<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1994
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 SSE Loop 323, Tyler, Texas 75701
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 903/595-3701
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
----------------------------
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
--------------------
The aggregate market value of the voting stock held by non-affiliates of the
registrant as computed by reference to the average of the closing bid and asked
prices of such stock, as reported by the NASDAQ, on January 6, 1995 ($22.125)
was $391,816,913. Shares of voting stock held by each officer and director and
by each person who owns 5% or more of the Company's outstanding voting stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
The number of shares outstanding of the registrant's common stock as of January
6, 1995 was:
24,577,607 shares of common stock.
----------
Documents incorporated by reference: Part III Items 11, 12 and 13 are
incorporated by reference to the Registrant's definitive Proxy Statement for its
Annual Meeting of Shareholders presently scheduled to be held March 30, 1995.
<PAGE> 2
PART I
Item 1. Business
General
TCA Cable TV, Inc. ("the Company") is engaged in the development, operation and
management of cable television systems. (1) At October 31, 1994, the Company
owned and operated 51 cable television systems which had approximately 465,000
subscribers and managed 2 systems which are owned by affiliated corporations
and had approximately 3,500 subscribers. (2) The Company is listed in industry
trade publications as one of the 30 largest operators of cable television
systems in the United States (including subscribers in managed systems). The
Company's systems are located primarily in smaller markets in Texas, Louisiana,
Arkansas, Mississippi and New Mexico where over-the-air television reception is
unsatisfactory, and the Company intends to continue to concentrate its
activities in these and similar areas.
The Company was organized as a Texas corporation in December, 1981, to
consolidate the ownership of four corporations which had been developing and
operating cable television systems since 1965, 1973, 1975 and 1976,
respectively. Unless the context otherwise requires, all references to "TCA
Cable TV, Inc." and the "Company" in this report shall refer to TCA Cable TV,
Inc. and its predecessors and subsidiaries.
The Cable Television Industry
Cable television is a service which delivers to the home varied entertainment
and information programming, either as transmitted by licensed radio and
television stations or programming designed specifically for cable
distribution. Radio and television signals are received by "off-air" antennae,
microwave relay systems and satellite earth stations and are modulated and
amplified at an electronic control center, or "headend", for distribution
through a network of aerial or underground coaxial cables or optical fiber to
television sets owned by subscribers. Subscribers generally pay a monthly fee
for the service. Cable systems generally operate under non-exclusive franchises
granted by local or state governmental authorities. The growth of the cable
television industry has been accompanied by a significant number of operator
consolidations.
The cable television industry began in the early 1950's. The industry's birth
and subsequent growth was the result of demand for more stations and improved
reception in areas where over-the-air television reception was unsatisfactory
because of topography or remoteness from broadcast towers. The use of cable as
the means of providing additional television channels and improved over-the-air
reception is now generally referred to as "basic service", and normally
consists of programming available from nearby over-the-air television channels,
public channels and a limited number of channels relayed from distant cities,
and satellite programming. Additional satellite programming services are
offered in a separate "expanded basic" service for an additional charge. For an
additional monthly or individual event charge, cable operators also provide
subscribers a choice of "premium services" (referred to as "Pay TV" or
"Pay-Per-View"), generally consisting of feature films, sporting and other
special entertainment events. The availability of cable specific channels and
premium service has established cable television as an entertainment medium in
addition to fulfilling its original
- --------------------
(1) A system includes all areas served from a single administrative office.
A system may include one or more "headends" and the cable properties related
thereto, and one or more communities or franchise areas.
(2) The Company reports its subscribers based on the number of separate
accounts billed. The Company's practice differs from the "subscriber
equivalent" method used by some other cable system operators. The
Company estimates that the use of subscriber equivalents in its
reporting would increase its number of subscribers by approximately 5%.
2
<PAGE> 3
purpose to provide better over-the-air television reception. This development
has led to significant growth of cable television in larger metropolitan
markets. Although the Company offers premium services and plans to increase its
capacity to provide such services, it has no present plans to acquire or
develop new systems in larger metropolitan markets.
The Company believes the cable television industry may derive additional income
in the foreseeable future from the sale of air time to advertisers who desire
access to the television media to promote their products or services. This
revenue source is commonly referred to as advertising income. Revenue from
advertising was approximately 9%, 7% and 5% of total revenue during 1994, 1993
and 1992, respectively.
The Company is continually evaluating the technical and economic feasibility of
providing enhanced or expanded subscriber services and may provide additional
such services in the future. However, the Company cannot provide assurance that
revenue from any of these sources will increase significantly.
Development of Cable Systems
The following table provides data relative to the last five fiscal years and
indicates the growth of the cable systems owned by the Company. Information
with respect to systems managed by the Company but owned by others is not
included in the table.
<TABLE>
<CAPTION>
Basic Service Premium Service
--------------------------- ------------------------
Premium
Miles of Homes Subscribers as Number Units as %
Active Passed by Number of % of Homes of Premium of Basic
Plant Cable Subscribers Passed Units Subscribers
--------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
At October 3l:
1990 9,596 636,231 413,573 65% 217,620 53%
1991 9,853 638,265 423,974 66% 230,764 54%
1992 9,953 639,265 438,247 69% 238,360 54%
1993 10,216 649,415 454,832 70% 255,101 56%
1994 10,413 651,250 465,471 71% 321,076 69%
</TABLE>
Subscriber growth experienced by the Company in recent years has come from the
acquisition of existing systems and the upgrading and development of systems
already owned, rather than from the securing of new franchises or the
construction of new systems. Prior to and upon its acquisition of a system, the
Company conducts a review of the acquired system's cable plant and operating
policies and procedures. On the basis of its review, the Company typically
makes modifications, repairs, upgrades to the plant, and additionally
institutes operating policies and procedures designed to expand the system and
improve its profitability.
The Company intends to continue its emphasis on growth through acquisition of
existing systems. There can be no assurances, however, that the Company will be
able to acquire existing systems in the future on terms as favorable as it has
been able to do in the past. The Company does not currently have any definitive
agreements for the acquisition of any additional systems except for the
investments in limited partnerships that have entered into agreements to
purchase the cable television systems in Fayetteville and Russellville,
Arkansas as further discussed in Note 13 to the financial statements. However,
the Company may in the future acquire additional systems on terms it deems
favorable based on evaluations of a system's selling price relative to
subscriber levels and projected cash flow, among other factors.
In addition to growth resulting from system acquisitions and improvements made
to acquired systems, the Company expects to continue growth through increased
subscriptions caused by population growth in its franchise areas, and by
emphasizing the availability of increased services to its basic subscribers.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations". There can be no assurance, however, that the number of the
Company's subscribers will continue to increase.
3
<PAGE> 4
The Systems
The following table sets forth information as of October 31, 1994,
regarding the Company's cable systems, all of which are owned by the
Company unless otherwise indicated:
<TABLE>
<CAPTION>
Basic
Plant Subscriber Equivalent Premium Homes
States Miles Accounts Billing Units* TV Units Passed
--------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Texas 3,858 196,869 204,821 126,900 287,500
Louisiana 3,148 130,818 137,122 117,268 183,170
Arkansas 2,771 107,065 111,105 57,180 137,095
New Mexico 195 12,009 12,231 5,452 18,200
Mississippi 237 13,408 13,628 10,526 18,035
Idaho 204 5,302 8,158 3,750 7,250
-----------------------------------------------------------
TCA owned systems 10,413 465,471 487,065 321,076 651,250
Managed systems 89 3,475 3,528 2,174 5,370
-----------------------------------------------------------
Owned and
Managed systems 10,502 468,946 490,593 323,250 656,620
===========================================================
</TABLE>
* Equivalent Billing Units, presented here to allow comparison with
cable TV companies which report by this method, are calculated by
dividing the basic service revenue by the base rate on commercial
accounts and adding the number of residential accounts.
Multiple-outlet subscribers at rates higher than the base rate make
up the difference.
System Operating Offices
Texas: Amarillo, Athens, Big Spring, Bryan/College Station, Conroe,
Dalhart, Gatesville, Gladewater, Henderson, Huntsville,
Mineola, Nacogdoches, Paris, Plainview, Snyder, Sulphur
Springs and Victoria.
Louisiana: Abbeville, Bastrop, Crowley, DeRidder, Franklin, Lafayette,
Minden, Natchitoches, New Iberia, Patterson, Ruston, St.
Martinville and Winnfield.
Arkansas: Arkadelphia, Batesville, Bentonville, Berryville, Harrison,
Heber Springs, Helena, Hot Springs Village, Magnolia,
Malvern, McGehee, Mena, Mountain Home, Newport, Ozark,
Pocahontas, Siloam Springs and Springdale.
New Mexico: Clovis.
Mississippi: Greenville.
Idaho: Sun Valley.
Subscriber Services
The Company offers services to its subscribers that are generally comparable to
those offered by other cable television operators. The basic service offered by
the Company typically includes signals of nearby over-the-air television
stations carrying all four commercial networks; independent, specialty and
educational stations; sports and educational programming; and additional
satellite programming such as signals of distant independent stations, news,
sports and religious programming, and continuous time, news and weather
information.
The Company offers an additional level of service known as "expanded basic"
service. Under this level of service the Company makes available to subscribers
a variety of packaged programming, including news, sports, educational and
entertainment channels and programs purchased from independent suppliers and
combined in different formats to appeal to different tastes. Expanded basic
service is provided at an additional monthly charge.
4
<PAGE> 5
Most of the Company's systems normally offer at least four premium services
while some systems offer additional premium service options. Premium services
include channels such as: The Movie Channel, HBO, Showtime, Cinemax and The
Disney Channel, which offer feature motion pictures, concerts and other special
features without commercial interruption. The Company's services do not include
X-rated motion pictures. The programming provided under premium service, and in
some cases under basic service, is acquired by the Company from independent
suppliers for a fee equal to a specified portion of the amount charged by the
Company for the service. The fees paid by the Company to independent suppliers
are believed by the Company to be comparable to those paid by similarly situated
cable television companies.
Rates charged subscribers vary with the type of service selected. All of the
Company's cable systems are subject to rate regulation. See
"Business-Regulation". The monthly service fee for basic service generally
ranges from $8 to $12. The monthly service fee for expanded basic service
generally ranges from $6 to $13. The Company's average monthly revenue per
subscriber during fiscal 1994 for basic and expanded basic services was $20.23.
A one-time installation fee ranging from $24 to $42 is usually charged to new
subscribers. Monthly charges for equipment furnished to the customer generally
range from $1 to $3. Additionally, the Company generally charges $8.00 to $10.00
per month for each premium subscription service. Premium service charges are
sometimes discounted for multiple services. Subscribers are free to terminate
service at any time.
The Company also services commercial subscribers such as hotels, motels,
hospitals, and apartments. These subscribers are charged a one-time connection
fee, which is usually sufficient to cover the Company's cost of installation.
Commercial subscribers are generally free to terminate service at any time.
Management Services
In addition to operating its own cable television systems, the Company provides
general management services for two systems owned by corporations affiliated
with the Company ("the Affiliated Companies"). The Company's management services
include: accounting, auditing, billing, marketing, computer operations,
purchasing, engineering, and other technical and administrative support services
which the Company performs pursuant to management contracts. These services are
charged to the systems on a fee basis equal to specified amounts per subscriber
for each particular service performed or a specified percentage of revenue. The
intention is to recover the Company's actual costs of providing the services,
plus a profit. Total revenues received by the Company for management services
for fiscal 1994, 1993 and 1992 were $53,323, $51,220 and $50,398, respectively.
One of the Company's management contracts provides the Company a right of first
refusal with respect to any proposed sales of any of the Affiliated Company's
cable systems or with respect to any cable system acquisition opportunities
which come to the attention of the Affiliated Company subject to the management
contract. The Company does not intend to exercise its rights of first refusal
with respect to relatively small cable systems which are contiguous to, or in
the vicinity of, the systems owned by the Affiliated Companies.
The Company believes that the terms of its management contracts with Affiliated
Companies are at least as favorable to the Company as could be obtained with
unaffiliated third parties in arm's-length transactions.
Franchises
Each local government authority typically issues a non-exclusive permit or
enacts a non-exclusive franchise ordinance for the construction and operation of
a cable television system within its borders after considering presentations by
competing cable television companies. The Company's franchises normally require
that 2% to 5% of the gross revenues of the cable system be paid to the
franchising authority.
5
<PAGE> 6
Effective January 1, 1987, rates charged to subscribers could no longer be
regulated by local authorities in areas where the FCC determined that cable
television systems were subject to "effective competition". Congress in the
Cable Act of 1992 amended the effective competition standard in a manner that
subjects virtually all of the Company's systems to rate regulation. See
"Business-Regulation".
FCC Rules and some franchises generally require approval by the franchising
authority for the sale of a system. See "Business-Regulation". Most of the
Company's franchises can be terminated prior to their stated expiration for
breach of material provisions. The Company holds approximately 185 franchises
with unexpired terms ranging generally from one to 40 years. No one franchise
accounts for more than 10% of the Company's total revenue.
Franchises have historically been renewed for companies that have provided
adequate service and have complied generally with the franchise terms.
Additionally, the Cable Communications Policy Act of 1984 established renewal
procedures designed to protect incumbent franchisees against arbitrary denial of
renewal. The Company believes that it has provided satisfactory levels of
service and has maintained favorable relationships with local communities and
anticipates that all or substantially all of its franchises will be renewed,
although there can be no assurance of such renewals. In addition, other
applicants have an opportunity to compete for the franchise upon its expiration.
See "Competition" below. In connection with a renewal, the franchising authority
may impose different and more stringent terms, the impact of which cannot be
predicted. To date, however, all of the Company's franchises have been renewed
or extended, generally at or prior to their stated expirations, and on modified,
but not unduly burdensome, terms.
In City of Los Angeles v. Preferred Communications, Inc., the U.S. Supreme
Court affirmed a decision that had allowed a challenge to the constitutionality
of the cable television franchise process and which suggested that, where
feasible, franchising authorities must grant access to others seeking to
provide competitive cable television service in a community. If the rationale
of the Preferred Communications case and other similar court decisions is
applied generally to the cable television industry, many cable television
operators, including the Company, may face increased competition from other
cable television operators.
Competition
The Company encounters competition for the acquisition of existing systems and
may encounter similar competition at the time of franchise renewal. The cable
television industry has undergone significant consolidation in recent years. At
the same time, the number of United States communities that have not awarded
cable television franchises has rapidly diminished and the competition for new
franchises and for renewal of existing franchises has intensified. Furthermore,
certain regulations restricting competition in the industry have recently been
relaxed or rescinded, reflecting current and future policy objectives of the FCC
and in Congress to increase competition to cable television. See "Regulation."
As a result of the foregoing, it may be expected that the Company will encounter
increased competition from other entities having substantially greater resources
than the Company.
Competition for the Company's cable services arises from numerous alternative
entertainment and information sources such as movie theaters, broadcast
television stations, direct broadcast satellites and home satellite receivers,
wireless cable systems, video cassette recorders, and other sources of home
entertainment. Advances in communications technology and changes in the market
place are constantly occurring. Due to changes in technology and regulatory
policies encouraging competition, the Company anticipates significantly
increased comptetition, particularly from recently launched direct broadcast
satellite systems, as well as telephone companies, providing video programming
to subscribers.
6
<PAGE> 7
Regulation
General. Cable television systems are regulated extensively by federal, local
and sometimes state authorities. Local and state regulations generally relate to
the awarding of franchises, rate regulation, customer service standards and
other operational requirements.
FCC Regulation
General. Federal regulation of cable television systems is effected primarily
through the Federal Communications Commission (FCC). Regulations promulgated by
the FCC contain detailed provisions relating to virtually all aspects of the
cable industry including rate regulation, must carry and retransmission consent
for carriage of broadcast signals, technical standards, customer service
standards, competition, programming, franchise issues, commercial leased access
channels, ownership of cable television systems, non-duplication of network
programming, syndicated program exclusivity, sports program blackouts, equal
employment opportunities, comprehensive reporting requirements, signal leakage
standards and other matters. The FCC is authorized to impose monetary fines on
cable system operators for violations of FCC rules and may also issue cease and
desist orders.
Cable Communications Policy Act of 1984 and the Cable Television Consumer
Protection and Competition Act of 1992
On October 11, 1984, Congress passed the Cable Communications Policy Act of 1984
("Cable Act of 1984"). A major objective of Congress in passing that law was to
clarify the regulatory relationship between franchisers and cable operators. On
October 5, 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 ("Cable Act of 1992"), which expands the scope of cable
industry regulation beyond that imposed by the Cable Act of 1984. Provisions of
these laws which the Company believes may have a significant impact on its
operations are summarized below.
RATE REGULATION
All of the Company's cable systems are or will be subject to rate regulation.
Pursuant to the Cable Act of 1992 the FCC has established rate standards and
procedures governing regulation of basic cable service rates. Franchising
authorities may "certify" to the FCC that they will follow the FCC standards and
procedures in regulating basic rates and, once such certification is made, the
franchising authorities will assume rate regulation authority over basic rates.
The Cable Act of 1992 also requires that the FCC, upon complaint from a
franchising authority or a cable subscriber, review the "reasonableness" of
rates for additional tiers of cable service. Only rates for premium pay channels
and single event pay-per-view services are excluded entirely from rate
regulation. Additionally, the Cable Act of 1992 imposes rate regulation pursuant
to an FCC formula for the sale and lease of cable equipment such as converters,
remote controls and additional outlets "on the basis of actual cost." It is
impossible to predict the exact impact of rate regulation upon existing and
future rates of the Company, but such rate regulation could result in denial of
requested rate increases and in reduction of existing rate levels.
The Cable Act of 1992 prohibits cable systems which have addressable technology
and addressable converters in place from requiring cable subscribers to purchase
service tiers above the basic level of service as a condition to purchasing
premium movie channels. If cable systems do not have such addressable technology
or addressable converters in place, they are given up to ten years to comply.
RETRANSMISSION CONSENT
The Cable Act of 1992 establishes a choice for broadcasters between "must carry"
rights (as described below) or "retransmission consent" rights. As of October
1993, cable operators are required to secure permission from broadcasters that
have selected retransmission consent before retransmitting the broadcaster's
television signals. Local and distant broadcasters can require cable operators
to make payments as a condition to granting such consent for carriage of the
broadcast station on the cable system. This requirement has the potential of
significantly increasing the cost of carriage of broadcast stations on the
Company's cable systems.
7
<PAGE> 8
MUST CARRY REQUIREMENTS
The Cable Act of 1992 imposes obligations to carry "local" broadcast stations
should such stations choose a "must carry" right as opposed to the
"retransmission consent" right described above. Generally, the cable operator
must dedicate up to approximately one-third of its channel capacity for carriage
of commercial television stations and additional channels for non-commercial
television stations.
PROGRAMMING COSTS AND EXCLUSIVITY
Pursuant to the Cable Act of 1992 the FCC has adopted regulations regarding the
sale and acquisition of cable programming in which a cable operator has an
attributable interest. The legislation and the subsequent FCC regulations will
preclude most exclusive programming contracts, will limit "volume discounts" for
programming that can be offered to affiliated cable operators, and will require
that such cable programmers make their programming services available to
competing video technologies such as wireless cable systems and direct to the
home broadcast satellite operators on terms and conditions that do not
discriminate against such competing technologies.
OWNERSHIP RESTRICTIONS
The Cable Act of 1984 codifies the FCC's regulatory cable cross-ownership
restrictions which restrict common ownership of television broadcasting stations
and cable television systems within the television broadcast station's broadcast
area. Additionally, local telephone companies are prohibited from providing
cable television services within their telephone service areas unless the area
is deemed "rural" or unless a waiver is obtained from the FCC. The FCC has
indicated its intention to expand the rural exemption and to relax the waiver
standards to make it easier for telephone companies to obtain such waivers and
has recommended to Congress elimination of the telephone/cable cross-ownership
restrictions in the Cable Act of 1984. In addition, a number of recent court
decisions have held that the telephone/cable cross-ownership restrictions are
unconstitutional and unenforcable.
The FCC recently authorized so-called "video dialtone" services, by which
independent programmers may provide video services to the home over
telephone-provided circuits, thereby by-passing the local cable system. The FCC
has declared that such services would require no local franchise or payment to
the local government authority, but that ruling is now being litigated. The FCC
decision allows telephone companies to acquire a limited financial interest in
programming services, but currently limits their delivery role to that of a
traditional "common carrier." However, the FCC is considering proposals to
reduce the limitations on telephone company involvement in programming. The
FCC's actions, related proposals advanced in Congress, and recent court
decisions suggest that greater involvement and competition from telephone
companies in the cable industry must be anticipated.
Pursuant to the Cable Act of 1992 the FCC has adopted regulations establishing
limits on the number of cable subscribers a person is authorized to reach
through cable systems owned by such person, or in which such person has an
attributable interest, and establishing limits on the number of channels on a
cable system that can be occupied by a video programmer in which a cable
operator has an attributable interest. Additionally, cable operators are
prohibited from selling a cable system within three years of acquisition or
construction of such cable system.
CUSTOMER SERVICE/TECHNICAL STANDARDS
Pursuant to the Cable Act of 1992 the FCC has adopted regulations establishing
comprehensive standards for customer service and technical system performance.
Franchising authorities are allowed to enforce stricter customer service
requirements than the FCC standards.
OTHER PROVISIONS
The Cable Act of 1992 contains a host of other regulatory provisions. Together
with the Cable Act of 1984, a comprehensive regulatory framework for cable
television systems has been created. Violation by a cable operator of the
statutory provisions or the rules and regulations of the FCC can subject the
operator to substantial monetary penalties and other significant sanctions.
8
<PAGE> 9
The majority of the Cable Act of 1984 remains in place. The Cable Act of 1984
continues to: (a) affirm the right of franchising authorities to award one or
more franchises for cable; (b) require cable television systems with 36 or more
"activated" channels to reserve a percentage of such channels for commercial use
by unaffiliated third parties; (c) permit franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for public,
educational and government access; (d) limit the amount of fees required to be
paid by the cable operator to franchise authorities to a maximum of 5% of annual
gross revenues; (e) provide subscribers an opportunity to lock out offensive
channels from personal reception; (f) establish a federal policy for use of
subscriber lists and subscriber information; (g) establish civil and criminal
liability for unathorized reception or interception of programming offered over
a cable television system or satellite delivered services; and (h) contain
provisions governing cable operator's compliance with equal employment
opportunity programs.
Many of the specific obligations imposed on cable television systems under these
laws and regulations are complex, burdensome and will increase the Company's
cost of doing business. Various provisions of the Cable Acts of 1984 and 1992
have been appealed in the courts. The outcome of those appeals and the potential
impact on the legislation and the Company is uncertain. In addition, the
constitutionality of various aspects of the cable television franchising process
has been called into question by recent court decisions. See "Business -
Franchises".
Copyright Act
Cable television systems are subject to the Copyright Act of 1976 (the
"Copyright Act"). The Copyright Act requires the carrier of television signals
to have a copyright license. The license for television broadcast signals is
compulsory under the provisions of this Act and subjects the licensee to
compliance with certain copyright and FCC regulations. Additionally, a
semiannual royalty payment must be made to the U. S. Copyright Office and is
generally calculated as a percentage of each system's gross receipts. The U. S.
Copyright Office is empowered to review and increase copyright rates.
Carriage of any television broadcast station by a cable system in a manner
inconsistent with applicable FCC regulations, the Copyright Act, or copyright
regulations can subject the cable system operator to full copyright liability,
including a potential copyright infringement action for material damages and
suspension of the operator's compulsory license. Cable systems do not receive a
compulsory license and are subject to the general copyright laws, with respect
to the transmission of nonbroadcast programming.
