<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File No: 0-11478
TCA CABLE TV, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1798185
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3015 S. E. Loop 323, Tyler, Texas 75701
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 903/595-3701
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the registrant's classes of common
stock as of June 12, 1995 was:
24,542,209 shares of common stock
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TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - April 30, 1995 and October 31, 1994 3
Consolidated Statements of Operations -
Three and Six months ended April 30, 1995 and 1994 4
Consolidated Statement of Shareholders' Equity -
Six months ended April 30, 1995 5
Consolidated Statements of Cash Flows -
Six months ended April 30, 1995 and 1994 6-7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 9
SIGNATURES 10
</TABLE>
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1995 1994
----------------------- ------------------
(Unaudited)
<S> <C> <C>
Cash $ 2,444,953 $ 2,445,112
----------------------- ------------------
Accounts receivable, subscribers 5,809,833 4,913,712
----------------------- ------------------
Accounts receivable, other 190,682 164,904
----------------------- ------------------
Investments, at cost 2,014,471 2,223,038
----------------------- ------------------
Property, plant and equipment, at cost:
Land 2,671,160 2,661,055
Distribution systems 258,516,176 243,607,084
Transportation equipment 7,303,529 6,513,387
Other 24,052,214 22,553,063
----------------------- ------------------
292,543,079 275,334,589
Less accumulated depreciation (172,515,394) (162,749,992)
----------------------- ------------------
120,027,685 112,584,597
----------------------- ------------------
Other assets:
Intangibles, net of accumulated
amortization of $68,158,063 and
$65,132,499, respectively 164,067,486 163,386,733
Prepaid expenses 677,103 494,839
----------------------- ------------------
164,744,589 163,881,572
----------------------- ------------------
$ 295,232,213 $ 286,212,935
======================= ==================
</TABLE>
<TABLE>
<CAPTION>
April 30, October 31,
LIABILITIES 1995 1994
------------------- --------------
(Unaudited)
<S> <C> <C>
Accounts payable $ 6,848,501 $ 5,357,363
Accrued expenses 10,600,377 11,276,727
Subscriber advance payments 3,726,488 3,739,313
Income taxes payable 790,382 495,278
Deferred income taxes 42,900,000 40,000,000
Term debt 122,744,095 126,447,345
------------------ --------------
187,609,843 187,316,026
------------------ --------------
Contingencies and commitments
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value,
5,000,000 shares authorized; none
issued
Common stock, $.10 par value, 60,000,000
shares authorized; 24,749,453 and
24,733,261 shares issued, respectively 2,474,945 2,473,326
Additional paid-in capital 43,129,634 42,860,849
Retained earnings 65,821,544 56,266,488
------------------ --------------
111,426,123 101,600,663
Less treasury stock, at cost,
209,828 and 159,828 shares, respectively (3,803,754) (2,703,754)
------------------ --------------
107,622,369 98,896,909
------------------ --------------
$ 295,232,212 $ 286,212,935
================== ==============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------------- -----------------------------------
1995 1994 1995 1994
-------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C>
CATV revenues $ 43,953,790 $ 39,848,022 $ 87,258,079 $ 79,126,615
-------------- --------------- -------------- ------------------
Operating expenses:
Salaries, wages and benefits 7,704,939 7,623,348 15,260,652 14,531,681
Programming costs 10,013,357 8,924,821 19,892,817 17,796,274
Other operating expenses 1,540,326 1,472,291 3,024,025 2,758,474
Selling, general and administrative 2,854,916 2,747,857 5,429,821 5,412,641
Depreciation and amortization 6,517,159 8,426,557 12,843,753 16,778,820
-------------- --------------- -------------- ------------------
28,630,697 29,194,874 56,451,068 57,277,890
-------------- --------------- -------------- ------------------
Operating income 15,323,093 10,653,148 30,807,011 21,848,725
Other income 229,500 983,734 302,304 1,641,967
Interest expense (2,414,635) (2,373,969) (4,884,193) (4,863,295)
-------------- --------------- -------------- ------------------
Income before income taxes 13,137,958 9,262,913 26,225,122 18,627,397
-------------- --------------- -------------- ------------------
Provision for income taxes:
Current 3,970,000 2,700,000 7,870,000 5,500,000
Deferred 1,450,000 800,000 2,900,000 1,600,000
-------------- --------------- -------------- ------------------
5,420,000 3,500,000 10,770,000 7,100,000
-------------- --------------- -------------- ------------------
Income before cumulative effect of
change in accounting principle 7,717,958 5,762,913 15,455,122 11,527,397
Cumulative effect of change in
accounting principle (1,900,000)
-------------- --------------- -------------- ------------------
Net Income $ 7,717,958 $ 5,762,913 $ 15,455,122 $ 9,627,397
============== =============== ============== ==================
Earnings per common share before
cumulative change in accounting principle $ 0.31 $ 0.24 $ 0.62 $ 0.47
Cumulative effect of change in
accounting principle (0.07)
-------------- --------------- -------------- ------------------
Earnings per common share $ 0.31 $ 0.24 $ 0.62 $ 0.40
============== =============== ============== ==================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Issued Additional
--------------------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock
------------ ---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1994 24,733,261 $ 2,473,326 $ 42,860,849 $ 56,266,488 $ (2,703,754)
Net income for the six months
ended April 30, 1995 15,455,122
Issuance of common stock 9,375 937 215,471
Stock options exercised 6,817 682 53,314
Treasury stock purchased (1,100,000)
Cash dividends at $.24 a share (5,900,066)
------------ ---------------- -------------- --------------- ---------------
Balance, April 30, 1995 24,749,453 $ 2,474,945 $ 43,129,634 $ 65,821,544 $ (3,803,754)
============ ================ ============== =============== ===============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
5
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
---------------------------------------
1995 1994
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 86,323,355 $ 79,977,727
Cash paid to suppliers and employees (42,806,216) (40,877,191)
Other revenue received 347,036 182,298
Interest paid (4,836,359) (5,031,290)
Income taxes paid (7,574,896) (6,390,657)
--------------- --------------
Net cash provided by operating activities 31,452,920 27,860,887
--------------- --------------
Cash flows from investing activities:
Payments for purchases of companies
and CATV systems (3,704,876) (111,929)
Capital expenditures (17,884,211) (13,252,411)
--------------- --------------
Net cash used in investing activities (21,589,087) (13,364,340)
--------------- --------------
Cash flows from financing activities:
Borrowings of term debt 36,499,990 35,199,990
Repayments of term debt (40,203,240) (46,002,942)
Treasury stock purchased (1,100,000)
Proceeds from sale of assets 785,331 1,777,950
Proceeds from stock options exercised 53,995 31,639
Dividends paid (5,900,068) (5,426,517)
--------------- --------------
Net cash provided by (used in) financing activities (9,863,992) (14,419,880)
--------------- --------------
Net increase (decrease) in cash and cash equivalents (159) 76,667
Cash and cash equivalents at beginning of period 2,445,112 1,450,276
--------------- --------------
Cash and cash equivalents at end of period $ 2,444,953 $ 1,526,943
=============== ===============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
6
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
----------------------------------------
1995 1994
------------------- -------------------
<S> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 15,455,122 $ 9,627,397
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense 9,818,189 10,982,068
Amortization expense 3,025,564 5,796,751
Deferred income taxes 2,900,000 3,500,000
(Gain) loss on sale of assets (164,225) (1,459,669)
Share of (earnings) losses of affiliates 208,957
Contribution of common stock to retirement plan 216,409 276,509
(Increase) decrease in accounts receivable, subscribers (896,121) 368,863
(Increase) decrease in accounts receivable, other (25,778) 243,566
(Increase) decrease in other assets (182,264) (618,237)
Increase (decrease) in accounts payable 1,491,138 (325,771)
Increase (decrease) in subscriber advance payments (12,825) 238,683
Increase (decrease) in accrued expenses (676,350) 121,384
Increase (decrease) in income taxes payable 295,104 (890,657)
------------------- -----------------
Net cash provided by operating activities $ 31,452,920 $ 27,860,887
=================== =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
7
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TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain financial information has been condensed and certain
footnote disclosures have been omitted. Such information and disclosures are
normally included in financial statements prepared in accordance with generally
accepted accounting principles.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto in the Company's latest report on Form
10-K.
The financial statements as of April 30, 1995 and for the six month period
then ended are unaudited; however, in the opinion of management, such
statements include all adjustments (consisting solely of normal and recurring
adjustments) necessary to present fairly the financial information included
therein.
B. The consolidated statements of operations for the six months ended April
30, 1995, are not necessarily indicative of the operating results to be
expected for the full year.
C. Earnings per common share are computed based upon the weighted average
common shares outstanding during the period, including common stock
equivalents, of 24,559,659 shares and 24,685,832 shares for 1995 and 1994,
respectively.
D. In March 1995, the Company announced its agreement to purchase the assets
related to the cable system serving approximately 32,800 customers in the towns
of San Angelo, Andrews, Ballinger, Miles, and Winters, Texas from Marcus Cable
of San Angelo. The Company anticipates a July 1, 1995 closing.
E. In May 1995, the Company finalized its purchase of two cable television
systems operating in Fayetteville, Russellville, Clarksville, Booneville and
Paris, Arkansas which was handled through a limited partnership. The newly
acquired systems serve approximately 34,300 basic subscribers.
F. The Company also announced in May 1995 its agreement to purchase the
assets related to the cable system serving El Dorado, Arkansas from Time Warner
Cable Ventures, a division of Time Warner Entertainment, L.P. This system
currently serves approximately 10,400 subscribers. An August 1, 1995 closing
is anticipated.
8
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TCA CABLE TV, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Comparison of the three-month period ended April 30,
1995, with the same three-month period of the prior year reveals
increases in revenues, operating income, and net income. Revenues,
operating income, and net income increased by approximately 10%, 44%, and 34%,
respectively.
The revenue increase was mostly attributable to internal growth. The
Company's basic accounts increased from 460,360 at April 30, 1994 to 471,991
at April 30, 1995 or approximately 2%. Average revenue per account increased
from $28.80 to $31.04 or approximately 8%.
Operating expenses decreased approximately 2% during the second quarter of
fiscal 1995 as compared to the second quarter of fiscal 1994. The decrease in
operating expenses resulted from a 23% decrease in depreciation and
amortization expense. Salaries, wages and benefits increased 1%. Programming
costs and other operating expenses increased 12% and 5%, respectively.
Selling, general, and administrative expenses increased 4%.
Interest expense decreased by $41,000 or approximately 2%. The decrease was
attributable to the repayment of term debt.
LIQUIDITY AND CAPITAL RESOURCES - The Company's capital expenditures have been
primarily for cable system construction, upgrading and rebuilding, acquisition
of other cable systems and purchases of converters to be furnished to
subscribers.
Expenditures for rebuilding, upgrading and maintaining the Company's cable
systems and for converter purchases have been financed principally with cash
flow from operations. Acquisitions of cable systems have generally been
financed with cash flow from operations and through bank borrowings.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit A
2.1. Asset Purchase Agreement among Marcus Cable of San
Angelo, L.P. and Teleservice Corporation of America
dated March 24, 1995.(1)
2.2. Amendment No. 1 to Asset Purchase Agreement
10.1. TCA Cable TV, Inc. Amended and Restated Incentive Stock
Option Plan
B. No reports on Form 8-K have been filed during the quarter for
which this report is filed.
C. Exhibit 27 - Financial Data Schedule
- --------------------------
(1) Schedules and similar attachments to this exhibit have not been filed
herewith, but the nature of their contents is described in the body of
this exhibit. The Company agrees to furnish a copy of any such omitted
schedules and attachments to the Commission upon request.
9
<PAGE> 10
SIGNATURES
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 thereto duly authorized.
TCA CABLE TV, INC.
Date: June 13, 1995 /s/ Robert M. Rogers
Robert M. Rogers, Chairman and
Chief Executive Officer
Date: June 13, 1995 /s/ Jimmie F. Taylor
Jimmie F. Taylor, Vice President,
CFO and Treasurer
10
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EXHIBIT INDEX
Exhibit 2.1 - Asset Purchase Agreement among Marcus Cable of San
Angelo, L.P. and Teleservice Corporation of America
dated March 24, 1995.(1)
Exhibit 2.2 - Amendment No. 1 to Asset Purchase Agreement
Exhibit 10.1 - TCA Cable TV, Inc. Amended and Restated Incentive Stock
Option Plan
Exhibit 27 - Financial Data Schedule
- --------------------------
(1) Schedules and similar attachments to this exhibit have not been filed
herewith, but the nature of their contents is described in the body of
this exhibit. The Company agrees to furnish a copy of any such omitted
schedules and attachments to the Commission upon request.
