or accelerating deductions to periods for which AT&T is liable), unless
otherwise required by applicable law or pursuant to a "determination" within
the meaning of Code Section 1313(a) and except as provided in Section
7.17.1(iv) below with respect to Peak and except for manners, positions,
elections and methods that, in the case of any Consolidated Tax Returns, would
be applicable to entities other than the Consolidated Entities and, in the case
of any other Tax Returns, are required to be filed in conformity with such
Consolidated Tax Returns. Except as provided in Section 7.17.4, AT&T shall have
the sole authority to deal with any matters (including any Tax Proceeding)
relating to any Consolidated Tax Returns and any Tax Returns of the
Consolidated Entities for taxable periods ending as to the Consolidated
Entities on or prior to the Closing Date. Cox shall, and shall cause its
Affiliates and the Consolidated Entities to, facilitate the exercise of AT&T's
rights pursuant to the immediately preceding sentence, including by providing
AT&T or its designees with any reasonably requested power of attorney with
respect to such Tax Returns or proceedings.
(ii) Cox shall be responsible for the
preparation and filing of all Tax Returns of the Consolidated Entities for all
taxable periods that end as to the Consolidated Entities after the Closing Date
(including Straddle Periods, but not including Straddle Consolidated Tax
Returns), and Cox shall be responsible for the contents of such Tax Returns and
the payment of all Taxes due with respect thereto (subject to indemnification
by AT&T to the extent provided in Section 7.17.2); provided, however, that with
respect to any Straddle Period, Cox shall be responsible for Taxes for the
portion of such period that ends on the Closing Date only to the extent that
either such Taxes are taken into account as Current Liabilities in computing
Working Capital or the Working Capital Adjustment pursuant to SCHEDULE 2.1 or
Cox is obligated to indemnify AT&T pursuant to Section 7.17.2. Cox shall file
or cause to be filed all such Tax Returns when due, and shall remit or cause to
be remitted any Taxes due in respect of such returns. All such Tax Returns
shall be prepared and filed in a manner consistent with past practice of the
Consolidated Entities (and the Non- Consolidated Entities with respect to the
Systems) and consistent with the manner in which Tax Returns of the
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Consolidated Entities are prepared and filed by AT&T pursuant to this Section
7.17.1, and, on such Tax Returns, no position shall be taken, election made or
method adopted that is inconsistent with positions taken, elections made or
methods used in preparing similar Tax Returns for prior periods (including, but
not limited to, positions which would have the effect of shifting income to
periods for which AT&T is liable or deferring deductions to periods for which
Cox is liable), unless otherwise required by applicable law or pursuant to a
"determination" within the meaning of Code Section 1313(a) and except for
manners, positions, elections and methods that, in the case of any Tax Return
that includes any Consolidated Entity, on the one hand, and Cox or any
Subsidiary of Cox other than a Consolidated Entity, on the other hand (a "COX
CONSOLIDATED TAX RETURN"), would be applicable to entities other than the
Consolidated Entities and, in the case of any other Tax Returns, are required
to be filed in conformity with such Cox Consolidated Tax Returns. Except as
provided in Sections 7.17.4 and 7.17.5 Cox shall have the sole authority to
deal with any matters (including any Tax Proceeding) relating to Tax Returns of
the Consolidated Entities for taxable periods ending as to the Consolidated
Entities after the Closing Date.
(iii) Except to the extent taken into account in
computing Working Capital or the Working Capital Adjustment pursuant to
SCHEDULE 2.1, Cox shall promptly pay or cause to be paid to AT&T all refunds of
Taxes and interest thereon received by Cox or any Affiliate of Cox attributable
to Taxes paid by AT&T or any Consolidated Entity with respect to any taxable
period of any Consolidated Entity ending on or before the Closing Date or with
respect to the portion of any Straddle Period ending on or prior to the Closing
Date. AT&T shall promptly pay or cause to be paid to Cox all refunds of Taxes
and interest thereon received by AT&T or any Affiliate of AT&T attributable to
Taxes paid by Cox or the Consolidated Entities with respect to any taxable
period ending after the Closing Date.
(iv) In respect of the purchase by AT&T or one
or more Subsidiaries of AT&T of all of the membership interests in Fisher
Communications pursuant to the Consolidation, to the extent permissible under
applicable law and to the extent that AT&T is responsible under Section
7.17.1(i) for filing the relevant Tax Return, AT&T and its Subsidiaries shall
cause Peak to timely file an election under Code Section 754, to the extent
that such an election is not already in effect with respect to Peak, so that
Peak shall adjust the tax basis of its assets under Code Section 743(b) as a
result of such purchase.
(v) Following the Closing Date, Cox shall cause
the Consolidated Entities to empower, by appropriate powers of attorney, if
necessary, one or more designees of AT&T to sign all Tax Returns for any
taxable period of any Consolidated Entity that AT&T is required to file or
cause to be filed pursuant to this Section 7.17.1.
7.17.2. Payment of Taxes; Tax Indemnification.
(i) AT&T shall be liable for, and shall hold
Cox, the Consolidated Entities and each other Affiliate of Cox harmless from
and against, (a) any and all Taxes due and payable with respect to the Systems,
and (b) any and all Taxes of the Consolidated Entities, in the case of (a) and
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(b), for any taxable period ending on or prior to the Closing Date and, with
respect to any Straddle Period (or any taxable period of a Consolidated Entity
included in a Straddle Consolidated Tax Return), for the portion of such period
ending on and including the Closing Date (other than, in the case of (a) and
(b), any Taxes taken into account as Current Liabilities in calculating Working
Capital or the Working Capital Adjustment and any and all Taxes resulting from
any acts of Cox or any of its Subsidiaries or Affiliates, or which Cox or any
of its Affiliates causes any of the Consolidated Entities to take (other than
such actions, if any, taken to effect the Consolidation and the Separation),
occurring on the Closing Date and not in the ordinary course of business after
the Closing Time ) (collectively, "PRE-CLOSING TAXES"); provided, however, that
AT&T shall not be liable for, and shall not hold Cox, the Consolidated
Entities, and the Affiliates of Cox harmless from and against, any Pre-Closing
Taxes resulting from a breach by Cox or any of its Affiliates of any
representation contained in Section 6.6 or any covenant contained in Section
7.4 or the penultimate sentence of Section 2.2.2 or any representation
contained in the Cox Tax Matters Certificate (a "COX TAX BREACH") (it being
acknowledged and agreed that a Peak Asset Disposition shall not constitute a
Cox Tax Breach). In the event that Cox or any Affiliate of Cox is required to
pay any Tax for which AT&T is liable hereunder as a result of a "determination"
within the meaning of Code Section 1313(a) in connection with any Tax
Proceeding, AT&T shall pay Cox (or its designee) such amount for which AT&T is
liable not later than 10 days after the date of such determination.
(ii) Cox shall be liable for, and shall hold
AT&T, each Non-Consolidated Entity and each other Affiliate of AT&T harmless
from and against, (a) any and all Taxes due and payable with respect to the
Systems other than Pre-Closing Taxes, (b) any and all Taxes of the Consolidated
Entities other than Pre-Closing Taxes, (c) any Taxes taken into account as
Current Liabilities in calculating Working Capital or the Working Capital
Adjustment, and (d) any Taxes resulting from any acts of Cox or any of its
Subsidiaries or Affiliates, or which Cox or any of its Affiliates causes any of
the Consolidated Entities to take (other than such actions, if any, taken to
effect the Consolidation and Separation), occurring on the Closing Date and not
in the ordinary course of business after the Closing Time; provided, however,
that Cox shall not be liable for, and shall not hold AT&T, the Non-Consolidated
Entities or the other Affiliates of AT&T harmless from and against any Taxes
described in clause (a), (b), (c) or (d) resulting from a breach by AT&T or any
of its Affiliates of any representation contained in Section 4.5 or in the last
sentence of Section 4.6 or any covenant contained in Section 7.4 or any
representation contained in the AT&T Tax Matters Certificate (an "AT&T TAX
BREACH"). In the event that AT&T or any of its Affiliates is required to pay
any Tax for which Cox is liable hereunder as a result of a "determination"
within the meaning of Code Section 1313(a) in connection with any Tax
Proceeding, Cox shall pay AT&T (or its designee) such amount for which Cox is
liable not later than 10 days after the date of such determination.
(iii) AT&T shall be liable for, and shall hold
Cox, the Consolidated Entities, and the Affiliates of Cox harmless from and
against, any and all Taxes of the Non-Consolidated Entities, other than any
such Taxes resulting from a Cox Tax Breach. In the event that Cox or any
Affiliate of Cox is required to pay any Tax for which AT&T is liable hereunder
as a result of a "determination" within the meaning of Code Section 1313(a) in
connection with any Tax Proceeding,
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AT&T shall pay Cox (or its designee) such amount for which AT&T is liable not
later than 10 days after the date of such determination.
(iv) AT&T shall be liable for, and shall hold
Cox, the Consolidated Entities and the Affiliates of Cox harmless from and
against, Taxes of any Person (other than the Consolidated Entities, Cox and any
Affiliate of Cox) for taxable periods beginning prior to or including the
Closing Date for which any of the Consolidated Entities is or becomes liable
pursuant to Treasury Regulations Section 1.1502-6 or pursuant to any comparable
provisions of state, local or foreign law (but excluding Taxes of any Person
for which a Consolidated Entity becomes liable thereunder as a result of being
an Affiliate of such Person solely in periods after the Closing Date), other
than any such Taxes resulting from a Cox Tax Breach. In the event that Cox or
any Affiliate of Cox is required to pay any Tax for which AT&T is liable
hereunder as a result of a "determination" within the meaning of Code Section
1313(a) in connection with any Tax Proceeding, AT&T shall pay Cox (or its
designee) such amount for which AT&T is liable not later than 10 days after the
date of such determination.
(v) AT&T shall be liable for, and shall hold
Cox, the Consolidated Entities and the Affiliates of Cox harmless from and
against, any Taxes resulting from an AT&T Tax Breach. In the event that Cox or
any of its Affiliates is required to pay any Tax for which AT&T is liable
hereunder as a result of a "determination" within the meaning of Code Section
1313(a) in connection with any Special Cox Tax Proceeding, as defined below,
AT&T shall pay Cox or such Affiliate (or their designee) such amount for which
AT&T is liable not later than 10 days after the date of such determination;
provided, however, that in the event that the arbitration procedure described
in Section 7.17.4(iii)(e) applies, then AT&T shall be required to pay Cox the
amount for which AT&T is liable no later than 10 days after the arbitrator
referred to in such clause renders its decision (with interest pursuant to
Section 7.17.2(ix) from the date payment would have been due in the absence of
such arbitration).
(vi) Cox shall be liable for, and shall hold
AT&T, the Non-Consolidated Entities and the Affiliates of AT&T harmless from
and against, any Taxes resulting from a Cox Tax Breach. In the event that AT&T
or any of its Affiliates is required to pay any Tax for which Cox is liable
hereunder as a result of a "determination" within the meaning of Code Section
1313(a) in connection with any Special AT&T Tax Proceeding, as defined below,
Cox shall pay AT&T or such Subsidiary (or their designee) such amount for which
Cox is liable not later than 10 days after the date of such determination;
provided, however, that in the event that the arbitration procedure described
in Section 7.17.4(iii)(d) applies, then Cox shall be required to pay AT&T the
amount for which Cox is liable no later than 10 days after the arbitrator
referred to in such clause renders its decision (with interest pursuant to
Section 7.17.2(ix) from the date payment would have been due in the absence of
such arbitration).