Various legislative proposals have been introduced and considered from time to
time in Congress that, if adopted, would materially revise the Copyright Act.
The proposals include, among other things, a significant increase in the rate
structure for royalty fees, imposition of restrictions on carriage of television
broadcast programming and elimination of the compulsory license for cable system
carriage of television broadcast signals. The FCC has recommended to Congress
the elimination of the cable compulsory license and similar recommendations have
been made by other government agencies and interested parties. Although none of
these bills have been enacted, it can be expected that similar proposals to
change the Copyright Act and royalty fee structure will be made in the future,
and if enacted, could have an unfavorable impact on the Company.
Availability of Supplies
The Company experiences no difficulty in obtaining equipment or supplies.
Employees
On October 31, 1994, the Company had 991 full-time employees, none of
whom was represented by a union. The Company has not experienced any work
stoppages and considers its employee relations to be good.
9
<PAGE> 10
Item 2. Properties
The Company's principal physical assets consist of operating plant and
equipment, including signal receiving apparatus, headends and distribution plant
and equipment for each of its cable television systems. The signal receiving
apparatus typically includes a tower, antennae and ancillary electronic
equipment for reception of over-the-air broadcast television signals, and earth
stations and ancillary electronic equipment for reception of satellite signals.
Headends, consisting of associated electronic equipment necessary for the
reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist of coaxial cables,
optical fibers and related electronic equipment and customer connection devices
(principally converters). The Company owns the receiving equipment, headends
and distribution equipment and property, and owns or leases small parcels of
property for the receiving sites and for business offices.
The Company's cables are generally attached to utility poles covered by rental
agreements with local utility companies, although approximately 15% of the
Company's cables are buried in trenches.
After the expiration of an initial term of one to three years, pole rental
agreements generally are terminable by the utility companies upon six months
notice or less. The Company's activities are dependent upon its pole agreements,
and substantially increased pole attachment fees or the termination of pole
agreements would have a material adverse effect on the Company. Although the
Company believes that any such termination is unlikely and knows of no situation
in which such a termination of rights has been exercised, no assurance can be
given that the utility companies will not attempt to exercise their termination
rights.
The Company believes that its properties are in good condition and are suitable
to and adequate for its business. The physical components of cable television
systems require maintenance and also require upgrading to keep pace with
technological advances.
The Company leases a building in Tyler, Texas, which houses its headquarters.
The building is owned by a corporation controlled by an officer of the Company
and the Company may cancel the lease at any time. The Company believes the terms
of such lease are at least as favorable as would be obtainable from a
third-party lessor. The Company also owns and leases various offices, tower
sites, microwave locations, test equipment and service vehicles, no one of which
is considered material to the Company or its business.
Item 3. Legal Proceedings
The Company is a party to certain legal proceedings arising in the ordinary
course of business, none of which are believed to be material to the Company's
business or operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
10
<PAGE> 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Price Range of Common Stock
The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol "TCAT". The
following table shows the range of closing bids for the common stock of the
Company in the over-the-counter market for each fiscal quarter beginning with
the quarter ended January 31, 1993 as reported by NASDAQ. The quotations
represent prices in the over-the-counter market between dealers in securities,
do not include retail markup, markdown or commission and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
01/31/93 23.25 18.38
04/30/93 26.00 19.50
07/31/93 23.25 19.00
10/31/93 29.63 22.25
01/31/94 29.38 24.13
04/30/94 28.00 18.63
07/31/94 23.63 19.38
10/31/94 24.88 22.13
</TABLE>
(b) Approximate Number of Equity Security Holders
<TABLE>
<CAPTION>
Approximate Number of
Equity Holders (as of
Title of Class January 6, 1995)
-------------- ---------------------
<S> <C>
Common Stock $0.10 Par Value 2,950
</TABLE>
(c) Dividends
During the fiscal year ended October 31, 1994, cash dividends were paid to
shareholders in the amount of $10,831,640 ($.11 per share paid in January,
April, July and October, 1994). During the prior fiscal year, $9,846,089 in cash
dividends were paid to shareholders ($.10 per share paid in January, April,
July and October, 1993). At the December 6, 1994 regularly scheduled Board of
Directors meeting, a cash dividend of $.12 per share for the quarter ending
January 31, 1994 was declared. This dividend was payable January 10, 1995 to
shareholders of record as of December 23, 1994.
The Board of Directors of the Company intends to continue to declare comparable
dividends and will determine dividend policy, including amounts and frequency
thereof, taking into account, among other things, the amount of funds legally
available, and the Company's earnings, financial condition and other cash
requirements.
Item 6. Selected Financial Data
The selected financial data should be read in conjunction with, and is qualified
in its entirety by reference to, the consolidated financial statements and the
notes thereto set forth elsewhere in this Annual Report on Form 10-K.
11
<PAGE> 12
<TABLE>
<CAPTION>
Year Ended October 31,
1994(1) 1993 1992 1991 1990
------------------------------------------------------------------
($000, except per-share amounts)
<S> <C> <C> <C> <C> <C>
Operations for the periods indicated:
Total Revenues $162,300 $152,291 $138,839 $127,090 $113,738
Costs and Expenses 141,225 131,842 123,850 118,597 108,983
Net Income 21,075 20,449 14,989 8,493 4,755
Earnings per share of Common Stock 0.86 0.83 0.61 0.35 0.20
Financial position at the end of the
periods indicated:
Total Assets 286,213 288,077 289,889 305,700 324,826
Term Debt 126,447 143,253 163,319 189,252 218,541
Total Shareholders' Equity 98,897 90,251 77,957 70,762 64,940
Cash Dividends per Common Share 0.44 0.40 0.34 0.28 0.24
</TABLE>
(1) The Company adopted Statement on Financial Accounting Standards
No. 109 "Accounting for Income Taxes" during the first quarter of
1994 by recognizing a one-time cumulative effect adjustment which
reduced net income by $1.9 million.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following historical table sets forth for the periods indicated certain
items in the Selected Financial Data as a percentage of total revenues.
<TABLE>
<CAPTION>
Percentage of Revenues for
Year Ended October 31,
1994 1993 1992
---------------------------------------
<S> <C> <C> <C>
Revenues from:
Basic and expanded basic subscriptions 68.5% 71.5% 72.4%
Premium subscriptions 18.0 18.0 18.8
Advertising 8.5 6.5 4.9
Other sources 5.0 4.0 3.9
---------------------------------------
Total Revenues 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 18.1% 17.1% 17.0%
Programming costs 22.5 21.7 21.2
Other operating expenses 3.6 3.3 3.4
Selling, general and administrative 6.8 6.9 7.7
Depreciation and amortization 20.7 21.9 23.6
---------------------------------------
Total operating expenses 71.7% 70.9% 72.9%
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Year Ended October 31,
1994 1993 1992
---------------------------------------
<S> <C> <C> <C>
Operating income 28.3% 29.1% 27.1%
Other income 1.0 0.2 0.2
Interest expense 6.0 7.2 9.5
Income tax 9.2 8.7 7.0
Cumulative effect of change in accounting principle 1.1 0.0 0.0
Net income 13.0 13.4 10.8
---------------------------------------
</TABLE>
Results of Operations
General. During the past three years, the Company has experienced increases
in revenues, operating income and net income reflecting increased subscriptions
due to internal growth, the acquisition and construction of additional systems
and subscription rate increases. During the period from November 1, 1991 through
October 31, 1994, revenues, operating income and net income increased at average
annual growth rates of approximately 9%, 14% and 39%, respectively.
1994 Compared to 1993
Fiscal year 1994 revenue increased by 7% over 1993 revenue. Approximately 14% of
the revenue increase was the result of increased revenue from existing
customers, 36% from internal growth in the number of subscribers, 40% from
additional advertising revenue and 10% from acquisitions. The Company's revenue
from advertising increased 40%, revenue from basic and expanded basic services
increased 2% and revenue from premium services increased 6%.
Operating expenses increased 8% in 1994 compared to 1993. Of the operating
expense increase, 41% was from increases in programming costs, 39% from
salaries, wages and benefits, 9% from other operating expenses, 7% from selling,
general and administrative and 4% from depreciation and amortization.
Programming costs increased 10%, salaries, wages and benefits 12%, other
operating expenses 16%, selling, general and administrative 6% and depreciation
and amortization 1%.
The Company's other income increased $1,342,000. Other income includes a pre-tax
gain of $1,459,000 from the sale of two cable television properties. Other
income also includes losses of $193,000 from the Company's investment in
affiliates reported under the equity method.
Interest expense decreased 11% as a result of the Company's repayment of term
debt.
The Company has adopted Statement on Financial Accounting Standards No. 109
"Accounting for Income Taxes" which has changed the Company's method of
accounting for income taxes to an asset and liability method. The Company
adopted FAS 109 during the first quarter of 1994 by recognizing a one-time
cumulative effect adjustment which reduced net income by $1.9 million. Net
income before the cumulative effect of FAS 109 was $23.0 million, a 12% increase
over 1993. Net income after recognition of FAS 109 was $21.1 million, a 3%
increase over 1993.
1993 Compared to 1992
Fiscal year 1993 revenue increased by 10% over 1992 revenue. Of the revenue
increase, approximately 42% was the result of increased revenue from existing
customers, 31% from growth in the number of subscribers, 23% from increased
advertising revenue and 4% from acquisitions. The Company's revenue from
advertising increased 47% in 1993. Operating expenses increased by 7% in 1993
compared to 1992. Of the operating expense increase, 53% was due to increased
programming costs and 38% to increased salaries, wages and benefits. Programming
costs increased 12% in 1993 over 1992. Salaries, wages and benefits increased
11%. The Company's cable advertising operations accounted for 43% of the
increase. Other operating expenses increased 5%, depreciation and amortization
increased 2% and selling, general and administrative decreased 2%. Interest
expense decreased 17% due to the repayment of term debt and declining interest
rates. Net income increased 36%.
13
<PAGE> 14
Liquidity and Capital Resources
The Company's capital expenditures during fiscal 1994 were primarily directed at
cable system construction, upgrading and rebuilding and purchases of converters
to be furnished to subscribers. Approximately $28.5 million of internally
generated funds was spent for system upgrading and expansion during fiscal 1994.
The Company anticipates a 5% increase in the amount of capital expenditures
needed for system upgrading and expansion during 1995 compared to 1994.
Approximately 90.1%, 75.8%, and 97.3%, respectively, of capital expenditures in
fiscal years 1994, 1993 and 1992 were directed at upgrading and rebuilding
existing systems, and approximately 9.9%, 24.2% and 2.7%, respectively, of
capital expenditures during such years were directed at acquisitions.
The Company anticipates paying approximately $8.8 million and $11.8 million in
interest expense and dividends, respectively, during fiscal 1995. The Company
anticipates incurring an additional $2.5 million in interest expense during 1995
relating to the Fayetteville/Russellville Acquisition, as described in Note 13,
if the transaction is consummated. Each of the foregoing items is expected to be
financed from operating cash flows. The Company does not anticipate a material
negative affect on liquidity on account of the payment of such items.
The Company's net cash provided by operating activities during the most recent
fiscal year increased to $60.5 million, up from $58.9 million in fiscal 1993 and
$50.6 million in fiscal 1992. The increase is a result of additional subscribers
in existing systems, increased revenue per subscriber and acquisitions, as more
fully explained above with respect to the Company's results of operations.
At October 31, 1994, the Company had $58.4 million borrowed under its revolving
credit agreements with six banks which provide for total credit of up to $102.3
million. The revolving credit agreements provide for interest at prime or, at
the Company's option, at a rate using a formula based on either the bank's
certificate of deposit interest rates or LIBOR.
During 1994, 1993 and 1992, the Company borrowed approximately $73.7 million,
$104.4 million and $39.6 million, respectively, and repaid approximately $90.5
million, $124.5 million and $65.5 million, respectively. At October 31, 1994,
the Company had outstanding term debt of approximately $126.4 million, bearing
interest at a weighted average rate of approximately 7.5%.
Under terms of the Company's current term debt, the Company will have scheduled
debt maturities of approximately $27.4 million, $24.5 million, $16.1 million,
$24.6 million and $24.6 million in fiscal 1995, 1996, 1997, 1998 and 1999,
respectively. The Company believes that cash flow from operations will be
adequate to fund these debt maturities.
One measure of liquidity is interest coverage. Interest coverage is the ratio
of operating income before depreciation and amortization ($79.6 million, $77.7
million and $70.4 million in 1994, 1993 and 1992, respectively) to interest
expense ($9.7 million, $11.0 million and $13.2 million in 1994, 1993 and 1992,
respectively). The Company's interest coverage ratio was 816%, 708% and 533% for
1994, 1993 and 1992, respectively.
Expenditures for rebuilding, upgrading and maintaining the Company's cable
systems and for converter purchases have been financed principally with cash
flow from operations and through bank borrowings and seller financing.
The Company believes that net cash provided by operating activities and the
Company's ability to obtain additional financing will provide adequate sources
of short-term and long-term liquidity in the future.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included under Item 14 of
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
14
<PAGE> 15
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Year First Elected
Name Age Present Office or Position Director
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert M. Rogers 68 Chairman of the Board of Directors 1981
and Chief Executive Officer
Fred R. Nichols 48 President, Chief Operating Officer 1981
and Director
Jimmie F. Taylor 41 Vice President, Chief Financial --
Officer and Treasurer
Jerry P. Yandell 56 Vice President-Operations --
Melvin R. Jenschke 53 Vice President-Engineering --
Martha S. Hensley 44 Secretary --
Wayne J. McKinney (2) 63 Director 1981
Ben R. Fisch, M.D. (1) 69 Director 1981
James F. Ackerman (1) 70 Director 1981
Kenneth S. Gunter (2) 61 Director 1984
A. W. Riter, Jr. (2) 70 Director 1981
Randall K. Rogers 35 Director and System Manager 1989
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Stock Option and Compensation Committee
Each of the foregoing persons has served in the above capacities since the
inception of the Company in 1981 unless otherwise indicated. Each director
serves until the next annual meeting of the Company's shareholders or until his
successor is duly elected and qualified. The Company's executive officers serve
at the discretion of the Board of Directors.
Robert M. Rogers founded the Company and each of its subsidiaries and has served
as Chairman of the Board of Directors and CEO of the Company and each of the
Company's subsidiaries since their inception. Mr. Rogers was President of the
Company from its inception in 1981 until September, 1990. Mr. Rogers has been
actively involved in the ownership and operation of cable television systems
since 1954. Mr. Rogers is the Chairman of the Board of Directors and an officer,
director and shareholder of the Affiliated Companies. He is a member of the
cable television Pioneer's Club.
15
<PAGE> 16
Fred R. Nichols is President, Chief Operating Officer and a director of the
Company. Prior to being named President in September, 1990, Mr. Nichols served
as Executive Vice President and a director of the Company since its inception,
Chief Operating Officer of the Company since December, 1983 and Secretary of the
Company from September, 1984 until December, 1990. He had been Treasurer of the
Company's subsidiaries from 1980 until 1985 when he was named President of TCA
Management Company and all other wholly-owned subsidiaries of the Company,
excluding VPI Communications, Inc. Mr. Nichols is currently Chairman of the
Cable Telecommunications Association (CATA), a trade association of the cable
industry. He is also on the Board of Directors of C-SPAN, a CATV network.
Jimmie F. Taylor is Vice President, Chief Financial Officer and Treasurer. Prior
to being named Vice President in December, 1990, Mr. Taylor served as Chief
Financial Officer and Treasurer of the Company since November 1, 1986. He had
been Controller of the Company's wholly-owned subsidiary, TCA Management
Company, since joining the Company in May, 1984. Immediately prior to joining
the Company, he was employed for nine years in public accounting. Mr. Taylor is
a Certified Public Accountant.
Jerry P. Yandell has served as a Vice President of the Company since March 25,
1987. He is Senior Vice President-Operations of TCA Management Company, and
has been Personnel Director since March, 1979. Immediately prior to joining the
Company, he was employed as Personnel Director for General Electric in Tyler,
Texas, where he had been for eighteen years.
Melvin R. Jenschke has served as a Vice President of the Company since March 25,
1987. He has been with the Company since 1969 serving in several capacities
prior to becoming Senior Vice President-Engineering for TCA Management Company
in 1983.
Martha S. Hensley was appointed Secretary of the Company in December, 1990. Mrs.
Hensley has served as Vice President-Administration of TCA Management Company
since September, 1982. She is also Secretary of the Company's subsidiaries.
Wayne J. McKinney has been actively engaged in the cable television business
since 1958 and was employed by the Company or its subsidiaries from 1958 until
his retirement in January, 1986, serving as a Director and Senior Vice President
- -Engineering of the Company from its inception and as Senior Vice President or
Vice President, Chief Engineer and/or Director of Engineering of the Company's
subsidiaries. Mr. McKinney has been a member of the cable television Pioneer's
Club since 1979, and is a charter member of the Society of Cable Television
Engineers.
Ben R. Fisch, M.D., has been a director of the Company or its subsidiaries since
1967. Dr. Fisch has been retired from medical practice in Tyler, Texas since
July, 1986.
A. W. Riter, Jr. retired as Chairman of the Board of Directors and Chief
Executive Officer of NCNB Texas-Tyler, Texas (successor to First RepublicBank
Tyler), on September 30, 1988. He held the same positions with First
RepublicBank Tyler and its predecessor, InterFirst Bank Tyler, from August, 1979
to June, 1988 and served as President of Peoples National Bank (predecessor of
InterFirst Bank Tyler) from 1964 until 1979. Mr. Riter served as a director and
Vice President of most of the Company's subsidiaries from time to time from 1965
to 1974.
James F. Ackerman is President of Cardinal Ventures, LLC in Indianapolis,
Indiana. Cardinal Ventures, LLC is an equity investor in small businesses. Mr.
Ackerman had been President of Jim Ackerman and Associates, Inc., a financial
consulting firm to the cable television industry from October, 1984 to December
31, 1994. From 1973 to December 1, 1984, he was Senior Vice President of A.G.
Becker Paribas, Inc. Mr. Ackerman has been engaged in investment banking
activities with respect to the cable television industry since 1959 and had
served as a partner of Becker Communications Associates, a cable television
investment partnership, from 1973 to 1989. He was also Chairman and Chief
Executive Officer of Cardinal Communications, Inc., an Indiana cable television
operator, a position he had held from 1971 until the company was sold in 1993.
Mr. Ackerman is a former President and Director of the Indiana Cable Television
Association, a past Director of the National Cable Television Association and a
member of the cable television Pioneer's Club.
16
<PAGE> 17
Kenneth S. Gunter has been Executive Vice-President of Columbia International,
Inc., a cable television multiple system operator, since 1985. From 1972 to
1985, he served as Executive Vice-President of UA-Columbia Cablevision, Inc. Mr.
Gunter has 36 years of experience in the cable television industry, working in
all phases of management and engineering. He is a past Director of the National
Cable Television Association, a Senior Member and past Director of the Society
of Cable Television Engineers, and a member of the cable television Pioneer's
Club.
Randall K. Rogers has been with TCA since 1983, previously serving as system
manager in Big Spring and Huntsville, Texas. Since 1989, Mr. Rogers has served
as general manager of the Company's operations in Bryan/College Station, Texas.
Mr. Rogers is the son of Robert M. Rogers.
For information with respect to the Affiliated Companies and the relationship
between the above persons and the Affiliated Companies, see "Business-
Management Services".
The Board of Directors held four meetings during fiscal 1994. The Board of
Directors has two standing committees-the Audit Committee and the Compensation
and Stock Option Committee.
The functions performed by the Audit Committee include: recommending to the
Board of Directors selection of the Company's independent accountants for the
ensuing year; reviewing with the independent accountants and management the
scope and result of the audit; reviewing the independence of the independent
accountants; reviewing actions by management and independent accountants'
recommendations; and meeting with management and the independent auditors to
review the effectiveness of the Company's system of internal control. The Audit
Committee met two times during fiscal 1994.
The Compensation and Stock Option Committee met twice during 1994. The functions
performed by this committee include: reviewing and recommending the Company's
executive salary structure; reviewing the Company's Incentive Stock Option Plan
(and granting options thereunder); recommending directors' fees; and approving
salary and bonus awards to certain key employees.
The information called for by Item 11, Executive Compensation, Item 12, Security
Ownership of Certain Beneficial Owners and Management, and Item 13, Certain
Relationships and Related Transactions, is hereby incorporated by reference to
the Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders presently scheduled to be held March 30, 1995, which shall be filed
with the Securities and Exchange Commission within 120 days of the end of the
Registrant's last fiscal year.
17
<PAGE> 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following consolidated financial statements of TCA Cable TV, Inc. and
Subsidiaries, otherwise includable under Item 8, are included in this Item 14.
<TABLE>
<CAPTION>
14 (a)(1) TCA Cable TV, Inc. and Subsidiaries Financial Statements: Pages
--------------------------------------------------------- -----
<S> <C>
(i) Report of Independent Certified Public Accountants. F1
(ii) Consolidated Balance Sheets as of October 31, 1994 and 1993. F2
(iii) Consolidated Statements of Operations for the years ended F3
October 31, 1994, 1993 and 1992.
(iv) Consolidated Statements of Shareholder's Equity for the years F4
ended October 31, 1994, 1993 and 1992.
(v) Consolidated Statements of Cash Flows for the years ended F5-F6
October 31, 1994, 1993 and 1992.
(vi) Notes to Consolidated Financial Statements. F7-F13
14 (a)(2) Financial Statement Schedules:
None.
</TABLE>
14 (a)(3) Exhibits
Exhibit
2 None.
3(a) Articles of Incorporation and Bylaws. *1
3(b) Articles of Amendment to Articles of Incorporation. *2
3(c) Articles of Amendment to Articles of Incorporation. *2
3(d) Articles of Amendment to Articles of Incorporation. *6
4(a) Form of Stock Certificate. *1
9 None.
10(a) Sample Form of Affiliated Company Management Agreement. *1
10(b) TCA Deferred Savings and Retirement Plan. *4
10(c) Office building lease. *5
18
<PAGE> 19
Exhibit
10(d) TCA Cable TV, Inc. Amended and Restated Incentive Stock Option
Plan. *2
10(e) Credit Agreement dated September 13, 1989 between Texas
Commerce Bank National Association and TCA Cable TV, Inc. *3
10(f) Note Agreement dated as of September 27, 1989 by and between the
Prudential Insurance Company of America and TCA Cable TV, Inc. *3
10(g) First Amendment dated and effective April 29, 1992 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(h) Credit Agreement between TCA Cable TV, Inc. and NationsBank of Texas,
N.A. dated March 31, 1993 *5
10(i) Second Amendment dated and effective April 23, 1993 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(j) Third Amendment dated and effective October 31, 1994 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(k) Asset and Purchase Agreement dated January 20, 1995 by and between
Tele-Communications of Arkansas Limited Partnership and Time Warner
Entertainment L. P., through its division Time Warner Cable
Ventures. *3
10(l) Asset and Purchase Agreement dated January 20, 1995 by and between
Tele-Communications of Northwest Arkansas Limited Partnership and
Time Warner Entertainment L. P., through its division Time Warner
Cable Ventures. *3
10(m) Limited Partnership Agreement of McMillian Partners, L. P. dated
January 20, 1995. *3
10(n) Limited Partnership Agreement of Tele-Communications of Arkansas
Limited Partnership dated January 20, 1995. *3
10(o) Limited Partnership Agreement of Tele-Communications of Northwest
Arkansas Limited Partnership dated January 20, 1995. *3
11 None.
12 None.
13 None.
16 None.
18 None.
21 Subsidiaries of the Registrant. *3
22 None.
19
<PAGE> 20
Exhibit
23 Consent of Coopers & Lybrand. *3
24 None.
27 Financial Data Schedule *3
28 None.
99 None.
*1 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1, File No. 2-75516, and incorporated by
reference herein.