<PAGE> 1
ASSET PURCHASE AGREEMENT
AMONG
MARCUS CABLE OF SAN ANGELO, L.P.
AND
TELESERVICE CORPORATION OF AMERICA
March 24, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Assets Subject to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Adjustments to Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Final Adjustment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Pre-Closing Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV - Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 No Breach of Statute or Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Claims, Litigation and Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Service Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Cable Plant and Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Assumed Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.12 Taxes, Fees and Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Franchises, Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 FCC and Franchise Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.16 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.17 Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.18 Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.19 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.20 Franchise and Pole Attachment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.21 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.22 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
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ARTICLE V - Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 No Breach of Statute or Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Claims, Litigation and Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Buyer's Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI - Seller's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2 Conduct of Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.7 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.8 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.9 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.10 Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII - Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Discharge of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.5 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII - Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Buyer's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Buyer's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Buyer's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX - Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Seller's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 Seller's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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9.4 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.5 Seller's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE X - Closing and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XI - Seller's Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Instruments of Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Bring Down Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.5 Opinion of FCC Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.6 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XII - Buyer's Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.2 Assignment and Assumption Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3 Bring Down Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.4 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XIII - Retained Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.1 Retained Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XIV - Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.4 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.5 Tax Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XV - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.2 Governing Law; Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.4 Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.5 Definition of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.6 Headings, Gender, Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.9 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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15.10 Assignment and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.11 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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INDEX OF SCHEDULES
Schedule 1.2 - Cash and Cash Equivalents
Schedule 3.6 - Allocation of Purchase Price
Schedule 4.4 - Consents
Schedule 4.6 - Liens and Other Encumbrances
Schedule 4.7 - Claims, Litigation and Disputes
Schedule 4.8 - Service Rates
Schedule 4.9 - Cable Plant and Subscribers
Schedule 4.10 - Assumed Contracts
Schedule 4.11 - Compliance with Laws
Schedule 4.13 - Franchises and FCC Licenses
Schedule 4.14 - FCC and Franchise Reports
Schedule 4.15 - Employment Matters
INDEX OF EXHIBITS
Exhibit A - Pre-Closing Escrow Agreement
Exhibit B - Opinion of Baker & Botts, L.L.P.
Exhibit C - Opinion of Dow, Lohnes & Albertson
Exhibit D - Opinion of Jackson & Walker, L.L.P.
Exhibit E - Retained Franchises Escrow Agreement
Exhibit F - Retained Franchises Management Agreement
Exhibit G - Elements of a Signal Agreement
Exhibit H - Non-Competition Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into this
24th day of March, 1995 by and between Marcus Cable of San Angelo, L.P., a
Delaware limited partnership ("Seller"), and Teleservice Corporation of
America, a Texas corporation ("Buyer").
BACKGROUND
Seller is engaged in the business of operating a cable
television system (the "System") in the following Texas locations: City of San
Angelo, Goodfellow Air Force Training Center, Andrews County, Ballinger County,
Miles County and Winters County. Seller desires to sell, and Buyer desires to
buy, Seller's operating assets on the terms herein set forth.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.1 Assets Subject to Agreement. Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, assume
and acquire from Seller, all of Seller's right, title and interest in the
following assets (the "Assets") as the same shall exist on the Closing Date (as
defined below); provided that the Assets shall not include any of the assets
described in Section 1.2:
(a) Accounts Receivable. All of Seller's
accounts receivable as of the Closing Date;
(b) Inventory. All of Seller's operating
inventory, supplies and other inventories of every kind and nature;
(c) Real Estate. The owned and leased real
estate, including the land, buildings and other improvements thereon,
described in Schedule 4.6 hereto (the "Real Estate").
(d) Equipment. All equipment and other personal
property of Seller that is an integral part of the System (the
"Equipment"), including: headend equipment, including towers and
origination, transmission and electronic equipment; distribution
equipment, including trunk, distribution and drop lines, amplifiers,
power supplies, conduit, vaults, pedestals, grounding and pole
hardware; subscriber devices, including converters, encoders, behind
television transformers and taps; installer and technician equipment,
including vehicles, tools and test equipment; and cable data terminals
and modems;
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(e) Permits and Licenses. Seller's cable
television franchises (the "Franchises"); Federal Communications
Commission ("FCC") permits, licenses and authorizations (the "FCC
Licenses"), all as set forth on Schedule 4.13 hereto; state and county
highway crossing permits; and railroad crossing permits;
(f) Assumed Contracts. Seller's real estate
leases (the "Real Estate Leases"), Seller's equipment leases (the
"Equipment Leases"), Seller's pole attachment agreements (the "Pole
Attachment Agreements") and certain other contracts (the "Other
Contracts") all as set forth on Schedule 4.10 hereto, Seller's
agreements with Customers (as defined in Section 9.1 hereof) for cable
television service as of the Closing Date (the "Customer Agreements")
and Seller's unfilled service orders. The Franchises, FCC Licenses,
Real Estate Leases, Equipment Leases, Pole Attachment Agreements,
Other Contracts, Subscriber Agreements and unfilled service orders are
referred to herein as the "Assumed Contracts;" and
(g) Intangible Property. Seller's Customer lists
and Customer records; construction and engineering maps and data,
schematics and blueprints; books and financial records pertaining to
the operation of the System; correspondence and documents pertaining
to Customers, governmental authorities and other third parties
relevant to the System's ongoing relationships with Customers,
governmental authorities and other third parties; and prepaid expenses
to the extent such prepaid expenses result in an adjustment to the
Purchase Price (as defined below) under Section 3.3 hereof.
1.2 Excluded Assets. Notwithstanding anything contained
in Section 1.1 hereof to the contrary, the Assets will not include any of the
following assets:
(a) Cash. Cash, certificates of deposit, bank or
savings and loan accounts, U.S. government securities, any other
marketable securities of any kind or nature or notes receivable,
including without limitation, the marketable securities identified
on Schedule 1.2 hereto.
(b) Claims. Claims of Seller against third
parties, other than customer accounts receivable;
(c) Programming Contracts. Programming contracts
used by Seller in the System other than those listed on Schedule 1.2
hereto.
(d) Bonds of Insurance. Bonds and insurance
policies furnished by Seller pursuant to any Franchise, Pole
Attachment Agreement or other authorization or agreement;
(e) Nonexclusive Use. Assets of Seller not
solely used or reserved solely for use in Seller's ownership or
operation of the System;
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(f) Name. The "Marcus" name.
(g) Software. Traffic and billing software;
provided, however, that for a period of up to 180 days after the
Closing Date, Buyer shall have the nonexclusive right to use such
software, without charge, in connection with its operation of the
System.
(h) Other. All other items described in Schedule
1.2 hereto.
ARTICLE II
Assumption of Liabilities
2.1 Assumption of Liabilities. Buyer shall assume, pay,
perform and discharge, and forever indemnify and hold Seller and all of
Seller's officers, directors, shareholders and partners harmless against and
from the following liabilities and obligations of Seller (the "Assumed
Liabilities"); provided that the Assumed Liabilities shall not include any of
the liabilities described in Section 2.2 hereof:
(a) Assumed Contracts. All of Seller's
liabilities and obligations under the Assumed Contracts to be
satisfied or performed on or after the Closing Date.
(b) Current and Accrued Liabilities. All of
Seller's accounts payable remaining unpaid on the Closing Date and
accrued current liabilities as of the Closing Date to the extent such
accounts payable and accrued current liabilities result in an
adjustment to the Purchase Price under Section 3.2 hereof.
(c) Operating Liabilities. All liabilities,
obligations, costs and expenses with respect to claims arising in any
way with respect to the operation of the System on or after the
Closing Date, including, without limitation, any and all franchise
fees; pole attachment rentals; copyright fees; rate refunds; federal,
state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments,
or charges of any kind whatever, together with any interest and
penalties, additions to tax, or additional amounts with respect
thereto ("Tax" or "Taxes"); or tort claims arising out of or
attributable to the conduct of the System on or after the Closing
Date.
2.2 Excluded Liabilities. Notwithstanding anything
contained in Section 2.1 hereof to the contrary, Buyer shall not assume and
shall not be obligated to pay, perform or discharge any of Seller's following
liabilities:
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(a) Operating Liabilities. Except to the extent
specifically assumed by Buyer under paragraph 2.1(b) hereto, any
liabilities, obligations, costs and expenses with respect to claims
arising in any way with respect to the operation of the System prior
to the Closing Date, including without limitation any and all
franchise fees; pole attachment rentals; copyright fees; rate refunds;
Tax or Taxes; or tort claims arising out of the conduct of the System
before the Closing Date.
(b) Taxes. Any of Seller's liabilities and
obligations for any federal, state or local income taxes resulting
from the sale of the Assets hereunder.
ARTICLE III
Purchase Price
3.1 Purchase Price. The purchase price for the Assets
(the "Purchase Price") shall be Sixty Five Million Five Hundred Thousand
Dollars ($65,500,000), subject to the adjustments set forth in Section 3.2
hereof.
3.2 Adjustments to Purchase Price. The Purchase Price
shall be increased for accounts receivable and prepaid expenses, and shall be
reduced for accrued expenses and prepaid income as follows, all as determined
in accordance with generally accepted accounting principles ("GAAP"), to
reflect the principle that, except as qualified in this Section, all income and
expenses attributable to the System for the period before the Closing Date are
for the account of Seller, and all income and expenses attributable to the
System for the period on or after the Closing Date are for the account of
Buyer. In order to facilitate the Closing, Seller shall prepare and deliver
to Buyer, at least three business days prior to the Closing Date, a statement
(the "Estimate Statement") showing the amount reasonably estimated by Seller,
in good faith, to be the net amount, if any, of the Purchase Price adjustments
(the "Estimated Adjustment Amount") provided for in this Section. Prior to
the Closing, Seller shall provide Buyer with copies of or reasonable access to
all books and records as Buyer may reasonably request for purposes of verifying
the adjustments set forth in the Estimate Statement. The Purchase Price paid
by Buyer at Closing shall be based on the Estimated Adjustment Amount set forth
in the Estimate Statement and shall be adjusted post-Closing, if necessary,
pursuant to Section 3.3 hereof.
(a) Accounts Receivable. The Purchase Price
shall be increased by an amount equal to the sum of the Customer
Receivables (as hereinafter defined) and the Advertising Receivables
(as hereinafter defined) on Seller's books as of the Closing Date.
"Customer Receivables" means the aggregate accounts receivable due
from Customers which will have been outstanding less than 61 days from
the date billed as of the Closing Date. "Advertising Receivables"
means the aggregate accounts receivable due from advertisers which
will have been outstanding less than 91 days from the date billed as
of the Closing Date.
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(b) Prepaid Revenues. The Purchase Price shall
be reduced by an amount equal to all prepaid revenues for the System
as of the Closing Date.
(c) Expenses. The following expenses shall be
prorated as of the Closing Date in favor of Seller or Buyer, as the
case may be: all franchise, copyright and pole attachment fees and
other rentals and charges payable under any of the Assumed Contracts;
all real and personal property taxes and assessments levied and
assessed against any of the Assets; sales and use taxes payable in
respect of sales at retail to Customers served by the System; and
charges for utilities (including but not limited to electricity, fuel,
water, sanitation and garbage disposal). Payroll expenses, including
accrued wages and vacation and sick pay for Seller's employees shall
be paid by Seller to the day of Closing and shall not be prorated.
(d) Deposits. The Purchase Price shall be
increased by the amount of any monies relating to the System that are
on deposit with third parties as security for Seller's performance of
the Assumed Contracts as of the Closing Date. The Purchase Price
shall be decreased by the amount of any monies held by Seller as
customer deposits, liability for which is assumed by Buyer.
3.3 Final Adjustment Amount.
(a) Within 45 days after the Closing
Date, Seller shall prepare and deliver to Buyer a statement (the
"Final Statement"), setting forth Seller's good faith determination of
the actual adjustment to the Purchase Price (the "Final Adjustment
Amount"). During the 15-day period following delivery of the Final
Statement to Buyer, Seller shall provide Buyer with access during
normal business hours to any books, records, working papers or other
information reasonably necessary or useful in the review of the Final
Statement and the calculation of the Final Adjustment Amount to enable
Buyer to verify the accuracy of the Final Statement. The Final
Statement shall become final and binding upon all parties hereto on
the sixteenth day following delivery thereof (without counting such
day of delivery) to Buyer unless the Buyer gives written notice of
disagreement with the Final Statement (a "Notice of Disagreement") to
Seller prior to such date. Any Notice of Disagreement shall specify
in reasonable detail the nature of any disagreement so asserted and
relate solely to the review of the Final Statement and the calculation
of the Final Adjustment Amount.