(vii) For purposes of this Section 7.17, whenever
it is necessary to determine the liability for Taxes of an entity for a portion
of any Straddle Period, the determination of the Taxes for the portion of the
Straddle Period ending on, and for the portion of the Straddle Period beginning
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after, the Closing Date shall be determined on the basis of a closing of the
entity's books at the close of business on the Closing Date as if the taxable
period ended at such time; provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, property Taxes and other similar items, shall be apportioned
between such two taxable periods on a daily basis. Cox shall use commercially
reasonable efforts to submit to AT&T not later than sixty (60) days prior to
the due date (including extensions) for filing such Tax Return, and shall
submit to AT&T not later than thirty (30) days prior to the due date (including
extensions) for filing such Tax Return, a copy (in the form proposed to be
filed in all material respects) of any Tax Return required to be filed by it
pursuant to this Section 7.17 for any Straddle Period (and a calculation of the
amount of Tax, if any, in connection with such Tax Return, for which Cox has
determined AT&T is responsible) to AT&T for AT&T's review and consent, which
consent shall not be unreasonably withheld. AT&T shall provide any comments on
such Tax Return and calculation to Cox within twenty (20) days of receipt of
such Tax Return. Cox shall file such Tax Return in a manner that reflects any
good faith comments of AT&T, and shall provide AT&T with a copy of such filed
Tax Return promptly after such Tax Return is filed; provided, however, that if
Cox disagrees in good faith with any such comments, such disagreement shall be
resolved expeditiously by AT&T and Cox, or, failing that, by a neutral
arbitrator, mutually selected by the parties, but if such disagreement has not
been resolved before the due date (including extensions) for filing such Tax
Return, then Cox may file such Tax Return in a manner that Cox, in its
reasonable determination, deems appropriate and, following the final decision
of such arbitrator, Cox shall file an amended Tax Return to the extent
necessary to reflect such final decision. If the amount of Taxes with respect
to such Tax Return taken into account as Current Liabilities in computing
Working Capital or the Working Capital Adjustment pursuant to SCHEDULE 2.1
(plus, if applicable, any estimated Tax payments made by AT&T with respect to
the portion of such Straddle Period ending on the Closing Date if Cox is
entitled to a credit for such estimated Tax payments on the respective Tax
Return when such Tax Return is filed and such estimated Tax payments were not
taken into account in computing Working Capital or the Working Capital
Adjustment ("AT&T CREDITED ESTIMATED TAX PAYMENTS")) is less than the amount of
such Taxes with respect to such Tax Return as so filed (or, if applicable, with
respect to the amended return filed in accordance with the decision of the
arbitrator) payable for the portion of the respective Straddle Period ending on
and including the Closing Date, then AT&T shall pay such shortfall to Cox at
least one (1) day prior to the due date (including extensions) for filing the
respective Tax Return. If the amount of Taxes with respect to such Tax Return
taken into account as Current Liabilities in computing Working Capital or the
Working Capital Adjustment pursuant to SCHEDULE 2.1 plus any AT&T Credited
Estimated Tax Payments is greater than the amount of such Taxes with respect to
such Tax Return as so filed payable for the portion of the respective Straddle
Period ending on and including the Closing Date, then Cox shall pay such excess
to AT&T within five (5) days after filing the respective Tax Return. In the
event the arbitration procedure described in this Section 7.17.2(vii) applies
and payment is required to be made hereunder after the due date for filing such
return, then payment shall be made within ten (10) days following the date of
the decision of the arbitrator, with interest pursuant to Section 7.17.2(ix)
from the due date for such return.
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(viii) Each of Cox and AT&T shall promptly deliver
to the other party any notice (or the relevant portion thereof) from any Tax
authority received by it or any of its Affiliates relating to Taxes for which
the other party is or may be liable pursuant to this Agreement.
(ix) If any amount payable hereunder is not paid
when due, such amount shall bear interest from the date such payment is due to
the date payment is made at the "underpayment rate" set forth in Code Section
6621.
7.17.3. Cooperation on Tax Matters.
(i) AT&T and Cox shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 7.17 and any Tax Proceeding.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such Tax Return or Tax Proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. AT&T and Cox agree (a) to retain all books and
records with respect to Tax matters pertinent to the Consolidated Entities
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by AT&T
or Cox, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(b) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, AT&T or Cox, as the case may be, shall allow the other party to take
possession of such books and records to the extent they would otherwise be
destroyed or discarded.
(ii) AT&T and Cox further agree, upon request,
to use commercially reasonable efforts to obtain any certificate or other
document from any Governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed with
respect to the transactions contemplated hereby.
(iii) Within 90 days following the execution of
this Agreement (or, if later, within 15 days following the filing of the
respective Tax Return), AT&T shall deliver to Cox: (a) pro forma federal income
Tax Returns for the Consolidated Entities (or otherwise relating to the
Systems) for the calendar years ending December 31, 1996, and each December 31
thereafter, derived from the federal income Tax Returns filed by AT&T on or
prior to the Closing Date with respect to taxable periods ending on or after
December 31, 1996, and on or prior to the Closing Date, (b) where a
Consolidated Entity has filed a state income Tax Return included in a
Consolidated Tax Return, pro forma state income Tax Returns for the
Consolidated Entities (or otherwise relating to the Systems) for the calendar
years ending December 31, 1996, and each December 31 thereafter, derived from
the Consolidated Tax Returns filed by AT&T on or prior to the Closing Date with
respect to taxable periods ending on or after December 31, 1996, and on or
prior to the Closing Date, (c) true and complete copies of the state income Tax
Returns (other than any Consolidated Tax Return or Straddle Consolidated Tax
Return) relating to the Consolidated Entities or otherwise relating to the
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Systems filed on or prior to the Closing Date with respect to taxable periods
ending on or after December 31, 1996, and on or prior to the Closing Date
(limited to the states in which AT&T has determined (based on the business and
operations of the Consolidated Entities during the calendar year 1999 and, if
the Closing occurs after December 31, 1999, during the period on and after
January 1, 2000, up to and including the Closing Date) that the Consolidated
Entities will be required to file Tax Returns after the Closing Date); and (d)
AT&T's calculation of Tax basis, and schedules showing AT&T's calculation of
Tax depreciation and amortization as of December 31, 1998, relating to the
Assets comprising the Systems based on the applicable books and records. Within
90 days following the Closing Date, AT&T shall deliver to Cox: (x) AT&T's
calculation of Tax basis, and schedules showing AT&T's calculation of Tax
depreciation and amortization as of the Closing Date relating to the Assets
comprising the Systems based on the applicable books and records, (y) AT&T's
calculation of any Tax carryforward items of each of the Consolidated Entities
as of the Closing Date based on the applicable books and records, and (z)
AT&T's calculation of the earnings and profits of each of the Consolidated
Entities as of the Closing Date based on the applicable books and records.
Within 90 days following the Closing Date (or, if later, within 15 days
following the filing of the respective Tax Return), AT&T shall deliver to Cox
(xx) pro forma federal income Tax Returns for the Consolidated Entities (or
otherwise relating to the Systems) derived from the federal income Tax Returns
filed by AT&T after the Closing Date relating to the Consolidated Entities or
otherwise relating to the Systems, (yy) where a Consolidated Entity has filed a
state income Tax Return included in a Consolidated Tax Return, pro forma state
income Tax Returns for the Consolidated Entities (or otherwise relating to the
Systems) derived from the Consolidated Tax Returns filed by AT&T after the
Closing Date relating to the Consolidated Entities or otherwise relating to the
Systems, and (zz) true and complete copies of the state income Tax Returns
(other than any Consolidated Tax Return or Straddle Consolidated Tax Return)
relating to the Consolidated Entities or otherwise relating to the Systems
filed after the Closing Date (limited to the states in which AT&T has
determined (based on the business and operations of the Consolidated Entities
during the calendar year 1999 and, if the Closing occurs after December 31,
1999, during the period on and after January 1, 2000, up to and including the
Closing Date) that the Consolidated Entities will be required to file Tax
Returns after the Closing Date).
7.17.4. Tax Audits.
(i) AT&T shall consult with Cox with respect to
any issue arising in taxable periods of the Consolidated Entities ending on or
before the Closing Date, or arising in taxable periods of any Person that is a
party to the Consolidation with respect to the Consolidation, the Separation,
or the Systems, which issue may adversely affect the liability for Taxes of
Cox, any Affiliate of Cox, or the Consolidated Entities for any period ending
after the Closing Date (including, without limitation, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the
reduction or loss of credits). Cox shall consult with AT&T with respect to any
issue arising in taxable periods of the Consolidated Entities ending after the
Closing Date which issue may adversely affect the liability for Taxes of AT&T,
any Affiliate of AT&T, or the Consolidated Entities for any period ending on or
prior to the Closing Date (including, without limitation, the reduction of
asset basis or
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cost adjustments, the lengthening of any amortization or depreciation periods,
the denial of amortization or depreciation deductions, or the reduction or loss
of credits).
(ii) In the case of a Tax Proceeding relating to
a Straddle Period (a "STRADDLE PERIOD TAX PROCEEDING"), except in the case of a
Special AT&T Tax Proceeding or a Special Cox Tax Proceeding, (A) Cox shall
control such Straddle Period Tax Proceeding if the claims for which Cox is
responsible exceed the claims for which AT&T is responsible and AT&T shall
control such proceeding if the claims for which AT&T is responsible exceed the
claims for which Cox is responsible (Cox or AT&T respectively, the "CONTROLLING
PARTY," and AT&T or Cox, respectively, the "NONCONTROLLING PARTY"), (B) the
Controlling Party shall provide the Noncontrolling Party with a timely and
reasonably detailed account of each stage of such Straddle Period Tax
Proceeding and a copy of all documents (or portions thereof) relating to such
Straddle Period Tax Proceeding which are relevant to any Tax for which the
Noncontrolling Party may be required to indemnify the Controlling Party or any
Affiliate of the Controlling Party or may otherwise be liable, (C) the
Controlling Party shall consult with the Noncontrolling Party before taking any
significant action in connection with such Straddle Period Tax Proceeding that
might adversely affect the Noncontrolling Party and shall consult with the
Noncontrolling Party with respect to any written submissions in connection with
such Straddle Period Tax Proceeding which are relevant to any Tax for which the
Noncontrolling Party may be required to indemnify the Controlling Party or any
Affiliate of the Controlling Party or may otherwise be liable, (D) the
Controlling Party shall defend such Straddle Period Tax Proceeding in good
faith and diligently as if the taxpayer whose Tax Return is at issue were the
only party in interest in connection with such Straddle Period Tax Proceeding,
and, before any court, vigorously and with a view to the merits, (E) the
Noncontrolling Party shall have the right to participate in any conference with
any Tax authority regarding any Tax for which the Noncontrolling Party may be
required to indemnify the Controlling Party or any Affiliate of the Controlling
Party or may otherwise be liable, (F) the Noncontrolling Party shall facilitate
the Controlling Party's exercise of control over such Straddle Period Tax
Proceeding, including by delivery of any reasonably requested powers of
attorney with respect to such a Straddle Period Tax Proceeding, and shall not
impede the Controlling Party's exercise of control over such Straddle Period
Tax Proceeding, and (G) the Controlling Party shall not settle, compromise or
abandon any such Straddle Period Tax Proceeding without obtaining the prior
written consent, which consent shall not be unreasonably withheld, of the
Noncontrolling Party. In the event that the Noncontrolling Party reasonably
withholds consent pursuant to clause (G) above, the Noncontrolling Party shall
be entitled to assume the defense of the Straddle Period Tax Proceeding;
provided that the Controlling Party's liability in connection with the Straddle
Period Tax Proceeding shall be limited to the amount such liability would have
been under the proposed settlement.