*2 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-8, File No. 33-21901, and incorporated by
reference herein.
*3 Filed herewith.
*4 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-8, File No. 2-88892, and incorporated by
reference herein.
*5 Previously filed as an exhibit to Registrant's Form 10-K filed
January 27, 1994 and incorporated by reference herein.
14(b) Reports on Form 8-K:
None.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(REGISTRANT)
Dated: 01/27/95 /s/ Robert M. Rogers
----------- ------------------------------------
Robert M. Rogers
Chairman and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
Dated: 01/27/95 /s/ Robert M. Rogers
----------- ---------------------------------------
Robert M. Rogers, Chairman and
Chief Executive Officer
Dated: 01/27/95 /s/ Fred R. Nichols
----------- ---------------------------------------
Fred R. Nichols, President, Chief
Operating Officer and Director
Dated: 01/27/95 /s/ Wayne J. McKinney
----------- ---------------------------------------
Wayne J. McKinney, Director
Dated: 01/27/95 /s/ Ben R. Fisch
----------- ---------------------------------------
Ben R. Fisch, M.D., Director
Dated: 01/27/95 /s/ Kenneth S. Gunter
----------- ---------------------------------------
Kenneth S. Gunter, Director
Dated: 01/27/95 /s/ Randall K. Rogers
----------- ---------------------------------------
Randall K. Rogers, Director
Dated: 01/27/95 /s/ A. W. Riter, Jr.
----------- ---------------------------------------
A. W. Riter, Jr., Director
Dated: 01/27/95 /s/ James F. Ackerman
----------- ---------------------------------------
James F. Ackerman, Director
Dated: 01/27/95 /s/ Jimmie F. Taylor
----------- ---------------------------------------
Jimmie F. Taylor, Vice President,
Chief Financial Officer and Treasurer
Dated: 01/27/95 /s/ Robert A. Roseman
----------- ---------------------------------------
Robert A. Roseman, Controller
TCA Management Company
</TABLE>
21
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
TCA Cable TV, Inc.:
We have audited the consolidated financial statements of TCA Cable TV, Inc. and
Subsidiaries as listed in item 14(a) of this Form 10-K. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of TCA
Cable TV, Inc. and Subsidiaries as of October 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
January 20, 1995
F-1
<PAGE> 23
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
----------------- ----------------
<S> <C> <C>
Cash $ 2,445,112 $ 1,450,276
----------------- ----------------
Accounts receivable, subscribers 4,913,712 4,723,024
----------------- ----------------
Accounts receivable, other 164,904 461,796
----------------- ----------------
Investments 2,223,038
----------------- ----------------
Property, plant and equipment, at cost:
Land 2,661,055 2,636,485
Distribution systems 243,607,084 225,115,438
Transportation equipment 6,513,387 5,932,948
Other 22,553,063 20,724,468
----------------- ----------------
275,334,589 254,409,339
Less accumulated depreciation (162,749,992) (147,998,653)
----------------- ----------------
112,584,597 106,410,686
----------------- ----------------
Other assets:
Intangibles, net of accumulated
amortization of $65,132,499 and
$53,536,525, respectively 163,386,733 174,407,377
Prepaid expenses 494,839 623,873
----------------- ----------------
163,881,572 175,031,250
----------------- ----------------
$ 286,212,935 $ 288,077,032
================ ===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES 1994 1993
---------------- ---------------
<S> <C> <C>
Accounts payable $ 5,357,363 $ 4,749,068
Accrued expenses 11,276,727 9,713,501
Subscriber advance payments 3,739,313 3,884,635
Income taxes payable 495,278 1,212,732
Deferred income taxes 40,000,000 35,012,886
Term debt 126,447,345 143,253,390
---------------- ---------------
187,316,026 197,826,212
---------------- ---------------
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; 24,733,261 and
24,706,696 shares issued, respectively 2,473,326 2,470,670
Additional paid-in capital 42,860,849 42,300,381
Retained earnings 56,266,488 46,023,523
---------------- ---------------
101,600,663 90,794,574
Less treasury stock at cost, 159,828 and
49,828 shares, respectively (2,703,754) (543,754)
---------------- ---------------
98,896,909 90,250,820
---------------- ---------------
$ 286,212,935 $ 288,077,032
=============== ==============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-2
<PAGE> 24
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- -------------- --------------
<S> <C> <C> <C>
CATV revenues $ 162,300,265 $ 152,291,268 $ 138,838,774
Operating expenses:
Salaries, wages and benefits 29,341,560 26,102,999 23,583,195
Programming costs 36,476,851 33,021,761 29,445,885
Other operating expenses 5,807,893 5,026,068 4,773,304
Selling, general and administrative 11,086,059 10,470,737 10,637,071
Depreciation and amortization 33,635,939 33,329,644 32,804,927
------------- -------------- --------------
116,348,302 107,951,209 101,244,382
------------- -------------- --------------
Operating income 45,951,963 44,340,059 37,594,392
Other income 1,662,688 320,515 289,493
Interest expense (9,747,932) (10,970,889) (13,213,291)
------------- -------------- --------------
Income before income taxes 37,866,719 33,689,685 24,670,594
------------- -------------- --------------
Provision for income taxes:
Current 11,805,000 11,192,000 6,611,000
Deferred 3,087,114 2,049,000 3,071,000
------------- -------------- --------------
14,892,114 13,241,000 9,682,000
------------- -------------- --------------
Income before cumulative effect of
change in accounting principle $ 22,974,605 $ 20,448,685 $ 14,988,594
Cumulative effect of change in
accounting principle (1,900,000)
------------- -------------- --------------
Net Income $ 21,074,605 $ 20,448,685 $ 14,988,594
============= ============== ==============
Earnings per common share before
cumulative effect of change in
accounting principle $ 0.93 $ 0.83 $ 0.61
Cumulative effect of change in accounting principle (0.07)
------------- -------------- --------------
Earnings per common share $ 0.86 $ 0.83 $ 0.61
============= ============== ==============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 25
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Common Stock Issued Additional
------------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock
---------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, October 31,1991 24,560,950 $ 2,456,095 $ 40,073,173 $ 28,776,124 $ (543,754)
Net income 14,988,594
Issuance of common stock 20,821 2,082 392,953
Stock options exercised 26,900 2,690 153,231
Cash dividends at $.34 a share (8,343,791)
---------- ----------- ------------- -------------- -------------
Balance, October 31, 1992 24,608,671 2,460,867 40,619,357 35,420,927 (543,754)
Net income 20,448,685
Issuance of common stock 70,856 7,086 1,518,026
Stock options exercised 27,169 2,717 162,998
Cash dividends at $.40 a share (9,846,089)
---------- ----------- ------------- -------------- -------------
Balance, October 31, 1993 24,706,696 2,470,670 42,300,381 46,023,523 (543,754)
Net income 21,074,605
Issuance of common stock 23,179 2,318 525,044
Stock options exercised 3,386 338 35,424
Cash dividends at $.44 a share (10,831,640)
Treasury stock purchased (2,160,000)
---------- ----------- ------------- -------------- -------------
Balance, October 31, 1994 24,733,261 $ 2,473,326 $ 42,860,849 $ 56,266,488 $ (2,703,754)
========== =========== ============ ============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-4
<PAGE> 26
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 162,261,147 $ 150,933,831 $ 138,539,752
Cash paid to suppliers and employees (79,791,539) (70,640,656) (67,166,327)
Other revenue received 391,800 366,033 375,428
Interest paid (9,840,838) (11,147,290) (13,987,265)
Income taxes paid (12,522,454) (10,601,029) (7,145,555)
--------------- ---------------- ---------------
Net cash provided by operating activities 60,498,116 58,910,889 50,616,033
--------------- ---------------- ---------------
Cash flows from investing activities:
Payments for purchases of companies
and CATV systems (3,116,975) (6,933,460) (449,215)
Capital expenditures (28,452,921) (21,658,411) (16,272,156)
Proceeds from sales of assets 1,828,538 58,548 57,510
--------------- ---------------- ---------------
Net cash used in investing activities (29,741,358) (28,533,323) (16,663,861)
--------------- ---------------- ---------------
Cash flows from financing activities:
Borrowings of term debt 73,699,990 104,399,999 39,608,375
Repayments of term debt (90,506,034) (124,465,451) (65,541,533)
Treasury stock purchased (2,160,000)
Proceeds from stock options exercised 35,762 165,715 155,921
Dividends paid (10,831,640) (9,846,089) (8,343,791)
--------------- ---------------- ---------------
Net cash used in financing activities (29,761,922) (29,745,826) (34,121,028)
--------------- ---------------- ---------------
Net increase (decrease) in cash and cash equivalents 994,836 631,740 (168,856)
Cash at beginning of year 1,450,276 818,536 987,392
--------------- ---------------- ---------------
Cash at end of year $ 2,445,112 $ 1,450,276 $ 818,536
============== =============== ==============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-5
<PAGE> 27
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------------- ---------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 21,074,605 $ 20,448,685 $ 14,988,594
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense 22,039,964 21,540,573 21,351,261
Amortization expense 11,595,975 11,789,071 11,453,666
(Gain) loss on sale of assets (1,463,491) 45,518 85,935
Share of (earnings) losses of affiliates 192,603
Deferred income taxes 4,987,114 2,049,000 3,071,000
Contribution of common stock to
retirement plan 527,362 462,612 395,035
(Increase) decrease in prepaid expenses 129,034 44,111 (219,995)
Increase in accounts receivable, subscribers (190,688) (1,499,205) (245,274)
(Increase) decrease in accounts receivable, other 296,892 119,676 (120,017)
Increase (decrease) in subscriber
advance payments (145,322) 22,092 66,269
Increase (decrease) in accrued
expenses 1,563,226 3,122,860 (330,949)
Increase (decrease) in income taxes payable (717,454) 590,971 (534,555)
Increase (decrease) in accounts
payable 608,296 174,925 655,063
--------------- ---------------- ---------------
Net cash provided by operating activities $ 60,498,116 $ 58,910,889 $ 50,616,033
============== =============== ==============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-6
<PAGE> 28
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENT PRESENTATION:
TCA Cable TV, Inc. (the "company" or "TCA") owns and operates cable
television ("CATV") systems in nonurban areas.
The consolidated financial statements include the accounts of TAL
Financial Corporation ("TAL"), a wholly-owned subsidiary of the company,
and TAL's wholly-owned subsidiaries: TCA Management Company; Teleservice
Corporation of America; Texas Community Antennas, Inc.; Texas Telecable,
Inc.; TCA Cable of Amarillo, Inc.; Telecable Associates, Inc.; Delta
Cablevision, Inc., Sun Valley Cablevision, Inc., VPI Communications,
Inc., and AvComm Corporation.
All significant intercompany transactions have been eliminated in
consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the related assets
as follows:
<TABLE>
<S> <C>
Distribution systems 5-15 years
Transportation equipment 5 years
Other 5-32 years
</TABLE>
Maintenance and repair costs are charged to expense as incurred. Major
replacements and betterments are capitalized. Upon sale or retirement, the
cost and accumulated depreciation applicable to the asset is removed from
the accounts and the resulting profit or loss is reflected in income.
Income Taxes
The company and its subsidiaries file a consolidated federal income tax
return. During the year, the Company adopted Statement on Financial
Accounting Standards No. 109 "Accounting for Income Taxes." This statement
requires the use of an asset and liability approach for financial
accounting and reporting for income taxes. Net income for 1994 was reduced
$1,900,000 or $.07 per share by the recognition of a one-time cumulative
effect adjustment from the adoption of FAS 109.
Intangibles
Intangible assets including franchises, noncompete agreements and
goodwill are recorded at cost. Intangible assets are amortized on a
straight-line basis over the expected useful lives of the assets which
range from 5 to 40 years.
Goodwill represents the excess of the cost of the acquisition over the
fair value of the net assets acquired and is being amortized on a
straight-line basis over 40 years. At each balance sheet date, management
assesses whether there has been a permanent impairment in the value of
goodwill by considering current operating results, trends and prospects.
Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Investments
Investments in affiliates in which the Company's voting interest is 20% to
50% are accounted for under the equity method. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the
Company's share of the net earnings or losses of the affiliates as they
occur rather than as dividends or other distributions are received. The
Company's share of the results of operations of investees is not material.
F-7
<PAGE> 29
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Reclassifications
The accompanying financial statements for the year ended October 31, 1992
reflect certain reclassifications to conform with classifications adopted
in 1993. These reclassifications had no effect on net income or
shareholders' equity as previously reported.
3. INTANGIBLE ASSETS:
Intangible assets consists of the following at October 31:
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Covenants not to compete $ 33,152,423 $ 33,152,423
Franchises 135,991,565 139,267,743
Goodwill 59,375,244 55,523,736
-------------- --------------
228,519,232 227,943,902
Less: Accumulated amortization (65,132,499) (53,536,525)
-------------- --------------
$ 163,386,733 $ 174,407,377
============== ==============
</TABLE>
4. TERM DEBT:
Term debt consists of the following:
<TABLE>
<CAPTION>
October 31,
-------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Notes payable to three companies payable in semiannual
installments beginning February 1993, due August 1999,
bearing interest at 9.0% $68,000,000 $84,000,000
Revolving bank credit, converting to a term loan April 1996,
payable in 20 quarterly installments commencing July 1996, with
interest at prime, LIBOR or a rate based on certificate of
deposit rates, unused portion of $17,000,000 and $12,000,000
as of October 31,1994 and 1993, respectively,with a commitment fee
of 1/4% per annum on the unused portion (a) 15,000,000 20,000,000
Revolving bank credit, terminating February 29, 2000,
with 20 quarterly commitment reductions commencing May 1995,
with interest at prime or LIBOR, unused portion of $20,000,000
and $22,500,000 as of October 31, 1994 and 1993, respectively
with a commitment fee of 1/4% per annum on the unused portion (a) 25,000,000 22,500,000
</TABLE>
F-8
<PAGE> 30
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Term Debt, continued:
<TABLE>
<CAPTION>
October 31,
-------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Revolving bank credit, terminating June 1995, with interest at
prime or LIBOR, unused portion of $4,000,000 and $300,000
as of October 31, 1994 and 1993, respectively, with no
commitment fees (a) $11,000,000 $9,700,000
Revolving bank credit, terminating April 1996, with interest at
prime, LIBOR or a rate based on certificate of deposit rates,
unused portion of $1,000,000 as of October 31, 1994 and 1993,
with a commitment fee of 1/4% per annum on the unused portion (a) 7,000,000 7,000,000
Other 447,345 53,390
------------ ------------
$126,447,345 $143,253,390
============ ============
</TABLE>
(a) The weighted average interest rate on the Company's revolving bank
credit at October 31, 1994 was 5.84%.
The company's revolving bank credit agreements and the term loan
agreements contain restrictive covenants including minimum cash flow
ratios. Under these covenants, the Company's dividends, capital
expenditures and fixed principal payments could also be limited.
Scheduled maturities of term debt at October 31, 1994, are as follows:
<TABLE>
<S> <C>
1995 $27,406,666
1996 24,507,364
1997 16,101,885
1998 24,571,487
1999 24,572,428
Thereafter 9,287,515
------------
$126,447,345
============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES:
TCA Management Company performs all accounting and management services for
two CATV systems owned by affiliated companies (the "affiliated
companies"). Revenues received by TCA Management Company from the
affiliated companies (which equal an expense reimbursement plus a profit)
are included in CATV revenues and related expenses are included in
operating expenses. These amounts are not material.
The company leases its headquarters building from a company partially
owned by an officer and director of TCA. The annual lease expense was
$324,784, $393,744 and $393,744 for 1994, 1993 and 1992, respectively.
The Company purchased distribution system construction services from a
partnership partially owned by a director of the Company. During 1994,
transactions with the partnership totaled $816,705, all of which were
capitalized.
F-9
<PAGE> 31
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. CONTINGENCIES AND COMMITMENTS:
Annual rental expense for utility poles and tower sites for the years
ended October 31, 1994, 1993 and 1992 was approximately $1,482,000,
$1,490,000 and $1,411,000, respectively.
Rental expense for all rental agreements for the years ended October 31,
1994, 1993 and 1992 was approximately $2,288,000, $2,156,000 and
$2,050,000, respectively.
7. INCOME TAXES:
The following is a reconciliation of taxes computed at the statutory
federal income tax rate with the provision for income taxes in the
consolidated financial statements for the three years ended October 31:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Income before income taxes $37,866,719 $33,689,684 $24,670,594
=========== =========== ===========
Statutory federal rate 35.0% 34.8% 34.0%
Provision for federal
income taxes at the
statutory federal rate $13,253,352 $11,735,240 $ 8,388,002
State income taxes 1,362,000 1,151,936 764,945
Amortization of goodwill 317,300 362,174 530,617
Other (40,538) (8,350) (1,564)
----------- ----------- -----------
Provision for income taxes $14,892,114 $13,241,000 $ 9,682,000
=========== =========== ===========
</TABLE>
The provision for deferred income taxes of $40,000,000 and $35,012,886 at
October 31, 1994 and 1993, respectively, is the tax effect of a temporary
difference between allowable depreciation and amortization for tax
purposes and depreciation and amortization provisions under generally
accepted accounting principles. The Company does not have any other
material temporary differences necessitating a provision for deferred
income taxes.
8. EARNINGS PER COMMON SHARE:
Earnings per common share are computed using the weighted average number
of shares outstanding during the period, including common stock
equivalents: 24,638,135 shares for 1994, 24,638,061 shares for 1993, and
24,562,941 shares for 1992.
F-10
<PAGE> 32
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. SALES AND ACQUISITIONS:
On July 1, 1994, the Company acquired the assets of the cable television
system serving 411 subscribers in Elm Springs, Arkansas and parts of
Springdale, Arkansas. The cable television system is located adjacent to,
and will be operated by, a currently owned system of the Company. The
acquisition was funded by the payment of $540,465 in cash obtained from
operations.
On June 1, 1994, the Company acquired 50% of the common stock of TCA
Communications, Inc. ("TCAC"). TCAC is a new corporation whose initial
purpose is to sell long distance telephone services in the cable
television communities presently served by the Company and in other
adjacent markets. The acquisition was funded by the payment of $2 million
in cash obtained from operations. The remaining 50% of TCAC is owned by a
privately held independent telephone company.
In April, 1994, the Company acquired 80% of the common stock of AvComm
Corporation ("AvComm"), a new company formed to sell telecommunications
services. The purchase price of $160,000 was obtained from operations.
In September, 1994 the Company acquired the remaining 20% of the common
stock of AvComm for $172,800 in cash from operations. The consolidated
financial statements include the accounts of AvComm. All material
intercompany transactions and balances have been eliminated.
In March, 1994, the Company acquired 40% of the stock of Intermedia
Technologies, Inc. The Company also acquired a 40% interest in Intermedia
Technologies, Ltd., a limited partnership engaged in telecommunications
engineering and construction. The remaining 60% of both entities is owned
by a director of the Company and his son. Intermedia Technologies,
Inc. is the general partner of Intermedia Technologies, Ltd. The
Company's initial investment in both entities was $122,333 paid in cash
from operations. During 1994, the Company invested an additional $293,308
in Intermedia Technologies, Ltd.
On March 1, 1994, the Company sold the assets of the cable television
systems serving 807 subscribers in two cities. The sales price was
$1,008,750 resulting in a pre-tax gain of approximately $900,000 and an
increase in net income of approximately $549,000 or $0.02 per share.
On December 1, 1993, the Company sold the assets of a cable television
system serving 641 subscribers in one city. The sales price was $769,200
resulting in a pre-tax gain of approximately $559,000 and an increase in
net income of approximately $341,000 or $0.01 per share.
On July 1, 1993, the Company acquired the assets of the cable television
systems serving the towns of Tontitown, Cave Springs and Goshen, Arkansas
and parts of Washington County and Benton county, Arkansas. these cable
television plants are adjacent to, and will be operated by, a currently
owned system of the Company. The acquisition was funded by the payment of
$4,800,000 in cash obtained from operations.
On March 1, 1993 the company acquired the assets of the cable television
system located in Hearne, Texas. The acquisition was funded by the
payment of approximately $1,200,000 in cash obtained from operations and
the issuance of 50,000 shares of the Company's common stock.
On February 1, 1993 the company acquired the assets of a cable television
advertising company. The purchase price of $900,000 was financed through
cash flow.
These acquisitions were accounted for as purchases, and accordingly,
results of operations of the acquired assets have been included in the
consolidated financial statements from the dates of acquisition.
The pro forma operating results for the fiscal 1994 and 1993 acquisitions
as though the acquisitions had been made at the beginning of the
respective years would not result in material differences in revenues, net
income or earnings per share, and accordingly, have not been disclosed.
F-11
<PAGE> 33
10. INCENTIVE STOCK OPTION PLAN:
In January 1982, the company adopted an incentive stock option plan
for the benefit of key employees. Under the terms of the plan, options to
acquire up to 410,000 shares of common stock may be granted at no less
than 100% of the fair market value on the date of grant.
Transactions during 1994, 1993 and 1992 under this plan are summarized
below:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Options outstanding at beginning of year 109,728 111,000 147,184
Granted 47,300 50,400 0
Exercised (4,822) (46,572) (35,684)
Cancelled 0 (5,100) (500)
------- ------- -------
Options outstanding at end of year 152,206 109,728 111,000
======= ======= =======
Options exercisable at end of year 67,231 57,353 90,225
======= ======= =======
Average price of options:
Granted during year $24.45 $21.00 $0.00
Exercised during year 15.98 15.37 9.45
Outstanding at end of year 20.38 18.44 15.65
</TABLE>
11. DEFERRED SAVINGS AND RETIREMENT PLAN:
Effective September 1, 1983, the company and several of its affiliates
adopted a deferred savings and retirement plan covering all employees with
at least one year of service.
Employees may elect to contribute a portion of their compensation to the
plan with the first one percent of their earnings being mandatory. The
company may contribute up to an amount equal to the employee's
contributions but not in excess of three percent of the employee's
earnings. The company anticipates that all or substantially all of their
discretionary and matching contributions will consist of registered shares
of common stock of the company. The company's contributions for the years
ended October 31, 1994, 1993 and 1992 were $527,362, $462,612 and
$395,035, respectively.
12. SUPPLEMENTARY INCOME STATEMENT INFORMATION:
The following amounts of certain expenses are included in the accompanying
consolidated statements of operations:
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $1,769,359 $1,533,216 $1,492,303
========== ========== ==========
Taxes, other than income taxes:
CATV Franchise $ 177,775 $1,795,676 $2,083,658
Property 1,980,245 1,954,256 1,805,312
Other 395,278 216,584 251,220
---------- ---------- ----------
$2,553,298 $3,966,516 $4,140,190
========== ========== ==========
Rents $2,288,309 $2,156,137 $2,050,453
========== ========== ==========
Copyright fees $1,182,935 $1,448,094 $1,425,464
========== ========== ==========
</TABLE>
Due to FCC regulations implemented effective September 1, 1993, CATV
Franchise taxes based on gross receipts are treated as pass-through items.
Revenues and CATV Franchise taxes for 1994 no longer reflect the taxes
received or paid where the tax is based on gross receipts rather than
subscribers.
F-12
<PAGE> 34
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Subsequent Events:
At the December 6, 1994 directors' meeting, a cash dividend of $0.12 was
declared. This dividend is to holders of record on December 23, 1994 and
payable on January 10, 1995.
On January 20, 1995, the Company invested as a limited partner in two
partnerships. Those partnerships have entered into agreements to purchase
cable television systems operating in Fayetteville, Russellville,
Clarksville, Paris and Booneville, Arkansas and surrounding areas
("Fayetteville/Russellville Acquisition"). The transaction includes the
issuance of a minority tax certificate and is subject to regulatory
approval. The systems to be purchased by the partnerships serve
approximately 34,300 basic subscribers. The aggregate purchase price is
approximately $65 million. The transaction is expected to close by May
15, 1995.