(b) If a Notice of Disagreement is given by
Buyer in a timely manner, then the Final Statement shall become final
and binding upon all parties hereto on the earlier of (x) the date
Seller and Buyer resolve in writing any differences they may have with
respect to all matters specified in the Notice of Disagreement and (y)
the date all disputed matters are finally resolved in writing by the
Arbitrator (as hereinafter defined). During the 15-day period
following the delivery of a Notice of Disagreement, Seller and Buyer
shall seek in good faith to resolve any differences which they may
have with respect to any matter specified in the Notice of
Disagreement and each shall
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provide the other with reasonable access to any books, records,
working papers or other information reasonably necessary or useful in
the preparation or calculation of (i) the Final Adjustment Amount,
(ii) the Final Statement, (iii) any Notice of Disagreement or (iv)
otherwise with respect to any thereof. At the end of such 15-day
period if there has been no resolution of the matters specified in the
Notice of Disagreement, Seller and Buyer shall submit to an arbitrator
(the "Arbitrator") for review and resolution any and all matters
arising under this Section which remain in dispute. The Arbitrator
shall be KPMG Peat Marwick, Dallas, Texas or if such firm is unable or
unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Seller and Buyer. The
Arbitrator shall render a decision resolving the matters submitted to
the Arbitrator within 30 days following submission thereto (or as soon
thereafter as reasonably practicable). The fees and expenses of the
Arbitrator pursuant to this Agreement shall be borne by the party
identified by the Arbitrator as the unsuccessful party.
(c) Within five business days after the Final
Statement becomes final and binding upon the parties, Seller or
Buyer, as the case may be, shall pay the difference between the
Estimated Adjustment Amount and the Final Adjustment Amount. All
payments pursuant to this Section 3.3 shall be by wire transfer of
immediately available funds to an account designated by the recipient
at least two business days prior to the date of payment.
3.4 Pre-Closing Escrow. Upon the execution hereof, Buyer
shall pay Three Million Dollars ($3,000,000) (the "Pre-Closing Escrow Amount")
to NationsBank Texas, N.A. (the "Pre-Closing Escrow Agent"), and the
Pre-Closing Escrow Agent shall hold the Pre-Closing Escrow Amount under the
terms of an escrow agreement in the form of Exhibit A hereto (the "Pre-Closing
Escrow Agreement"). Under the terms of the Pre-Closing Escrow Agreement, the
Pre-Closing Escrow Agent shall pay the Pre-Closing Escrow Amount to Seller and
such amount shall be credited towards the Purchase Price or, if the Agreement
shall be terminated, to Seller, unless the Agreement is terminated by Buyer
under Section 10.2(a), 10.2(c), 10.2(d) or 10.2(e) hereof, in which case the
Pre-Closing Escrow Agent shall pay the Pre-Closing Escrow Amount to Buyer. All
interest earned on the Pre-Closing Escrow Amount belongs, and shall be
distributed, to Buyer.
3.5 Transfer Taxes. Any sales, use, transfer, recording
or other similar taxes due as a result of the transactions provided for herein
shall be paid by Buyer.
3.6 Allocation of Purchase Price. For federal income and
other applicable tax purposes, the Purchase Price shall be allocated among the
Assets as set forth in Schedule 3.6, such allocation to be made as provided in
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code").
Buyer and Seller shall each file Form 8594 (Asset Acquisition Statement Under
Section 1060) on a timely basis reporting the allocation of the Purchase Price
consistent with the allocation in Schedule 3.6. Schedule 3.6 also reflects the
aggregate fair market values for each of Class I assets, Class II assets and
Class III assets, as such terms are
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defined in regulations promulgated pursuant to Section 1060 of the Code. Buyer
and Seller shall file on a timely basis any amendments required to such Form
8594 as a result of a subsequent increase or decrease of the Purchase Price.
Buyer and Seller shall not take any position on their respective federal income
or other applicable tax returns that is inconsistent with the allocation of the
Purchase Price as agreed to in Schedule 3.6 or as adjusted as a result of a
subsequent increase or decrease in the Purchase Price. Buyer and Seller shall
each indemnify, defend and hold harmless the other party from and against any
and all claims, losses, liabilities, damages, cost and expenses that may be
incurred as a result of the failure to file Form 8594, the failure to file such
Form 8594 on a timely basis or the failure to file its tax returns in the
manner required by this Section 3.6. In the event Schedule 3.6 is not
available in final form on the Closing Date, Buyer and Seller shall cooperate
in its completion after the Closing Date and shall agree on the allocation of
the Purchase Price (subject to adjustments to reflect adjustments to the
Purchase Price) no later than the 30th day after the Closing Date, or (ii) in
the absence of such agreement, shall, on or before such 30th day, select by
mutual agreement, a qualified appraiser, the fees of which will be split
equally by Buyer and Seller, and such appraiser shall make the allocation of
Purchase Price contemplated by this Section 3.6 and reflect such allocation on
Schedule 3.6.
ARTICLE IV
Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
4.1 Due Incorporation. Seller is a limited partnership
duly organized and validly existing under the laws of the State of Delaware and
has the partnership power and authority to conduct its business as heretofore
conducted and to own or hold under lease its properties and assets. Seller is
duly qualified and in good standing in the State of Texas and in every
jurisdiction where the character of the properties owned or leased by, or the
nature of the business conducted by, Seller makes qualification to do business
as a foreign entity necessary, except such jurisdictions where a failure to so
qualify could not reasonably be expected to have a material adverse effect upon
Seller, its properties or business.
4.2 Authorization. Seller has full partnership power to
execute and deliver this Agreement and to perform hereunder, and the execution,
delivery and performance hereof and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite partnership
action. No other or further partnership action by Seller or its partners is
required in connection herewith.
4.3 No Breach of Statute or Contract. Subject to the
receipt of the approvals described on Schedule 4.4 hereto, neither the
execution and delivery of this Agreement, nor compliance with the terms and
provisions hereof, on the part of Seller will (a) cause Seller to breach any
statute, ordinance or regulation of any governmental authority, (b) conflict
with or result in a breach of any of the terms, conditions or provisions of any
agreement or instrument
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to which Seller is a party or by which it may be bound, or constitute a default
thereunder or (c) other than any liability for any income taxes which may be
payable by Seller or its partners as a result of the consummation of the
transactions contemplated hereby, result in the creation of any material lien,
charge or encumbrance of any nature whatsoever, or give to others any interest
or rights, including rights of termination or cancellation, in or with respect
to any of Seller's properties or assets, which breach, conflict, default or
creation would have a material adverse effect on the financial condition or
business operations of the System.
4.4 Third Party Consents. Each person whose consent to
the execution, delivery or performance of this Agreement by Seller is legally
or contractually required is identified on Schedule 4.4 hereto, to the extent
that the failure to obtain such consent would have a material adverse effect on
the financial condition or business operations of the System or the ability of
Seller to consummate the transactions contemplated hereunder.
4.5 Enforceability. This Agreement has been duly
executed and delivered by Seller, and constitutes a valid and binding
obligation of Seller enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting creditors' rights generally or by
the application of general principles of equity.
4.6 Assets. Schedule 4.6 contains descriptions of all
material items of tangible personal property included in the Assets. The
Assets are in good working condition. The Assets include all of the rights and
properties reasonably necessary to operate the System as currently operated and
to provide cable television service to the System's Customers. Seller has good
and marketable title, free and clear of any mortgage, lien, restriction,
encumbrance or adverse claim to all of the Assets, except for (a) liens for
general taxes and assessments for the year of Closing and subsequent years; (b)
minor encumbrances which do not materially affect the transferability, present
use or value thereof; (c) mortgages, judgments and other liens to be satisfied
at or before Closing; (d) the liens and exceptions listed on Schedule 4.6
hereto; and (e), in the case of the Real Estate and real estate covered by the
Real Estate Leases, (i) the Real Estate Leases, (ii) municipal and zoning
ordinances, (iii) such legal highways as do not interfere with the present use
of the property, (iv) standard title insurance exceptions and (v) recorded
easements for public utilities, recorded building and use restrictions and
covenants, and other minor encumbrances, provided none of the foregoing
materially interfere with the present use of the property subject thereto.
Except as disclosed on Schedule 4.6 hereto, Seller is the sole and exclusive
owner of the Assets (other than leased Assets) and does not use any of the
Assets (other than leased Assets) by the consent of any other person. The Real
Estate and the real estate subject to the Real Estate Leases conforms in all
material respects with applicable covenants in all building, zoning,
environmental, land use and other laws, ordinances, codes, orders and
regulations which affect the Real Estate and/or the real estate subject to the
Real Estate Leases. All necessary occupancy and other certificates and permits
for the present lawful use and occupancy of the Real Estate and the real estate
subject to the Real Estate Leases, and the Equipment thereon, have been issued
to Seller, except where the failure to obtain such certificates and permits
would not have a material adverse effect on the financial condition or
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business operations of the System. All notices or orders to correct violations
of law, ordinances, codes, orders or regulations issued by any state, county,
municipal or a local department having jurisdiction against or affecting any of
the Real Estate during Seller's occupancy or use thereof have been complied
with by Seller. All such Real Estate is accessible from public roads and has
all utilities and other services necessary to the conduct of the System. There
does not exist any standing order, decree, injunction, judgment or writ of any
court which affects, concerns or attaches to the Assets, which standing order,
decree, injunction, judgment or writ would have a material adverse effect on
the financial condition or business operations of the System. No legal or
administrative action has been threatened or, to Seller's knowledge, is pending
which could ripen into a judgment or give rise to any such order, decree,
injunction or is writ affecting the Assets in any material respect. All items
of cable plant and headend equipment included in the Assets (a) have been
maintained in a manner consistent with generally accepted standards of good
engineering practice, and (b) will permit the System to operate in all material
respects in accordance with the terms of the Franchises.
4.7 Claims, Litigation and Disputes. Except as disclosed
in Schedule 4.7 hereto, and except for actions, formal proceedings or official
investigations affecting the cable television industry in general, there is no
claim or litigation or formal investigative proceeding or rate proceeding
pending or, to Seller's knowledge, threatened in writing (a) against Seller to
compel Seller to make any change in the character or location of any of the
Assets or (b) which would materially affect (i) Seller's ability to perform
hereunder, (ii) the Assets, (iii) the rights granted under the Assumed
Contracts, (iv) the financial condition or business operations of the System or
(v) the ownership, use, maintenance or operation of the Assets and the System
by Buyer. There is no strike or unresolved labor dispute affecting any of
Seller's employees.
4.8 Service Rates. Schedule 4.8 hereto sets forth
Seller's rates, for broadcast basic, satellite showcase, economy showcase,
average basic bulk, additional outlets, basic converters, basic converters -
remote capable, addressable converters, basic remote control, addressable
remote control and installation and collection fees for each of the communities
served by the System. Seller has used reasonable good faith efforts to ensure
that these rates would be allowable under the rules and regulations promulgated
by the FCC under The Cable Television Consumer Protection and Competition Act
of 1992, as amended (the "1992 Cable Act"), regardless of whether the rates in
a particular jurisdiction are currently subject to active regulation.
4.9 Cable Plant and Subscribers. Schedule 4.9 hereto
sets forth in all material respects accurate information as of the date hereof
with respect to (a) the number of Seller's Customers and (b)(i) the number of
homes passed, (ii) fully completed miles of plant, aerial and underground and
(iii) total homes in service areas. All of the distribution plant described in
Schedule 4.9 hereto is fully served by existing headends.
4.10 Assumed Contracts. The Assumed Contracts, together
with Seller's state and county highway crossing permits and Seller's railroad
crossing permits, together with Seller's signal carriage agreements and
together with any easements created under the Cable
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Communications Policy Act of 1984, include all agreements necessary for the
operation of the System. Except as disclosed in Schedule 4.10 hereto, all of
the Assumed Contracts necessary for the operation of the System are in good
standing, valid and effective as to Seller, and there has been no material
breach, violation or default or notice or claim of material breach, violation
or default by any party thereto known to Seller, and Seller is not aware of any
event which has occurred that with notice or lapse of time or both could
constitute a material breach, violation or default by any party thereto.
Except as described in Schedule 4.10, Seller has delivered to Buyer true and
complete copies of the Assumed Contracts.