(iii) If AT&T or any Affiliate of AT&T, on the
one hand, or Cox or any Affiliate of Cox, on the other hand, receives any
notice from the IRS or any state or local Tax authority questioning or
otherwise relating to the treatment of the Separation as tax-free to Cox and
AT&T either (i) under Code Sections 368(a)(1)(D) (as to Cox and AT&T) and
355(a) (as to Cox) and 361 (as to AT&T) or (ii) under Code Section 355(a) (as
to Cox) and Section 355(c) (as to AT&T), or relating to the treatment of the
Consolidation in a manner other than as set forth in the
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Statement of Tax Qualification of the Consolidation, or relating to the amount
of any deferred intercompany gain or any excess loss accounts required to be
taken into account as a result of the Reorganization, then: (a) the Person
receiving such notice shall promptly notify, and deliver a copy of the relevant
portion of such notice (or a summary of any oral notice) to, the other party to
this Agreement; (b) AT&T shall be entitled to control (including control over
whether and in what manner to settle, compromise or abandon (in each case, to
"VOLUNTARILY DISCHARGE," and each such action a "VOLUNTARY DISCHARGE")) any Tax
Proceeding to the extent relating to the income Tax treatment to AT&T, the
Consolidated Entities (for taxable periods ending on or prior to the Closing
Date as to the Consolidated Entities, for any Straddle Period that includes the
Closing Date, or for any Straddle Consolidated Tax Return), the
Non-Consolidated Entities or any Subsidiary of AT&T of the Separation or the
Consolidation or relating to the amount of any deferred intercompany gain or
any excess loss accounts required to be taken into account as a result of the
Reorganization (to such extent, a "SPECIAL AT&T TAX PROCEEDING"); (c) Cox shall
be entitled to control (including control over whether and in what manner to
Voluntarily Discharge) any Tax Proceeding to the extent relating to the income
Tax treatment to Cox or any Affiliate of Cox (including any Consolidated Entity
solely for taxable periods beginning after the Closing Date) of the Separation
(to such extent, a "SPECIAL COX TAX PROCEEDING"); (d) in the event that AT&T
asserts that a Tax resulting from a Cox Tax Breach is owed by AT&T or any
Affiliate of AT&T in connection with a Voluntary Discharge of a Special AT&T
Tax Proceeding, then a neutral arbitrator mutually selected by AT&T and Cox
shall determine the extent to which AT&T Voluntarily Discharged such proceeding
for an amount in excess of the amount for which a court would have held AT&T or
such Affiliate of AT&T liable for such Tax on the merits, and Cox's obligation
to indemnify AT&T or any Affiliate of AT&T shall be reduced to the extent that
such excess represents an excessive Voluntary Discharge of liability resulting
from Cox's Tax Breach; and (e) in the event that Cox asserts that a Tax
resulting from an AT&T Tax Breach is owed by Cox or any Affiliate of Cox in
connection with a Voluntary Discharge of a Special Cox Tax Proceeding, then a
neutral arbitrator mutually selected by AT&T and Cox shall determine the extent
to which Cox Voluntarily Discharged such proceeding for an amount in excess of
the amount for which a court would have held Cox or such Affiliate of Cox
liable for such Tax on the merits, and the obligation of AT&T or any AT&T Cable
Subsidiary to indemnify Cox or any Affiliate of Cox shall be reduced to the
extent that such excess represents an excessive Voluntary Discharge of
liability resulting from AT&T's Tax Breach.
(iv) If AT&T or any Affiliate of AT&T becomes
involved in a Special AT&T Tax Proceeding, or if Cox or any Affiliate of Cox
becomes involved in a Special Cox Tax Proceeding (each a "SPECIAL TAX
PROCEEDING," and the controlling party in such proceeding, AT&T or Cox, as
applicable, hereinafter the "SPECIAL CONTROLLING PARTY," and the other of AT&T
or Cox the "SPECIAL NONCONTROLLING PARTY") then (A) the Special Controlling
Party shall provide the Special Noncontrolling Party with a timely and
reasonably detailed account of each stage of such Special Tax Proceeding and a
copy of all documents (or portions thereof) relating to such Special Tax
Proceeding which are relevant to any Tax for which the Special Noncontrolling
Party may be required to indemnify the Special Controlling Party or any
Affiliate of the Special Controlling Party or may otherwise be liable, (B) the
Special Controlling Party shall consult with the Special Noncontrolling Party
before taking any significant action in connection with such Special Tax
Proceeding that might
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adversely affect the Special Noncontrolling Party and shall consult with the
Special Noncontrolling Party with respect to any written submissions in
connection with such Special Tax Proceeding, and (C) the Special Controlling
Party shall defend such Special Tax Proceeding in good faith and diligently
and, before any court, vigorously and with a view to the merits.
7.17.5. Straddle Consolidated Tax Returns.
(i) No Straddle Consolidated Tax Return shall
be filed by or on behalf of any Consolidated Entity unless otherwise required
by applicable law. If AT&T determines that a Straddle Consolidated Tax Return
is required to be filed under applicable law, then AT&T shall deliver written
notice to Cox to that effect at least thirty (30) days prior to the due date
for filing the respective Tax Return setting forth the basis for such
determination (it being agreed that AT&T shall use its commercially reasonable
efforts to deliver such notice to Cox at least sixty (60) days prior to the due
date for filing the respective Tax Return). If Cox disagrees with such
determination, such disagreement shall be resolved expeditiously by AT&T and
Cox, or, failing that, by a neutral arbitrator, mutually selected by the
parties, but if such disagreement has not been resolved before the due date
(including extensions) for filing such Tax Return, then AT&T may file a
Straddle Consolidated Tax Return, but if the final decision of the arbitrator
is that such Straddle Consolidated Tax Return was not required to be filed
under applicable law, then AT&T shall file an amended Tax Return to the extent
necessary to reflect such final decision. Nothing in this Section 7.17.5 shall
be deemed to prohibit Cox from filing such Tax Returns as Cox determines to be
appropriate with respect to the Consolidated Entities for taxable periods
beginning after the Closing Date.
(ii) If a Straddle Consolidated Tax Return is
required to be filed under applicable law, then AT&T shall be responsible for
the preparation and filing of such Tax Returns and AT&T shall be responsible
for the contents of such Tax Returns and for the payment of all Taxes due with
respect thereto, except as otherwise provided in this Section 7.17.5 (and
subject to indemnification by Cox to the extent provided in Section 7.17.2).
AT&T shall file or cause to be filed all such Tax Returns when due, and shall
remit or cause to be remitted any Taxes due in respect of such returns, subject
to payment by Cox with respect to the Consolidated Entities for periods after
the Closing Date in accordance with Section 7.17.5(iii) below. All such Tax
Returns shall be prepared and filed in a manner consistent with past practice
of the Consolidated Entities (and the Non-Consolidated Entities with respect to
the Systems) and, on such Tax Returns, no position shall be taken, election
made or method adopted that is inconsistent with positions taken, elections
made or methods used in preparing similar Tax Returns for prior periods
(including, but not limited to, positions which would have the effect of
deferring income to periods for which Cox is liable or accelerating deductions
to periods for which AT&T is liable), unless otherwise required by applicable
law or pursuant to a "determination" within the meaning of Code Section 1313(a)
and except as provided in Section 7.17.1(iv) with respect to Peak and except
for manners, positions, elections and methods that would be applicable to
entities other than the Consolidated Entities. Except as otherwise provided in
this Section 7.17.5, and except to the extent related to a Special AT&T Tax
Proceeding or a Special Cox Tax Proceeding, AT&T shall have the sole authority
to deal with any matters (including any Tax Proceeding) relating to any
Straddle Consolidated Tax Returns. Cox
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shall, and shall cause its Affiliates and the Consolidated Entities to,
facilitate the exercise of AT&T's rights pursuant to the immediately preceding
sentence, including by providing AT&T or its designees with any reasonably
requested power of attorney with respect to such Straddle Consolidated Tax
Returns or proceedings.
(iii) For purposes of this Section 7.17, whenever
a Straddle Consolidated Tax Return is required to be filed by applicable law
and it is necessary to determine the liability for Taxes of an entity for a
portion of any taxable period of a Consolidated Entity included in a Straddle
Consolidated Tax Return, the determination of the Taxes for the portion of such
taxable period ending on, and for the portion of such taxable period beginning
after, the Closing Date shall be determined on the basis of a closing of the
entity's books at the close of business on the Closing Date as if the taxable
period ended at such time; provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, property Taxes and other similar items, shall be apportioned
between such two taxable periods on a daily basis. AT&T shall use commercially
reasonable efforts to submit to Cox not later than sixty (60) days prior to the
due date (including extensions) for filing such Tax Return, and shall submit to
Cox not later than thirty (30) days prior to the due date (including
extensions) for filing such Tax Return, a pro forma income Tax Return for the
respective Consolidated Entity based (in all material respects) on the Straddle
Consolidated Tax Returns proposed to be filed by AT&T relating to such
Consolidated Entity (and a calculation of the amount of Tax, if any, payable in
connection with such Tax Return, for which AT&T has determined Cox is
responsible) to Cox for Cox's review and consent, which consent shall not be
unreasonably withheld. Cox shall provide any comments on such Tax Return and
calculation to AT&T within twenty (20) days of receipt of such Tax Return. AT&T
shall file such Straddle Consolidated Tax Return in a manner that reflects any
good faith comments of Cox, and shall provide Cox with a pro forma Tax Return
of the respective Consolidated Entity based on such filed Tax Return promptly
after such Tax Return is filed; provided, however, that if AT&T disagrees in
good faith with any such comments, such disagreement shall be resolved
expeditiously by AT&T and Cox, or, failing that, by a neutral arbitrator,
mutually selected by the parties, but if such disagreement has not been
resolved before the due date (including extensions) for filing such Tax Return,
then AT&T may file such Tax Return in a manner that AT&T, in its reasonable
determination, deems appropriate and, following the final decision of such
arbitrator, AT&T shall file an amended Tax Return to the extent necessary to
reflect such final decision. If the amount of estimated Taxes paid by Cox on
behalf of the respective Consolidated Entities for the portion of such taxable
period after the Closing Date included in such Straddle Consolidated Tax Return
and for which AT&T is entitled to a credit when such Tax Return is filed ("COX
CREDITED ESTIMATED TAX PAYMENTS") is less than the amount allocable to such
Consolidated Entities for the portion of such taxable period after the Closing
Date with respect to such Straddle Consolidated Tax Return as filed (or, if
applicable, the amended return filed in accordance with the decision of the
arbitrator) then Cox shall pay such shortfall to AT&T at least one (1) day
prior to the due date (including extensions) for filing the respective Tax
Return. If the amount of the Cox Credited Estimated Tax Payments is greater
than the amount allocable to such Consolidated Entities for the portion of such
taxable period after the Closing Date with respect to such Straddle
Consolidated Tax Return as filed (or, if applicable, the amended return filed
in accordance with the decision of the arbitrator) then AT&T
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shall pay such excess to Cox within five (5) days after the filing of such
Straddle Consolidated Tax Return. In the event the arbitration procedure
described in this Section 7.17.5(iii) applies and payment is required to be
made hereunder after the due date for filing such return, then payment shall be
made within ten (10) days following the date of the decision of the arbitrator,
with interest pursuant to Section 7.17.2(ix) from the due date for such return.