14. Quarterly Financial Information (Unaudited):
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
January 31 April 30 July 31 October 31
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenues:
1994 $39,278,593 $39,848,022 $41,077,677 $42,095,973
1993 36,650,223 37,843,791 38,304,936 39,492,318
Operating income:
1994 11,195,577 10,653,148 11,774,802 12,328,436
1993 10,603,282 10,983,995 11,060,758 11,692,024
Net income:
1994 3,864,484 5,762,913 5,353,891 6,093,317
1993 4,774,828 5,075,920 4,987,571 5,610,366
Earnings per common
share:
1994 $0.16 $0.24 $0.21 $0.25
1993 $0.19 $0.21 $0.20 $0.23
</TABLE>
Net income for the first quarter of 1994 was reduced $1,900,000 or $.07 per
share by the recognition of a one-time cumulative effect adjustment from
the adoption of FAS 109. See note 2.
15. Fair Value of Financial Instruments:
The carrying amount of cash and cash equivalents, accounts receivable,
subscribers and accounts payable approximates fair value due to the short
maturity of these instruments.
F-13
<PAGE> 35
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
2 None.
3(a) Articles of Incorporation and Bylaws. *1
3(b) Articles of Amendment to Articles of Incorporation. *2
3(c) Articles of Amendment to Articles of Incorporation. *2
3(d) Articles of Amendment to Articles of Incorporation. *6
4(a) Form of Stock Certificate. *1
9 None.
10(a) Sample Form of Affiliated Company Management Agreement. *1
10(b) TCA Deferred Savings and Retirement Plan. *4
10(c) Office building lease. *5
10(d) TCA Cable TV, Inc. Amended and Restated Incentive Stock Option
Plan. *2
10(e) Credit Agreement dated September 13, 1989 between Texas
Commerce Bank National Association and TCA Cable TV, Inc. *3
10(f) Note Agreement dated as of September 27, 1989 by and between the
Prudential Insurance Company of America and TCA Cable TV, Inc. *3
10(g) First Amendment dated and effective April 29, 1992 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(h) Credit Agreement between TCA Cable TV, Inc. and NationsBank of Texas,
N.A. dated March 31, 1993 *5
10(i) Second Amendment dated and effective April 23, 1993 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(j) Third Amendment dated and effective October 31, 1994 to Credit
Agreement dated September 13, 1989 between Texas Commerce Bank,
National Association and TCA Cable TV, Inc. *3
10(k) Asset and Purchase Agreement dated January 20, 1995 by and between
Tele-Communications of Arkansas Limited Partnership and Time Warner
Entertainment L. P., through its division Time Warner Cable
Ventures. *3
10(l) Asset and Purchase Agreement dated January 20, 1995 by and between
Tele-Communications of Northwest Arkansas Limited Partnership and
Time Warner Entertainment L. P., through its division Time Warner
Cable Ventures. *3
10(m) Limited Partnership Agreement of McMillian Partners, L. P. dated
January 20, 1995. *3
10(n) Limited Partnership Agreement of Tele-Communications of Arkansas
Limited Partnership dated January 20, 1995. *3
10(o) Limited Partnership Agreement of Tele-Communications of Northwest
Arkansas Limited Partnership dated January 20, 1995. *3
11 None.
12 None.
13 None.
16 None.
18 None.
21 Subsidiaries of the Registrant. *3
22 None.
23 Consent of Coopers & Lybrand. *3
24 None.
27 Financial Data Schedule *3
28 None.
99 None.
*1 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1, File No. 2-75516, and incorporated by
reference herein.
*2 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-8, File No. 33-21901, and incorporated by
reference herein.
*3 Filed herewith.
*4 Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-8, File No. 2-88892, and incorporated by
reference herein.
*5 Previously filed as an exhibit to Registrant's Form 10-K filed
January 27, 1994 and incorporated by reference herein.
14(b) Reports on Form 8-K:
None.
<PAGE> 1
Exhibit 10(e)
CREDIT AGREEMENT
Dated September 13, 1989
By and Between
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
and
TCA CABLE TV INC.
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Adjusted CD Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Adjusted CD Rate Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Adjusted CD Rate Reserve Percentage" . . . . . . . . . . . . . . . . . . . . . . . . 2
"Adjusted Operating Cash Flow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Alternate Base Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Alternate Base Rate Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Applicable Lending Office" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Assumption Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Bank" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Basic Subscribers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Basic Subscriber Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Borrowing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Calculation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Calculation Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Capital Expenditures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Capital Lease" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Capitalized Lease Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Cash Equivalents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"CATV System" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Certificates of Deposit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Consolidated Debt Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Contingent Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Conversion Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Cooke Cablevision" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Cooke Franchise Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Covenant Not to Compete Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Default" . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Dollars" and "$" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
"Domestic Lending Office" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Eurocurrency Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Eurodollar Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Eurodollar Lending Office" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Eurodollar Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Eurodollar Rate Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Eurodollar Rate Reserve Percentage" . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Facility I Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Facility I Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Facility I Commitment Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility I Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility I Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility II Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility II Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility II Commitment Reduction Date" . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility II Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Facility II Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"FCC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Federal Communications Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Federal Funds Effective Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"First Chicago" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"First Chicago Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"First City" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"First City Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Fiscal Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Fixed Charge Coverage Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Fixed Charges" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Floating Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Franchise Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Funded Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Funding Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Governmental Authority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Governmental Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Highest Lawful Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Homes Passed" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Initial Acquisition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
"Initial Franchise Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Interest Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Lease" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Leverage Premium" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Lien" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Loan Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Loan Origination Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Management" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Management Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Margin Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Material Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Material Franchise Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Multiemployer Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Multiple Employer Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Net Income" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Net Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Notice of Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Notice of Facility I Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Notice of Facility II Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Operating Cash Flow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Other Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Other Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Other Senior Debt Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Other Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"PBGC Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Permits" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Permitted Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Permitted Liens" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Prudential" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Prudential Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Regulation G", "Regulation T", "Regulation U" and "Regulation X" . . . . . . . . . . 18
"Reportable Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Responsible Officer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Seller" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Subject Transactions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Subsequent Acquisition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
"Subsidary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Termination Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Termination Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Type of Facility I Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Type of Facility II Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Wholly-Owned Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Withdrawal Liability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.02. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II. AMOUNT AND TERMS OF THE FACILITY I LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.01. Facility I Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.02. Facility I Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.03. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.04. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.05. Reduction of Facility I Commitment . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.07. Treatment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III. AMOUNT AND TERMS OF THE FACILITY II LOANS . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.01. Facility II Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.02. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.03. Facility II Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.04. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.05. Borrowing Procedure for Facility II Loans . . . . . . . . . . . . . . . . . . . . 25
Section 3.06. Reduction of Facility II Commitment . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV. INTEREST RATE DETERMINATION; EURODOLLAR RATE LOANS; INCREASED COSTS, ETC. . . . . . . . . . 26
Section 4.01. Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.02. Eurodollar Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.03. Change of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.04. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.05. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.06. Capital Adequacy Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V. PREPAYMENTS; PAYMENTS; ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.01. Payment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.02. Optional Prepayments on the Loans . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.03. Mandatory Prepayments on the Loans . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.04. Place and Time of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE VI. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.01. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.01. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.02. Conditions Precedent to Certain Borrowings . . . . . . . . . . . . . . . . . . . . 38
Section 7.03. Conditions Precedent to Borrowings Which Do Not Increase
Principal Amount Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.01. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.02. Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.03. Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.04. No Conflict or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.05. Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.06. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.07. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.08. Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.09. Titles, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.10. Franchise Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.11. Casualties; Taking of Properties; Insurance . . . . . . . . . . . . . . . . . . . . 42
Section 8.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.13. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.14. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.15. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.16. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.17. Insider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.18. Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.19. Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.20. Transfer of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.21. Quality of CATV System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.22. Certain Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.01. Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.02. Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.03. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.05. Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.06. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.07. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.08. ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.09. Compliance with Material Franchise Agreements . . . . . . . . . . . . . . . . . . . 50
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C>
ARTICLE X. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.01. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.03. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.04. Dividends, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . 52
Section 10.05. Sale or Other Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.06. Merger and Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.07. Sale-Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.08. Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.09. Supply and Purchase Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.12. Change of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.13. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.14. Certain Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.15. Limitation On Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.02. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE XII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.07. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.08. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.09. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.10. Limitation on Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
-vi-
<PAGE> 8
CREDIT AGREEMENT
This Credit Agreement, dated as of September 13, 1989, is
between TCA CABLE TV INC., a Texas corporation (the "Borrower") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association (the
"Bank"). In consideration of the mutual covenants herein contained, the
Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquisition" means an Initial Acquisition or a Subsequent
Acquisition, as the case may be.
"Acquisition Agreement" means that certain Asset Purchase and
Sale Agreement between the Borrower and Cooke Cablevision dated as of July 14,
1989, together with any and all amendments thereto, as in effect on the Funding
Date.
"Acquisition Documents" means (i) with respect to the Initial
Acquisition, the Acquisition Agreement, the Management Agreement, the
Assumption Agreement and the Covenant Not to Compete Agreement and (ii) with
respect to any Subsequent Acquisition. any purchase agreement executed by the
Borrower in connection with such Acquisition, and each of the other material
agreements attached thereto or otherwise executed in connection therewith or
pursuant thereto.
"Adjusted CD Rate" means with respect to an Alternate Base
Rate Loan or an Adjusted CD Rate Loan comprising part of the same Borrowing, an
interest rate per annum determined by the Bank to be equal to the sum of (a)
the rate per annum obtained by dividing (i) the average rate of interest
determined by the Bank to be the bid rate per annum, on such date, of at least
two (2) certificate of deposit dealers of recognized standing selected by the
Bank for the purchase at face value of (x) 90 Day Certificates of Deposit in
the case of the Adjusted CD Rate determination under the Alternate Base Rate,
and (y) Certificates of Deposit for a period equal to the applicable Interest
Period in the case of the Adjusted CD Rate determination for an Adjusted CD
Rate Loan, by (ii) a percentage equal to 100% minus the Adjusted CD Rate
Reserve Percentage for such Interest Period, plus (b) the annual
<PAGE> 9
assessment rate estimated by the Bank on such date determined by the then
current annual assessment payable by the Bank to the Federal Deposit Insurance
Corporation for such Corporation's insuring Dollar deposits of the Bank in the
United States, expressed as a percentage.
"Adjusted CD Rate Loan" means a Loan that is designated as
such in a Notice of Borrowing.
"Adjusted CD Rate Reserve Percentage" for the Interest Period
for each Alternate Base Rate Loan or Adjusted CD Rate Loan means the reserve
percentage applicable on the first day of the applicable Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental or
other marginal reserve requirement) applicable, or to become applicable (x)
during the next following 90 day period in the case of the Adjusted CD Rate
determination under the Alternate Base Rate, and (y) for a period equal to the
applicable Interest Period in the case of the Adjusted CD Rate determination
for an Adjusted CD Rate Loan, as the case may be, to the Certificates of
Deposit used in the calculation of the Adjusted CD Rate for such Interest
Period.
"Adjusted Operating Cash Flow" means Operating Cash Flow for
any period, adjusted in the event of an Acquisition, to give effect to such
Acquisition, as if such Acquisition had occurred on the first day of any period
of calculation, by adding to Operating Cash Flow, if positive, or subtracting
from Operating Cash Flow, if negative, the actual Operating Cash Flow of the
newly acquired Person or CATV system or derived from such Person or CATV system
during such period prior to the date of Acquisition. In the event of a sale,
transfer or other disposition by the Borrower or any Subsidiary of a Subsidiary
or all or substantially all of a CATV system during any period, Operating Cash
Flow shall be adjusted to give effect to such sale, transfer or other
disposition as if it had occurred on the first day of any period of
calculation, by excluding from Operating Cash Flow of the Borrower or such
Subsidiary all Operating Cash Flow of the Subsidiary or Operating Cash Flow
derived from such CATV system being sold, transferred or disposed of, for the
period during which such sale, transfer or other disposition occurred. For
purposes of calculation by the Borrower of financial covenants hereunder,
Adjusted Operating Cash Flow shall be determined on a consolidated basis by
reference to the financial statements provided hereunder.
"Affiliate" means any Person which, directly or indirectly,
controls or is controlled by or under common control with another Person. For
the purposes of this definition, "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the power to direct or cause the direction of
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities or by contract or otherwise.
-2-
<PAGE> 10
"Agreement" means this Credit Agreement between the Borrower
and the Bank, as it may be modified or amended from time to time in accordance
with the provisions of Section 12.01 hereof.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards to the nearest 1/16 of 1%) equal to the greater of (a)
the Floating Rate (computed on the basis of the actual number of days elapsed
over a year of 365 days or 366 days, as the case may be) in effect on such day;
(b) the Federal Funds Effective Rate in effect for such day plus 1/2 of 1%
(1/2%); or (c) the Adjusted CD Rate in effect for such day plus one and one-
quarter percent (1-1/4%). For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Federal Funds Effective Rate shall
be effective on the effective date of such change in the Federal Funds
Effective Rate. If for any reason the Bank shall have determined (which
determination shall be conclusive, absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including, without
limitation, the inability or failure of the Bank to obtain sufficient bids or
publications in accordance with the terms thereof, the Alternate Base Rate
shall be the greater of (a) the Floating Rate or (b) the Adjusted CD Rate plus
one and one-quarter percent (1-1/4%) until the circumstances giving rise to
such inability no longer exist.
"Alternate Base Rate Loan" means a Loan that is designated
as such in a Notice of Borrowing.
"Applicable Lending Office" means, with respect to the Bank,
the Bank's Domestic Lending Office in the case of an Alternate Base Rate Loan
or an Adjusted CD Rate Loan and the Bank's Eurodollar Lending Office in the
case of a Eurodollar Rate Loan.
"Assumption Agreement" means that certain Assumption Agreement
to be entered into between the Borrower and Cooke Cablevision pursuant to the
Acquisition Agreement.
"Bank" has the meaning specified in the preamble hereto.
"Basic Subscribers" shall mean all of the following which are
receiving basic cable television service provided by the CATV Systems: (a)
private residential customer accounts (including those of employees of the
Borrower and its Affiliates and regardless whether in single family homes or in
individually billed units in multi-unit buildings, but excluding "second
connects" or "additional outlets" as such terms are commonly understood in the
cable television industry), each of which shall be counted as one Basic
Subscriber; and (b) commercial and bulk-billed accounts, such as hotels,
motels. apartment houses and multifamily homes, provided that the number of
Basic Subscribers serviced by each
-3-
<PAGE> 11
commercial or bulk-billed account shall be determined as the quotient of the
monthly basic service revenue derived from such commercial or bulk-billed
account (excluding any charges for taxes or other nonrecurring items) divided
by the applicable Basic Subscriber Rate.
"Basic Subscriber Rate" shall mean the predominant monthly
fees and charges derived from the provision of "basic service" (as such term is
commonly understood in the cable television industry and excluding any charges
for additional outlets and installation fees and revenues derived from the
rental of converters, remote control devices and other like charges for
equipment) charged to customers.
"Borrowing" means a Facility I Borrowing or a Facility II
Borrowing.
"Borrowing Date" means the Business Day on which a Borrowing
is made.
"Business Day" means a day (i) other than Saturday and Sunday
and other than any other day on which banks are required or authorized to close
in New York City or Houston and (ii) if the applicable Business Day relates to
any Eurodollar Rate Loan, on which dealings are carried on in the interbank
market selected by the Bank for purposes of setting the Eurodollar Rate.
"Calculation Date" means the last day of each fiscal quarter
of the Borrower.
"Calculation Period" means the most recent twelve month
accounting period of the Borrower ending with the month which is immediately
prior to the month in which the date of calculation occurs.
"Capital Expenditures" shall mean, for any period, (i) the
aggregate of all expenditures (paid in cash during such period and including
cash payments under Capitalized Lease Obligations entered into after the date
hereof) by the Borrower and its Subsidiaries during such period that, in
conformity with GAAP, are required to be included in or reflected by the
property, plant or equipment or similar fixed asset accounts reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries (including
equipment which is purchased simultaneously with the trade-in of existing
equipment owned by the Borrower and its Subsidiaries to the extent of (A) the
gross amount of such purchase price less (B) the cash proceeds or trade-in
credit of the equipment being traded in at such time), but (ii) excluding
capital expenditures made in connection with the replacement or restoration of
assets, to the extent reimbursed or refinanced from insurance proceeds paid on
account of the loss of or damage to the assets being replaced or restored, or
from awards of compensation arising from the taking by condemnation of or the
exercise of the power of eminent domain with respect to such assets being
replaced or restored.
-4-
<PAGE> 12
"Capital Lease" means any lease of any property (whether
real, personal or mixed) which, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of the lessee.
"Capitalized Lease Obligations" of any Person means all
obligations of such Person, as lessee, under leases which should, in accordance
with GAAP, be recorded as Capital Leases.
"Cash Equivalents" means Investments of the kind described in
Section 10.03(b) hereof.
"CATV System" means the cable television distribution system
owned and operated, directly or indirectly, by the Borrower or any Subsidiary
that receive television and radio signals by antenna, microwave transmission or
satellite transmission and which amplify such signals and distribute them via
coaxial or fiber optic cable.
"Certificates of Deposit" means certificates of deposit for
the applicable period issued by the principal office of the Bank, in principal
amount approximately equal or comparable to the principal amount of the
Alternate Base Rate Loan or the Adjusted CD Rate Loan, as the case may be, to
which the Alternate Base Rate or the Adjusted CD Rate, respectively, is
applicable.
"Closing" means the execution of this Agreement by the Bank
and the Borrower.
"Closing Date" means the date of the execution of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and all regulations promulgated thereunder.
"Commitment" means, with respect to the Bank, an amount equal
to the Bank's Facility I Commitment or Facility II Commitment, as the case may
be, as adjusted in accordance with Sections 2.05, 3.06 and 12.07 hereof.
"Common Stock" means the Common Stock, par value $.10 per
share, of the Borrower and all other shares of the Borrower having ordinary
voting power.
"Consolidated Debt Service" means for any period the sum of
(a) all scheduled interest payments required to be made by the Borrower and its
Subsidiaries on a consolidated basis with respect to Indebtedness of the
Borrower and its Subsidiaries during any period and (b) the sum of (i)
scheduled principal payments or scheduled prepayments required to effect
reductions in the Commitment or in Funded Debt plus (ii) scheduled payments on
Capital Leases to the extent such payments could not be refinanced under this
Agreement as of the
-5-
<PAGE> 13
date any such payment is due. For purposes of this calculation, interest which
is subject to fluctuation or change during any twelve (12) month period will be
calculated at the rate at which interest accrued on such Indebtedness on the
day of calculation.
"Contingent Liabilities" means the liabilities described in
clause (iv) of the definition of "Indebtedness" contained in this Section 1.01.
"Conversion Date" means the second anniversary of the Closing
Date or if such date is not a Business Day, the Business Day next preceding
such second anniversary.
"Cooke Cablevision" means collectively (i) Jack Kent Cooke
Incorporated, a Nevada corporation, (ii) Cooke Media Group Inc., a Nevada
corporation, (iii) Cooke BCS Communications, Inc.; (iv) Cooke South Central
Communications, Inc.; (v) Pacific Telatronics, Inc., and (iv) Cooke
Cablevision, Inc.
"Cooke Franchise Agreements" means the franchise agreements or
other similar agreements to be assigned to the Borrower or its Subsidiaries
pursuant to the Acquisition Agreement as more particularly described on
Exhibit 4.8(b) to the Acquisition Agreement.
"Covenant Not to Compete Agreement" means the Covenant Not to
Compete to be entered into between the Borrower and Cooke Cablevision pursuant
to the Acquisition Agreement.
"Default" means any event which, with the lapse of time or
giving of notice or both, would constitute an Event of Default.
"Dollars" and "$" means the lawful money of the United States
of America.
"Domestic Lending Office" means with respect to the Bank, the
office of the Bank specified as its "Domestic Lending Office" under its name on
the signature page hereof or such other office of the Bank as the Bank may from
time to time specify by notice to the Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" means any Subsidiary or trade or business
(whether or not incorporated) which is a member of a controlled group of which
the Borrower is a member or which is under common control within the meaning of
Section 414 of the Code (such rules and regulations shall also be deemed to
apply to foreign corporations and entities).
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
-6-
<PAGE> 14
"Eurodollar Event" has the meaning specified in
Section 4.03(a) hereof.
"Eurodollar Lending Office" means, with respect to the Bank,
the office of the Bank specified as its "Eurodollar Lending Office" under its
name on the signature page hereof (or, if no such office is specified, its
Domestic Lending Office) or such other office of the Bank as the Bank may from
time to time specify in writing to the Borrower.
"Eurodollar Rate" means with respect to the applicable
Interest Period in effect for each Eurodollar Rate Loan comprising part of the
same Borrowing, the per annum rate of interest obtained by dividing: (i) the
annual rate of interest (rounded upward to the nearest whole multiple of whole
multiple of 1/100 of 1%, if such average is not such a multiple) determined by
the Bank, at or before 10:00 A.M. Houston time (or as soon thereafter as
practicable), on the second Business Day prior to the first day of such
Interest Period, to be the annual rate of interest at which deposits of Dollars
are offered to the Bank or, at the Bank's option, offered to an Affiliate of
the Bank, by prime banks in whatever Eurodollar interbank market may be
selected by the Bank in its sole discretion, acting in good faith, at the time
of determination and in accordance with the then existing practice in such
market for delivery on the first day of such Interest Period in immediately
available funds and having a maturity equal to such Interest Period in an
amount equal (or as nearly equal as may be) to an amount equal to such
Eurodollar Rate Loan; by (ii) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period.
"Eurodollar Rate Loan" means a Loan that is designated as such
in a Notice of Borrowing.
"Eurodollar Rate Reserve Percentage" of the Bank for any
Interest Period for any Eurodollar Rate Loan means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for member banks of the Federal Reserve
System with deposits exceeding $1,000,000,000 with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.
"Event of Default" has the meaning specified in Section 11.01
hereof.
"Facility I Borrowing" means a borrowing under Article II
hereof consisting of one Facility I Loan of the same Type of Facility I Loan
from the Bank.
"Facility I Commitment" has the meaning specified in
Section 2.01 hereof.
-7-
<PAGE> 15
"Facility I Commitment Fee" has the meaning specified in
Section 2.06 hereof.
"Facility I Loan" has the meaning specified in Section 2.01
hereof. Each Facility I Loan shall be an Alternate Base Rate Loan, an Adjusted
CD Rate Loan or a Eurodollar Rate Loan. Each of these three categories of
Facility I Loans constitutes a "Type of Facility I Loan."
"Facility I Note" has the meaning specified in Section 2.02
hereof, including any renewal, extension, modification or rearrangement of the
Facility I Note.
"Facility II Borrowing" means a Borrowing under Article III
hereof consisting of one Facility II Loan of the same Type of Facility II Loan
from the Bank.
"Facility II Commitment" has the meaning specified in Section
3.01 hereof.
"Facility II Commitment Reduction Date" has the meaning
specified in Section 3.06(a) hereof.
"Facility II Loan" has the meaning specified in Section 3.01
hereof. Each Facility II Loan shall be an Alternate Base Rate Loan, an Adjusted
CD Rate Loan or a Eurodollar Rate Loan. Each of these three categories of
Facility II Loans constitutes a "Type of Facility II Loan."
"Facility II Note" has the meaning specified in Section 3.03
hereof, including any renewal, extension, modification or rearrangement of the
Facility II Note.
"FCC" means the Federal Communications Commission or any
successor governmental agency thereto.