4.11 Compliance With Laws. Except as disclosed on
Schedule 4.11, the System is in compliance with all federal, state and local
laws, rules and regulations applicable to the System, the applicable rules and
regulations of the FCC, including, but not limited to, signal carriage rules
governing must carry retransmission consent and program exclusivity, the
applicable rules and regulations of the licensing division of the United States
Copyright Office and the applicable rules and regulations of the Federal
Aviation Administration with respect to air navigation hazards, except where
the failure to be in compliance would not reasonably be likely to have a
material adverse effect on the financial condition or business operations of
the System. To Seller's knowledge, no claims or investigations alleging any
violation by Seller of any such material laws, rules and regulations have at
any time been made or settled. At Closing, the Seller will have owned the
System for more than 36 months, and the sale to Seller will not violate the
1992 Cable Act's anti-trafficking provision.
4.12 Taxes, Fees and Utilities.
(a) Filing of Tax Returns. Seller has duly and
timely filed with the appropriate governmental agencies all income,
excise, corporate, franchise, property, ad valorem, sales, use,
transfer, employment, stamp, occupation, windfall profits, payroll,
withholding and other tax returns (including information returns) and
reports that have become due on or before the Closing Date, including
all schedules or attachments thereto required by the United States or
any state or any political subdivision thereof or any foreign
jurisdiction to be filed by the Seller in connection with any Tax
("Tax Returns"). All such Tax Returns are complete and accurate and
properly reflect the Taxes of the Seller for the periods covered
thereby. Seller is not currently the beneficiary of any extension of
time within which to file any Tax Return or within which to pay any
Tax reflected on any such Tax Return.
(b) Payment of Taxes. Seller has paid or accrued
all Taxes that have become due with respect to any Tax Returns that it
has filed and any assessments of which it is aware. Seller, if any,
is not delinquent in the payment of any Tax. The reserves for Taxes
made by Seller, if any, are adequate to cover the Tax liabilities of
Seller as of the date thereof and nothing has occurred subsequently to
make any such reserves inadequate.
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(c) No Pending Deficiencies, Delinquencies,
Assessments or Audits. No Tax deficiency or delinquency has been
asserted against Seller. To Seller's knowledge, there is no unpaid
assessment, proposal for additional Taxes, deficiency or delinquency
in the payment of any of the Taxes of Seller that could be asserted by
any taxing authority. There is no taxing authority audit of Seller in
progress, or, to Seller's knowledge, pending or threatened, and unpaid
taxes resulting from any completed audits are properly reflected in
the Financial Statements. There are no pending claims for refunds of
Taxes filed by Seller.
(d) No Extension of Limitation or Assessment
Period. Seller has not granted an extension to any taxing authority
of the limitation period during which any Tax liability may be
assessed or collected or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) Tax Liens. There are no liens for Taxes upon
any assets of Seller other than liens for unpaid Taxes not yet due.
(f) All Withholding Requirements Satisfied. All
monies required to be withheld by Seller and paid to governmental
agencies for all Taxes (including any amounts required to be withheld
pursuant to Sections 1441-1446 of the Internal Revenue Code of 1986,
as amended ("Code")) have been (i) collected or withheld and either
paid to the respective governmental agencies or set aside in accounts
for such purpose or (ii) properly reflected in the Financial
Statements.
(g) Foreign Person. Seller is not a foreign
person, as such term is referred to in Section 1445(f)(3) of the Code.
(h) Safe Harbor Lease. None of the Assets
constitute property that Buyer, or any affiliate of Buyer, will be
required to treat as being owned by another person pursuant to the
"Safe Harbor Lease" provisions of Section 168(f)(8) of the Code prior
to repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
(i) Tax Exempt Entity. None of the Assets are or
will be subject to a lease to a "tax exempt entity" as such term is
defined in Section 168(h)(2) of the Code.
(j) Closing Agreements. The Seller has not
executed, become subject to or entered into any closing agreement
pursuant to Section 7121 of the Code or any similar or predecessor
provision thereof under the Code or other law.
(k) Other Tax Matters. Seller does not own any
interest in any entity that is classified as a partnership under the
Code.
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<PAGE> 18
(l) Fees and Utilities. Seller has paid in full
any and all license fees, copyright fees, franchise fees, business
permit costs, pole attachment fees, unemployment and worker's
compensation insurance contributions and utility bills required to be
paid as of the date hereof.
(m) State Unemployment Taxes. In respect of its
most recently completed reporting period, Seller has paid state
unemployment taxes to the State of Texas at the rate of .35 percent of
the wages paid by Seller during such period that are subject to such
tax. Seller does not know of any proposed increase, or facts that
would lead to an increase, in the rate of such state unemployment tax
in the future other than (i) matters of public record that are
generally known by person's engaged in similar or related businesses
to that of Seller or to their professional advisors and (ii) changes,
if any, that result from the purchase of the System by Buyer or its
continued operation by Buyer.
4.13 Franchises, Licenses and Permits. Schedule 4.13
contains a true and complete list of all Franchises and FCC Licenses needed to
operate the System. Except as described in Schedule 4.13, Seller has delivered
to Buyer true and complete copies of all Franchises and FCC Licenses listed on
Schedule 4.13. Except as contained in the Franchises, the Franchises are
subject to no conditions or restrictions other than such as may exist by virtue
of acts of Congress, the rules and regulations of federal regulatory agencies
or laws and rules adopted by the various local governing authorities of the
State of Texas. Except as set forth in Schedule 4.13, Seller has filed with
the appropriate franchising authorities all appropriate requests for renewal
under the Communications Act of 1934, as amended, within 30 to 36 months prior
to the expiration of each of the Franchises, with respect to material
Franchises. Other than orders, actions, proceedings or investigations
generally applicable to the cable television industry in the United States or
in the State of Texas, there are no formal proceedings pending which would
materially and adversely affect the validity of the Franchises or the terms and
provisions thereof. Except as disclosed in Schedule 4.13 hereto, the System is
currently in compliance in all material respects with all of the Franchises.
Schedule 4.13 hereto also contains a true and complete list of all current
licenses, authorizations, permits and orders issued by the FCC to Seller and
which are required by the FCC for the current operation of the System in
accordance with FCC rules and regulations (the "FCC Licenses"). Except as
contained in the FCC Licenses, the FCC Licenses are subject to no conditions or
restrictions other than such as may exist by virtue of acts of Congress, the
rules and regulations of federal regulatory agencies or laws and rules adopted
by the various local governing authorities of the State of Texas. Except as
disclosed in Schedule 4.13 hereto, the System is in material compliance with
the provisions of the FCC Licenses.
4.14 FCC and Franchise Reports. During the period the
Seller owned the System, Seller has filed or caused to be filed all material
reports and statements required to be filed with the FCC and franchising
authorities with respect to the System, and such reports are accurate and
complete in all material respects, and, except as disclosed in Schedule 4.14
hereto, all tests required by the regulations of the FCC to be conducted, have
been conducted at the
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<PAGE> 19
times and places so required, and the records pertaining thereto, all of which
have been retained as required by law, accurately and completely reflect, in
all material respects, the results of such tests. During the period the Seller
owned the System, the Seller has filed all material notices and reports
required to be filed with the United States Copyright Office with respect to
the System, and such reports are accurate and complete in all material respects
and all fees required to be paid with respect to the System under the terms of
the United States Copyright Revision Act of 1976 have been properly computed
and paid by Seller, in all material respects. All required certificates,
permits and clearances from governmental agencies with respect to all of
Seller's towers, microwave transmitters, earth stations, business radios, CARS
licenses, if any, and frequencies carried by the System have been obtained,
except where the failure to obtain such certificates, permits and clearances
would not have a material adverse effect on the financial condition or business
operations of the System.
4.15 Employees. Except as disclosed in Schedule 4.15
hereto, Seller has complied with all applicable employment and labor laws,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes,
except where the failure to comply would not have a material adverse effect on
the financial condition or business operations of the System. Except as
disclosed in Schedule 4.15 hereto, Seller has no pension, retirement, or
deferred compensation plans or policies for the benefit of its employees.
Except as disclosed in Schedule 4.15 hereto, there are no written contracts of
employment between Seller and any employees. Except as set forth on Schedule
4.15 hereto, there are no employee claims against Seller, which claims
individually or in the aggregate would have a material adverse effect on the
financial condition or business operations of the System.
4.16 Financial Statements. Seller has delivered to Buyer
its unaudited balance sheet at December 31, 1994 and February 28, 1995 and the
related statement of operations and cash flows for the year or two month period
then ended, as the case may be (the "Financial Statements"). The Financial
Statements have been prepared in conformity with GAAP consistently applied
(except in the case of the interim Financial Statements, for normal year-end
adjustments and the absence of notes). Total revenues as reported on the
unaudited statement of operations for the year ended December 31, 1994, are
complete and correct in all material respects.
4.17 Changes in Condition. Since December 31, 1994, (i)
there has been no material adverse change in the Assets or the financial
condition or operations of the System; (ii) the Assets and the financial
condition and operations of the System have not been materially and adversely
affected as a result of any fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation or act of God or public force or
otherwise; and (iii) Seller has not made any sale, assignment, lease or other
transfer of any of Seller's properties other than in the normal and usual
course of business.
4.18 Brokerage Fees. No person or other entity acting on
behalf of Seller is entitled to any brokerage or finder's fee or commission in
connection with this Agreement other
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than Waller Capital Corporation, who has been employed by Seller and whose fees
Seller has agreed to pay.
4.19 Environmental.
(a) To Seller's knowledge, none of the Real
Property is the subject of any "Superfund" evaluation or
investigation, or any other investigation or proceeding of any
governmental authority evaluating whether any remedial action is
necessary to respond to any release of Hazardous Substances
(hereinafter defined) on or in connection with the Real Estate.
(b) To Seller's knowledge, except as described on
Exhibit 4.19, no surface impoundments or underground storage tanks are
located in or on the Real Estate.
(c) Seller has received no notice of, and has no
actual knowledge of, the presence, use, generation, manufacture,
disposal, release or threatened release of any Hazardous Substances on
the Real Estate, which could reasonably be expected to prevent
compliance by Seller or the Real Estate with, or result in losses
under, applicable legal requirements.
(d) "Hazardous Substances" has the meaning given
in the Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C.A. Sections 9601et seq.) ("CERCLA") as amended, and rules
and regulations promulgated thereunder.
4.20 Franchise and Pole Attachment Fees. The current
rates for all franchise fees payable with respect to the Franchises and for all
pole attachment or conduit fees and the number of poles or conduits covered by
each of Seller's pole attachment and conduit agreements are disclosed in
Schedule 4.20. Seller has paid all "make ready" or other related charges
required under its pole attachment and conduit agreements for which it has
received an invoice. Except as disclosed in Schedule 4.20, Seller has not been
notified by any governmental authority or third party regarding any adjustment
to the amount of franchise fees, pole attachment or conduit fees paid by Seller
to such governmental authority or third party.
4.21 Intangibles. Seller neither uses nor holds any
copyrights, trademarks, trade names, service marks, service names, logos,
licenses, permits or other similar intangible property rights and interests in
the operations of the System that do not incorporate the name "Marcus" or
variations thereof. In the operation of the System, Seller is not aware that
it is infringing upon or otherwise acting adversely to any such intangible
property rights and interests owned by any other person or persons, and there
is no claim or action pending, or to the knowledge of Seller threatened, with
respect thereto.
4.22 Accounts Receivable. Seller's accounts receivable as
reflected on the Financial Statements are actual and bona fide receivables
representing obligations for the total
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dollar amount thereof shown on the Financial Statements which resulted from the
regular course of the Seller's business.
ARTICLE V
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
5.1 Due Incorporation. Buyer is a corporation duly
organized and validly existing under the laws of the State of Texas and has the
corporate power and authority to conduct its business as heretofore conducted
and to own or hold under lease its properties and assets. Buyer is duly
qualified and in good standing in every jurisdiction where the character of the
properties owned or leased by, or the nature of the business conducted by,
Buyer makes qualification to do business as a foreign corporation necessary,
except such jurisdictions where a failure to so qualify could not reasonably be
expected to have a material adverse effect upon Buyer, its properties or
business.
5.2 Authorization. Buyer has full corporate power to
execute and deliver this Agreement and to perform hereunder, and the execution,
delivery and performance hereof and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action. No other or further corporate action by Buyer, its Board of Directors
or shareholders is required in connection herewith.
5.3 No Breach of Statute or Contract. Except as set
forth on Schedule 5.3, neither the execution and delivery of this Agreement,
nor compliance with the terms and provisions hereof, on the part of Buyer will
(a) cause Buyer to breach any statute, ordinance or regulation of any
governmental authority, domestic or foreign, or (b) conflict with or result in
a material breach of any of the terms, conditions or provisions of an agreement
or instrument to which Buyer is a party or by which it may be bound, or
constitute a default thereunder, which breach, conflict, default or creation
would have a material adverse effect on the financial condition or business
operations of Buyer.