(iv) In the case of a Tax Proceeding relating to
a Straddle Consolidated Tax Return that is required to be filed by applicable
law (a "CONSOLIDATED STRADDLE PERIOD TAX PROCEEDING"), except to the extent
such proceeding is a Special AT&T Tax Proceeding or a Special Cox Tax
Proceeding, (A) AT&T shall control such Consolidated Straddle Period Tax
Proceeding, (B) AT&T shall provide Cox with a timely and reasonably detailed
account of each stage of such Consolidated Straddle Period Tax Proceeding and a
copy of all documents (or portions thereof) relating to such Consolidated
Straddle Period Tax Proceeding which are relevant to any Tax for which Cox may
be required to indemnify AT&T or any Affiliate of AT&T or may otherwise be
liable, (C) AT&T shall consult with Cox before taking any significant action in
connection with such Consolidated Straddle Period Tax Proceeding that might
adversely affect Cox and shall consult with Cox with respect to any written
submissions in connection with such Consolidated Straddle Period Tax Proceeding
which are relevant to any Tax for which Cox may be required to indemnify AT&T
or any Affiliate of AT&T or may otherwise be liable, (D) AT&T shall defend such
Consolidated Straddle Period Tax Proceeding in good faith and diligently and,
before any court, vigorously and with a view to the merits, (E) if the issues
in such Consolidated Straddle Period Tax Proceeding relate solely to one or
more Consolidated Entities, then Cox shall have the right to participate in any
conference with any Tax authority relating to any Tax for which Cox may be
required to indemnify AT&T or any Affiliate of AT&T or may otherwise be liable,
(F) Cox shall facilitate AT&T's exercise of control over such Consolidated
Straddle Period Tax Proceeding, including by delivery of any reasonably
requested powers of attorney with respect to such a Consolidated Straddle
Period Tax Proceeding, and shall not impede AT&T's exercise of control over
such Straddle Period Tax Proceeding, and (G) AT&T shall consult with Cox prior
to any settlement, compromise or abandonment of any issues in such Consolidated
Straddle Period Tax Proceeding relating to any Consolidated Entity. In the
event that AT&T asserts that a Tax is owed by Cox or any Affiliate of Cox in
connection with a compromise, settlement or abandonment of a Consolidated
Straddle Period Tax Proceeding, then a neutral arbitrator mutually selected by
AT&T and Cox shall determine the extent to which AT&T settled, compromised or
abandoned such proceeding for an amount in excess of the amount for which a
court would have held the respective Consolidated Entity liable for such Tax on
the merits, and Cox's obligation to indemnify AT&T or any Affiliate of AT&T
shall be reduced to the extent that such excess represents an excessive
Voluntary Discharge of liability.
7.17.6. Expenses of the Arbitrator. In the event of the
referral of any dispute to an arbitrator pursuant to this Section 7.17, the
expenses of such arbitrator shall be paid one-half by AT&T and one-half by Cox.
7.18. Transfer Taxes, Fees and Expenses. Cox and AT&T shall each
respectively pay one-half of (i) all federal, state or local sales, use,
transfer, excise, documentary or license Taxes or fees
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or any other charge (including filing fees) imposed by any Governmental
Authority with respect to the transactions contemplated by this Agreement,
including the Consolidation and the Separation, including, without limitation,
the filing fees for premerger notification under the HSR Act, (ii) all costs
and expenses of the environmental auditing companies in connection with the
performance of environmental investigations pursuant to Section 7.11 (other
than the costs of any remedial actions, which shall be paid in accordance with
Section 7.11), (iii) all costs and expenses incurred in obtaining title
insurance policies and ALTA surveys pursuant to Section 7.10 (other than the
costs of removing title defects in connection with obtaining such title
insurance policies to the extent specified in Section 7.10, which shall be
borne by AT&T), and (iv) all costs and expenses incurred in obtaining the AT&T
Consents and the Cox Consents (other than costs and expenses relating to curing
any default by AT&T or any Consolidated Entity or Non-Consolidated Entity under
a Contract or Governmental Permit or by Cox under any agreement to which such
Cox Consent relates, in each case which shall be borne by such defaulting
party). Notwithstanding the foregoing, and except as otherwise provided in this
Agreement, each party shall pay its own expenses incurred in connection with
the authorization, preparation, execution and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents and other
representatives.
7.19. Noncompetition; Nonsolicitation. AT&T shall cause each of
Donne F. Fisher, Blake F. Fisher and William K. Fisher and Scott M. Fisher to
deliver a Noncompetition Agreement with respect to each of Arkansas, Oklahoma,
Utah and Nevada.
7.20. Cooperation; Satisfaction of Conditions. Each party shall
cooperate fully with the other parties and their respective counsel,
accountants and other business personnel in connection with any action required
to be taken as part of their respective obligations under this Agreement, and
each party shall execute such other documents as may be necessary and desirable
to the implementation and consummation of this Agreement, the AT&T Related
Agreements or the Cox Related Agreements, and otherwise use diligent efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
hereunder. Except as otherwise expressly provided herein, each party will use
its commercially reasonable efforts to satisfy, or to cause to be satisfied,
the conditions to the obligations of the other parties to consummate the
transactions contemplated by this Agreement, as set forth in Article 8,
provided that Cox 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. Cox agrees to cooperate with
AT&T with respect to the payment of the Partnership Debt.
7.21. Confidentiality. Each party shall keep secret and hold in
confidence for a period of two years following the date hereof, any and all
information relating to any other party that is confidential to such other
party, including, without limitation, proprietary information, contacts,
marketing information, technical information, product or service concepts,
customer information, rates, financial information, ideas, concepts and
research and development (it being understood and agreed that all confidential
information of AT&T, the Consolidated Entities and the Non-Consolidated
Entities that is included among the Assets shall become the confidential
information of Cox upon the Closing), other than the following: (i) information
that has become generally available
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to the public other than as a result of a disclosure by such party; (ii)
information already known to such party prior to its disclosure by any other
party; (iii) information that becomes available to such party or an agent of
such party on a nonconfidential basis from a third party having no obligation
of confidentiality to a party to this Agreement; (iv) information that is
required to be disclosed by applicable law, judicial order or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
on which securities of such party or any such affiliate are listed or traded;
and (v) disclosures made by any party as shall be reasonably necessary in
connection with obtaining the Consents; provided, however, in connection with
disclosure of confidential information under (iv) and (v) hereof, the
disclosing party shall give the other party hereto timely prior notice of the
anticipated disclosure and the parties shall cooperate in designing reasonable
procedural and other safeguards to preserve, to the maximum extent possible,
the confidentiality of such material. Each party may also 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, the AT&T Related Agreements or the
Cox Related Agreements. 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. In the event of a breach of the covenants contained in
this Section 7.21 by any party, the other parties shall be entitled to seek
injunctive relief as well as any and all other remedies at law or equity.
7.22. Publicity. No party hereto will issue any press release or
otherwise make any public statement with respect to this Agreement, the AT&T
Related Agreements or the Cox Related Agreements and the transactions
contemplated hereby and thereby without the prior consent of the other parties
(which consent shall not be unreasonably withheld), except as may be required
by applicable Legal Requirements, in which event the party required to make the
release or announcement shall, if possible, allow each other party reasonable
time to comment on such release or announcement or obtain a protective order at
its own expense in advance of such issuance.
7.23. Billing Services. At the Closing, the applicable AT&T Cable
Subsidiary and Cable Sub will execute and deliver an Agreement to Provide
Billing Services in a form mutually agreeable to the parties (the "BILLING
SERVICES AGREEMENT"). The Billing Services Agreement will provide that the
applicable AT&T Cable Subsidiary or its agent will perform billing services for
Cox with respect to the Systems received by Cox for the 180-day period
immediately following the Closing, at no cost to Cox or Cable Sub or any
Subsidiary of Cable Sub.
7.24. Delivery of Financial Information. The AT&T Cable
Subsidiaries shall deliver to Cox within 30 days after the end of each month
ending between the date of this Agreement and the Closing Date a statement of
income and expense for each of the Systems for the month previously ended and
such other financial information (including information on payables and
receivables) relating to the Systems as Cox may reasonably request. The income
statements delivered by the AT&T Cable Subsidiaries to Cox pursuant to this
Section 7.24 shall be in accordance with the books and records of the Systems
and shall present fairly in all material respects the results of operations of
the Systems for the year-to-date periods then ended. Promptly after the
preparation thereof, the
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AT&T Cable Subsidiaries shall deliver to Cox copies of any other financial
statements, subscriber counts and other operational data regularly prepared by
AT&T or any Affiliate of AT&T with respect to the Systems for internal use;
provided that AT&T and the AT&T Cable Subsidiaries shall not be required to
make and shall not be deemed to make any representation or warranty concerning
any such information delivered to Cox (other than that the information
furnished to Cox is a true and complete copy of the information prepared for
internal use by AT&T or any Affiliate of AT&T with respect to the Systems).
7.25. Franchise Renewals. The AT&T Cable Subsidiaries will cause
each of the Consolidated Entities and Non-Consolidated Entities to, file all
requests for renewal under Section 626(a) of the Cable Act with the proper
Governmental Authority with respect to any Franchise at least 30 months prior
to the expiration of any such Franchise; provided that such Person shall
consult with Cox prior to the filing of any such renewal requests. The AT&T
Cable Subsidiaries shall use commercially reasonable efforts to pursue all
requests for renewal in consultation with Cox.
7.26. Use of Trade Name. For a period of 90 days after the Closing
Date, Cox may continue (but only to the extent reasonably necessary) to operate
the Systems using the trade names currently used with respect to the Systems,
including, without limitation, the trade name "TCI", and all derivations and
abbreviations of such names and related trade names and marks in use in the
Systems on the Closing Date, such use to be in a manner consistent with the way
in which the Consolidated Entities and the Non-Consolidated Entities have used
the marks. Within 90 days after the Closing Date, Cox will discontinue using
and will dispose of all items of stationery, business cards and literature
bearing such names or marks. Notwithstanding the foregoing, Cox will not be
required to remove or discontinue using any such name or mark that is affixed
to converters or other items in or to be used in customer homes or properties,
or as are used in similar fashion making such removal or discontinuation
impracticable for Cox.
7.27. Peak Acquisition Agreement.
7.27.1. AT&T shall use commercially reasonable efforts to
deliver to Cox, no later than 6 Business Days after the date of this Agreement,
the form of the Peak Acquisition Agreement (including the exhibits and
disclosure schedules thereto, subject to the provisions of Section 7.31), that
AT&T Peak is prepared to execute. No later than 72 hours following Cox's
receipt of the form of the Peak Acquisition Agreement, Cox shall notify AT&T
(the "PEAK NOTICE") whether in Cox's reasonable business judgment, the Peak
Acquisition Agreement would result in the imposition upon Cox of additional or
more burdensome liabilities than those imposed on Cox by the terms and
provisions relating to the Peak Systems set forth in this Agreement
("ADDITIONAL PEAK LIABILITIES"). The Peak Notice shall set forth Cox's estimate
of the Additional Peak Liabilities. In making its judgment with respect to the
Additional Peak Liabilities, Cox may consider the allocation of transfer tax
payments imposed as a result of the transactions contemplated by the Peak
Acquisition Agreement as a basis for Additional Peak Liabilities, but Cox may
not consider the tax attributes of either the Peak Systems or of the AT&T
Affiliate which is the purchaser pursuant to the Peak Agreement.