"Federal Communications Act" means the Federal Communications
Act of 1934, including the Cable Communications Policy Act of 1984, each as
amended, and including all rules and regulations thereunder.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal fund transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, of the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Bank from
three Federal funds brokers of recognized standing selected by it.
-8-
<PAGE> 16
"Financial Statements" means the financial statements which
have been delivered to the Bank pursuant to Section 8.06 and the financial
statements required to be delivered pursuant to Sections 9.01(a) and 9.01(b).
"First Chicago" means The First National Bank of Chicago.
"First Chicago Documents" means (a) an Amended and Restated
Revolving Credit and Term Loan Agreement to be entered into by and between the
Borrower and First Chicago governing the terms of an unsecured $50,000,000 loan
to be made by First Chicago to the Borrower, and (b) the promissory notes to be
issued thereunder.
"First City" means First City, Texas - Tyler, N.A.
"First City Documents" means a Loan Agreement to be entered
into by and between the Borrower and First City governing the terms of an
unsecured $10,000,000 loan to be made by the Borrower to First City and the
promissory note issuable pursuant to such loan agreement.
"Fiscal Year" means the fiscal year of the Borrower, which
shall be the twelve (12) month period ending on October 31 in each year or such
other twelve (12) month period as the Borrower may designate and the Bank may
approve in writing, which approval will not be unreasonably withheld.
"Fixed Charge Coverage Ratio" means, for any period, the
quotient obtained by dividing (i) Adjusted Consolidated Operating Cash Flow
calculated for the preceding twelve month period, by (ii) Fixed Charges
incurred over the preceding twelve month period.
"Fixed Charges" means, without duplication, for any period,
(i) the amounts for such period of interest expense, plus (ii) the amounts of
scheduled principal payments and prepayments made in the twelve (12) month
period preceding any date of determination, required to effect reductions in
the Commitment or in Funded Debt, plus (iii) Capital Expenditures made in such
period, plus (iv) cash dividends paid during such period, plus (v) taxes paid
in cash in such period.
"Floating Rate" shall mean, as of a particular date, the prime
rate most recently announced by the Bank and thereafter entered in the minutes
of the Bank's Loan and Discount Committee. Without notice to the Borrower or
any other Person, the Floating Rate shall change automatically from time to
time as and in the amount by which said prime rate shall fluctuate, with each
such change to be effective as of the date of each change in such prime rate.
The Floating Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Bank may make
commercial loans or other loans at rates of interest at, above or below the
Floating Rate.
-9-
<PAGE> 17
"Franchise Agreements" shall mean the Initial Franchise
Agreements and all franchise agreements or other similar agreements of any
Person transferred to the Borrower pursuant to any Subsequent Acquisition, or
at a date subsequent to the Closing Date from Cooke Cablevision.
"Funded Debt" means all Indebtedness of a Person which matures
more than one year from the date of creation or matures within one year from
such date but is renewable or extendible, at the option of such Person, by its
terms or by the terms of any instrument or agreement relating thereto, to a
date more than one year from such date or arises under a revolving credit or
similar agreement which obligates the lender or lenders to extend credit during
a period of more than one year from such date, including, without limitation,
all amounts of any Funded Debt required to be paid or prepaid within one year
from the date of determination of the existence of any such Funded Debt. The
term "Funded Debt" also includes Capitalized Lease Obligations of the Borrower
for such period determined in accordance with GAAP.
"Funding Date" means the date on which, and the time at which,
the Initial Acquisition becomes effective.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation, any arbitration panel,
any court or any commission.
"Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational,
safety and health standards or controls) of any (domestic or foreign) federal,
state, county, municipal, parish, provincial or other government or any
department, commission, board, court, agency or any other instrumentality of
any of them.
"Guaranty" means, in respect of any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of another Person, including, without limitation, by means of an
agreement to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to maintain financial
-10-
<PAGE> 18
covenants, or to assure the payment of such Indebtedness by an agreement to
make payments in respect of goods or services regardless of whether delivered,
or otherwise, provided that the term "Guaranty" shall not include endorsements
for deposit or collection in the ordinary course of business; and such term
when used as a verb shall have a correlative meaning.
"Highest Lawful Rate" means, with respect to the Bank, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the Notes
payable to the Bank or on other amounts due to the Bank, if any, pursuant to
this Agreement under laws applicable to the Bank which are presently in effect
or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Homes Passed" shall mean the total of (a) the number of
single family residences capable of being serviced without further line
construction, (b) the number of units in multi-family residential buildings
capable of being serviced without further line construction and not then
governed by bulk service agreements, and (c) the number of then current bulk
service agreements regardless of the number of units serviced or the equivalent
billing units.
"Indebtedness" means (without duplication), for any Person,
(i) all indebtedness of such Person for borrowed money or
arising out of any extension of credit to or for the account of such Person
(including, without limitation, extensions of credit in the form of
reimbursement or payment obligations of such Person relating to letters of
credit issued for the account of such Person) or for the deferred purchase
price of property or services, except indebtedness which is owing to trade
creditors in the ordinary course of business and which is due within 90 days
after the original invoice date;
(ii) Indebtedness of the kind described in clause (i) of
this definition which is secured by (or for which the holder of such
Indebtedness has any existing right, contingent or otherwise, to be secured by)
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has assumed
or become liable for the payment of such Indebtedness or obligations;
(iii) Capitalized Lease Obligations of such Person; and
(iv) all Guaranties or other contingent liabilities (other
than endorsements for collection in the ordinary course of business), direct or
indirect, with respect to Indebtedness (of the kind described in clause (i),
(ii) or (iii) of this definition) of another Person, through an agreement or
otherwise, including, without limitation,
-11-
<PAGE> 19
(A) any endorsement not for collection in the ordinary
course of business or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a
Guaranty in respect of any such Indebtedness;
(B) any agreement (1) to purchase, or to advance or supply
funds for the payment or purchase of, any such Indebtedness, (2) to
purchase, sell or lease property, products, materials or supplies, or
transportation or services, in order to enable such other Person to
pay any such Indebtedness or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the property, products,
materials or supplies or transportation or services or (3) to make any
loan, advance or capital contribution to or other investment in, or
to otherwise provide funds to or for, such other Person in order to
enable such Person to satisfy any obligation (including any liability
for a dividend, stock liquidation payment or expense) or to assure a
minimum equity, working capital or other balance sheet condition in
respect of any such obligation;
(C) obligations of such Person to the counterparty under
foreign currency "hedging" contracts and interest rate contracts
(including without limitation liquidated damages specified therein)
arising by reason of a default or breach (however defined) by such
Person thereunder, net of amounts to be paid to such Person from such
counterparty thereunder; and
(D) obligations under surety, appeal or customs bonds.
"Indemnified Parties" has the meaning set forth in Section
12.04(a) hereof.
"Initial Acquisition" means the acquisition by the Borrower of
certain Systems as defined in the Acquisition Agreement.
"Initial Franchise Agreements" means the franchise agreements
or other similar agreements to which the Borrower and its Subsidiaries are
parties as of the Closing Date and the Cooke Franchise Agreements to be assigned
to the Borrower or its Subsidiaries pursuant to the Acquisition Documents.
"Interest Period" means, with respect to each Loan, the period
commencing on the Borrowing Date for such Loan and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case of an Alternate
Base Rate Loan, a period of not less than 30 days and not to exceed 90 days;
(b) in the case of an Adjusted CD Rate Loan, 30, 60, 90 or 180 days; and (c) in
the case of a Eurodollar Rate Loan, 1, 2, 3 or 6 months, provided, however,
that:
(i) no Interest Period shall end on a date after the
Termination Date;
-12-
<PAGE> 20
(ii) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration, and
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, in the case of any Interest Period for a Eurodollar Rate Loan, that
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the Business Day next preceding the day that otherwise would be the
last day of such Interest Period.
"Investment" of any Person means any direct or indirect
investment, loan or advance by such Person (other than receivables owed to the
Borrower in the ordinary course of business) whether by means of stock
purchase, loan, advance or otherwise.
"Lease" means, as applied to any Person, any operating lease
other than a Capital Lease of any Property (whether real, personal or mixed) by
that Person as lessee, together with all renewals, extensions and options
thereon, and all substitutions therefor.
"Leverage Premium" means the following percentage to be added
with respect to the Loans to the Adjusted CD Rate, the Alternate Base Rate or
the Eurodollar Rate so long as no Default or Event of Default shall have
occurred and be continuing beginning on September 30, 1990:
<TABLE>
<CAPTION>
If the ratio of the aggregate
Indebtedness of the Borrower and
its Subsidiaries to Consolidated The Leverage Premium to be
Operating Cash Flow determined added with respect to the
as of any Calculation Date is: Loans set forth below is:
- ------------------------------ -------------------------
<S> <C>
Less that 4.0 to 1.0 -0-
Greater than or equal to 4.0 to 1.0 1/8 of 1%
</TABLE>
The applicable Leverage Premium shall be computed by the Bank based on the
financial statements of the Borrower on the forty-fifth (45th) day following
each Calculation Date and such Leverage Premium shall become effective with
respect to each Loan requested by the Borrower on each such date of
computation, and shall remain in effect for a period of ninety (90) successive
days, including the date of computation. Promptly after each such date of
computation, the Bank shall notify the Borrower of the applicable Leverage
Premium.
-13-
<PAGE> 21
"Lien" means any claim, mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof), or the interest of the
lessor under any Capital Lease.
"Loan Documents" means this Agreement, all Notes and any and
all agreements or instruments now or hereafter executed and delivered by the
Borrower or any other Person guaranteeing, securing or otherwise supporting
payment or performance of any Note, this Agreement or any other Loan Document,
as they may be renewed, modified or amended from time to time.
"Loan Origination Fee" shall have the meaning set forth in
Section 2.06(b).
"Loans" means, collectively, the Facility I Loans and the
Facility II Loans.
"Management" means any vice president, president or chief
executive officer of the Borrower or any of its Subsidiaries.
"Management Agreement" means the Management Agreement to be
entered into between Texas Telecable, Inc. and Cooke South Central
Communications, Inc. pursuant to the Acquisition Agreement.
"Margin Stock" shall mean "margin stock" as defined in
Regulation U.
"Material Adverse Effect" means any material adverse effect on
(i) the financial condition, business, properties or operations of the Borrower
and its Subsidiaries taken as a whole, or (ii) the ability of the Borrower or
any Subsidiary to perform its obligations under this Agreement, or any Note or
any other Loan Document on a timely basis.
"Material Agreements" shall mean, as of any date, any
agreements, contracts or instruments which are material to the business,
operations or financial condition of the Borrower and its Subsidiaries as of
such date. Material Agreements shall not include the Franchise Agreements or
licenses or other similar agreements executed in connection with the Franchise
Agreements.
"Material Franchise Agreements" shall mean Franchise
Agreements in connection with CATV Systems constituting 10% or more at any time
of aggregate Basic Subscribers of the Borrower and its Subsidiaries.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA (or any similar type of plan established or regulated under the laws of
any foreign country) to which the
-14-
<PAGE> 22
Borrower or any ERISA Affiliate is making or accruing or has made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means any employee benefit plan
within the meaning of Section 3(3) of ERISA, other than a Multiemployer Plan,
subject to Title IV of ERISA, to which Borrower or any ERISA Affiliate and an
employer other than an ERISA Affiliate or Borrower contribute.
"Net Income" means net income of any Person, as determined in
accordance with GAAP, and with respect to the Borrower and its Subsidiaries
shall be determined on a consolidated basis by reference to the financial
statements provided hereunder.
"Net Proceeds" means with respect to the disposition of any
Property of the Borrower or any Subsidiary, including without limitation the
disposition of Property permitted by Sections 10.05 and 10.08 hereof, all
proceeds realized from such disposition after deducting: (i) any withholding
taxes arising from the disposition of assets located outside of the United
States; (ii) the ordinary and customary out- of- pocket costs of such
disposition (taking into account the limitations imposed by Section 10.12);
and (iii) amounts applied to the repayment of Indebtedness secured by Liens
permitted under Section 10.02(b). "Net Proceeds" shall also include proceeds of
insurance with respect to an actual or constructive loss of Property, an agreed
or compromised loss of Property or the taking of any Property under the power
of eminent domain and condemnation awards and awards in lieu of condemnation
for the taking of property under the power of eminent domain.
"Notes" means, collectively, the Facility I Note and the
Facility II Note. "Note" means any such note individually.
"Notice of Borrowing" means either a Notice of Facility I
Borrowing or a Notice of Facility II Borrowing.
"Notice of Facility I Borrowing" has the meaning specified in
Section 2.04(a) hereof.
"Notice of Facility II Borrowing" has the meaning specified in
Section 3.05(a) hereof.
"Operating Cash Flow" means for any period (i) Net Income,
adjusted for (w) any gain or loss arising from the sale of capital assets; (x)
earnings and losses of a subsidiary or an Affiliate that is less than 49% owned
(to the extent such earnings or losses are taken into account in arriving at
Net Income) and; (y) interest income; and (z) extraordinary items; plus to the
extent deducted in arriving at Net Income (ii) depreciation and amortization,
interest expense for such period, deferred taxes and any other non-cash
charges. For purposes of calculation by the Borrower of financial covenants
hereunder, Operating Cash
-15-
<PAGE> 23
Flow shall be determined on a consolidated basis by reference to the financial
statements provided hereunder.
"Other Indebtedness" means all of the Indebtedness of the
Borrower and its Subsidiaries other than the Indebtedness evidenced by the
Notes.
"Other Senior Debt" means the unsecured Indebtedness evidenced
by the Prudential Documents, the First City Documents and the First Chicago
Documents, as the same may be amended from time to time.
"Other Senior Debt Documents" means the Prudential Documents,
the First City Documents and the First Chicago Documents, and any and all other
material agreements and instruments executed and delivered by the Borrower or
any other Person in connection with the transactions connected therewith, as
they may be renewed, modified or amended from time to time.
"Other Taxes" has the meaning specified in Section 6.01(b)
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PBGC Plan" means any Plan subject to Title IV of ERISA.
"Permits" has the meaning specified in Section 8.18 hereof.
"Permitted Debt" has the meaning specified in Section 10.01
hereof.
"Permitted Liens" means:
(a) Liens for current taxes, assessments or other
governmental charges which are not delinquent or remain payable
without any penalty, or the validity or amount of which is
contested in good faith by appropriate proceedings, provided, however,
that any right to seizure, levy, attachment, sequestration, foreclosure
or garnishment with respect to Property of the Borrower and its
Subsidiaries by reason of such Lien has not matured, or has been and
continues to be effectively enjoined or stayed;
(b) non-consensual Liens imposed by operation of law such
as landlord liens for rent not yet due and payable and those for
materialmen, mechanics, warehousemen, carriers, employees, workmen and
repairmen, for current wages or accounts payable not yet delinquent
and arising in the ordinary course of business, provided, however that
any right to seizure, levy, attachment, sequestration, foreclosure or
garnishment with respect to Property of the Borrower and its
Subsidiaries by reason of such Lien has not matured, or has been and
continues to be effectively enjoined or stayed;
-16-
<PAGE> 24
(c) easements, rights-of-way, restrictions and other
similar Liens or imperfections to title which do not materially
interfere with the occupation, use and employment by the Borrower and
its Subsidiaries of the Property encumbered thereby or materially
impair the value of such Property subject thereto and none of which
are violated by existing or proposed improvements or land use of such
Property;
(d) deposits for workers' compensation and unemployment
insurance;
(e) Liens arising out of or in connection with any
litigation or other legal proceeding which is being contested
in good faith by appropriate proceedings, provided, however, that any
right to seizure, levy, attachment, sequestration, foreclosure or
garnishment with respect to Property of the Borrower and its
Subsidiaries by reason of such Lien has not matured, or has been and
continues to be effectively enjoined or stayed; provided that the
aggregate amount of all claims secured by such Liens shall not exceed
$500,000 at any time outstanding;
(f) Leases of equipment and inventory in the ordinary
course of business;
(g) Liens on cables and other property affixed to
transmission poles and in conduits under agreements with public
utility companies, municipalities or other lessors permitting the
Borrower or a Subsidiary to use transmission poles and conduits of
such person in distributing its cable television signals; and
(h) Liens arising under Franchise Agreements to secure the
performance of the Borrower or one of its Subsidiaries under such
Franchise Agreement or incurred in connection with obtaining a
performance bond required by any Franchise Agreement.
"Person" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, association, joint stock company,
government or any agency or political subdivision thereof or any other entity.
"Plan" means an employee benefit plan as defined in Section
3(3) of ERISA in which any personnel of Borrower or an ERISA Affiliate
participate or have participated, excluding any Multiemployer Plan, but
including any such plan established or maintained by Borrower or any ERISA
Affiliate, or to which Borrower or any ERISA Affiliate has an obligation
(whether or not current or contingent) to contribute (or any similar type of
plan established or regulated under the laws of any foreign country).
"Property" means any interest or right in any kind of
property or asset, whether real, personal or mixed, whether owned or leased and
whether tangible or intangible and whether now held or hereafter acquired.
-17-
<PAGE> 25
"Prudential" means the Prudential Insurance Company
of America.
"Prudential Documents" means (a)(i) that certain Note
Purchase Agreement dated June 2, 1987, by and between the Borrower and
Prudential, and (ii) the promissory note in the amount of $20,000,000 issued
thereunder, (b)(i) that certain Note Purchase Agreement dated December 21,
1987 by and between the Borrower and Prudential, and (ii) the promissory note
in the amount of $25,000,000 issued thereunder, and (c) a Note Agreement to be
entered into by and between the Borrower and Prudential related to the issuance
of $100,000,000 principal amount of the Borrower's 9% unsecured senior notes,
and (ii) the promissory notes to be issued thereunder.
"Regulation G", "Regulation T", "Regulation U" and "Regulation
X" mean Regulations G, T, U or X, as the case may be, of the Board of Governors
of the Federal Reserve System, or any successor or other regulation hereafter
promulgated by said Board to replace the prior Regulation G, T, U or X and
having substantially the same function.
"Reportable Event" shall mean any event described in Section
4043 subsections (b)(7) and (b)(9)) of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the provision for
thirty-day notice to the PBGC under such regulations).
"Responsible Officer" means, with respect to any Person, any
officer of such Person having substantial responsibility for financial,
accounting or executive management affairs.
"Seller" means as to the Initial Acquisition, Cooke
Cablevision, and as to any subsequent Acquisition, the seller of the property
being purchased by, or exchanged for property of, the Borrower or any
Subsidiary.
"Subject Transactions" has the meaning set forth in Section
12.04(b) hereof.
"Subsequent Acquisition" means the acquisition of cable
television franchises, whether by purchase of all or substantially all of the
assets of any other Person, or the purchase of capital stock of any other
Person, or otherwise, other than the Initial Acquisition, from and after the
Funding Date through and including the Termination Date.
"Subsidiary" means any corporation of which the Borrower or
any Subsidiary, either directly or indirectly, owns at the time more than 50%
of the outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (whether or not at the
time stock of any other class or classes of such corporation shall have, or
might have, voting power by reason of the happening of any contingency), and
shall include any such corporation which shall become a Subsidiary after the
date hereof.
-18-
<PAGE> 26
"Taxes" has the meaning specified in Subsection 6.01(a)
hereof.
"Termination Date" means, as applicable, (i) with respect to
the Facility I Loans, the Conversion Date or (ii) with respect to the Facility
II Loans, the seventh anniversary of the Closing Date, or if such date is not a
Business Day, the Business Day next preceding such anniversary, and in either
event, on any earlier date on which the Facility I Commitment or the Facility
II Commitment, as the case may be, shall have been terminated in accordance
with this Agreement and (a) all unpaid amounts owing under the Facility I Note
or the Facility II Note have been declared due and payable in accordance with
this Agreement or (b) all unpaid amounts owing under the Facility I Note or the
Facility II Note have been prepaid in accordance with this Agreement.
"Termination Event" means (i) a Reportable Event, or (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a PBGC Plan or a Multiple Employer Plan or the treatment of a plan
amendment as a termination under Section 4041(c) of ERISA, or (iv) the
institution of proceedings to terminate a PBGC Plan or a Multiple Employer Plan
by the PBGC, or (v) any other event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any PBGC Plan or a Multiple Employer Plan, or (vi) the
occurrence of an event described in Section 4068(f) of ERISA with respect to a
PBGC Plan, or (vii) any occurrence similar to any of those referred to in
clauses (i) to (vi) above under the applicable laws of a foreign country.
"Type of Facility I Loan" has the meaning specified in the
definition of "Facility I Loans" contained in this Section 1.01.
"Type of Facility II Loan" has the meaning specified in the
definition of "Facility II Loans" contained in this Section 1.01.
"Wholly-Owned Subsidiary" means any Subsidiary of the
Borrower, 100% of the capital stock of which is owned by the Borrower.
"Withdrawal Liability" has the meaning specified under Part I
of Subtitle E of Title IV of ERISA.
Section 1.02. Accounting Principles. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the audited financial
statements referred to in Section 8.06 hereof. All financial information
delivered to the Bank pursuant to Section 9.01 hereof shall be prepared in
accordance with GAAP applied on a basis consistent with those reflected by the
initial Financial Statements delivered to the Bank dated as of October 31,
1988, and thereafter, delivered pursuant to Section 9.01, except (i) where
such principles are inconsistent with the
-19-
<PAGE> 27
requirements of this Agreement and (ii) for those changes with which the
independent certified public accountants referred to in Section 9.01(a) hereof
concur in rendering unqualified certificates as to Financial Statements and as
to which changes the Bank has consented, which consent shall not be
unreasonably withheld.
ARTICLE II
AMOUNT AND TERMS OF THE FACILITY I LOANS
Section 2.01. Facility I Loans. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrower herein set forth, the Bank agrees, on the terms and
conditions hereinafter set forth, to make revolving credit loans (each a
"Facility I Loan" and collectively, the "Facility I Loans") to the Borrower on
the Funding Date, and, to the extent set forth in the next succeeding sentence,
on any Business Day from and after the Funding Date and prior to the
Termination Date, in an aggregate amount not to exceed at any time outstanding
an amount equal to $50,000,000 (such amount as it may be reduced from time to
time pursuant to Section 2.05 hereof being the Bank's "Facility I Commitment").
Within the limits of the Bank's Facility I Commitment and subject to the other
terms and conditions of this Agreement, the Borrower may borrow, repay and
reborrow under this Agreement.
Section 2.02. Facility I Note. On the Closing Date, the
Borrower shall execute and deliver to the Bank to evidence the Facility I Loans
made by the Bank a promissory note in the form of Exhibit 2.02 hereto payable
to the order of the Bank in the amount of the Bank's Facility I Commitment
(such promissory note being a "Facility I Note"). Each Facility I Loan shall
be due and payable on the last day of the Interest Period therefor and as
otherwise provided in the Facility I Note and in this Agreement.
Section 2.03. Interest Rates. A Facility I Loan shall bear
interest at one of the following rates of interest as selected by the Borrower
in its Notice of Facility I Borrowing:
(a) Each Alternate Base Rate Loan shall bear interest
for the Interest Period with respect thereto on the unpaid principal amount
thereof at a rate per annum equal to the lesser of (i) the Alternate Base Rate
in effect from time to time plus the applicable Leverage Premium, or (ii) the
Highest Lawful Rate, which interest shall be due and payable at the times set
forth in Section 5.01(b) hereof and as otherwise provided in the Facility I
Notes.
(b) Each Eurodollar Rate Loan shall bear interest for the
Interest Period with respect thereto on the unpaid principal amount thereof at
a rate per annum equal to the lesser of (i) the Eurodollar Rate plus one-half
of one percent (1/2%) plus the applicable Leverage Premium, or (ii) the Highest
Lawful Rate. which interest shall be due and payable at the times set forth in
Section 5.01(b) hereof and as otherwise provided in the Facility I Notes.