5.4 Third Party Consents. Except as set forth on
Schedule 5.4, each person whose consent to the execution, delivery or
performance of this Agreement by Buyer is legally or contractually required has
been obtained.
5.5 Enforceability. This Agreement has been duly
executed and delivered by Buyer, and constitutes a valid and binding obligation
of Buyer enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights generally or by the application
of general principles of equity.
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<PAGE> 22
5.6 Claims, Litigation and Disputes. There is no claim
or litigation or investigative proceeding pending, or to Buyer's knowledge,
threatened against Buyer which would materially affect Buyer's ability to
perform hereunder.
5.7 Brokerage Fees. No person or other entity acting on
behalf of Buyer is entitled to any brokerage or finder's fee or commission in
connection with this Agreement.
5.8 Buyer's Investigation. Buyer hereby acknowledges
that it has conducted an investigation of the physical plant of the System
which investigation included evaluation of the condition and performance of the
physical plant. Notwithstanding anything in this Agreement to the contrary,
Buyer acknowledges that it is accepting the Assets in their present conditions
and locations and with their present operating capabilities. Buyer
acknowledges that Seller makes no warranty, express or implied, as to the
condition of the Assets except that Seller does represent that the Assets and
System are in good working condition, normal wear and tear excepted, and except
for representations and warranties of Seller set forth in Article IV hereof.
Buyer has not relied upon, and Seller shall not be liable for or bound in any
manner by, any express or implied verbal or written information, warranties,
guarantees, promises, statements, inducements, representations or opinions
pertaining to the System or the Assets, except as may be contained in this
Agreement and certificates delivered hereunder.
ARTICLE VI
Seller's Covenants
Except and to the extent Buyer may otherwise permit in
writing, Seller covenants and agrees as follows:
6.1 Inspection. Between the date hereof and the Closing,
Seller shall give to Buyer, its officers, agents, employees, counsel,
accountants, engineers and other representatives, reasonable access to all the
premises and books and records relating to the System and, to the extent
permitted by law, cause Seller's employees to furnish to Buyer such information
related to the System as Buyer shall from time to time reasonably request;
provided, however, that any such investigation shall be conducted (a) through
the Vice President - Operations of Seller, (b) during normal business hours and
(c) in such a manner as to not unreasonably to interfere with the operation of
the System by Seller.
6.2 Conduct of Business Pending Closing. Until the
Closing, Seller shall carry on its business diligently and substantially in the
manner as heretofore conducted, and shall not make or initiate any unusual or
novel methods of purchase, sale, management, accounting, construction or
operation, or make any adjustments in the pricing of its services not
consistent with Seller's past business practices. Seller shall use its best
efforts to preserve its business, to preserve its present business organization
and to preserve the System's existing business relationships with its
Customers, suppliers, governmental authorities, employees and
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<PAGE> 23
others having business relations with Seller. Without limiting the scope of
the foregoing, Seller shall:
(a) Use, preserve and maintain the Assets on a
basis consistent with past practice and keep the Assets and System in
good working condition;
(b) Maintain adequate insurance covering the
Assets and System in effect as of the date hereof;
(c) Pay all debts and obligations incurred by it
in the operation of its businesses in the ordinary course of business
consistent with past practice;
(d) Not commit any act or omit to do any act, nor
permit any act or omission to act, which may cause a material breach
of any of the Assumed Contracts;
(e) Maintain its books, accounts and records in
the usual manner and on a basis consistent with past practice;
(f) Not enter into any agreement or agreements
for the sale of any of the Assets except for sales of Equipment
provided any item of Equipment sold is replaced with an item of
Equipment of like value and quality unless such item of Equipment is
no longer necessary for the operation of the System;
(g) Not decrease any of its Customer rates or
conduct any sales or marketing programs other than marketing programs
consistent with past practices; provided, however, that this Agreement
shall not preclude Seller from (i) seeking usual and ordinary rate
increases or (ii) decreasing rates in accordance with applicable laws,
rules and regulations;
(h) Bill Customers on a basis consistent with
past practices, sending out bills in the normal monthly routine;
(i) Operate the System in material compliance
with all applicable legal requirements;
(j) Promptly deliver to Buyer copies of any
reports with respect to the operation of the System regularly prepared
by Seller for management at any time from the date hereof until
Closing;
(k) Promptly inform Buyer in writing of any
adverse change in the condition (financial or otherwise), operations,
assets, liabilities, business or prospects of the System.
Notwithstanding the disclosure to Buyer of any such material adverse
change, Seller shall not be relieved of any liability for, nor shall
the providing of such
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<PAGE> 24
information by Seller to Buyer, except at Closing, be deemed a waiver
by Buyer of, the breach of any representation or warranty of Seller
contained in this Agreement; and
(l) Not solicit or participate in negotiations
(and Seller shall use its best efforts to prevent any affiliate,
partner, director, officer, employee or other representative or agent
of Seller from negotiating with, soliciting or participating in
negotiations) with any third party with respect to the sale of the
Assets or the System or any transaction inconsistent with those
contemplated hereby;
6.3 HSR Act. Seller agrees to make an appropriate filing
of a Notification and Report Form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") with respect to the
transactions contemplated hereby within 15 days after the date of execution of
this Agreement and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act. The Seller
will not take any action that will have the effect of delaying, impairing or
impeding the receipt of any required approvals or consents or the termination
of any waiting periods. Seller will reimburse Buyer for one-half of the filing
fee paid by Buyer upon filing by Buyer of Buyer's Notification and Report Form
pursuant to the HSR Act, within five business days of the date Buyer makes such
filing.
6.4 Third Party Consents. Seller shall give all notices
to governmental authorities and other third parties required to be given by it
under the Assumed Contracts or otherwise in connection with the transactions
contemplated hereby. In order to facilitate the orderly assignment and
transfer of all rights, privileges and Franchises necessary to own and operate
the System, and to facilitate the securing of all required and necessary
approvals by the franchising authorities or any other governmental authority,
Seller shall proceed promptly after the execution of this Agreement, to
prepare, file and prosecute each request and application therefor together with
such information as may be necessary and appropriate to affect such approvals.
In obtaining such approvals, Seller may agree to commercially reasonable
non-material changes to such Franchises. Nothing herein shall require the
expenditure or payment of any monies (other than in respect of normal and usual
filing fees) or the giving of any other consideration by Seller in order to
obtain any of such approvals.
6.5 Further Assurances. Seller will at any time after
the Closing, at the reasonable request of Buyer, execute any and all such
further assurances as Buyer may reasonably request in order to carry out the
transactions contemplated hereunder.
6.6 Confidentiality. Seller acknowledges that Buyer
would be irreparably damaged if confidential information concerning the
business and affairs of Buyer were disclosed to or utilized on behalf of any
person not a party to this Agreement. Seller covenants and agrees that it will
not, at any time directly or indirectly, except in connection with the
transactions contemplated hereby or to the extent required by law, make use of
or divulge, or permit any of its agents or employees to make use of or divulge,
nonpublic information concerning the business, financial or other affairs of,
or any of the methods of doing business used by Buyer.
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<PAGE> 25
6.7 Reasonable Best Efforts. Seller will use its
reasonable best efforts to cause the Closing contemplated hereby to occur,
including, without limitation, its reasonable best efforts to cause all
required third party consents for transfer of the Assets to be obtained.
6.8 Title Insurance. Seller will reasonably cooperate
with Buyer if Buyer elects to obtain title insurance policies on parcels of
Real Property, it being understood that Buyer shall have the sole
responsibility for obtaining and paying for such policies. The parties agree
that the obtaining of title insurance shall not be a condition to the
obligations of Buyer to consummate the transactions contemplated hereunder.
6.9 Employee Benefit Matters.
(a) Seller shall provide "continuation coverage"
to any "qualified beneficiary" who is covered by a "group health plan"
sponsored, maintained or contributed to by Seller and who has
experienced a "qualifying event" or is receiving such "continuation
coverage" on or prior to the Closing Date. Continuation coverage,
qualified beneficiary, qualifying event and group health plan shall
have the meanings given such terms under Section 4980B of the Code and
Section 601 et seq. of ERISA.
(b) Seller acknowledges that, except as set forth
in Section 7.5 hereof, this Agreement is not intended to require that
Buyer have any obligation to employ any of Seller's current or prior
employees and that the Agreement contemplates that Seller shall be
responsible for and shall cause to be discharged and satisfied in full
all amounts owed to any current or prior employee, including wages,
salaries, accrued vacation, any employment, incentive, compensation or
bonus agreements or other benefits or payments on account of
termination prior to Closing by Seller but not including any hiring or
termination acts or decisions by Buyer, and shall indemnify Buyer and
hold Buyer harmless from any losses thereunder.
6.10 Audited Financial Statements. To the extent that
Buyer or its parent is required to file with the Securities and Exchange
Commission a Current Report on Form 8-K, an Annual Report on Form 10-K or a
registration statement containing audited balance sheets for the System for
either of the two most recent fiscal years and audited statements of income and
changes in financial position for any of the three most recent fiscal years,
prior to and following the Closing, Seller agrees to provide Buyer's employees
and auditors access during normal business hours to Seller's financial and
accounting records. Sellers shall instruct KPMG Peat Marwick, at Buyer's
expense, to fully cooperate with Buyer in order to allow Buyer to develop the
financial information required by Buyer.
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ARTICLE VII
Covenants of Buyer
Except and to the extent Seller may otherwise permit in
writing, Buyer covenants and agrees as follows:
7.1 Third Party Consents. Buyer shall give all notices
to governmental authorities and other third parties required to be given by it
in connection with the transactions contemplated hereby. In order to
facilitate the orderly assignment and transfer of all rights, privileges and
Franchises necessary to own and operate the System, and to facilitate the
securing of all required and necessary approvals by franchising authorities or
any other governmental entity or authority, Buyer shall cooperate with Seller,
and shall provide Seller with such information and complete such application
forms as may reasonably be requested by Seller to prepare, file and prosecute
each request and application therefor. Buyer shall attend such meetings as
Seller may reasonably request in connection with obtaining third party
consents, and Buyer shall provide such financial information as third parties
may reasonably request in connection with the review of transfer requests.
Buyer acknowledges that it may need to enter into direct agreements with
franchising authorities or other governmental entities or authorities.
7.2 HSR Act. Buyer agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby within 15 days after the date of execution of
this Agreement and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act. The Buyer
will not take any action that will have the effect of delaying, impairing or
impeding the receipt of any required approvals or consents or the termination
of any waiting periods.
7.3 Discharge of Assumed Liabilities. Buyer shall pay,
perform and discharge the Assumed Liabilities as they become due, including,
without limitation, the discharge and performance when due of each and every
obligation of Seller under the Assumed Contracts.
7.4 Confidentiality. Buyer acknowledges that Seller
would be irreparably damaged if confidential information concerning the
business and affairs of Seller and its affiliates were disclosed to or utilized
on behalf of any person not a party to this Agreement. Buyer covenants and
agrees that it will not, at any time, directly or indirectly, except in
connection with the transactions contemplated hereby or to the extent required
by law, make use of or divulge, or permit any of its agents or employees to
make use of or divulge, nonpublic information concerning the business,
financial or other affairs of or any of the methods of doing business used by
Seller or any of its affiliates.
7.5 Employee Matters. On the Closing Date, Buyer shall
hire at least 18 of the employees of Seller (the "Retained Employees"). Buyer
shall provide to Retained
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Employees salary and benefits generally consistent with those that have been
provided by Seller to such employees.
7.6 Reasonable Best Efforts. Buyer will use its
reasonable best efforts to cause the Closing contemplated hereby to occur,
including, without limitation, its reasonable best efforts to cause all
required third party consents for transfer of Assets to be obtained.
7.7 Access. Seller shall, for a period of seven years
from the Closing Date, have access to, and the right to copy, at its expense,
for bona fide business purposes and during usual business hours upon reasonable
prior notice to Buyer, all books and records relating to the System. Buyer
shall retain and preserve all such books and records for such seven year
period.
7.8 Further Assurances. Buyer will at any time after the
Closing, at the reasonable request of Seller, execute any and all such further
assurances as Seller may reasonably request in order to carry out the
transactions contemplated hereunder.