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7.27.2. In the event that the Additional Peak Liabilities as
specified in the Peak Notice are equal to or exceed Ten Million Dollars
($10,000,000), then AT&T may through the delivery of written notice to Cox
within 5 Business Days subsequent to the date of the receipt by AT&T of the
Peak Notice terminate this Agreement.
7.27.3. In the event that the Additional Peak Liabilities as
specified in the Peak Notice are less than Ten Million Dollars ($10,000,000),
then Cox and AT&T shall negotiate to resolve the amount of the Additional Peak
Liabilities. In the event that Cox and AT&T are not able to agree upon the
amount of the Additional Peak Liabilities within 10 Business Days, then Cox and
AT&T shall within 10 Business Days appoint a mutually acceptable independent
accounting firm which shall not have performed services for either Cox or AT&T
during the preceding two years to determine the amount of the Additional Peak
Liabilities. Upon the determination in an amount of less than $10 million of
the Additional Peak Liabilities as a result of either the agreement of Cox and
AT&T or the determination of such independent accounting firm, then the
Required Assets shall be increased as required by item A.3.(A) of SCHEDULE 2.1.
7.27.4. Without the prior written consent of Cox, the Peak
Acquisition Agreement may not be amended or modified in any material respect,
nor shall any material action be taken by AT&T or its Affiliates with respect
to the rights and obligations of the parties under the Peak Acquisition
Agreement, including, without limitation, any exercise of the right to
terminate the Peak Acquisition Agreement, any waiver of any condition to the
closing of the transactions contemplated thereby, and any waiver of any breach
of any representation, warranty, covenant or agreement set forth therein;
provided, that if Cox waives any conditions to the Closing or any breach of any
representation, warranty, covenant or agreement with respect to the Peak
Systems, Peak or Fisher Communications under this Agreement, any correlative
closing condition or correlative breach of any representation, warranty,
covenant or agreement under the Peak Acquisition Agreement may be waived by
AT&T Peak.
7.28. Year 2000 Compliance.
7.28.1. Certain Defined Terms. For purposes of this Section
7.28, the following terms shall have the following meanings:
(i) "COMPUTER AND OTHER SYSTEMS" means any
level of hardware or software, equipment and cable plant, or building and other
facilities included in the Assets and which will be used in connection with the
business of the Systems following the Closing which are date dependent or which
process date data, including, without limitation, any microcode, firmware,
application programs, user interfaces, files and databases, and which might be
adversely affected by the advent or changeover to the calendar year 2000 A.D.
or to the advent or changeover to any leap year.
(ii) "YEAR 2000 READY" or "YEAR 2000 READINESS"
means that the referenced component, system, software, equipment or other item
is designed to be used prior to, during and
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after the calendar year 2000 A.D., and that such component, system, software,
equipment or other item will operate at all levels, including, without
limitation, microcode, firmware, application programs, user interfaces, files
and databases, during each such time period without error or interruption
relating to, or the product of, date data which represents or references
different centuries or more than one century or leap year.
(iii) "YEAR 2000 REMEDIATION PROGRAM" means an
enterprise-wide program to make Year 2000 Ready all material components,
systems, software, equipment, facilities and other items related to the subject
entity's business. Such Year 2000 Remediation Program must be conducted by
Persons with experience in issues related to Year 2000 Readiness and such
Persons must have organized an enterprises-wide program management office which
reports to executive level management and the board of directors or other
governing body of such entity.
7.28.2. Year 2000 Readiness Efforts. The Consolidated
Entities and the Non-Consolidated Entities have a Year 2000 Remediation
Program in place with respect to the Systems owned by them and shall maintain
such program prior to the Closing Date. Pursuant to such Year 2000 Remediation
Program, all material Computer and Other Systems included in the Assets (the
"MATERIAL COMPUTER AND OTHER SYSTEMS") will be evaluated, remediated and tested
on the same general basis, and on the same general work plan and timetable, as
other material computer systems, facilities and equipment owned and operated by
the Consolidated Entities and the Non-Consolidated Entities. After the Closing
Date through March 31, 2000, the AT&T Cable Subsidiaries will use commercially
reasonable efforts to cooperate with Cox regarding the Systems' Year 2000
Remediation Programs. Such cooperation shall consist of providing Cox with any
non-confidential information possessed by it and reasonably requested by Cox
regarding the Year 2000 Readiness of any material component of the Computer and
Other Systems included in the Assets.
7.29. Programming Carriage.
7.29.1. After the Closing, except as required by law and
subject to provisions of this Section 7.29, Cox will, or will cause Cable Sub
and its Subsidiaries to, continue to carry on the Tulsa System, the Baton Rouge
System and each of the Peak Systems each of the programming services listed on
SCHEDULE 7.29 (on the level of service they are being carried as of the date of
this Agreement, if any) through the expiration date indicated next to each
programming service on SCHEDULE 7.29. In addition, Cox will, or will cause
Cable Sub and its Subsidiaries to, carry on the Tulsa System, the Baton Rouge
System and each of the Peak Systems, Encore/Starz in accordance with the terms
of the agreement between AT&T and Encore as in effect on the date of this
Agreement (the "ENCORE/STARZ AGREEMENT"). AT&T acknowledges that a true and
complete copy of the Encore/Starz Agreement shall be delivered to Cox within
fifteen (15) Business Days after the date of this Agreement.
7.29.2. The parties hereto acknowledge and agree that unless
AT&T otherwise consents in writing the foregoing obligation to carry on the
Tulsa System and the Baton Rouge System each of the programming services listed
on SCHEDULE 7.29 (including the carriage of
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Encore/Starz in accordance with the terms of the Encore/Starz Agreement) shall
apply to any successors or assigns of Cable Sub or any of its Subsidiaries that
acquire the assets of either of the Tulsa System or the Baton Rouge System or
otherwise succeed to the ownership of either of the Tulsa System or the Baton
Rouge System. The parties hereto further acknowledge and agree that the
foregoing obligation to carry on the Peak Systems each of the programming
services listed on SCHEDULE 7.29 (other than carriage of Encore/Starz in
accordance with the terms of the Encore/Starz Agreement) shall not apply to any
successors or assigns of Cable Sub or any of its Subsidiaries (other than any
such successor or assign that is an Affiliate of Cox) that acquire the assets
of any of the Peak Systems or otherwise succeed to the ownership of any of the
Peak Systems; provided, however, that the carriage of Encore/Starz in
accordance with the terms of the Encore/Starz Agreement on the Peak Systems
shall apply to any successors or assigns of Cable Sub or any of its
Subsidiaries that acquire the assets of any of the Peak Systems or otherwise
succeed to the ownership of any of the Peak Systems.
7.29.3. With respect to the programming services listed on
SCHEDULE 7.29, Cox shall be entitled to any launch incentives and marketing
support received by AT&T, any Affiliate of AT&T or Fisher Communications with
respect to the Tulsa System, the Baton Rouge System and the Peak Systems after
the date of this Agreement and before the Closing, as determined in accordance
with GAAP (collectively, the "PROGRAMMING SUPPORT"). The amount of the
Programming Support shall be credited to Cox in accordance with SCHEDULE 2.1.
7.30. Application of Covenants to Consolidated Entities and
Non-Consolidated Entities.
7.30.1. The covenants made on the date of this Agreement by
AT&T and the AT&T Cable Subsidiaries with respect to the Consolidated Entities
and the Non-Consolidated Entities will be deemed made solely with respect to
the Consolidated Entities and the Non-Consolidated Entities that are the
Subsidiaries owning the Required Assets as of the date of this Agreement and
that are listed on SCHEDULE 5.24.
7.30.2. As of the date of this Agreement, and thereafter
until such covenant expires pursuant to this Agreement, the covenants
referencing the Consolidated Entities and the Non-Consolidated Entities will
be deemed made as of such date of delivery and thereafter until such covenant
expires pursuant to this Agreement with respect to the Consolidated Entities
and the Non-Consolidated Entities identified in the Consolidation Outline;
provided that if an amendment to the Consolidation Outline is delivered
pursuant to Section 2.2.3 of this Agreement, the covenants referencing the
Consolidated Entities and the Non-Consolidated Entities will be deemed made as
of the date of this Agreement and thereafter until such covenant expires
pursuant to this Agreement with respect to any additional Consolidated Entities
and Non-Consolidated Entities identified in said amendment.
7.30.3. In the event a Consolidated Entity or
Non-Consolidated Entity, which is not an entity listed on SCHEDULE 5.24, is
identified in the Consolidation Outline or any amendment thereto, and results
in any exception to or breach of a covenant contained herein, such exception or
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failure shall be disclosed to Cox on a revised or additional schedules (the
"ADDITIONAL COVENANT SCHEDULES") to this Agreement as of the date of delivery
of the Consolidation Outline or any such amendment. If in Cox's reasonable
determination the disclosures or exceptions or breach of a covenant contained
herein, and the information otherwise disclosed in, such Additional Covenant
Schedules individually or in the aggregate (when considered together with the
matters disclosed in the Schedules delivered at the time of this Agreement and
in the Delayed Schedules and the Additional Schedules) would have a Material
Adverse Effect, then Cox shall so notify AT&T in writing (the "ADDITIONAL
COVENANT SCHEDULES OBJECTION NOTICE") within five days. In the event the
Additional Covenant Schedules Objection Notice is given, Cox and AT&T agree to
negotiate in good faith to reach agreement as to a mutually satisfactory
procedure for addressing the exceptions and other information disclosed in such
Additional Covenant Schedules (including, by way of example, agreeing to treat
objectionable matters as Excluded Assets or Indemnified Liabilities.) If Cox
and AT&T are unable to reach such agreement within five days after delivery of
the Additional Covenant Schedules Objection Notice, then Cox shall have the
right to terminate this Agreement upon written notice to AT&T, which notice of
termination shall be given to AT&T no later than 2 days following the
expiration of such five-day period. Once Cox and AT&T reach agreement in
writing on the Additional Covenant Schedules, such Additional Covenant
Schedules will be deemed to have been part of this Agreement effective as of
the date hereof.
7.31. Delivery of Disclosure Schedules. The parties acknowledge
that this Agreement is being signed and delivered without the following
Exhibits and Schedules attached hereto: EXHIBIT C (with respect to the Peak
System only), SCHEDULE 1.70, SCHEDULE 4.3, SCHEDULE 4.4, SCHEDULE 4.6, SCHEDULE
5.5, SCHEDULE 5.6, SCHEDULE 5.7, SCHEDULE 5.9, SCHEDULE 5.12.1A, SCHEDULE
5.12.1B, SCHEDULE 5.12.2, SCHEDULE 5.14, SCHEDULE 5.15, SCHEDULE 5.16, SCHEDULE
5.19, SCHEDULE 5.21 and SCHEDULE 5.23, as well as all of the Schedules with
respect to the Peak Systems (collectively, the "DELAYED SCHEDULES"). AT&T
agrees to deliver the Delayed Schedules to Cox within 15 Business Days after
the date of this Agreement and in connection therewith to supply to Cox such
information and copies of agreements as Cox may reasonably request in
connection with its review of such Delayed Schedules. If in Cox's reasonable
determination the exceptions to the representations and warranties of AT&T and
the AT&T Cable Subsidiaries contained in, and the information otherwise
disclosed in, such Delayed Schedules individually or in the aggregate (when
considered together with the matters disclosed in the Schedules delivered at
the time of this Agreement) would have a Material Adverse Effect, then Cox
shall so notify AT&T in writing (the "DELAYED SCHEDULES OBJECTION NOTICE")
within five days. In the event the Delayed Schedules Objection Notice is given,
Cox and AT&T agree to negotiate in good faith to reach agreement as to a
mutually satisfactory procedure for addressing the exceptions and other
information disclosed in such Delayed Schedules (including, by way of example,
agreeing to treat objectionable matters as Excluded Assets or Indemnified
Liabilities.) If Cox and AT&T are unable to reach such agreement within five
days after delivery of the Delayed Schedules Objection Notice, then Cox shall
have the right to terminate this Agreement upon written notice to AT&T, which
notice of termination shall be given to AT&T no later than 2 days following the
expiration of such five-day period. Once Cox and AT&T reach agreement in
writing on the Delayed Schedules, such Delayed Schedules will be deemed to have
been part of this Agreement effective as of the date hereof.