-20-
<PAGE> 28
(c) Each Adjusted CD Rate Loan shall bear interest for
the Interest Period with respect thereto on the unpaid principal amount thereof
at a rate per annum equal to the lesser of (i) the Adjusted CD Rate in effect
from time to time plus one-half of one percent (1/2%) plus the applicable
Leverage Premium, or (ii) the Highest Lawful Rate, which interest shall be due
and payable at the times set forth in Section 5.01(b) hereof and as otherwise
provided in the Facility I Notes.
(d) Any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear interest
at a rate per annum equal to the lesser of (i) the Alternate Base Rate in
effect from time to time plus two percent (2%), or (ii) the Highest Lawful
Rate, which interest shall be due and payable on demand.
Section 2.04. Borrowing Procedure.
(a) Each Facility I Borrowing shall be made on the
Borrower's irrevocable oral or written notice from the Borrower to the Bank
(the "Notice of Facility I Borrowing"), requesting that the Bank makes one or
more Facility I Loans to the Borrower on a certain Borrowing Date; provided,
however, with respect to any oral Notice of Facility I Borrowing, the Borrower
shall deliver promptly to the Bank a confirmatory written Notice of Facility I
Borrowing. Each Notice of Facility I Borrowing shall be irrevocable and
binding on the Borrower. Each such Notice of Facility I Borrowing shall be in
the form of Exhibit 7.01(II)(a)(iv)(I) attached hereto and shall specify (i)
the amount of each requested Facility I Borrowing; (ii) the Borrowing Date
therefor; (iii) the basis of interest applicable to such Facility I Loan
(either Alternate Base Rate, Adjusted CD Rate or Eurodollar Rate); and (iv)
the Interest Period for each Facility I Loan; provided that there shall not be
more than six (6) Interest Periods in effect at any one time with respect to
the Facility I Note. Each Notice of Facility I Borrowing shall be given not
later than 11:00 A.M. (Houston time) on the third Business Day prior to the
Borrowing Date if any Facility I Borrowing consists of Eurodollar Rate Loans,
on the second Business Day prior to the Borrowing Date if the Facility I
Borrowing consists of Adjusted CD Rate Loans, and on the first Business Day
prior to the Borrowing Date if any Facility I Borrowing consists of Alternate
Base Rate Loans. Notwithstanding the foregoing, if the Bank shall not have
received a Notice of Facility I Borrowing on or before 11:00 A.M. (Houston
time) on the first Business Day prior to the last day of any Interest Period
with respect to any Facility I Loan, the Borrower shall be deemed to have
requested an Alternate Base Rate Loan in the amount of the outstanding
principal amount of the Facility I Loan due and payable on such date, for an
Interest Period equal to thirty (30) days, commencing on the day succeeding the
last day of such Interest Period.
(b) Each Facility I Borrowing shall be in an aggregate
amount of not less than $1,000,000 or the unused portion of the Commitment, if
less, or the outstanding principal balance of any Facility I Loan if less than
$1,000,000, as the case may be, and shall consist of Facility I Loans of the
same Type of Facility I Loans.
-21-
<PAGE> 29
(c) No later than 2:00 P.M. (Houston time) on the
Borrowing Date specified in the Notice of Facility I Borrowing and upon
fulfillment by the Borrower of the applicable conditions precedent set forth in
Article VII hereof, the Bank shall make available to the Borrower at the Bank's
Domestic Lending Office, in immediately available funds, an amount equal to
each Facility I Borrowing to be made on such Borrowing Date.
Section 2.05. Reduction of Facility I Commitment.
(a) The Borrower may, upon at least three (3) Business
Days' notice to the Bank, terminate in whole or reduce in part the unused
portions of the Facility I Commitment of the Bank, provided that each partial
reduction of such unused portions shall be in the minimum aggregate amount
equal to the lesser of (i) $1,000,000 or (ii) the aggregate amount of such
unused portions. Any such termination or reduction of the Facility I
Commitment shall be permanent.
(b) After a reduction of the Facility I Commitment
pursuant to subsection (a) of this Section 2.05, the Facility I Commitment Fee
owing to the Bank pursuant to Section 2.06 shall be calculated upon the
Facility I Commitment as so reduced. In the event of acceleration of the
maturity date of any Loan in accordance with this Agreement, the Facility I
Commitment of the Bank shall thereupon automatically terminate without notice.
Each reduction and any termination of the Facility I Commitment shall be
irrevocable.
Section 2.06. Fees.
(a) The Borrower agrees to pay to the Bank a commitment
fee (the "Facility I Commitment Fee") on the average daily unused portion of
the Facility I Commitment, calculated on a daily basis of a 365-day or 366-day
year, as the case may be, from the date hereof until the Termination Date at
the rate of one-quarter of one percent (1/4%) per annum, such fee to be
payable in arrears commencing on October 31, 1989, and thereafter on each
January 31, April 30, July 31, and October 31 during the term of the
Facility I Commitment, and on the Conversion Date.
(b) On or before the Funding Date the Borrower shall pay
to the Bank a Loan Origination Fee (the "Loan Origination Fee") in an amount
equal to $100,000.
Section 2.07. Treatment of Fees. The fees described in
this Agreement represent compensation for services rendered and to be rendered
separate and apart from the lending of money or the provision of credit and do
not constitute compensation for the use, detention or forbearance of money, and
the obligation of the Borrower to pay each fee described herein shall be in
addition to, and not in lieu of, the obligation of the Borrower to pay
interest, other fees described herein and expenses otherwise described in this
Agreement. Fees shall be payable when due in Houston, Texas in immediately
available funds. All fees
-22-
<PAGE> 30
shall be non-refundable when due to the Bank, including, without limitation
those referred to in this Section 2.07, and shall, to the fullest extent
permitted by law, bear interest, if not paid when due, at the rate then
applicable to past due Alternate Base Rate Loans (but not to exceed the Highest
Lawful Rate).
Section 2.08. Use of Proceeds. The Borrower agrees that
the proceeds of the Facility I Borrowings hereunder shall be used by the
Borrower only (a) for general corporate purposes of the Borrower and its
Subsidiaries, including working capital, Acquisitions and Capital
Expenditures; (b) to pay a portion of the cash consideration used to effect the
transactions contemplated by the Acquisition Agreement; and (c) to refinance
certain existing Indebtedness of the Borrower or its Subsidiaries.
ARTICLE III
AMOUNT AND TERMS OF THE FACILITY II LOANS
Section 3.01. Facility II Loans. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrower herein set forth, the Bank hereby agrees to make
term loans to the Borrower on the Conversion Date in an aggregate amount (such
amount as it may be reduced from time to time pursuant to Section 3.06
hereof being the Bank's "Facility II Commitment") not exceeding the
outstanding and unpaid aggregate principal amount of the Facility I Loans on
the Conversion Date, for the sole purpose of paying such principal amount, and
thereafter in an aggregate amount not to exceed at any time outstanding an
amount equal to the Facility II Commitment from time to time (each a "Facility
II Loan" and collectively, the "Facility II Loans"). Within the limits of the
Bank's Facility II Commitment and subject to the terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow (all reborrowings to be
for the sole purpose of refinancing any Facility II Loans at the end of the
Interest Period therefor) under this Agreement. In no event shall any such
Facility II Borrowing increase the amount of the Facility II Loans outstanding.
Section 3.02. Conversion. Provided that no Event of
Default has occurred and is continuing, on the Conversion Date the Bank shall
make Facility I Loans to the Borrower in the aggregate amount equal to the
principal balance of all Facility I Loans outstanding on such date. The
proceeds of such Facility II Loans shall be applied by the Bank to pay in full
the principal balance of the Facility I Loans outstanding on such date. Unless
the Borrower has timely requested other types of Facility II Loans in
accordance with the provisions of Section 3.05 hereof, the Facility II Loans
made on the Conversion Date shall be made as a single Alternate Base Rate Loan
having an Interest Period of thirty (30) days. On the Conversion Date, the
Borrower shall pay in full all accrued but unpaid interest on the Facility I
Loans then outstanding.
-23-
<PAGE> 31
Section 3.03. Facility II Note. The Borrower shall execute
and deliver to the Bank on the Conversion Date a Facility II Note dated the
Conversion Date substantially in the form of Exhibit 3.03 attached hereto to
evidence the Facility II Loans made on such date, in the aggregate outstanding
principal amount of the Facility II Loans made on such date and with other
appropriate insertions (the "Facility II Note"); provided, however, that the
Borrower's execution and delivery of the Facility II Note shall not be a
condition precedent to the occurrence of the conversion of the Facility I Loans
and the Bank's obligation to make Facility II Loans as set forth in Section
3.02. Upon the Bank's receipt of the Facility II Note executed by the Borrower,
the Bank shall deliver to the Borrower the Facility I Note marked "paid in
full." Each Facility II Loan shall be due and payable on the last day of the
Interest Period therefor and as otherwise provided in the Facility II Note and
in this Agreement.
Section 3.04. Interest Rates. A Facility II Loan shall
bear interest at one of the following rates of interest as selected by the
Borrower in its Notice of Facility II Borrowing:
(a) Each Alternate Base Rate Loan shall bear interest for
the Interest Period with respect thereto on the unpaid principal amount thereof
at a rate per annum equal to the lesser of (i) the Alternate Base Rate in
effect from time to time plus the applicable Leverage Premium, or (ii) the
Highest Lawful Rate, which interest shall be due and payable at the times set
forth in Section 5.01(b) hereof and as otherwise provided in the Facility II
Note.
(b) Each Eurodollar Rate Loan shall bear interest for the
Interest Period with respect thereto on the unpaid principal amount thereof at
a rate per annum equal to the lesser of (i) the Eurodollar Rate plus one-half
of one percent (1/2%) plus the applicable Leverage Premium, or (ii) the Highest
Lawful Rate, which interest shall be due and payable at the times set forth in
Section 5.01(b) hereof and as otherwise provided in the Facility II Note.
(c) Each Adjusted CD Rate Loan shall bear interest for
the Interest Period with respect thereto on the unpaid principal amount thereof
at a rate per annum equal to the lesser of (i) the Adjusted CD Rate in effect
from time to time plus one-half of one percent (1/2%) plus the applicable
Leverage Premium, or (ii) the Highest Lawful Rate, which interest shall be due
and payable at the times set forth in Section 5.01(b) hereof and as otherwise
provided in the Facility II Note.
(d) Any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear interest
at a rate per annum equal to the lesser of (i) the Alternate Base Rate in
effect from time to time plus two percent (2%), or (ii) the Highest Lawful
Rate, which interest shall be due and payable on demand.
-24-
<PAGE> 32
Section 3.05. Borrowing Procedure for Facility II Loans.
(a) Each Facility II Borrowing made in connection with a
Facility II Loan shall be made on the Borrower's irrevocable oral or written
notice from the Borrower to the Bank (the "Notice of Facility II Borrowing"),
requesting that the Bank make one or more Facility II Loans to the Borrower on
a certain Borrowing Date; provided, however, with respect to any oral Notice
of Facility II Borrowing, the Borrower shall deliver promptly to the Bank a
confirmatory written Notice of Facility II Borrowing; and further provided,
no such Borrowing shall increase the principal amount outstanding on the
Facility II Loans at the time of such Borrowing. Each Notice of Facility II
Borrowing shall be irrevocable and binding on the Borrower. Each such Notice
of Facility II Borrowing shall be in substantially the form of Exhibit 3.05(a)
attached hereto and shall specify (i) the amount of each requested Facility II
Loan; (ii) the Borrowing Date therefor; (iii) the basis of interest
applicable to such Loan (either Alternate Base Rate, Adjusted CD Rate or
Eurodollar Rate); and (iv) the Interest Period for each Facility II Loan;
provided that there shall not be more than six (6) Interest Periods in effect
at any one time with respect to the Facility II Note. Each Notice of Facility
II Borrowing shall be given not later than 11:00 A.M. (Houston time) on the
third Business Day prior to the Borrowing Date if any Facility II Borrowing
consists of Eurodollar Rate Loans, on the first Business Day prior to the
Borrowing Date if any Facility II Borrowing consists of Alternate Base Rate
Loans and on the second prior to the Borrowing Date if any Facility II
Borrowing consists of Adjusted CD Rate Loans. Notwithstanding the foregoing,
if the Bank shall not have received a Notice of Facility II Borrowing on or
before 11:00 AM (Houston time) with respect to any Facility II Loan, the
Borrower shall be deemed to have requested an Alternate Base Rate Loan in the
outstanding principal amount of the Facility II Loan due and payable on such
date, for an Interest Period equal to thirty (30) days, commencing on the date
succeeding the last day of such Interest Period.
(b) Each Facility II Borrowing shall be in an aggregate
amount of not less than $1,000,000, or the outstanding principal balance of any
Facility II Loan if less than $1,000,000, as the case may be, and shall consist
of Facility II Loans of the same type of Facility II Loans.
(c) No later than 2:00 P.M. (Houston time) on the
Borrowing Date specified in the Notice of Facility II Borrowing and upon
fulfillment by the Borrower of the applicable conditions precedent set forth in
Article VII hereof, the Bank shall make available to the Borrower at the Bank's
Domestic Lending Office, in immediately available funds, an amount equal to
each Facility II Loan to be made on such Borrowing Date.
Section 3.06. Reduction of Facility II Commitment.
(a) Commencing December 31, 1991, and continuing
thereafter each March 31, June 30, September 30 and December 31 of each year,
the Facility II Commitment shall be reduced by the Borrower by an amount equal
to 5% of the outstanding Facility II
-25-
<PAGE> 33
Commitment on the Termination Date, and on September 30, 1996, the Facility II
Commitment shall be reduced to zero (each such date being a "Facility II
Commitment Reduction Date"). Each reduction of the Facility II Commitment made
pursuant to this Section 3.06(a) shall be irrevocable. The Borrower shall have
no right to reborrow, any amount required to be repaid on a Facility II
Commitment Reduction Date.
(b) In the event of acceleration of the maturity date of
any Loan in accordance with this Agreement, the Facility II Commitment of the
Bank shall thereupon automatically terminate without notice. Each reduction
and any termination of the Facility II Commitment shall be irrevocable.
ARTICLE IV
INTEREST RATE DETERMINATION; EURODOLLAR RATE LOANS,
INCREASED COSTS, ETC.
Section 4.01. Interest Rate Determination.
(a) The Alternate Base Rate for the Interest Period for
each Alternate Base Rate Loan shall be determined by the Bank on the first day
and on each day of such Interest Period, or if such day is not a Business Day,
on the next succeeding Business Day. The Eurodollar Rate for the Interest
Period for each Eurodollar Rate Loan shall be determined by the Bank three
Business Days before the first day of such Interest Period. The Adjusted CD
Rate for the Interest Period for each Adjusted CD Rate Loan shall be determined
by the Bank two Business Days before the first day of said Interest Period.
The Bank shall give prompt notice to the Borrower of the applicable interest
rates determined by the Bank for purposes of clauses (a), (b) and (c) of
Sections 2.03 and 3.04.
(b) Interest with respect to Alternate Base Rate Loans
shall be calculated on the basis of a 365-day or 366-day year, as the case may
be, for the actual days elapsed. Interest with respect to Eurodollar Rate
Loans and Adjusted CD Rate Loans shall be calculated on the basis of a 360-day
year for the actual days elapsed, unless such calculation would result in a
usurious rate, in which case such interest shall be calculated on the basis
of a 365-day or 366-day year, as the case may be.
(c) Each determination of an applicable interest rate by
the Bank shall be conclusive in the absence of manifest error.
Section 4.02. Eurodollar Rate Loans. Anything in this
Agreement to the contrary not withstanding,
(a) If the Bank determines in good faith (which
determination shall be conclusive) that from and after the date hereof the
introduction of or any change in or in the
-26-
<PAGE> 34
interpretation of any law or regulation makes it unlawful, or that any central
bank or other Governmental Authority asserts that it is unlawful, for the Bank
or its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Loans or to fund or maintain Eurodollar Rate Loans hereunder
(whether or not such assertion carries the force of law), the Bank shall
forthwith give notice thereof to the Borrower and the obligation of the Bank to
make or effect a Eurodollar Rate Loan as a part of such Borrowing or any
subsequent Borrowing shall be suspended until the circumstances causing such
suspension no longer exist, and the Eurodollar Rate Loans comprising such
requested Borrowing shall be Alternate Base Rate Loans, having an Interest
Period equal to that of the Eurodollar Rate Loans comprising such requested
Borrowing; and
(b) If the Bank determines in good faith (which
determination shall be conclusive) that the Eurodollar Rate for Eurodollar Rate
Loans comprising such Borrowing will not adequately reflect the cost to the
Bank of making or funding the Eurodollar Rate Loans for such Borrowing, the
right of the Borrower to select Eurodollar Rate Loans for such Borrowing or any
subsequent Borrowing shall be suspended until the Bank shall notify the
Borrower that the circumstances causing such suspension no longer exist, and
the Eurodollar Rate Loans comprising such requested Borrowing shall be
Alternate Base Rate Loans, having an Interest Period equal to that of the
Eurodollar Rate Loans comprising such requested Borrowing.
Section 4.03. Change of Law.
(a) If at any time the Bank determines in good faith
(which determination shall be conclusive) that any change in any applicable
law, rule or regulation or in the interpretation, application or administration
thereof makes it unlawful, or any central bank or other Governmental Authority
asserts that it is unlawful, for the Bank or its foreign branch or branches to
fund or maintain any Eurodollar Rate Loan (any of the foregoing determinations
being a "Eurodollar Event"), then, at the option of the Bank, the aggregate
principal amount of the Eurodollar Rate Loans then outstanding (to the extent
directly affected by such Eurodollar Event) shall be prepaid by the Borrower;
and any remaining obligation of the Bank hereunder to make Eurodollar Rate
Loans (but not Alternate Base Rate Loans or CD Rate Loans) shall be suspended
as long as such Eurodollar Event shall continue. Upon the occurrence of any
Eurodollar Event, and at any time thereafter so long as such Eurodollar Event
shall continue, the Bank may exercise its aforesaid option by giving written
notice thereof to the Borrower.
(b) Any prepayment of any Eurodollar Rate Loan which is
required under this Section 4.03 shall be made, together with accrued and
unpaid interest and all other amounts payable to the Bank under this Agreement
or the Bank's Note with respect to such prepaid Loan (including, without
limitation, amounts payable pursuant to Section 4.05 hereof), on the date
stated in the notice to the Borrower referred to above, which date (the
"required prepayment date") shall be not less than 15 days from the date of
such notice. If any Eurodollar
-27-
<PAGE> 35
Rate Loan is required to be prepaid under this Section 4.03, the Bank shall
make an Alternate Base Rate Loan, in the same principal amount and having an
Interest Period ending on the same date as the Eurodollar Rate Loan so prepaid.
Section 4.04. Increased Costs.
(a) If from and after the date hereof, due to either (i)
the introduction of or any change (other than any change by way of imposition
or increase of reserve requirements, in the case of Eurodollar Rate Loans,
included in the Eurodollar Rate Reserve Percentage, or in the case of Adjusted
CD Rate Loans, included in the Adjusted CD Rate Reserve Percentage) in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental
authority (whether or not having the force of law), there shall be any
increase in the cost to the Bank of agreeing to make or making or maintaining
any Eurodollar Rate Loan, any Adjusted CD Rate Loan or any Alternate Base Rate
Loan or maintaining its Commitment with respect thereto (other than any
increase in income or franchise taxes imposed on it by the jurisdiction under
the laws of which the Bank is organized or by the jurisdiction of the Bank's
Applicable Lending Office or any political subdivision of either thereof), then
the Borrower shall from time to time, upon demand by the Bank, pay to the Bank
additional amounts sufficient to compensate the Bank for such increased cost;
provided, however, the Bank shall not request compensation for, and the
Borrower shall not be obligated to compensate the Bank for, any increased costs
incurred by the Bank for any period prior to the date the Bank delivers to the
Borrower a written notice informing the Borrower that such costs will be
incurred and specifying the basis therefore. Thereafter, the Bank shall notify
the Borrower from time to time of such compensation due and payable for the
period from and after the date of such notification, and the Borrower shall pay
such amount to the Bank within ten (10) days after the Bank delivers such
notice requesting compensation. Any notice delivered by the Bank to the
Borrower hereunder shall be deemed to be conclusive, absent manifest error.
(b) The Bank shall use its best efforts (consistent with
its internal policies and legal and regulatory restrictions) to avoid or
minimize any additional amounts that otherwise would be payable pursuant to
this Section, including changing the jurisdiction of its Applicable Lending
Office if such change would eliminate the amount of any such additional amounts
which may thereafter accrue; provided that no such change or action shall be
required to be made or taken if, in the reasonable judgment of the Bank, such
change would be disadvantageous to the Bank. If the Bank determines not to
make any change in the jurisdiction of its Applicable Lending Office, then,
at the option of the Borrower, the aggregate principal amount of the Loans then
outstanding to which the increased costs are attributable may be prepaid by the
Borrower; and any remaining obligation of the Bank hereunder to make such Loan
shall be suspended as long as the events giving rise to such increased costs
shall continue. The Borrower may exercise its aforesaid option by giving
written notice thereof to the Bank.
-28-
<PAGE> 36
(c) Any prepayment of any Loan which is made under this
Section 4.04 shall be made, together with accrued and unpaid interest and all
other amounts payable to the Bank under this Agreement or the Bank's Note with
respect to such prepaid Loan (including, without limitation, amounts payable
pursuant to Section 4.04(a) hereof and Section 4.05 hereof), on the date stated
in the notice to the Bank referred to in subsection (b) of this Section 4.04,
which date ("required prepayment date") shall be not less than three (3)
Business Days from the date of such notice. Subject to payment by the
Borrower in full not later than 1:00 P.M. (Houston time) of the amount required
to be paid on the required prepayment date, the Bank shall make on the required
prepayment date an Alternate Base Rate Loan in the same principal amount and
having an Interest Period ending on the same date as the Loan so prepaid.
Section 4.05. Funding Losses. The Borrower will indemnify
the Bank against, and reimburse the Bank on demand for, any loss,
cost or expense incurred or sustained by the Bank (including without limitation
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Bank to fund or maintain any Loan) as a
result of (a) any payment or prepayment (whether authorized or required
hereunder or otherwise) of all or a portion of any Loan on a day other than the
last day of an Interest Period for such Loan; (b) any payment or prepayment
(whether required hereunder or otherwise) of a Loan made after the delivery of
a Notice of Borrowing (whether oral or written) but before the applicable
Borrowing Date if such payment or prepayment prevents the proposed Borrowing
from becoming fully effective; or (c) after receipt by the Bank of a Notice of
Borrowing, the failure of any Loan to be made or effected by the Bank due to
any condition precedent to a Borrowing not being satisfied or due to any other
action or inaction of the Borrower. The Bank shall deliver to the Borrower a
statement reasonably setting forth the amount and manner of determining such
loss, cost or expense, which statement shall be conclusive and binding for all
purposes, absent manifest error.
Section 4.06. Capital Adequacy Requirements. If at any
time the Bank or any participant shall have determined that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank or any
participant with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's or any participant's capital as a consequence of its obligations
hereunder to a level below that which the Bank or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank's or such participant's policies with respect to capital adequacy) by
an amount deemed by the Bank or such participant to be material, then the
Borrower shall pay to the Bank or such participant such additional amount or
amounts as will compensate the Bank or such participant for such reduction;
provided, however, the Borrower will not be obligated to compensate the Bank
for any reduced rate of return suffered by the Bank for any period prior
-29-
<PAGE> 37
to the date of delivery to the Borrower of a notice specifying that such
reduction will occur and setting forth the basis therefore. Thereafter, the
Bank shall notify the Borrower from time to time of the amount of such
compensation due and payable for the period from and after the date of such
notification and the Borrower shall pay such amount to the Bank within ten (10)
days after the Bank delivers such notice requesting compensation. Any notice
delivered by the Bank to the Borrower hereunder shall be deemed to be
conclusive, absent manifest error. In preparing such notice,
the Bank or such participant may employ such assumptions and allocations of
costs and expenses as it shall in good faith deem reasonable and may use any
reasonable averaging and attribution methods.