ARTICLE VIII
Conditions to Seller's Obligations
Each and every obligation of Seller under this Agreement shall
be subject to the fulfillment, prior to or at Closing, of each of the following
conditions unless waived by Seller in writing:
8.1 Buyer's Representations and Warranties. Each
representation and warranty made by Buyer in Article VI hereto shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as though each such representation or warranty had been made or
given on and as of the Closing Date.
8.2 Buyer's Covenants. Buyer shall have performed and
complied with all of the covenants set forth in Article VII hereto which are to
be performed by it before or as of the Closing Date.
8.3 Consents. Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase of the Assets
contemplated hereby shall have expired or shall have been terminated, and no
action shall have been instituted by any governmental authority with
jurisdiction over the enforcement of antitrust laws challenging or seeking to
enjoin the consummation of the transactions contemplated under this Agreement
which such action shall not have been withdrawn or terminated.
8.4 Buyer's Deliveries. Buyer shall have delivered the
documents referred to in Article XII hereof.
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ARTICLE IX
Conditions to Buyer's Obligations
Each and every obligation of Buyer under this Agreement shall
be subject to the fulfillment, prior to or at Closing, of each of the following
conditions unless waived by Buyer in writing:
9.1 Consents.
(a) Seller shall, with the reasonable cooperation
of Buyer, have obtained all consents necessary to effect valid
assignment of all instruments necessary for operation of each
Franchise within its respective jurisdiction and the appropriate
authorities shall have issued all instruments necessary for the
operation of the Franchise by Buyer; provided, however, that if Seller
has obtained (i) consents to assign Franchises covering a number of
Basic Customers (as hereinafter defined) equal to or greater than 90%
of the total number of Basic Customers served by the System (ii)
consents to the transfer of the FCC CARS Licenses and (iii) consents
to the assignment of Assumed Contracts designated on Schedule 4.10 as
"material", this condition shall be deemed to have been met. "Basic
Customer" means any Customer who is not, as of the Closing Date, more
than 60 days delinquent in payment for Seller's cable television
service, and who has made payment (including payment upon
installation) for at least one regular month of basic cable television
service at Seller's then current Customer rates. "Customer" means any
person who is paying Seller for cable television services delivered by
means of the System.
(b) Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase of the Assets
contemplated hereby shall have expired or shall have been terminated,
and no action shall have been instituted by any governmental authority
with jurisdiction over the enforcement of antitrust laws challenging
or seeking to enjoin the consummation of the transactions contemplated
under this Agreement which such action shall not have been withdrawn
or terminated.
9.2 Seller's Representations and Warranties. Each
representation and warranty made by Seller in Article IV hereof shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as though each such representation and warranty had been made or
given on and as of the Closing Date.
9.3 Seller's Covenants. Except as provided in Section
9.1 hereof, Seller shall have performed and complied with all of the covenants
set forth in Article VI hereof which are to be performed by it before or as of
the Closing Date.
9.4 Material Adverse Change. No material adverse change
in the financial condition or operations of the System shall have occurred
since the date hereof.
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9.5 Seller's Deliveries. Seller shall have delivered the
documents referred to in Article XI hereof.
ARTICLE X
Closing and Termination
10.1 Closing. The closing (the "Closing") of the purchase
and sale of the Assets under this Agreement shall take place on such date on or
after June 1, 1995 and on or before November 1, 1995, as Seller may designate
by written notice to Buyer at least ten days prior to the date of such Closing.
The Closing will take place at the offices of Baker & Botts, L.L.P., 2001 Ross
Avenue, Dallas, Texas 75201 at 10:00 a.m. Dallas, Texas time on such date. The
date on which the Closing occurs is referred to herein as the "Closing Date."
Seller and Buyer shall meet on the date preceding the Closing Date at the
offices of Baker & Botts, L.L.P. to conduct a pre-Closing at which all
deliveries to be made at Closing will be reviewed by the parties and placed in
escrow. At 11:59 p.m. on the date preceding the Closing Date, Seller shall
terminate its operation of the System. At 12:01 a.m. on the Closing Date,
Buyer shall commence operation of the System. At 10:00 a.m. on the Closing
Date, all instruments and payments held in escrow shall be distributed and
disbursed to Seller and Buyer, and the Closing shall be consummated.
10.2 Termination. This Agreement (and the transactions
contemplated hereby) may not be terminated except as follows:
(a) Upon the mutual written consent of Seller and
Buyer;
(b) By Seller, if any of the conditions to
Seller's obligations set forth in Article VIII hereof have not been
satisfied before or at Closing;
(c) By Buyer, if any of the conditions to Buyer's
obligations set forth in Article IX hereof have not been satisfied
before or at Closing;
(d) By either party, if the Closing has not
occurred on or before November 1, 1995.
(e) By Buyer, within three business days after
April 24, 1995, if Seller has not delivered a statement of revenues of
the System for the month of February 1995, audited by KPMG Peat
Marwick, which reflects revenues of at least $932,119.
(f) By Buyer, within three business days after
April 24, 1995, if Seller has not delivered a letter from the City of
Andrews which indicates that the City of Andrews will continue in good
faith with Buyer the informal renewal discussions that currently are
underway with Seller.
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ARTICLE XI
Seller's Deliveries at Closing
At Closing, Seller shall deliver the following to Buyer:
11.1 Instruments of Conveyance. Such deeds, bills of
sale, assignment and assumption agreements and other instruments of transfer,
all dated the Closing Date, as shall be necessary to effectively vest in Buyer
good and marketable title in and to the Assets in form, content and substance
reasonably satisfactory to Buyer's counsel.
11.2 Bring Down Certificate. A bring-down certificate
executed by Seller to the effect that each representation and warranty made by
Seller in Article IV hereof is true and correct in all material respects on and
as of the Closing Date with the same effect as though each such representation
or warranty had been made or given on and as of such date, that Seller has
performed and complied with all of its covenants set forth in Article VI hereof
which are to be performed or complied with before or as of the Closing Date,
and that all of the conditions to Buyer's obligations set forth in Article IX
hereof have been satisfied on or before the Closing Date.
11.3 Secretary's Certificate. A certificate executed on
behalf of Seller by the Secretary of Seller's ultimate general partner
authenticating Seller's partnership agreement, certifying as to the incumbency,
and authenticating the signatures of, those persons executing this Agreement
and certificates delivered hereunder on behalf of Seller, and certifying as to
the adoption and continuing effect of appropriate resolutions authorizing
Seller's execution, delivery and performance of this Agreement.
11.4 Opinion of Counsel. An opinion of Baker & Botts,
L.L.P., substantially in the form of Exhibit B hereto.
11.5 Opinion of FCC Counsel. The opinion of
communications counsel to Seller, substantially in the form of Exhibit C
hereto.
11.6 Approvals and Consents. Evidence that Seller has
obtained all material approvals and consents required in connection with the
transfer of the Assets and the assignment of the Assumed Contracts pursuant to
Section 9.1 hereof.
ARTICLE XII
Buyer's Deliveries at Closing
At Closing, Buyer shall deliver the following to Seller:
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12.1 Purchase Price. Payment of the Purchase Price as set
forth in Section 3.1 hereof and adjusted pursuant to Section 3.2 hereof.
12.2 Assignment and Assumption Agreements. Such
Assignment and Assumption Agreements, all dated the Closing Date, as shall be
necessary to effectively assume Seller's liabilities and obligations pursuant
to Article II hereof.
12.3 Bring Down Certificate. A bring down Certificate
executed on behalf of Buyer by Buyer's President to the effect that each
representation and warranty made by Buyer in Article V hereof is true and
correct in all material respects on and as of the Closing Date with the same
effect as though each such representation or warranty had been made or given on
and as of such date, that Buyer has performed and complied with all of its
covenants set forth in Article VII hereof which are to be performed or complied
with before or as of the Closing Date, and that all of the conditions to
Seller's obligations set forth in Article VIII hereof have been satisfied on or
before the Closing Date.
12.4 Secretary's Certificate. A certificate executed on
behalf of Buyer by Buyer's Secretary authenticating Buyer's charter and bylaws,
certifying as to the incumbency, and authenticating the signatures of, officers
executing this Agreement and certificates delivered hereunder on behalf of
Buyer, and certifying as to the adoption and continuing effect of appropriate
resolutions authorizing Buyer's execution, delivery and performance of this
Agreement.
12.5 Opinion of Counsel. An opinion of Jackson & Walker,
L.L.P., substantially in the form of Exhibit C hereto.
ARTICLE XIII
Retained Franchises
13.1 Retained Franchises. Notwithstanding anything to the
contrary herein, after satisfaction or waiver (by the party for whose benefit
the condition is imposed) of the conditions precedent to Sellers' obligation to
close as set forth in Article VIII hereof, and to Buyer's obligation to close
as set forth in Article IX hereof, it is understood and agreed as follows:
(a) Those Franchises (including all Assets used
or useful in connection therewith, but excluding all headends and
business offices which are also used in connection with the operations
of other Franchises which are being transferred to Buyer) with respect
to which a required consent shall not have been obtained (the
"Retained Franchises") shall be retained by Seller, and, subject to
the terms and conditions provided for herein, shall be subsequently
sold by Seller and purchased by Buyer in accordance with the terms of
this Article XIII.
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(b) Those Franchises (including all Assets used
or useful in connection therewith, including all headends and business
offices used in connection with the operations of such Franchises)
with respect to which all required consents shall have been obtained
shall be sold by Seller and purchased by Buyer at the Closing on the
terms and conditions provided for herein.
(c) At the Closing, Buyer shall pay to Seller a
portion of the Purchase Price to be determined by multiplying the
Purchase Price by a fraction, (i) the numerator of which shall be the
aggregate number of Basic Customers served by all of the Franchises
except for the Retained Franchises as of the Closing Date and (ii) the
denominator of which shall be the number of Basic Customers served by
all of the Franchises (including the Retained Franchises) as of the
Closing Date. The product resulting therefrom shall be the Purchase
Price paid at Closing. No adjustments shall be made pursuant to
Section 3.2 hereof to the extent such adjustments are attributable to
a Retained Franchise, and provided further, that adjustments pursuant
to Section 3.2 hereof shall be made with respect to any Retained
Franchise only as an adjustment to the Purchase Price to be paid at
the actual time of transfer of such Retained Franchise.
(d) At the Closing, with respect to the Retained
Franchises, Buyer shall deliver to NationsBank Texas, N.A. (the
"Retained Franchises Escrow Agent") by wire transfer of immediately
available federal funds, an amount (the "Retained Franchises Escrow
Amount") equal to the difference between (i) the Purchase Price and
(ii) the portion of the Purchase Price to be paid at Closing, to be
held in escrow (the "Retained Franchises Escrow") pursuant to the
terms of an escrow agreement in the form of Exhibit E hereto (the
"Retained Franchises Escrow Agreement"). Upon any Retained Franchises
Transfer (as hereinafter defined), the Escrow Agent shall pay to
Seller an amount determined by multiplying (i) the Retained Franchises
Escrow Amount by (ii) a fraction (A) the numerator of which shall be
the aggregate number of Basic Customers as of the Closing Date of the
Retained Franchise which is to be purchased and sold pursuant to such
Retained Franchises Transfer and (B) the denominator of which shall be
the number of Basic Customers as of the Closing Date of all of the
Retained Franchises. All interest earned on the Retained Franchises
Escrow Amount shall be paid to Seller.
(e) For a period of 12 months after the Closing,
Buyer and Seller shall cooperate fully in obtaining any required
consents which have not been obtained. After the Closing, as required
consents are received, Seller shall give to Buyer notice of the actual
time of transfer of such Retained Franchise (a "Retained Franchises
Transfer") with respect to those Retained Franchises for which such
required consents relate, which Retained Franchises Transfer shall be
on a date within ten days after receipt of such notice from Seller,
and the parties hereto shall take all steps necessary or appropriate
on their respective parts to proceed with such Retained Franchises
Transfer on the terms and conditions provided for herein. At the end
of the 12-month period after the Closing (i) Buyer shall have no
further obligation hereunder to purchase any Retained Franchises
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that were not purchased by Buyer at or prior to such time; (ii)
Sellers shall have no obligation to sell any Retained Franchises that
were not purchased by Buyer at or prior to such time; (iii) Buyer
shall be entitled to all of the funds remaining in the Retained
Franchises Escrow (other than interest earned on the Retained
Franchises Escrow Amount which shall be paid to Seller) and, subject
to the terms of the Retained Franchises Management Agreement (as
hereafter defined), to reimbursement for all capital expenditures made
by Buyer with respect to any Retained Franchises not purchased by
Buyer at or prior to such time; and (iv) Seller shall retain any
Retained Franchises not previously transferred to Buyer.