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8. CONDITIONS TO CLOSING.
8.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions:
8.1.1. The Consolidation shall have been effected in
accordance with the terms of the Consolidation Outline.
8.1.2. All filings under the HSR Act shall have been made
and the applicable waiting period shall have expired or been earlier terminated
without the receipt of any objection or the commencement of any threat of
litigation by any Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement, the AT&T
Related Agreements or the Cox Related Agreements.
8.1.3. No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority, and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement, the AT&T Related Agreements or
the Cox Related Agreements, the result of which is to enjoin, restrain,
prohibit or obtain substantial damages in respect of any of the transactions
contemplated by this Agreement, the AT&T Related Agreements or the Cox Related
Agreements, or which would (i) prohibit Cox's ownership or operation of Cable
Sub and its Subsidiaries or all or a material portion of the business or
operations of the Systems or the Assets, (ii) compel Cox to dispose of or hold
separate all or a material portion of the Systems, the business or operations
of the Systems or the Assets as a result of any of the transactions
contemplated by this Agreement, the AT&T Related Agreements or the Cox Related
Agreements or (iii) otherwise prevent or make illegal the consummation of any
transactions contemplated by this Agreement, the AT&T Related Agreements or the
Cox Related Agreements.
8.1.4. (A) The AT&T Cable Subsidiaries shall have delivered
to Cox evidence, in form and substance satisfactory to Cox as described in
Section 7.9, that (i) the aggregate number of Equivalent Billing Units as of
the Closing Date in those Baton Rouge Franchise Areas that are Transferable
Franchise Areas shall be at least ninety-seven percent (97%) of the aggregate
number of Equivalent Billing Units in all Baton Rouge Franchise Areas; (ii) the
aggregate number of Equivalent Billing Units as of the Closing Date in those
Tulsa Franchise Areas that are Transferable Franchise Areas shall be at least
ninety-five percent (95%) of the aggregate number of Equivalent Billing Units
in all Tulsa Franchise Areas; (iii) the aggregate number of Equivalent Billing
Units as of the Closing Date in those Peak Franchise Areas that are
Transferable Franchise Areas shall be at least ninety percent (90%) of the
aggregate number of Equivalent Billing Units in all Peak Franchise Areas; and
(iv) all of the AT&T Consents noted with an asterisk (*) on SCHEDULE 4.4 have
been obtained or given and are in full force and effect and (B) Cox shall have
delivered to AT&T evidence, in form and substance satisfactory to AT&T as
described in Section 7.9, that all of the Cox Consents noted with an asterisk
(*) on SCHEDULE 6.3A and all of the Partnership Consents noted with an
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asterisk (*) on SCHEDULE 6.3B have been obtained or given and are in full force
and effect. For purposes of this Section 8.1.4, "active customers" as used in
the definition of "Equivalent Billing Unit" shall be deemed to include any
person, commercial establishment or multi-unit dwelling that is paying for and
receiving Basic Cable Service from a System that has an account that is more
than 60 days past due but not more than 90 days past due, provided (x) that
such person, commercial establishment or multi-unit dwelling otherwise meets
the definition of "active customer," (y) that such person, commercial
establishment or multi-unit dwelling is reflected as a "subscriber" on the then
most recent internal subscriber report of the applicable System generated in
the ordinary course of business consistent with the April 30, 1999 report of
such System, and (z) that in no event shall the number of Equivalent Billing
Units calculated pursuant to this Section 8.1.4 be deemed to include more than
an aggregate of two percent (2%) of persons, commercial establishments and
multi-unit dwellings that have an account that is more than 60 days past due
but not more than 90 days past due.
8.1.5. The closing under the Peak Acquisition Agreement
shall have occurred.
8.2. Conditions to Obligations of AT&T. The obligations of AT&T
and the AT&T Cable Subsidiaries to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions unless waived by AT&T:
8.2.1. The representations and warranties of Cox set forth
in this Agreement shall be true and correct in all material respects at and as
of the date of this Agreement and at and as of the Closing Date as though made
at and as of the Closing Date, except to the extent such representations and
warranties (i) speak of a specified date and except to the extent contemplated
or permitted by this Agreement or (ii) are already qualified by materiality, in
which event such representations and warranties shall be true and correct in
all respects.
8.2.2. Cox shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
8.2.3. Cox shall have furnished AT&T with a certificate of
its appropriate officers as to compliance with the conditions set forth in
Sections 8.2.1 and 8.2.2.
8.2.4. AT&T shall have received an opinion of Dow, Lohnes &
Albertson, PLLC, counsel for Cox, dated as of the Closing Date, in form and
substance reasonably satisfactory to AT&T and its counsel.
8.2.5. AT&T shall have received an opinion from AT&T's tax
counsel substantially to the effect that if the Reorganization is consummated
in accordance with the provisions of this Agreement and the Consolidation
Outline, under current law, for federal income tax purposes, (i) the Separation
should be tax-free to AT&T either (A) under Code Sections 368(a)(1)(D) and 361
or (B) under Code Section 355(c); (ii) the Separation should be tax-free to the
Consolidated Entities and each other direct or indirect Subsidiary of AT&T
under the Code; and (iii) the steps of the
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Consolidation indicated as tax-free to AT&T, the Consolidated Entities and each
other direct or indirect Subsidiary of AT&T under Code Sections 332, 337, 351,
354, 355, 361, 368, 1032, or otherwise in the Statement of Tax Qualification of
the Consolidation should be tax-free to AT&T, the Consolidated Entities and
each other direct or indirect Subsidiary of AT&T. For purposes of the
foregoing, income or gain, if any, required to be taken into account by AT&T or
any Subsidiary of AT&T under Treasury Regulations Sections 1.1502-13 or
1.1502-19 as a result of the Reorganization shall be disregarded.
8.3. Conditions to Obligations of Cox. The obligations of Cox to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions unless waived by Cox:
8.3.1. The representations and warranties of AT&T and the
AT&T Cable Subsidiaries set forth in this Agreement (other than those contained
in Section 5.14 (Tax Matters)) shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though made at and as of the Closing Date and the representations and
warranties of the AT&T Cable Subsidiaries contained in Section 5.14 shall be
true and correct at and as of the date of this Agreement and at and as of the
Closing Date except for such breaches which would not individually or in the
aggregate have a Material Adverse Effect; and except to the extent any
representations and warranties of AT&T or the AT&T Cable Subsidiaries set forth
in this Agreement (i) speak of a specified date and except to the extent
contemplated or permitted by this Agreement or (ii) are already qualified by
materiality, in which event such representations and warranties (other than the
representations and warranties contained in Section 5.14) shall be true and
correct in all respects.
8.3.2. Each of AT&T and the AT&T Cable Subsidiaries shall
have performed in all material respects all covenants and agreements required
to be performed by it under this Agreement at or prior to the Closing Date.
8.3.3. Between the date of this Agreement and the Closing
Date, there shall have been no changes, events or conditions which have had,
individually or in the aggregate, a Material Adverse Effect.
8.3.4. (i) AT&T shall have furnished Cox with a certificate
of its appropriate officers as to compliance by AT&T with the conditions set
forth in Sections 8.3.1 and 8.3.2 applicable to AT&T and (ii) the AT&T Cable
Subsidiaries shall have furnished Cox with a certificate, signed by appropriate
officers of each of the AT&T Cable Subsidiaries, as to (A) compliance by the
AT&T Cable Subsidiaries with the conditions set forth in Sections 8.3.1 and
8.3.2 applicable to the AT&T Cable Subsidiaries and (B) the total number of
Equivalent Billing Units for each of the Systems, estimated in good faith as of
the Closing Date.
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8.3.5. AT&T shall have delivered a Noncompetition Agreement
executed by each of Donne F. Fisher, Blake F. Fisher, William K. Fisher and
Scott M. Fisher with respect to each of Arkansas, Oklahoma, Utah and Nevada.
8.3.6. Cox shall have received one or more opinions of
counsel to AT&T, dated as of the Closing Date, in form and substance reasonably
satisfactory to Cox and its counsel; provided, however, that no FCC opinion
shall be required.
8.3.7. Cox shall have received an opinion from Cox's tax
counsel substantially to the effect that if the Reorganization is consummated
in accordance with the provisions of this Agreement and the Consolidation
Outline, under current law, for federal income tax purposes, the Separation
should qualify as tax-free to Cox either (i) under Code Sections 368(a)(1)(D)
and 355(a) or (ii) under Code Section 355(a).
8.3.8. As of the Closing, each of the Tulsa System, the
Baton Rouge System and the Peak Systems shall serve at least the number of
Equivalent Billing Units set forth on SCHEDULE 8.3.8 with respect to such
System or Systems.
8.3.9. As of the Closing, Cable Sub and its Subsidiaries
shall have all of the Required Assets and no liabilities or obligations of any
nature whatsoever, contingent, fixed or otherwise, other than the Assumed
Liabilities and the Indemnified Liabilities.
8.3.10. Immediately prior to the Closing, (i) AT&T shall own
record and beneficial title to the Cable Sub Shares, free and clear of all
Encumbrances of any nature whatsoever, (ii) Cable Sub or a Subsidiary thereof
shall be the sole owner of the Partnership Interest, free and clear of all
Encumbrances and all agreements, warrants, options, puts, calls, rights or
other commitments relating to the issuance, sale, purchase, redemption,
conversion, exchange or other transfer of the Partnership Interest, except for
Encumbrances or rights arising under the Partnership Agreement, (iii) Cable Sub
or such Subsidiary thereof shall be in material compliance with the provisions
of the Partnership Agreement, and (iv) Cable Sub or such Subsidiary thereof
shall have satisfied all capital contributions or other commitments to or on
behalf of the Partnership, including, without limitation, those set forth on
SCHEDULE 5.20.
8.3.11. AT&T shall have delivered to Cox evidence reasonably
satisfactory to Cox and its counsel that the master billing agreement between
AT&T (or an Affiliate of AT&T) and CSG, pursuant to which CSG provides billing
services for the Systems, has been terminated with respect to the Systems or
that the Systems and the Consolidated Entities have been released from any such
agreement.
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9. CLOSING.
9.1. Time and Place of the Closing.
9.1.1. The Closing shall be deemed effective as of 12:01
a.m. Central Time on the Closing Date, and all references herein that relate to
the date and time of the Closing (i.e., "prior to the Closing"), including in
the provisions dealing with the calculation of the Working Capital Adjustment
in SCHEDULE 2.1, shall refer to such effective date and time.