ARTICLE V
PREPAYMENTS; PAYMENTS; ETC.
Section 5.01. Payment of Loans.
(a) The Borrower shall repay the principal amount of each
Loan on the last day of the Interest Period for such Loan, provided that the
Borrower may reborrow in accordance with Sections 2.01 and 3.01 and in the case
of a Borrowing under Section 3.01, for the sole purpose of refinancing any Loan
at the end of the Interest Period therefor. The Borrower hereby authorizes the
Bank, if and to the extent payment owed to the Bank is not made to the Bank
when due hereunder or under the Note payable to the Bank, to charge from time
to time against any and or all of the Borrower's accounts with the Bank the
amount so due. Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest; provided, however,
if such extension would cause payment of interest on or principal of Eurodollar
Rate Loans to be made in the next following calendar month, such payment shall
be made on the next preceding.
(b) Interest Payments on Loans. All accrued and unpaid
interest on all Loans shall be payable in arrears as follows: (i) as to each
Alternate Base Rate Loan, on a quarterly basis commencing on December 31, 1989,
and continuing thereafter each March 31, June 30, September 30 and December 31
of each year; (ii) as to each Eurodollar Rate Loan or an Adjusted CD Rate Loan
having an Interest Period not greater than three (3) months or 90 days,
respectively, at maturity; (iii) as to each Eurodollar Rate Loan or an Adjusted
CD Rate Loan having an Interest Period greater than three (3) months or 90
days, respectively, at the end of the third month of the Interest Period for
such Loan, and at maturity; and (iv) upon any prepayment thereof to the extent
accrued on the amount being prepaid; and (v) as to all Loans, at maturity.
Interest shall be payable to the Bank in accordance with Section 5.04 hereof.
-30-
<PAGE> 38
Section 5.02. Optional Prepayments on the Loans. The
Borrower may at any time, (i) with respect to any Eurodollar Rate Loan or
Adjusted CD Rate Loan, upon at least three (3) Business Days' notice to the
Bank or (ii) with respect to any Alternate Base Rate Loan upon the giving of
notice to the Bank on or before 10:00 A.M. on the date of prepayment, prepay
the outstanding principal amounts of any Loans in whole or in part. Each
notice of prepayment shall state the proposed date of such prepayment (which
shall be a Business Day) and shall specify the Loans to be prepaid, and the
aggregate principal amount of the prepayment. All such prepayments shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid without premium or penalty thereon, provided that
funding losses incurred by the Bank under Section 4.05 hereof shall be payable
with respect to each such prepayment. Such notice shall be irrevocable and the
payment amount specified in such notice shall be due and payable
on the prepayment date described in such notice, together with accrued and
unpaid interest on the amount prepaid. Partial prepayments with respect to
a Loan shall be in an aggregate principal amount of $1,000,000 or greater
integral multiples of $1,000,000. The Borrower shall have no optional right
to prepay the principal amount of any Loan other than as provided in this
Section 5.02.
Section 5.03. Mandatory Prepayments on the Loans.
(a) On each Facility II Commitment Reduction Date, the
Borrower shall prepay that part of the unpaid principal amount of the Facility
II Loans that, but for this Section 5.03(a), would exceed the aggregate amount
of the Facility II Commitment immediately after each such reduction.
(b) Provided that no Event of Default has occurred which
is continuing, all prepayments made under Section 5.02 shall be applied in the
manner so directed by the Borrower. Borrower shall not be permitted to
re-borrow any prepayments of Facility II Loans, and no prepayment of Facility
II Loans shall reduce the amount Borrower is required to prepay upon a
reduction of the Facility II Commitment pursuant to Section 5.03(a). Any
prepayment of a Facility II Loan under this paragraph shall to the extent of
such application permanently reduce the related Commitment. The Borrower shall
have no right to reborrow any amount prepaid under Section 5.03(a).
Section 5.04. Place and Time of Payments. The Borrower
shall make each payment hereunder and under the Notes not later than 1:00 P.M.
(Houston time) on the day when due in lawful money of the United States and in
same day funds to the Bank at its Applicable Lending Office.
-31-
<PAGE> 39
ARTICLE VI
TAXES
Section 6.01. Taxes.
(a) To the extent permitted by applicable law, any and
all payments by the Borrower hereunder or under the Note shall be made free and
clear of and without deduction for any and all present or future taxes,
deductions, charges or withholdings, and all liabilities with respect thereto,
including without limitation, such taxes, deductions, charges, withholdings or
liabilities whatsoever imposed, assessed, levied or collected on or in respect
of a Loan solely as a result of the interest rate being determined by
reference to the Eurodollar Rate, or the provisions of the Agreement relating
to the Eurodollar Rate, or the recordings, registration, notarization or other
formalization of any thereof or any payments of principal, interest or other
amounts made on or in respect of a Loan when the interest rate is determined by
reference to the Eurodollar Rate, excluding, in the case of the Bank, taxes
imposed on its income (including penalties and interest payable in respect
thereof), and franchise taxes imposed on it, by the Jurisdiction under the laws
of which the Bank is organized or any political subdivision thereof and, in the
case of the Bank, taxes imposed on its income (including penalties and interest
payable in respect thereof), and franchise taxes imposed on it, by the
jurisdiction of the Bank's Applicable Lending Office or any political
subdivision thereof (all such non- excluded taxes, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under the Note, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 6.01) the
Bank receives an amount equal to the sum it would have received had no such
deductions been made and (ii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) To the extent permitted by applicable law, in
addition, the Borrower agrees to pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Note or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
the Note (hereinafter referred to as "Other Taxes").
(c) To the extent permitted by applicable law, the
Borrower will indemnify the Bank for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 6.01) paid by the Bank and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within 30 days from the
date the Bank makes written demand therefor; provided, however, to the extent
that the Bank is reimbursed for any
-32-
<PAGE> 40
Tax or Other Tax that was incorrectly or illegally asserted, the Bank shall
return to the Borrower the amount of such reimbursement, together with any
interest that may have been paid with respect thereto, to the extent the
Borrower has actually indemnified the Bank with respect thereto.
(d) Promptly after the date on which payment of any Taxes
or Other Taxes are due pursuant to applicable law, the Borrower at the request
of the Bank, furnish to the Bank evidence in form and substance satisfactory to
the Bank, that the Borrower has met its obligations under this Section 6.01.
(e) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreement and obligations of the
Borrower contained in this Section 6.01 shall survive the payment in full of
principal and interest hereunder and under the Notes.
ARTICLE VII
CONDITIONS OF LENDING
Section 7.01. Conditions to Closing. The obligation of the
Bank to execute and deliver this Agreement and to make its Loan comprising a
part of the initial Facility I Borrowing hereunder is subject to the following
conditions:
I. Conditions Precedent to Closing.
(a) The Bank shall have received appropriately dated and
in form and substance satisfactory to the Bank or the following actions shall
have been taken or circumstances shall have occurred:
(i) Loan Documents.
(A) Credit Agreement. The Credit Agreement duly
executed by the Borrower and the Bank; and
(B) Facility I Note. A Facility I Note, duly
executed by the Borrower and payable to the order of the Bank
in the amount of the Bank's Facility I Commitment.
(ii) Corporate Certificates.
(A) Secretary's Certificate (Borrower). A
certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) the names and true signatures of the
officers of the Borrower authorized to sign this Agreement.
-33-
<PAGE> 41
the Notes and other Loan Documents to which the Borrower is a
party and the notices and other documents and certificates to
be delivered pursuant to this Agreement, (B) the by-laws and
articles of incorporation of the Borrower as in effect on the
date of such certificate, and (C) the resolutions of the Board
of Directors of the Borrower approving and authorizing the
execution, delivery and performance by the Borrower of this
Agreement and the Notes and all other Loan Documents to which
it is a party and the transactions contemplated thereunder;
and
(B) Certificates. Certificates of appropriate
officials as to the existence and good standing of each of the
Borrower and its Subsidiaries in their respective
jurisdictions of incorporation and any and all jurisdictions
where the Property owned or the business transacted by each of
the Borrower and its Subsidiaries makes such qualification
necessary and where the failure to be so qualified would have
a Material Adverse Effect.
(iii) Miscellaneous.
(A) Compliance with Laws. On the Closing Date,
each Person that is a party to the Acquisition Agreement, this
Agreement or the Loan Documents shall have complied with all
laws (including, without limitation, Regulation G,
Regulation T, Regulation U, Regulation X and the Federal
Communications Act, and the rules and regulations promulgated
thereunder) necessary to consummate the transactions
contemplated by the Acquisition Agreements, this Agreement
and the Loan Documents;
(B) Compliance with Law; Orders. No law or
regulation shall prohibit, and no order, judgment or decree of
any Governmental Authority shall, and no litigation shall be
pending or threatened which in the reasonable judgment of the
Bank would enjoin, prohibit or restrain or have a Material
Adverse Effect on the making of the Loans or the consummation
of the transactions contemplated under the Loan Documents or
the Acquisition Agreement; and
(C) Other Documents. The Borrower shall have
taken such actions, and the Bank shall have received such
other documents as the Bank may reasonably request.
II. Conditions Precedent to initial Facility I Borrowing
on Funding Date.
(a) The Bank shall have received, or simultaneously
therewith, shall receive, appropriately dated and in form and substance
satisfactory to the Bank or the following actions shall have been taken or
circumstances shall have occurred:
-34-
<PAGE> 42
(i) Opinions.
(A) Borrower's Counsel's Opinion. An opinion of
Jackson & Walker, counsel for the Borrower and its
Subsidiaries, in form and substance satisfactory to the Bank;
and
(B) Special FCC Counsel. An opinion of Cole,
Rawid & Braverman, special FCC counsel for the Borrower and
the Subsidiaries, in form and substance satisfactory to the
Bank.
(ii) Other Senior Debt Documents.
(A) Other Senior Debt Documents. Executed
originals or conformed copies of all Other Senior Debt
Documents executed or delivered by the Borrower, any holder of
the promissory notes delivered in connection therewith or any
other Person prior to or on the Closing Date as a condition to
the issuance of such obligations thereunder, each in form,
substance and scope satisfactory to the Bank and certified by
the Secretary or an Assistant Secretary of the Borrower (A) as
being all of the Other Senior Debt Documents, (B) as being
true and correct copies of such documents as of the Funding
Date, (C) as having been duly authorized by the Board of
Directors of the Borrower, and (D) as having been duly
executed or filed, as the case may be; and
(B) Closing of Other Senior Debt Transactions.
Evidence of the consummation of the transactions under the
Other Senior Debt Documents in accordance with the terms
thereof and in conformity with applicable law, including,
without limitation, evidence of the issuance of the promissory
notes delivered in connection therewith, and the funding by
the respective holders of such notes of the amounts
represented by the indebtedness evidenced by such notes. The
Other Senior Debt Documents and all operative instruments
executed in connection therewith shall be valid, binding and
enforceable against the parties thereto in accordance with
their terms, and all conditions stated therein shall have been
satisfied without waiver where failure to satisfy such
conditions would cause a Material Adverse Effect.
(iii) Acquisition Documents.
(A) Acquisition Documents. In connection with
the Initial Acquisition, copies of all Acquisition Documents
received or delivered by any Person prior to or at the closing
under the Acquisition Agreement certified by the Secretary or
an Assistant Secretary of the Borrower, (A) as being all of
such Acquisition Documents, (B) as being true and correct
copies of such documents as of the
-35-
<PAGE> 43
Funding Date, (C) as having been duly authorized by the Board
of Directors of the Borrower, and (D) as having been duly
executed or filed, as the case may be; and
(B) Closing of Initial Acquisition. Evidence of
the consummation of the transactions under the Acquisition
Agreement in accordance with the terms thereof, except as
otherwise waived by the parties thereto (other than as set
forth in the next succeeding sentence), and in conformity with
applicable law. The Acquisition Documents related to the
Initial Acquisition and all operative instruments executed in
connection therewith shall be valid, binding and enforceable
against the parties thereto in accordance with their terms,
and none of the principal terms or conditions to closing of
any party set forth in such Acquisition Documents executed
prior to the Closing Date shall have been, without the prior
written consent of the Bank, amended or supplemented, and all
conditions stated therein shall have been satisfied without
waiver where the failure to satisfy such conditions would
cause a Material Adverse Effect.
(iv) Miscellaneous.
(A) Telexes. Bringdown telexes certifying the
existence and good standing of each of the Borrower and its
Subsidiaries in their respective jurisdictions of
incorporation and any and all jurisdictions where the Property
owned or the business transacted by each of the Borrower and
its Subsidiaries makes such qualifications necessary and where
the failure to be so qualified would have a Material Adverse
Effect;
(B) Consent Letters. All consents required under
all Franchise Agreements in order to effectuate the
transactions under the Acquisition Agreement;
(C) Payment of Expenses. Payment of all fees and
expenses of or incurred by the Bank and its counsel to and
including the Funding Date, to the extent billed as of the
Funding Date, in connection with the negotiation and closing
of the transactions contemplated herein;
(D) Regulatory Approvals. Evidence that all
approvals of Governmental Authorities necessary to consummate
the transactions contemplated by the Acquisition Documents and
the Loan Documents have been obtained, including, without
limitation, consents and approvals required by the FCC;
(E) Existing Debt. Evidence that all
Indebtedness other than Indebtedness permitted under Section
10.01 hereof has been or will on the
-36-
<PAGE> 44
Closing Date be repaid in full or refinanced upon terms and
conditions satisfactory to the Bank;
(F) Compliance with Laws. On the Funding Date,
each Person that is a party to the Acquisition Documents
related to the Initial Acquisition, this Agreement or the Loan
Documents shall have complied with all laws (including,
without limitation, Regulation G, Regulation T, Regulation U,
Regulation X and the Federal Communications Act, and the rules
and regulations promulgated thereunder) necessary to
consummate the transactions contemplated by such Acquisition
Documents, this Agreement and the Loan Documents;
(G) Consents. Evidence that the Borrower has
obtained all consents necessary for the execution, delivery
and performance by the Borrower of this Agreement, the Notes
and the other Loan Documents to which the Borrower is a party
and the transactions contemplated thereunder;
(H) Hart- Scott- Rodino Act. The Bank shall
have received evidence satisfactory to the Bank that the
Notification and Report Form with respect to the Acquisition
(i) is not required to be filed, or (ii) has been filed, under
the Hart- Scott- Rodino Antitrust Improvements Act of 1976 and
the waiting period with respect to the Acquisition shall have
expired or shall have been terminated;
(I) Delivery of Notice of Borrowing. The
Borrower shall have delivered to the Bank duly executed
Notices of Facility I Borrowing for the initial Facility I
Borrowing in substantially the form of Exhibit 7.01
(II)(a)(iv)(I) attached hereto;
(J) Insurance. The Bank shall have received all
such information as the Bank shall request concerning the
insurance maintained by the Borrower described in Section 8.11
hereof and the Bank shall have approved the types and amounts
of such insurance and the issuers thereof;
(K) Terms of Initial Acquisition. The principal
terms and provisions of the Acquisition Documents related to
the Initial Acquisition, and the Initial Acquisition itself
shall be acceptable to the Bank;
(L) Compliance with Law; Orders. No law or
regulation shall prohibit, and no order, judgment or decree of
any Governmental Authority shall, and no litigation shall be
pending or threatened which in the reasonable judgment of the
Bank would enjoin, prohibit or restrain or have a Material
Adverse Effect on the making of the Loans or the consummation
of the
-37-
<PAGE> 45
transactions contemplated under the Loan Documents or the
Acquisition Documents;
(M) Other Documents. The Borrower shall have
taken such actions, and the Bank shall have received such
other documents as the Bank may reasonably request:
(N) Payment of Fee. The Borrower shall have paid
to the Bank the Loan Origination Fee: and
(O) Material Adverse Change. No material adverse
change shall have occurred with respect to the business,
financial condition, properties or operations of the Borrower
and its Subsidiaries since October 31, 1988.
Section 7.02. Conditions Precedent to Certain Borrowings.
The obligation of the Bank to make a Loan on the occasion of each Borrowing
which increases the principal amount outstanding (including, without
limitation, the initial Facility I Borrowing) shall be subject to the further
condition precedent that the following statements shall be true (and the
acceptance by the Borrower of the proceeds of each Borrowing shall be deemed to
constitute a representation and warranty by the Borrower that on the date of
such Borrowing such statements are true):
(a) The representations and warranties contained in
Article VIII of this Agreement (other than those contained in the last sentence
of Section 8.06, except the representation and warranty made pursuant to
Section 8.06 shall be true and correct with respect to the initial Facility I
Borrowing) shall be true and correct in all material respects on and as of the
date of such Borrowing as though made on and as of such date, except that all
representations and warranties that speak as of a particular date shall only be
required to be true and correct in all material respects as of such date: and
(b) No event has occurred and is continuing, or would
result from such Borrowing, which constitutes a Default or an Event of Default;
and
(c) The Borrower has delivered to the Bank its Notice of
Borrowing.
Section 7.03. Conditions Precedent to Borrowings Which Do
Not Increase Principal Amount Outstanding. The obligation of the Bank to make
a Loan on the occasion of each Borrowing which does not increase the principal
amount outstanding shall be subject to the following conditions precedent:
(a) No event has occurred and is continuing which
constitutes an Event of Default, and
-38-
<PAGE> 46
(b) Except as otherwise permitted hereunder, the Borrower
has delivered to the Bank its Notice of Borrowing.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement, the
Borrower represents and warrants to the Bank (which representations and
warranties will survive the delivery of the Note and the making of the Loans)
as set forth below. It is understood and agreed that to the extent a
representation or warranty refers to the Acquisition, such reference will be
deemed a reference to the Initial Acquisition and to any Subsequent Acquisition
completed as of the date such representation or warranty is made or deemed
made, and to the extent such representations and warranties refer to the
Acquisition Documents, such reference will be deemed a reference to the
Acquisition Documents executed in connection with the Initial Acquisition and
to any Acquisition Documents related to any Subsequent Acquisition to the
extent the same have been executed by the Borrower or any Subsidiary and the
other parties thereto as of the date such representations and warranties are
made or deemed made.
Section 8.01. Corporate Existence. Each of the Borrower
and its Subsidiaries is a corporation duly organized, legally existing and in
good standing under the laws of the jurisdiction in which it is incorporated
and is duly qualified or licensed as a foreign corporation in all jurisdictions
where the failure to be so qualified would have a Material Adverse Effect.
Section 8.02. Corporate Power and Authorization. The
Borrower is duly authorized and empowered to execute, deliver and perform this
Agreement, the Note and the Acquisition Documents; and the Borrower is duly
authorized and empowered to execute, deliver and perform the other Loan
Documents to which it is a party; and all corporate action on the Borrower's
part requisite for the due execution, delivery and performance of this
Agreement, the Note, and the other Loan Documents to which the Borrower is a
party and the Acquisition Documents has been duly and effectively taken. The
Borrower is duly authorized and empowered to borrow under this Agreement and
all corporate action on the Borrower's part requisite for borrowing by the
Borrower hereunder has been duly and effectively taken.
Section 8.03. Binding Obligations. This Agreement, the
Note and the other Loan Documents to which the Borrower is a party constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms, except as such
enforceability may be (i) limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) subject to
the effect of general
-39-
<PAGE> 47
principles of equity (regardless of whether such enforceability is considered
in a proceeding at equity or at law).
Section 8.04. No Conflict or Resultant Lien.
(a) The Material Agreements described in
Exhibit 8.04(a)-1 hereto constitute all of Borrower's or any Subsidiary's
Material Agreements as of the date hereof and after giving effect to the
Initial Acquisition. With the exception of violations of Material Agreements
and Franchise Agreements which have either been waived or which are described
in Exhibit 8.04(a)-2 hereto, the execution, delivery and performance of this
Agreement, the Note and the other Loan Documents to which the Borrower is a
party, the borrowings hereunder by the Borrower as contemplated herein, the
consummation of the transactions contemplated by the Acquisition Documents, and
the effectuation of the transactions contemplated under this Agreement, the
Note, the other Loan Documents and the Acquisition Documents do not and will
not violate any provision of, or result in a default under, the articles or
certificate of incorporation or other charter documents or bylaws of the
Borrower or any Subsidiary, or any Material Agreement, Franchise Agreement or
material Governmental Requirement, to which the Borrower or any Subsidiary is a
party or by which it is bound or which it is subject, or result in the creation
or imposition of any Lien upon any Properties of the Borrower or any
Subsidiary. No Default or Event of Default hereunder has occurred and is
continuing.
(b) Neither the Borrower nor any Subsidiary is in default
in any manner in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Material Agreement to
which it is a party, the non-performance, non-observance or non-fulfillment of
which would have a Material Adverse Effect.
(c) Neither the Borrower nor any Subsidiary is otherwise
in violation of any Governmental Requirement which violation would have (in the
event such violation were asserted by any Person) a Material Adverse Effect.
Section 8.05. Consent. The Borrower's execution, delivery
and performance of this Agreement, the Note and the other Loan Documents to
which the Borrower is a party and the Borrowings hereunder do not require the
consent or approval of any other Person. The consummation of the transactions
contemplated by the Acquisition Documents do not require the consent or
approval of any other Person, except (a) such consents and approvals as have
been obtained or such consents or approvals which the failure to obtain will
not have a Material Adverse Effect and (b) such consents and approvals required
for the Material Agreements and the Franchise Agreements as are identified on
Exhibit 8.05 attached hereto. Neither the Borrower nor any Subsidiary has
otherwise failed to obtain any governmental consent, approval, license, permit,
franchise or other governmental authorization necessary to the ownership of any
of its Properties or the conduct of its business which failure would have (in
-40-
<PAGE> 48
the event that such violation or failure were successfully asserted by any
Person) a Material Adverse Effect.
Section 8.06. Financial Condition.
(a) The audited consolidated balance sheet of the
Borrower and its Subsidiaries as of October 31, 1988 and the audited
consolidated statements of stockholders' equity, changes in financial position
and income of the Borrower and its Subsidiaries for the years ended October 31,
1988 (including any related schedules or notes), each of which has been
delivered to the Bank, have been prepared in accordance with GAAP and in
conformity with the Borrower's accounting practices consistently applied, and
present fairly the consolidated financial condition of the Borrower and its
Subsidiaries as of such date and for the period then ended. Other than changes
disclosed in writing to the Bank, there has been no material adverse change in
the financial condition, business, properties or operations of the Borrower and
its Subsidiaries since the date of the financial statement dated October 31,
1988 and after having given effect to the Acquisition, there has been no
material adverse change in the financial condition, business, properties or
operations of the Borrower or any Subsidiary since such date.
Section 8.07. Litigation. Except as described on
Exhibit 8.07 hereto, as of the date of this Agreement and after giving effect
to the Initial Acquisition, there is no litigation, legal, administrative or
arbitral proceeding or, to the knowledge of the Borrower or any Subsidiary,
investigation or other action of any nature pending or, to the knowledge of the
Borrower or any Subsidiary, threatened against or affecting the Borrower or any
Subsidiary which could reasonably be expected to have a Material Adverse
Effect.
Section 8.08. Taxes; Governmental Charges. The Borrower
and each Subsidiary has filed all federal, state and foreign income tax returns
which, to the best knowledge of the officers of the Borrower, are required to
be filed, and has paid all taxes as shown on such returns or on any assessment
received by it to the extent that such taxes have become due, except for such
taxes and assessments as are being contested and reserved for in the manner
required by Section 9.02 hereof.