(f) Concurrent with the Closing hereunder, Buyer
and the applicable Seller shall enter into a management agreement (the
"Retained Franchises Management Agreement") with respect to the
Retained Franchises, which Retained Franchises Management Agreement
shall be substantially in the form ofExhibit F hereto. Buyer shall
continue to manage such Retained Franchises pursuant to the Retained
Franchises Management Agreement until the earlier of the last Retained
Franchises Transfer or 12 months after the Closing.
(g) It is understood and agreed that if a headend
and/or business office serves both certain Franchises which are being
sold at a given time and certain Retained Franchises, the Assets
related to such headend and/or business office shall be conveyed to
Buyer at the time such Assets are first purchased by Buyer; provided
that Buyer shall be required to provide signal services to Seller
after the expiration of the 12-month management period pursuant to a
mutually agreeable Signal Agreement having the parameters set forth in
Exhibit G hereto.
(h) The following provisions shall apply to any
Retained Franchises Transfer under this Agreement:
(i) The conditions precedent set forth
in Articles VIII and IX also shall apply at each Retained
Franchises Transfer.
(ii) Certificates and other documents
contemplated by this Agreement shall be delivered in the form
and substance provided for in this Agreement, modified as
necessary or appropriate to reflect the provisions of this
Article XIII and to relate only to the Franchises being
transferred at a given time.
(i) The parties intend that legal and beneficial
ownership of any Retained Franchises shall remain with Seller and
shall not be transferred to Buyer until the applicable Retained
Franchises Transfer of such Retained Franchises, which shall take
place only if and when all conditions precedent thereto shall have
occurred, including Sellers' receipt of all required consents to the
transfer of the Retained Franchises. All pre-Closing covenants herein
regarding a Retained Franchises shall
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continue in full force and effect until the time of the applicable
Retained Franchises Transfer.
ARTICLE XIV
Indemnification
14.1 Survival of Representations and Warranties. The
representations and warranties of each party contained in this Agreement or in
any document delivered pursuant hereto shall be deemed to be continuing and
shall survive the Closing and any investigations heretofore or hereafter made
by any party or its representatives for a period of six months.
14.2 Indemnification by Seller. Seller shall indemnify
and hold Buyer, its directors, officers, shareholders and agents harmless from
and against any loss, cost, expense or other damages suffered by Buyer, its
directors, officers, shareholders and agents resulting from, arising out of, or
incurred with respect to: (a) the operation of the System prior to the Closing
Date, except to the extent such loss, cost, expense or other damage is
specifically assumed by Buyer hereunder; (b) any violation of the Workers'
Adjustment and Retraining Notification Act of 1989 ("WARN Act") relating to the
System occurring prior to the Closing; (c) the falsity or breach of any
representation or warranty made by Seller herein or any certificate delivered
pursuant hereto; or (d) the failure by Seller to comply with any covenant of
Seller set forth herein or in any instrument or certificate delivered
hereunder, provided that any covenant of Seller to be performed or fulfilled on
or before the Closing Date shall be deemed to have been performed or fulfilled
unless Buyer shall make a written claim of nonperformance or nonfulfillment as
of the Closing Date. Seller's indemnity obligation to Buyer under this Section
14.2 above shall be Buyer's sole remedy against Seller with respect to such
matters and shall be subject to the following limitation: (x) Seller shall not
be obligated to indemnify Buyer with respect to indemnification claims made by
Buyer under such clause until such time as the aggregate amount of all such
claims exceeds the sum of $250,000; and (y) if the aggregate amount of all such
claims exceeds the sum of $250,000, the maximum aggregate amount of Seller's
indemnity obligation to Buyer under such clause with respect to such claims
shall be limited to the aggregate amount of such claims in excess of $250,000,
provided that in no event shall the maximum amount of Seller's indemnity
obligation to Buyer under such clause with respect to such claims exceed the
sum of $5,000,000.
14.3 Indemnification by Buyer. Buyer shall indemnify and
hold Seller, its directors, officers, shareholders and agents harmless from and
against any loss, cost, expense or other damages suffered by Seller, its
directors, officers, shareholders and agents resulting from, arising out of, or
incurred with respect to: (a) the operation of the System on or after the
Closing Date; (b) any violation of the WARN Act relating to the System
occurring from and after the Closing; (c) the falsity or breach of any
representation or warranty made by Buyer herein or in any certificate delivered
pursuant hereto; or (d) the failure by Buyer to comply with any covenant of
Buyer set forth herein or in any certificate delivered hereunder, provided that
any covenant of Buyer to be performed or fulfilled on or before the Closing
Date shall be
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deemed to have been performed or fulfilled unless Seller shall make a written
claim of nonperformance or nonfulfillment as of the Closing Date.
14.4 Defense of Claims. If any third party shall assert
any claim against Seller, Buyer or their respective directors, officers,
shareholders, partners or agents, which, if successful, would entitle the
latter to indemnification under this Article XIV, the latter (the "Indemnified
Party") shall give notice of such claim to the party from whom it intends to
seek indemnification (the "Indemnifying Party") and the Indemnifying Party
shall have the right to assume the defense of such claim at its expense. If
the Indemnifying Party does assume such defense, it shall indemnify and hold
the Indemnified Party harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement or judgment of such
claim. In addition, the Indemnified Party shall have the right to participate
in the defense of such claim at its expense, in which case (i) the Indemnifying
Party shall cooperate in providing information to and consulting with the
Indemnified Party about the claim; and (ii) the Indemnifying Party shall not
consent to the entry of judgment or enter into any settlement without the prior
written consent of the Indemnified Party. If the Indemnifying Party does not
assume the defense of any such claim, the Indemnified Party may defend against
or settle such claim in such manner and on such terms as it in good faith deems
appropriate and shall be indemnified by the Indemnifying Party for the amount
of any judgment or settlement and for all losses or expenses, including
attorneys' fees, incurred by the Indemnified Party in connection with the
defense or settlement of such claim. The Indemnified Party shall have the
right to employ its own counsel (but only one firm for all Indemnified Parties)
in any such claim and have the fees and expenses of such counsel paid by the
Indemnifying Party if the Indemnified Party shall have reasonably concluded
that there may be a conflict of interest between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such claim (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party).
14.5 Tax Effect. If any Indemnified Party shall be
entitled to indemnification hereunder as a result of any loss, cost, expense or
other damage for which indemnification may be claimed under this Article XIV,
the determination of the amount of indemnification to which such Indemnified
Party is entitled as a result of such loss, cost, expense or other damage shall
take into account any benefit, including any tax benefit, derived by the
Indemnified Party and arising out of the facts or circumstances which resulted
in such loss, cost, expense or other damage.
ARTICLE XV
Miscellaneous
15.1 Expenses. Except as otherwise expressly provided for
in this Section 15.1 or elsewhere in this Agreement, each party hereto shall
pay its own expenses and costs relating to the negotiation, execution and
performance of this Agreement. Seller and Buyer shall each
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bear all of its own costs and expenses incurred in securing the appropriate
governmental approvals to the assignment of the Assumed Contracts.
15.2 Governing Law; Forum. This Agreement shall be
construed and interpreted according the laws of the State of Texas without
reference to the rules of conflicts of law.
15.3 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when personally delivered or telecopied, or five days after mailed,
certified or registered mail, with postage prepaid addressed as follows (or to
such other person or address as the party to receive such notice may have
designated from time to time by notice in writing pursuant hereto):
If to Seller:
Marcus Cable of San Angelo, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, Texas 75219
Attention: President
With copies (which shall not constitute effective notice) to:
Marcus Cable of San Angelo, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, Texas 75219
Attention: General Counsel
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael A. Saslaw
If to Buyer:
Teleservice Corporation of America
3015 SSE Loop 323
Tyler, Texas 75701
Attention: Robert M. Rogers
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With a copy (which shall not constitute effective notice) to:
Jackson & Walker, L.L.P.
901 Main Street
Suite 6000
Dallas, Texas 75202
Attention: James S. Ryan, III
15.4 Non-Competition Agreement. At Closing, Buyer and
Seller shall each execute and deliver a Non-Competition Agreement in the form
of Exhibit H hereto.
15.5 Definition of Agreement. Unless the context clearly
otherwise requires, as used herein, the term "Agreement" means this Agreement
and the Schedules and Exhibits hereto. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section, Paragraph or other
subdivision.
15.6 Headings, Gender, Person. The headings to Articles
and Sections of this Agreement are for reference only and shall not be used in
construing the provisions hereof or otherwise affect the meaning hereof. The
use of the neuter pronoun "it" shall also refer to as appropriate to the
masculine and/or feminine gender. The use of the singular herein shall, where
appropriate, be deemed to include the plural and vice versa. As used herein,
the word "person" refers to any individual, corporation, partnership, trust,
governmental body or authority or other organization or entity.
15.7 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be an original but all of which shall
constitute but one and the same agreement and shall become binding upon the
parties when each party hereto has executed one or more counterparts.
15.8 Entire Agreement. This Agreement embodies the entire
agreement and understanding between Seller and Buyer and supersedes all prior
agreements and understandings related to the subject matter hereof. There are
no representations, warranties, covenants, promises or agreements on the part
of either party to the other hereto which are not explicitly set forth herein.
15.9 Modifications. Any modification, amendment or waiver
of or with respect to any provision of this Agreement or any agreement,
instrument or document delivered pursuant hereto shall not be effective unless
it shall be in writing and signed by Seller and Buyer and shall designate
specifically the terms and provisions so modified.
15.10 Assignment and Binding Effect. Neither party may
assign this Agreement or any interest herein without the prior written consent
of the other party hereto and any purported assignment without such consent
shall be void. Subject to the foregoing, this
-31-
<PAGE> 38
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their respective successors and assigns.
15.11 Schedules. Any matter disclosed on any one Schedule
hereto shall be deemed to be disclosed on all other Schedules hereto.
-32-
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MARCUS CABLE OF SAN ANGELO, L.P.
By: Marcus Cable Operating Company, L.P.,
its general partner
By: Marcus Cable Company, L.P., its general
partner
By: Marcus Cable Properties, L.P., its general
partner
By: Marcus Cable Properties, Inc., its general
partner
By:_______________________________________
Name:__________________________________
Title:_________________________________
BUYER:
TELESERVICE CORPORATION OF
AMERICA
By:_____________________________________________
Name:________________________________________
Title:_______________________________________
-33-
<PAGE> 1
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to the Asset Purchase Agreement, dated as
of April 21, 1995, is between Marcus Cable of San Angelo, L.P., a Delaware
limited partnership ("Seller"), and Teleservice Corporation of America, a Texas
corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer entered into an Asset Purchase
Agreement, dated as of March 24, 1995 (the "Purchase Agreement");
WHEREAS, Section 10.2(f) of the Purchase Agreement gives the
Buyer the option to terminate the Purchase Agreement within three business days
after April 24, 1995 if the Seller has not delivered a letter from the City of
Andrews which indicates that the City of Andrews will continue in good faith
with the Buyer the informal renewal discussions that are currently underway
with the Seller;
WHEREAS, Seller and Buyer wish to extend the time for delivery
of such letter from the City of Andrews until June 15, 1995.
NOW THEREFORE, in consideration of the premises and the
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Section 10.2(f) of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"By Buyer, within three business days after June 15,
1995, if Seller has not delivered a letter from the
City of Andrews which indicates that the City of
Andrews will continue in good faith with Buyer the
informal renewal discussions that currently are
underway with Seller."
-1-
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Amendment No. 1 to the Asset Purchase Agreement as of the date
first above written.
MARCUS CABLE OF SAN ANGELO, L.P.
By: Marcus Cable Operating Company, L.P.,
its general partner
By: Marcus Cable Company, L.P., its general
partner
By: Marcus Cable Properties, L.P., its general
partner
By: Marcus Cable Properties, Inc., its general
partner
By: /s/ JEFFREY A. MARCUS
Name: Jeffrey A. Marcus
Title: President
TELESERVICE CORPORATION OF
AMERICA
By: /s/ FRED R. NICHOLS
Name: Fred R. Nichols
Title: President
-2-
<PAGE> 1
TCA CABLE TV. INC.
AMENDED AND RESTATED INCENTIVE STOCK OPTION PLAN
ARTICLE I
THE PLAN
1.1 Purpose of Plan. This Amended and Restated Incentive Stock
Option Plan (hereinafter called the "Plan") provides for the granting of
options to certain key employees of TCA Cable TV, Inc. (hereinafter called the
"Company"), a Texas corporation. The purposes of the Plan are to advance the
interests of the Company and its stockholders by encouraging and enabling
selected key employees to acquire and retain a proprietary interest in the
Company by ownership of its stock and to provide an incentive for such
employees to remain in the employ of and to serve the Company. It is intended
that options issued pursuant to Article III shall constitute "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code").