9.1.2. Unless otherwise mutually agreed upon in writing by
AT&T and Cox, the Closing shall be held at the offices of Dow, Lohnes &
Albertson, PLLC, Suite 1600, One Ravinia Drive, Atlanta, Georgia 30346 at 10:00
a.m., local time, on the date specified by Cox by notice to AT&T, which
specified date shall be no later than five Business Days after satisfaction of
the conditions set forth in Section 8.1.2 and Section 8.1.4. The parties
acknowledge and agree that (i) the satisfaction of the conditions set forth in
Section 8.1.2 and Section 8.1.4 shall be determinative only of the date on
which the Closing shall be scheduled to occur, which scheduled date shall then
become the date by which each party shall have performed the covenants to be
performed by such party at or prior to the Closing, and (ii) the Closing shall
not occur unless and until all of the conditions to each party's obligation to
consummate the Closing set forth in Section 8.1, Section 8.2 and Section 8.3,
shall have been satisfied or waived in accordance with the terms of this
Agreement. Notwithstanding the foregoing, if the conditions set forth in
Section 8.1.2 and Section 8.1.4 have been satisfied: (i) Cox shall have the
right to postpone the Closing to a date no later than March 31, 2000 if Cox has
a substantial operational concern about the Systems' Year 2000 Readiness with
respect to any one or more Material Computer and Other Systems, and (ii) at the
election of either AT&T or Cox the Closing shall be scheduled to occur on
January 14, 2000.
9.1.3. Notwithstanding anything to the contrary in Section
9.1.2 above, if the Peak Acquisition Agreement is terminated prior to closing
thereunder, then the parties agree as follows:
(i) The "Required Assets" to be included in
Cable Sub and its Subsidiaries as of the Closing as provided in SCHEDULE 2.1
shall not include the assets of the Peak Systems, which shall be deemed
Excluded Assets;
(ii) The Closing shall be consummated, in
accordance with Article 9, on the date specified by Cox in accordance with
Section 9.1.2;
(iii) AT&T and Cox shall use commercially
reasonable efforts to agree upon replacement assets to be substituted for the
Peak Systems in the transactions contemplated by this Agreement; provided,
however, that in the event AT&T and Cox are unable to agree on such system or
systems or other replacement assets within 10 Business Days, the number of AT&T
Shares set forth on SCHEDULE 3.1 shall be reduced to the number of shares set
forth on SCHEDULE 9.1.3; and
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(iv) None of AT&T or either of the AT&T Cable
Subsidiaries shall have any liability to Cox for a breach of any
representation, warranty, covenant or agreement in the Agreement with respect
to Peak and the Peak Systems, and the parties hereto shall amend and restate
this Agreement as appropriate to reflect the provisions of this Section 9.1.3,
including, without limitation, (A) to delete the representations, warranties,
covenants and agreements set forth in the Agreement with respect to Peak and
the Peak Systems and (B) to delete the conditions to the Closing set forth in
the Agreement with respect to Peak and the Peak Systems.
9.1.4. Notwithstanding anything to the contrary in Section
9.1.2 above, if the merger of TCA Cable TV, Inc. into an Affiliate of Cox shall
not have closed prior to the date on which the conditions set forth in Section
8.1.2 and Section 8.1.4 have been satisfied, then the parties agree as follows:
(i) The date which Cox may specify as the date
on which the Closing shall occur shall be no sooner than 20 Business Days and
no later than 25 Business Days after satisfaction of the conditions set forth
in Section 8.1.2 and Section 8.1.4;
(ii) During such period between the satisfaction
of the conditions set forth in Section 8.1.2 and Section 8.1.4 and the date
scheduled as the Closing Date, if the parties are unable to agree on either (a)
the conditions under which Cox would assume the obligations of AT&T Partner
with respect to the Partnership, or (b) consideration which shall be
substituted for the Partnership Interest, then (x) the number of AT&T Shares
set forth on SCHEDULE 3.1 shall be reduced to the number of shares set forth on
SCHEDULE 9.1.4, and (y) the Partnership Interest shall not be deemed to be a
Required Assets but shall be deemed to be an Excluded Asset; and
(iii) In the event that the Partnership Interest
becomes an Excluded Asset pursuant to clause (ii) above, then none of AT&T or
either of the AT&T Cable Subsidiaries shall have any liability to Cox for a
breach of any representation, warranty, covenant or agreement in this Agreement
with respect to the Partnership or the Partnership Interest, and the parties
hereto shall amend and restate this Agreement as appropriate to reflect the
provision of this Section 9.1.4 including, without limitation, (A) to delete
the representations, warranties, covenants and agreements set forth in the
Agreement with respect to the Partnership and the Partnership Interest, and (B)
to delete the conditions to Closing set forth in the Agreement, if any, with
respect to the Partnership or the Partnership Interest.
9.2. Deliveries by AT&T. On the Closing Date (unless previously
delivered), AT&T shall deliver or cause to be delivered to Cox the following,
in form and substance reasonably satisfactory to Cox and its counsel:
9.2.1. Stock Certificates. All certificates representing
the Cable Sub Shares, duly endorsed for transfer or accompanied by instruments
of transfer reasonably satisfactory in form and substance to Cox and its
counsel;
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9.2.2. AT&T Consents. The original of each AT&T Consent
obtained prior to the Closing;
9.2.3. Billing Services Agreement. The Billing Services
Agreement executed by AT&T;
9.2.4. Secretary's Certificate. A certificate, dated as of
the Closing Date, executed by the Secretary of AT&T, without personal
liability: (i) certifying that the resolutions, as attached to such
certificate, were duly adopted by AT&T's Board of Directors authorizing and
approving the execution of this Agreement and the AT&T Related Agreements and
the consummation of the transactions contemplated hereby and thereby and that
such resolutions remain in full force and effect; and (ii) certifying as to the
incumbency of each signatory to this Agreement and the AT&T Related Agreements;
9.2.5. Certificates of Incorporation and Bylaws. A true and
complete copy of the Certificate of Incorporation and Bylaws or other governing
instruments of Cable Sub and any Subsidiary of Cable Sub as of the Closing
Time, each as amended or restated as of the Closing Time;
9.2.6. Opinion of Counsel. The opinion or opinions
referred to in Section 8.3.6; and
9.2.7. Noncompetition Agreement. A Noncompetition
Agreement executed by each of Donne F. Fisher, Blake F. Fisher, William K.
Fisher and Scott M. Fisher with respect to each of Arkansas, Oklahoma, Utah and
Nevada.
9.3. Deliveries by Cox. On the Closing Date (unless previously
delivered), Cox shall deliver or cause to be delivered to AT&T the following,
in form and substance reasonably satisfactory to AT&T and its counsel:
9.3.1. Stock Certificates. All certificates representing
the AT&T Shares owned by Cox, duly endorsed for transfer or accompanied by
instruments of transfer reasonably satisfactory in form and substance to Cox
and its counsel;
9.3.2. Cox Consents and Partnership Consents. The original
of each Cox Consent and Partnership Consent obtained prior to the Closing;
9.3.3. Billing Services Agreement. The Billing Services
Agreement executed by Cox;
9.3.4. Secretary's Certificate. A certificate, dated as of
the Closing Date, executed by the Secretary of Cox, without personal liability:
(i) certifying that the resolutions, as attached to such certificate, were duly
adopted by Cox's Board of Directors authorizing and approving the execution of
this Agreement and the Cox Related Agreements and the consummation of the
transactions contemplated hereby and thereby and that such resolutions remain
in full force and effect;
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and (ii) certifying as to the incumbency of each signatory to this Agreement
and the Cox Related Agreements; and
9.3.5. Opinion of Counsel. The opinion referred to in
Section 8.2.4.
10. CLOSING WITH LESS THAN 100% OF THE FRANCHISE CONSENTS.
10.1. Expenses; Risk of Loss. If the condition precedent set forth
in Section 8.1.4 has been satisfied and the Closing is consummated yet fewer
than 100% of the Franchise Consents have been obtained, Cox and AT&T shall each
pay one-half of the expense of defending any legal challenges alleging the
premature, unlawful or invalid transfer of any of the Franchises for which
consents were not obtained, including, without limitation, reasonable
attorneys' fees and consultants' fees; provided that the actual amount of any
judgments obtained by a Governmental Authority with respect to any Franchise
for which a consent was not obtained and amounts paid to reinstate such
Franchise shall be borne by Cox. Except as provided in the foregoing sentence,
if a Franchise is revoked there shall be no compensation paid by AT&T or either
AT&T Cable Subsidiary to Cox for the value of the loss suffered by Cox as a
result of such revocation.
10.2. Minimum Efforts Period. In no event shall a party be required
to consummate the Closing with fewer than 100% of the Franchise Consents prior
to the date that is 120 days after the date the last FCC Form 394 is filed
pursuant to Section 7.9.5.
10.3. Waiver. If the condition precedent set forth in Section 8.1.4
has been satisfied and the Closing is consummated yet fewer than 100% of the
Franchise Consents have been obtained, Cox shall be deemed to have waived the
pre-Closing performance by the AT&T Cable Subsidiaries of the covenants
contained in Section 7.9 with respect to the obtainment of Franchise Consents;
provided, however, that the AT&T Cable Subsidiaries shall reasonably cooperate
with Cox after Closing in connection with Cox's negotiations with the
appropriate Governmental Authorities with respect to any Franchise for which
consent was not obtained prior to Closing.
11. TERMINATION.
11.1. 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:
11.1.1. by the mutual written consent duly authorized by the
Board of Directors of Cox and AT&T;
11.1.2. by either Cox or AT&T, if the transactions
contemplated by this Agreement to take place at the Closing have not been
consummated by the first anniversary of this Agreement for any reason other
than (i) a material breach or material default by such terminating party in the
performance of any of its obligations under this Agreement, or (ii) the failure
of any representation or warranty of such terminating party to be accurate in
all material respects;
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11.1.3. by Cox under the conditions described in Section 2.3,
Section 5.24.3, Section 7.10, Section 7.11, Section 7.15, Section 7.30 or
Section 7.31; or
11.1.4. by AT&T under the conditions described in Section
2.3 or Section 7.27.3.
11.2. Effect 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 prior to termination with respect to any
of its representations, warranties, covenants or agreements contained in this
Agreement, except that Cox will have no liability in any event upon exercise of
its right to terminate pursuant to Section 11.1.3 and neither AT&T nor any of
its Affiliates will have any liability to Cox if Cox terminates this Agreement
pursuant to Section 2.3, Section 5.24.3, Section 7.30 or Section 7.31 or if
AT&T terminates this Agreement pursuant to Section 2.3 and Section 7.27.3.
11.3. Procedure Upon Termination. In the event of the termination
of this Agreement by either of AT&T or Cox pursuant to this Article 11, notice
of such termination will promptly be given by the terminating party to the
other parties.
12. SURVIVAL; INDEMNIFICATION.
12.1. Survival of Representations, Warranties, Covenants and
Agreements.
12.1.1. None of the representations and warranties of AT&T,
the AT&T Cable Subsidiaries or Cox set forth herein or in any AT&T Related
Agreement or Cox Related Agreement shall survive the Closing, other than the
representations and warranties contained in Sections 4.5 and 6.6 and in the
certificates delivered by AT&T and Cox pursuant to Section 7.5, which shall
survive until 30 days after the expiration of the statute of limitations
applicable to any claim or right of action related thereto.