With respect to employees who are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended
(hereinafter called the "Act"), transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Act. To the extent that any provision of the Plan or action by the Committee
(as herein defined) fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Committee.
1.2 Shares Subject to Plan. There are hereby authorized and
reserved for issuance upon the exercise of options to be granted from time to
time under the Plan (hereinafter called the "Options"), an aggregate of 660,000
shares (hereinafter called the "Plan Shares") of common stock, par value of
$.10 per share (hereinafter called the "Common Shares"), of the Company, which
shares may be in whole or in part, as the Board of Directors of the Company
(hereinafter called the "Board of Directors"), shall from time to time
determine, authorized but unissued Common Shares or issued Common Shares which
shall have been acquired by the Company. If an Option shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares covered thereby shall (unless the Plan shall have been terminated) be
added to the shares otherwise available for Options which may be granted in
accordance with the terms of the Plan.
1.3 Effective Date. The effective date of the Plan, as amended
and restated, shall be March 30, 1995, that is, the date on which it was
approved and adopted by the Board of Directors; provided that any grants to
employees hereunder are conditioned upon approval of the Plan by the
stockholders of the Company; and provided further that no Option may be
exercised unless the Plan is approved by a vote of the majority of the
stockholders of the Company's Common Shares present or represented and entitled
to vote at a meeting of the stockholders of the Company held within twelve (12)
months following the date of the Plan's adoption by the Board of Directors.
<PAGE> 2
1.4 Eligibility. Any employee of the Company (including officers,
whether or not they are directors) shall be eligible to participate in the
Plan. An optionee may hold more than one Option, but only on the terms and
subject to the restrictions hereafter set forth.
1.5 Payment of Option Price. The Option price shall be paid in
full in cash or with Common Shares of the Company upon the exercise of the
Option.
1.6 Rights as a Stockholder. An optionee or transferee of an
Option shall have no rights as a stockholder with respect to any shares covered
by his Option until the date of issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is
issued.
1.7 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
(as herein defined) may modify, extend or renew outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised). The Committee
shall not, however, modify any outstanding Options so as to specify a lower
price or accept the surrender of outstanding Options and authorize the granting
of new Options in substitution therefor specifying a price. Notwithstanding
the foregoing, however, no modification of an Option shall, without the consent
of the optionee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
1.8 Investment Purpose. Each Option under the Plan shall be
granted on the condition that the purchases of shares thereunder shall be for
investment purposes, and not with a view to resale or distribution except that
in the event the shares subject to such Option are registered under the
Securities Act of 1933, as amended (the "Securities Act"), or in the event a
resale of such shares without such registration would otherwise be permissible,
such conditions shall be inoperative if in the opinion of counsel for the
Company such condition is not required under the Securities Act or any other
applicable law, regulation, or rule of any governmental agency.
1.9 Acceleration in Certain Events. The Committee may accelerate
the exercisability of any Option in whole or in part at any time.
Notwithstanding the provisions of any option agreement, the following
provisions shall apply:
(a) Mergers and Reorganizations. If the Company or its
stockholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a sale,
merger, or other reorganization, liquidation or otherwise, all Options
shall become immediately exercisable with respect to the full number
of shares subject to such Options during the period commencing as of
the date of the agreement to dispose of all or substantially all of
the assets or stock of the Company and ending when the disposition of
assets or stock contemplated by that agreement is consummated or the
Options are otherwise terminated in accordance with its provisions or
the provisions of this Plan, whichever occurs first. The Options
shall not become immediately exercisable,
- 2 -
<PAGE> 3
however, if the transaction contemplated in the agreement is a merger
or reorganization in which the Company shall survive and the
stockholders of the Company who are stockholders on the date the
Options in question were granted shall continue to own at least 50% of
the total combined voting power of all classes of stock of the Company
after the transaction.
(b) Change in Control. In the event of a change in
control or threatened change in control of the Company, all Options
granted prior to the change in control or threatened change in control
shall become immediately exercisable. The term "change in control"
for purposes of this Section refers to the acquisition of 15% or more
of the voting securities of the Company by any person or by persons
acting as a group within the meaning of Section 13(d)(3) of the Act
(other than an acquisition by (i) a person or group meeting the
requirements of clauses (i) and (ii) of Rule 13d-1(b)(1) promulgated
under the Act or (ii) any employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) of the Company or of its
subsidiaries, including a trust established pursuant to such plan);
provided that no change in control or threatened change in control
shall be deemed to have occurred (i) if prior to the acquisition of,
or offer to acquire, 15% or more of the voting securities of the
Company, the full Board of Directors has adopted by not less than
two-thirds vote a resolution specifically approving such acquisition
or offer or (ii) from (A) a transfer of the Company's voting
securities by a person who is the beneficial owner, directly or
indirectly, of 15% or more of the voting securities of the Company (a
"15 Percent Owner") to (i) a member of such 15 Percent Owner's
immediate family (within the meaning of Rule 16a-1(e) of the Act)
either during such 15 Percent Owner's lifetime or by shall or the laws
of descent and distribution; (ii) any trust as to which such 15
Percent Owner or a member (or members) of his immediate family (within
the meaning of Rule 16a-1(e) of the Act) is the beneficiary; (iii) any
trust as to which such 15 Percent Owner is the settlor with sole power
to revoke; (iv) any entity over which such 15 Percent Owner has the
power, directly or indirectly, to direct or cause the direction of the
management and policies of the entity, whether through the ownership
of voting securities, by contract or otherwise; or (v) any charitable
trust, foundation or corporation under Section 501(c)(3) of the Code
that is funded by such 15 Percent Owner; or (B) the acquisition of
voting securities of the Corporation by either (i) such 15 Percent
Owner or (ii) a person, trust or other entity described in the
foregoing clauses (A)(i)-(v) of this subsection. The term "person"
for purposes of this Section refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein. Whether a change in control is
threatened shall be determined solely by the Board of Directors.
1.10 Termination of Employment or Death. If an optionee ceases to
be employed by the Company for any reason other than death, an Option shall be
exercisable by the optionee at any time prior to the expiration date of the
Option or within three months (or one year in the case of termination by reason
of disability) after the date of such termination, whichever is earlier, but
only to the extent the optionee had the right to exercise such Option at the
date of such termination. In the event of death of an optionee while in the
employ of the Company or
- 3 -
<PAGE> 4
within three months after termination of employment, his Option shall be
exercisable by the person or persons to whom such optionee's rights pass by
will or by the laws of descent and distribution at any time prior to the
expiration date of the Option or prior to one year after the date of such
death, whichever is earlier, but only to the extent the optionee had the right
to exercise such Option on the date of his death.
ARTICLE II
ADMINISTRATION
2.1 Administration. The Plan shall be administered by a committee
of not fewer than two members of the Board of Directors (the "Committee") and
each member shall be a "disinterested person" within the meaning of Rule 16b-3
under the Act (each hereinafter called a "Committee Member" and collectively
the "Committee Members"). Subject to the provisions of the Plan, the Committee
shall have the sole discretion and authority to determine from time to time the
employees to whom Options shall be granted and the number of Plan Shares
subject to each Option, to interpret the Plan, to prescribe, amend and rescind
any rules and regulations necessary or appropriate for the administration of
the Plan, to determine and interpret the details and provisions of each option
agreement, to modify or amend any option agreement or waive any conditions or
restrictions applicable to any Options (or the exercise thereof), and to make
all other determinations necessary or advisable for the administration of the
Plan. The Board of Directors may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, howsoever caused, shall
be filled by the Board of Directors. The Committee shall select one of its
members as Chairman, and shall hold meetings at such times and places as it may
determine. Actions by a majority of the Committee at which a quorum is
present, or actions reduced to or approved in writing by a majority of the
Committee Members, shall be the valid actions of the Committee. No Committee
Member shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.
2.2 Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors or Committee Members,
the Committee Members shall be indemnified by the Company against the
reasonable expenses, including attorney's fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of the may be a
part by reason of any action taken or failure to act under or in connection
with the Plan or any Option thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the company) or paid any them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee Member is liable for negligence or misconduct in the performance of
his duties; provided that within 60 days after institution of any such action,
suit or proceeding the Committee Member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
- 4 -
<PAGE> 5
ARTICLE III
INCENTIVE STOCK OPTIONS
3.1 Terms and Conditions of Options. Each employee receiving
Options pursuant to this Article shall be required to enter into a written
agreement with the Company and such agreement shall comply with and be subject
to the terms and conditions of this Plan.
3.2 Option Price. Each Option granted under this Article shall
state the Option price, which shall not be less than 100% of the fair market
value, as determined by the Committee, of the Common Shares of the Company on
the date of the granting of the Option.
3.3 Term and Exercise of Options. Each Option granted pursuant to
this Article and all rights thereunder shall expire on the date determined by
the Committee, but in no event shall the Option be exercisable after the
expiration of ten years from the date it is granted. During the lifetime of
the optionee, Options granted under this Article shall be exercisable only by
him and shall not be assignable or transferable by him other than by will or
the laws of descent and distribution. In addition, each Option shall be
subject to early termination as provided elsewhere in the Plan.
3.4 Ten Percent Shareholders. Any Option granted pursuant to this
Article to an individual who, at the time the Option is granted, owns shares
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company shall meet the following conditions:
(i) The Option price shall not be less than 110% of the
fair market value, as determined by the Committee, of
the Common Shares of the Company on the date of the
granting of the Option; and
(ii) Such Option shall not be exercisable after the
expiration of five years from the date such Option is
granted.
3.5 Maximum Amount of Options First Exercisable in Any Calendar
Year. The maximum aggregate Fair Market Value of Plan Shares (determined at
the time the Option is granted) with respect to which Options granted under
this Article and under all incentive stock option plans of the Company's
subsidiaries and affiliates are exercisable for the first time by an optionee
during any calendar year may not exceed $100,000. The portion of any Option
which exceeds the foregoing limit shall be deemed granted pursuant to Article
IV.
- 5 -
<PAGE> 6
ARTICLE IV
NONQUALIFIED STOCK OPTIONS
4.1 Terms and Conditions of Options. Each employee receiving
Options pursuant to this Article shall be required to enter into a written
agreement with the Company and such agreement shall comply with and be subject
to the terms and conditions of this Plan.
4.2 Duration of Options. Each Option granted pursuant to this
Article and all rights thereunder shall expire on the date determined by the
Committee, but in no event shall any Option granted under this Article expire
later than 10 years after the date on which the Option is granted. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.
4.3 Option Price. The purchase price for the Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under this
Article shall be determined by the Committee in its discretion.
ARTICLE V
TERMINATION, AMENDMENT AND ADJUSTMENT
5.1 Term of Plan. The Plan shall terminate on March 29, 2005 and
no Options shall be granted under the Plan thereafter.
5.2 Amendment of the Plan. The Board of Directors of the Company
may, insofar as permitted by law, from time to time, with respect to any shares
at the time not subject to Options, suspend or discontinue the Plan or revise
or amend it in any respect whatsoever; provided that, without shareholder
approval, no amendment or revision may (i) increase the maximum aggregate
number of Plan Shares, except as permitted under Section 5.3, (ii) change the
minimum purchase price for shares or (iii) permit the granting of an Option to
anyone other than as provided in the Plan; and provided further that, without
shareholder approval, no amendment to the Plan shall be effective that
materially increases the benefits accruing to optionees, materially increases
the number of securities that may be issued under the Plan or otherwise
materially modifies the requirements as to eligibility for participation in the
Plan, all within the meaning of Rule 16b-3. Furthermore, the Plan may not,
without the approval of the stockholders, be amended in any manner that will
cause options issued under it to fail to meet the requirements of "incentive
stock options" so defined in Section 422 of the Code.
5.2 Capital Adjustments Affecting Stock. In the event of a
capital adjustment resulting from a stock dividend, stock split,
reorganization, merger, consolidation, or a combination or exchange of shares,
the number of shares of stock subject to this Plan and the number of shares
under option shall be adjusted consistent with such capital adjustment. The
granting of an Option pursuant to this Plan shall not affect in any way the
right or power of the Company to make adjustments, reorganization,
reclassifications, or changes of its capital or
- 6 -
<PAGE> 7
business structure or to merge, consolidate, dissolve, liquidate, or sell or
transfer all or any part of its business assets.
- 7 -
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<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<CASH> 2,445,112
<SECURITIES> 0
<RECEIVABLES> 4,913,712
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0
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