12.1.2. The covenants and agreements of AT&T, the AT&T Cable
Subsidiaries and Cox set forth herein or in any AT&T Related Agreement or Cox
Related Agreement which by their terms are to be performed in full at or prior
to the Closing shall not survive the Closing, other than (i) the covenant and
agreement contained in Section 7.2.1(v), which shall survive the Closing for a
period ending on the six-month anniversary of the Closing Date and (ii) the
covenants and agreements contained in Sections 7.4 and 7.17, which shall
survive until 30 days after the expiration of the statute of limitations
applicable to any claim or right of action related thereto. The covenants and
agreements of AT&T, the AT&T Cable Subsidiaries and Cox set forth herein or in
any AT&T Related Agreement or Cox Related Agreement which by their terms are to
be performed in whole or in part after the Closing shall survive the Closing
until fully performed in accordance with their terms and, in the case of the
covenants and agreements contained in Sections 7.4 and 7.17, shall survive
until 30 days after the expiration of the statute of limitations applicable to
any claim or right of action related thereto. The covenants and agreements of
AT&T, the AT&T Cable Subsidiaries and Cox set forth in Section 7.15 shall
survive the Closing until fully performed in accordance with their terms.
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12.1.3. The written assertion of any claim by AT&T or Cox
against the other hereunder with respect to the breach or alleged breach of any
representation, warranty, covenant or agreement that pursuant to this Section
12.1 survives the Closing shall extend the period during which such
representation, warranty, covenant or agreement survives (the "SURVIVAL
PERIOD") through the date such claim is conclusively resolved.
12.2. Indemnification by AT&T and the AT&T Cable Subsidiaries. AT&T
and the AT&T Cable Subsidiaries will indemnify, defend and hold harmless Cox
and its Affiliates, and the shareholders, partners, directors, officers,
employees, agents, successors and assigns of any of such Persons, from and
against, in the case of AT&T, the matters specified in Section 12.2.1(i) (as
they relate to AT&T) and in the case of the AT&T Cable Subsidiaries, the
matters specified in Sections 12.2.1(i), 12.2.1(ii) and 12.2.1(iii) (as they
relate to the AT&T Cable Subsidiaries):
12.2.1. All losses, damages, liabilities, deficiencies or
obligations of or to Cox or any such other indemnified Person resulting from or
arising out of (i) any breach of any representation or warranty, covenant,
agreement or obligation of AT&T or either of the AT&T Cable Subsidiaries
contained in this Agreement or in any AT&T Related Agreement that pursuant to
Section 12.1 survives the Closing; (ii) any Indemnified Liabilities and (iii)
the repair or replacement cost of Material Computer and Other Systems that are
not Year 2000 Ready (including labor and installation costs associated
therewith but excluding any consequential damages relating thereto, including
lost profits) provided, however, that the AT&T Cable Subsidiaries'
indemnification obligations with respect to this clause (iii) shall arise only
if both (A) the Closing occurs prior to March 31, 2000 and (B) Cox submits a
written request for such indemnification on or before March 31, 2000; and
12.2.2. all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, refunds, 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 (i) and either
clause (ii) or (iii) of Section 12.2.1, Cox's right to pursue its claim under
clause (ii) or (iii) will exist notwithstanding the expiration of the Survival
Period applicable to such claim under clause (i).
12.3. Indemnification by Cox. Cox will indemnify, defend and hold
harmless AT&T and its Affiliates, and the shareholders, partners, directors,
officers, employees, agents, successors and assigns of any such Persons, from
and against:
12.3.1. All losses, damages, liabilities, deficiencies or
obligations of or to AT&T or any such other indemnified Person resulting from
or arising out of (i) any breach of any representation or warranty, covenant,
agreement or obligation of Cox contained in this Agreement or in any Cox
Related Agreement that pursuant to Section 12.1 survives the Closing or (ii)
the failure by Cox, Cable Sub or the Subsidiaries of Cable Sub to perform the
Assumed Liabilities after the Closing; and
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12.3.2. 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 (i) and under
clause (ii) of Section 12.3.1, AT&T's right to pursue its claim under clause
(ii) will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (i).
12.4. Procedure for Indemnification. The procedure for
indemnification shall be as follows:
12.4.1. The party claiming indemnification (the "CLAIMANT")
shall promptly give notice to the party from whom indemnification is claimed
(the "INDEMNIFYING PARTY") of any claim, whether between the parties or brought
by a third party, specifying (i) the factual basis for such claim and (ii) the
amount of the claim. If the claim relates to an action, suit or proceeding
filed by a third party against the Claimant, such notice shall be given by the
Claimant within ten days after written notice of such action, suit or
proceeding was given to the Claimant; provided, however, that failure of the
Claimant to give the Indemnifying Party notice as provided herein shall not
relieve the Indemnifying Party of its obligations hereunder, except to the
extent that such failure to give notice shall prejudice any defense or claim
available to the Indemnifying Party.
12.4.2. Following receipt of notice from the Claimant of a
claim, the Indemnifying Party shall have 30 days to make such investigation of
the claim as the Indemnifying Party deems necessary or desirable. For the
purposes of such investigation, the Claimant agrees to make available to the
Indemnifying Party and/or its authorized representative(s) the information
relied upon by the Claimant to substantiate the claim. If the Claimant and the
Indemnifying Party agree at or prior to the expiration of said 30-day period
(or any mutually agreed upon extension thereof) to the validity and amount of
such claim, the Indemnifying Party shall immediately pay to the Claimant the
full amount of the claim subject to the terms and in accordance with the
procedures set forth herein. If the Claimant and the Indemnifying Party do not
agree within said period (or any mutually agreed upon extension thereof), the
Claimant may seek appropriate legal remedy.
12.4.3. With respect to any claim by a third party as to
which the Claimant is entitled to indemnification hereunder, the Indemnifying
Party shall have the right, at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party. If the Indemnifying Party elects to assume control
of the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not elect to assume control or otherwise participate in
the defense of any third party claim, it shall be bound by the results obtained
by the Claimant with respect to such claim.
12.4.4. No Claimant may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior
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written consent of the Indemnifying Party, unless (i) the Indemnifying Party
fails to assume and maintain the defense of such claim pursuant to Section
12.4.3 or (ii) such settlement, compromise or consent includes an unconditional
release of the Indemnifying Party from all liability arising out of such claim.
An Indemnifying Party may not, without the prior written consent of the
Claimant, settle or compromise any claim or consent to the entry of any
judgment with respect to which indemnification is being sought hereunder unless
such settlement, compromise or consent included an unconditional release of the
Claimant from all liability arising out of such claim and does not contain any
equitable order, judgment or term which in any manner affects, restrains or
interferes with the business of the Claimant or any of the Claimant's
Affiliates.
12.4.5. If a claim, whether between the parties or by a
third party, requires immediate action, the parties will make every effort to
reach a decision with respect thereto as expeditiously as possible.
12.4.6. In the case of any claim for indemnification with
respect to Taxes, the provisions of Section 12.4.1 through Section 12.4.5 shall
not apply and, in lieu thereof, the procedures set forth in Section 7.17 shall
govern.
12.5. No Right of Contribution. Following the Closing, Cable Sub
and its Subsidiaries will be owned by Cox or its Subsidiaries. Accordingly,
AT&T and the AT&T Cable Subsidiaries acknowledge and agree that any recovery
under Section 12.2 shall be against AT&T or the AT&T Cable Subsidiaries, as
specified in Section 12.2, none of which shall have any right of reimbursement
or contribution against Cox, Cable Sub or any other Subsidiary of Cox.
13. MISCELLANEOUS.
13.1. 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 parties, no party may
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement.
13.2. 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
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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:
If to AT&T:
AT&T Corp.
295 N. Maple Avenue
Basking Ridge, New Jersey 07920
Attn: Marilyn Wasser, Esq.
Fax: (908) 221-6618
With a copy to:
AT&T Corp.
295 N. Maple Avenue
Basking Ridge, New Jersey 07920
Attn: Sarah Austrian, Esq.
Fax: (973) 644-8572
If to the AT&T Cable Subsidiaries:
c/o AT&T Broadband and Internet Services
9197 South Peoria Street
Englewood, Colorado 80112
Attn: Mr. Derek Chang
Fax: (720) 875-5396
With copies to:
AT&T Broadband and Internet Services
9197 South Peoria Street
Englewood, Colorado 80112
Attn: Mary S. Willis, Esq.
Fax: (720) 875-5858
and
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Sherman & Howard, LLC
First Interstate Tower North
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Attn: Joanne F. Norris, Esq.
Fax: (303) 298-0940
If to Cox:
c/o Cox Communications, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
Attn: Mr. John M. Dyer
Fax: (404) 843-5939
With copies to:
Cox Communications, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
Attn: Legal Department
Fax: (404) 843-5845
and
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue
Suite 800
Washington, DC 20036
Attn: Stuart A. Sheldon, Esq.
and Joyce T. Gwadz, Esq.
Fax: (202) 776-2222
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 13.2. 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 13.2, except
that any notice of a change of address will be effective only upon actual
receipt.
13.3. Right to Specific Performance; Remedies. The parties
recognize that in the event a party hereto should refuse to perform under the
provisions of this Agreement, monetary damages alone will not be adequate. The
nonbreaching party shall therefore be entitled, in addition to any other
remedies which may be available, including money damages, to obtain specific
performance of the terms of this Agreement. In the event of any action to
enforce this Agreement, the breaching
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party hereby waives the defense that there is an adequate remedy at law. In the
event of a breach or default which results in the filing of a lawsuit for
damages, specific performance or other remedy, the nonbreaching party shall be
entitled to reimbursement by the breaching party of reasonable legal fees and
expenses actually incurred by the nonbreaching party.
13.4. Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion. The waiver by any party
of any of the conditions precedent to its obligations under this Agreement
shall not preclude it from seeking redress for breach of this Agreement,
including with respect to the condition so waived.
13.5. Captions. The article and section captions of this Agreement
are for convenience only and do not constitute a part of this Agreement.
13.6. Choice of Law. This agreement and the 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 law
principles of such State.
13.7. Terms. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
13.8. Rights Cumulative. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
13.9. Further Actions. AT&T and Cox will execute and deliver to the
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
13.10. Time of the Essence. Time is of the essence under this
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a
day that is not a Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding Business Day.
13.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original.
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13.12. 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 and the agreements to be delivered in
accordance herewith) 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.
13.13. 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 benefited by such provision or
any other provisions of this Agreement; provided, however, that the economic
and legal substance of the transactions contemplated by this Agreement is not
affected in any manner that is materially adverse to any party affected by such
invalidity or unenforceability.
13.14. Construction. This Agreement has been negotiated by the
parties and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
[Signatures on Following Page]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
AT&T:
AT&T CORP.
By: /s/ Leo J. Hindrey, Jr.
-------------------------------------------
Name: Leo J. Hindrey, Jr.
-----------------------------------------
Title:
----------------------------------------
AT&T CABLE SUBSIDIARIES:
TCI HOLDINGS, INC.
By: /s/ Leo J. Hindrey, Jr.
-------------------------------------------
Name: Leo J. Hindrey, Jr.
-----------------------------------------
Title:
----------------------------------------
UNITED CABLE TELEVISION CORPORATION
By: /s/ Leo J. Hindrey, Jr.
-------------------------------------------
Name: Leo J. Hindrey, Jr.
-----------------------------------------
Title:
----------------------------------------
COX:
COX TELEPORT PARTNERS, INC.
By: /s/ John M. Dyer
-------------------------------------------
Name: John M. Dyer
-----------------------------------------
Title: Vice President
----------------------------------------