Section 8.09. Titles, etc. Each of the Borrower and each
Subsidiary has good and indefeasible title to its respective presently owned
material Properties, free and clear of all Liens, except Liens permitted by
Section 10.02 hereof. Simultaneous with the funding of the initial Facility I
Loan, the Initial Acquisition will occur and after giving effect thereto, the
Borrower or its Subsidiaries will have purchased and hold good and indefeasible
title to the Assets (as defined in the Acquisition Agreement).
Section 8.10. Franchise Agreements. The Initial Franchise
Agreements are described on Exhibit 8.10 attached hereto. After giving
effect to the Initial Acquisition, the Cooke Franchise Agreements will have
been duly assigned and transferred to the Borrower or
-41-
<PAGE> 49
its Subsidiaries. On and after the Funding Date, except as set forth on
Exhibit 8.10 hereto, after giving effect to any Acquisition with respect to
subsections (a) through (d) of this Section 8.10:
(a) each Material Franchise Agreement is a legal, valid
and binding agreement of the Borrower or a Subsidiary and to the Borrower's
knowledge, each other party thereto and is in full force and effect, except to
the extent that certain Material Franchise Agreements may have expired in
accordance with their terms as of the date this representation and warranty is
made or deemed made;
(b) the Borrower or a Subsidiary is not materially in
default or breach of (with or without the giving of notice or passage of time),
and no franchisor has asserted in writing that the Borrower or a Subsidiary is
materially in default or breach of (with or without the giving of notice or
passage of time), any Material Franchise Agreement;
(c) to the Borrower's knowledge, the other parties to the
Material Franchise Agreements are not in default thereunder;
(d) neither the Borrower nor any Subsidiary has waived
any rights under any Material Franchise Agreement where such waiver would have a
Material Adverse Effect; and
(e) the franchisors under each Material Franchise
Agreement have consented to the Acquisition and the transactions contemplated
thereunder to the extent such consent is required under such Material Franchise
Agreement, and have recognized the Borrower or a Subsidiary as franchisee under
said Material Franchise Agreements.
Section 8.11. Casualties; Taking of Properties; Insurance.
The Borrower and each Subsidiary maintains insurance of such types as is
usually carried by corporations of established reputation engaged in the same
or similar businesses and similarly situated with financially sound,
responsible and reputable insurance companies or associations (or, as to
workers' compensation or similar insurance, with an insurance fund or by self-
insurance authorized by the jurisdiction in which its operations are carried
on) and in such amounts (and with co-insurance and deductibles) as such
insurance is usually carried by corporations of established reputation engaged
in the same or similar businesses and similarly situated.
Section 8.12. ERISA. Each Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified, and each trust
related to any such Plan is exempt from Federal income tax under
Section 501(a) of the Code. All Plans have been administered in compliance
with the applicable provisions of ERISA and the Code, except where failure to
so comply would not have a Material Adverse Effect on the Borrower. Borrower
has no material obligation under any Plan which is an employee welfare benefit
plan (within the meaning of Section 3(1) of ERISA) to provide post-employment
health care benefits to any of its current or former employees, except as may
be required by Section 4980B of the Code.
-42-
<PAGE> 50
No Termination Event has occurred, or is reasonably expected to occur, with
respect to any PBGC Plan or Multiple Employer Plan. Neither the Borrower nor
any ERISA Affiliate has incurred nor is reasonably expected to incur any
withdrawal liability under ERISA to any Multiemployer Plan. Neither the
Borrower nor any ERISA Affiliate has engaged in any prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA such
that any material liability might be incurred by the Borrower or any ERISA
Affiliate. The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and thereby and the lending of funds
pursuant to the provisions thereof will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code. No
Plan established or maintained by the Borrower or ERISA Affiliate or to which
the Borrower has made contributions had an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, as of the last day of the most recent Plan year of such
Plan heretofore ended. No material liability, individually or in the
aggregate, to the PBGC (other than required insurance premiums, all of which
that are due have been paid) has been incurred (but not satisfied), or is
reasonably expected to be incurred by the Borrower or any ERISA Affiliate with
respect to any PBGC Plan or Multiple Employer Plan in respect of which the
Borrower or any ERISA Affiliate is or has been an "employer" as defined in
Section 3(5) of ERISA and there has not been any event or condition, in
addition to a Termination Event, which presents a material risk of the
termination of any such PBGC Plan under circumstances which, in the reasonable
determination of the Bank, could result in a material liability to Borrower.
To the best of Borrower's knowledge all accrued obligations that are either
individually or in the aggregate material of the Borrower or of any ERISA
Affiliate (but only if such ERISA Affiliate's accrued obligations could result
in a material liability to Borrower) whether arising by operation of law, by
contract or by past custom or practice, for payments by any of them to any
trust or other fund or to any governmental or administrative authority with
respect to pension benefits, unemployment compensation benefits, social
security or other benefits for employees or former employees of the Borrower or
any ERISA Affiliate have been paid or adequate accruals therefor have been made
and none of the foregoing has been rendered not due by reason of any extension,
whether at the request of the Borrower or any ERISA Affiliate, or otherwise.
To the best of Borrower's knowledge, all accrued obligations that are either
individually or in the aggregate material of the Borrower, or any ERISA
Affiliate (but only if such ERISA Affiliate's accrued obligations could result
in a material liability to Borrower) whether arising by operation of law, by
contract, by past custom or practice or otherwise, for salaries, vacation and
holiday pay, bonuses and other forms of compensation payable to employees or
former employees of the Borrower or any ERISA Affiliate have been paid or
adequate accruals therefor have been made in the books and records of the
Borrower or the appropriate ERISA Affiliate. For purposes of this Section, an
obligation or liability shall be considered material if it results in a
Material Adverse Effect. No Lien in favor of a Plan exists nor has there been
any occurrence that with the passage of time could likely result in the
imposition of a Lien in favor of any Plan. There has been no failure to comply
with the continuing health care coverage requirements of Section 4980B of the
Code which would have a Material Adverse Effect on the Borrower.
-43-
<PAGE> 51
Section 8.13. Full Disclosure. The financial projections
or pro forma financial statements furnished to the Bank by the Borrower with
respect to the transactions contemplated under the Acquisition Agreement and
this Agreement were prepared in good faith on the basis of information and
assumptions that the Borrower believed to be reasonable as of the date of such
information, and which assumptions are believed to be reasonable as of the
date of this Agreement. The Borrower does not believe that any information in
the materials furnished by or on behalf of the Borrower to the Bank for
purposes of or in connection with the transactions contemplated under the
Acquisition Documents or this Agreement, and thereafter as supplemented by
information provided to the Bank from time to time, contains any untrue
statement of a material fact or omits to state any material fact necessary to
keep the statements contained therein from being misleading.
Section 8.14. Investment Company Act. The Borrower is not
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
Section 8.15. Public Utility Holding Company Act. The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary-company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 8.16. Capital Structure. Attached hereto as
Exhibit 8.16 is a correct and complete list setting forth (i) the name of each
Subsidiary; (ii) the jurisdiction of its incorporation; and (iii) the title and
number of shares of its capital stock authorized and the number thereof
outstanding. The Borrower owns directly or indirectly 100% of the issued and
outstanding shares of capital stock of each Subsidiary and all shares of
capital stock of each Subsidiary are owned by the Borrower free and clear of
all Liens. All of the issued and outstanding shares of capital stock of the
Borrower are duly authorized, validly issued, fully paid and nonassessable.
Section 8.17. Insider. Neither the Borrower nor any
Subsidiary is, and no person having "control" (as that term is defined in 12
U.S.C. Section 375b(5) or in regulations promulgated pursuant thereto) of the
Borrower, or any Subsidiary is, an "executive officer", "director" or
"principal shareholder" (as those terms are defined in 12 U.S.C. 375b or in
regulations promulgated pursuant thereto) of the Bank, of a bank holding
company of which the Bank is a subsidiary or of any subsidiary of a bank
holding company of which the Bank is a subsidiary.
Section 8.18. Permits and Licenses. All material
franchises, permits, licenses, filings, registrations and other governmental
authorizations, including, without limitation, such franchises, permits,
licenses, filings, registrations and other governmental authorizations required
by the FCC (the "Permits") needed by the Borrower or any Subsidiary
-44-
<PAGE> 52
to carry on its business and to own and operate the CATV Systems have been
obtained or made and are in full force and effect and have not been modified or
amended. Neither the Borrower nor any Subsidiary is in material breach of any
such Permits and none of such Permits is the subject of any pending or
threatened attack or revocation.
Section 8.19. Acquisition Documents. The Borrower has
delivered to the Bank a true and correct copy of the Acquisition Documents.
The representations and warranties of the Borrower contained in the Acquisition
Documents are true and correct in all material respects. To the extent
permitted thereunder, with respect to representations and warranties of the
Seller under the Acquisition Documents, the Bank may rely thereon to the extent
that the Borrower is entitled under the Acquisition Documents to rely thereon.
Section 8.20. Transfer of Agreements. After giving effect
to the Initial Acquisition, all of the Material Agreements and the Franchise
Agreements have been transferred or assigned to, or are currently in the name
of, the Borrower or a Subsidiary and are in full force and effect.
Section 8.21. Quality of CATV System. The materials and
workmanship used in the construction and operation of the CATV System are of
sufficient quality to conform in all material respects with applicable
standards and regulations of the FCC or any other appropriate Governmental
Authority.
Section 8.22. Certain Regulatory Compliance. (a) The
Borrower and its Subsidiaries do not hold assets consisting of Margin Stock in
excess of 25% of the value of the assets of the Borrower and its Subsidiaries,
on a consolidated basis, and (b) the proceeds of each Loan shall at all times
be used in compliance with Regulations G, T, U or X, as the case may be.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Borrower will at all times comply with the covenants
contained in this Article IX, from the date of execution hereof until the Loans
are paid in full and the Commitments and all other obligations of the Bank
hereunder are finally terminated.
Section 9.01. Financial Statements and Reports. The
Borrower will promptly furnish to the Bank from time to time upon request such
information regarding the business and affairs and financial condition of the
Borrower as the Bank may reasonably request, and will furnish to the Bank:
-45-
<PAGE> 53
(a) Annual Financial Statements. As soon as practicable
and in any event within 90 days after the end of each Fiscal Year of the
Borrower, audited consolidated statements of income, stockholders' equity and
cash flow statement of the Borrower and its Subsidiaries for such year, and an
audited consolidated balance sheet of the Borrower and the Subsidiaries as of
the end of such year, and, commencing with the Fiscal Year ended October 31,
1989, setting forth in each case in comparative form corresponding figures from
the immediately preceding annual audit, all in reasonable detail and
satisfactory in scope to the Bank, together with the unqualified opinion of
such independent certified public accountants of recognized national standing
as are selected by the Borrower and reasonably satisfactory to the Bank,
stating that such financial statements fairly present the financial position of
the Borrower and its Subsidiaries as of the date indicated and the results of
its operations and changes in financial position for the period indicated in
conformity with GAAP applied on a consistent basis and that the audit by such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards;
(b) Quarterly Financial Statements. As soon as
practicable and in any event within 45 days after the end of each fiscal
quarter of the Borrower (including the fourth quarter), consolidated and
consolidating statements of income, stockholders' equity and cash flow
statement of the Borrower and its Subsidiaries for the period from the
beginning of the then current Fiscal Year of the Borrower to the end of such
fiscal quarter, and consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such fiscal quarter and,
commencing with the Fiscal Year ended October 31, 1989, setting forth in each
case in comparative form corresponding figures for the corresponding period,
all in reasonable detail and certified by the chief financial officer of the
Borrower as presenting fairly the financial position of the Borrower and its
Subsidiaries as of the date indicated and the results of its operations for the
period indicated in conformity with GAAP applied on a consistent basis, subject
to changes resulting from year-end adjustments;
(c) Other Reports. Promptly upon the sending thereof,
copies of all financial statements, notices and reports as the Borrower shall
send to its stockholders;
(d) Default Certificate. Together with delivery of any
information required by paragraph (a) and (b) of this Section 9.01, a
certificate of the Borrower signed by its chief financial officer (i) stating
that there exists no Event of Default or Default, or if any Event of Default or
Default exists, specifying the nature thereof, the period of existence thereof
and what action the Borrower proposes to take with respect thereto and (ii)
setting forth such schedules, computations and other information as may be
required to demonstrate that the Borrower is in compliance with its covenants
in Article X hereof and setting forth the calculation of the applicable
Leverage Premium;
(e) Notice of Default. Within five (5) Business Days of
any Responsible Officer of the Borrower obtaining knowledge of an Event of
Default or Default, a certificate of the chief financial officer of the
Borrower specifying the nature thereof, the period of
-46-
<PAGE> 54
existence thereof, and what action the Borrower has taken or proposes to take
with respect thereto;
(f) Default Under Other Agreements. Promptly upon any
Responsible Officer of the Borrower receiving written notice thereof or
obtaining knowledge thereof, notice of any default or event of default under
the Other Senior Debt Documents;
(g) Notice of Litigation. Promptly after any Responsible
Officer of the Borrower obtaining knowledge of the commencement thereof, notice
of any litigation, legal administrative or arbitral proceeding, investigation
or other action of any nature which involves the reasonable possibility of any
judgment or liability which could have a Material Adverse Effect;
(h) FCC Notices. Promptly upon the Borrower's or any
Subsidiary's receipt thereof, copies of all notices received from the FCC
regarding the termination, cancellation, revocation or taking of any other
adverse action with respect to any FCC licenses or Permits;
(i) Other Notices. Promptly upon the Borrower's or any
Subsidiary's receipt thereof, copies of any notice received from any
franchisors regarding the termination, cancellation or revocation of any
Franchise Agreement or any Material Agreements;
(j) Permits. Promptly after any Responsible Officer of
the Borrower or any Subsidiary obtaining knowledge thereof, notice of the
revocation, cancellation or termination of any Permit material to the conduct
of the Borrower's or such Subsidiary's business if such revocation,
cancellation or termination would have a Material Adverse Effect;
(k) CATV Information. Together with the delivery of the
financial statements required under paragraphs (a) and (b) of this Section
9.01, the Borrower shall deliver to the Bank a report setting forth with
respect to the Borrower and its Subsidiaries (i) the number of Homes Passed by
cable, (ii) the number of Basic Subscribers, and (iii) the number of pay units,
in each case as of the end of the preceding fiscal quarter or fiscal year, as
the case may be; and
(l) Additional Information. Promptly after request
therefor, such additional financial or other information as the Banks may
reasonably request from time to time, including without limitation capital
expenditures projected in the ordinary course of Business for the Borrower and
its Subsidiaries for the next succeeding twelve (12) month period.
Section 9.02. Taxes and Other Liens. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, or will cause
to be paid and discharged, promptly all taxes, assessments and governmental
charges or levies imposed upon the Borrower or any Subsidiary or upon the
income or any Property of the Borrower or any Subsidiary as well as all claims
of any kind (including claims for labor, materials, supplies
-47-
<PAGE> 55
and rent) which, if unpaid, might become a Lien upon any Property of the
Borrower or any Subsidiary; provided, however, that the Borrower or any
Subsidiary shall not be required to pay any such tax, assessment, charge, levy
or claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted by or
on behalf of the Borrower or any Subsidiary, and the Borrower or any Subsidiary
shall have set up adequate reserves therefor.
Section 9.03. Maintenance. The Borrower will, and will cause
each Subsidiary to (a) maintain its corporate existence, rights, licenses and
franchises, except such as may be duplicated or be rendered unnecessary as a
result of any merger or consolidation permitted by Section 10.06 hereof; (b)
observe and comply (to the extent necessary so that any failure to so comply
would not have a Material Adverse Effect) with all Governmental Requirements
and all agreements to which it is a party; (c) maintain, preserve and
materially comply with the terms of all licenses and Permits material to the
conduct, operation and maintenance of each Material Franchise Agreement and the
CATV System related thereto; (d) maintain its respective material Properties
(and any material Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition; and
(e) use materials and workmanship in any construction, maintenance and
operation of the CATV System of sufficient quality to conform in all material
respects with applicable standards and regulations of the FCC and provide each
subscriber with picture and sound in compliance with standards set by the FCC.
Section 9.04. Further Assurances. The Borrower at its expense
will promptly execute and deliver to the Bank upon request all such other and
further documents, agreements and instruments (or cause any of its Subsidiaries
to take such action) in compliance with or accomplishment of the covenants and
agreements of the Borrower or any of its Subsidiaries in the Loan Documents,
including, without limitation, the accomplishment of any condition precedent
that may have been waived on a limited basis by the Bank prior to the initial
Facility I Borrowing or any subsequent Borrowings.
Section 9.05. Reimbursement of Expenses. (a) The Borrower
agrees to pay on demand (i) all costs and expenses of the Bank in connection
with the preparation, execution, delivery, administration, modification and
amendment of the Loan Documents and the other documents to be delivered
thereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Bank, and of local counsel, domestic
or foreign, who may be retained by the Bank, with respect thereto and with
respect to advising the Bank as to its rights and responsibilities under the
Loan Documents; (ii) all costs and expenses (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of the Loan
Documents and the other documents to be delivered thereunder; and (iii) all
costs and expenses of the Bank in connection with due diligence,
transportation, computer, duplication, appraisals, audits, insurance,
consultants, and search reports, and all filing and recording fees.
-48-
<PAGE> 56
(b) The Borrower will, upon request, promptly reimburse
the Bank for all amounts expended, advanced or incurred by the Bank to satisfy
any obligation of the Borrower or any other Person (other than the Bank) under
any Loan Document, or to collect the Notes, and for all amounts reasonably
expended, advanced or incurred by the Bank to enforce the rights of the Bank
under any Loan Document, which amounts will include, without limitation, all
court costs, attorneys' fees (including, without limitation, for trial,
appeal or other proceedings), fees of auditors and accountants, and
investigation expenses, reasonably incurred by the Bank in connection with any
such enforcement, together with interest at the Alternate Base Rate plus two
percent (2%) (but never in excess of the Highest Lawful Rate) on each such
amount from the date of written demand or request by the Bank for reimbursement
until the date of reimbursement to the Bank.
Section 9.06. Insurance. The Borrower will maintain, and will
cause each Subsidiary to maintain, insurance of such types and in such amounts
as is described in Section 8.11 hereof; provided that such insurance shall not
be materially dissimilar in substance or amount to the insurance approved by
the Bank pursuant to Section 7.01 (II)(a)(iv)(J) hereof.
Section 9.07. Right of Inspection. The Borrower will permit
and will cause each Subsidiary to permit, any officer or employee of, or agent
designated by, the Bank, at the expense of the Bank, to visit and inspect any
of the Properties of the Borrower and its Subsidiaries, examine the Borrower's
or any Subsidiary's corporate books or financial records, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of the
Borrower or any Subsidiary with the Borrower's or any Subsidiary's officers all
at such reasonable times and as often as the Bank may reasonably desire.
Section 9.08. ERISA Information and Compliance. The Borrower
will furnish to the Bank (a) if requested by the Bank, promptly after the
filing thereof with the Internal Revenue Service copies of each Schedule B
(actuarial information) to the annual report with respect to each Plan; (b)
promptly after becoming aware of the occurrence of any Termination Event in
connection with any Multiple Employer Plan or PBGC Plan, a written notice
signed by the President, Chief Financial Officer or the Treasurer of the
Borrower specifying the nature thereof and any action the Borrower or
appropriate ERISA Affiliate proposes to take with respect thereto; (c) promptly
and in any event within five (5) Business Days after receipt thereof by the
Borrower or any of its ERISA Affiliates from the PBGC, copies of each notice
received by the Borrower or any such ERISA Affiliate of the PBGC's intention to
terminate any Multiple Employer Plan or PBGC Plan or to have a trustee
appointed under Section 4042(b) of ERISA to administer any PBGC Plan or
Multiple Employer Plan in either event under circumstances that in the
reasonable judgment of the Bank could result in material liability to Borrower
or any ERISA Affiliate; (d) promptly a written notice in the event there is
either a failure of Borrower or an ERISA Affiliate to comply with the minimum
funding requirements of Section 412 of the Code or Section 302 of ERISA or an
application for a waiver from either or both of such requirements is requested
or received by Borrower or an ERISA Affiliate with respect to a PBGC Plan or a
Multiple
-49-
<PAGE> 57
Employer Plan and in either event the failure to comply or the application or
grant of waiver is with respect to a material amount; and (e) promptly and in
any event within five (5) Business Days after receipt thereof by the Borrower
or any of its ERISA Affiliates from a Multiemployer Plan sponsor, a copy of
each notice received by the Borrower or any of its ERISA Affiliates concerning
the imposition and the amount of withdrawal liability upon the Borrower or an
ERISA Affiliate by a Multiemployer Plan pursuant to Section 4202 of ERISA. The
Borrower will comply in all material respects with all applicable provisions of
ERISA the violation of which would, in the reasonable judgment of the Bank,
give rise to a material liability of the Borrower. For purposes of this Section
9.08, an obligation or liability shall be considered material if it results in
a Material Adverse Effect.
Section 9.09. Compliance with Material Franchise Agreements.
The Borrower will maintain, and will cause each Subsidiary to maintain, in full
force and effect at all times during the term of this Agreement, and will
materially comply with, and will cause each Subsidiary to materially comply
with, the terms and provisions of, each Material Franchise Agreement and the
FCC license and Permits.
ARTICLE X
NEGATIVE COVENANTS
The Borrower will at all times comply with the covenants
contained in this Article X, from the date of execution hereof until the Loans
are paid in full and the Commitments are finally terminated.
Section 10.01. Debt. The Borrower will not, and will not
permit any Subsidiary to, incur, create, assume or suffer to exist any
Indebtedness except as set forth below, all of which shall be "Permitted Debt":
(a) Indebtedness of the Borrower to the Bank evidenced
by the Loan Documents;
(b) indebtedness of the Borrower or any Subsidiary for
borrowed money if (i) such indebtedness is unsecured; (ii) prior to and after
giving effect to the incurrence of such indebtedness, no Default or Event of
Default has occurred and is continuing; and (iii) at no time would such
indebtedness be senior in right of payment to the Indebtedness evidenced by the
Loan Documents and Other Senior Debt in situations involving the events
described in Sections 11(e) and 11(f);
(c) other Indebtedness, whether or not secured, of the
Borrower or any Subsidiary, the aggregate outstanding amount of which does not
at any time exceed $3,000,000; and
-50-
<PAGE> 58
(d) Indebtedness of the Borrower or any Subsidiary,
existing on the date hereof and described on Exhibit 10.01(d) hereof and which
has been approved by the Bank, provided that such Indebtedness is not
increased, renewed or extended or permitted to remain outstanding after the
stated maturity thereof.
Section 10.02. Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any Properties (other than Property which constitutes "Margin Stock" as defined
in Regulations G, T, U or X) (now owned or hereafter acquired) of the Borrower
or any Subsidiary except:
(a) Permitted Liens:
(b) Liens existing on the date hereof and described on
Exhibit 10.02(b) hereof and which have been approved by the Bank, and Liens
extending any such existing Lien, if the principal amount secured is not
increased and the extended Lien does not cover any Property which is not
covered by the existing Lien extended thereby; and
(c) Liens securing the indebtedness permitted by
Section 10.01(c) hereof.
Section 10.03. Investments. The Borrower will not, and will
not permit any Subsidiary to, permit to remain outstanding any loan or advance
(other than any loan or advance made by the Borrower or any Subsidiary in the
ordinary course of business which is treated as an expense item in accordance
with GAAP) to, or guarantee, endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the obligations, stock or
dividends of, or own, purchase or acquire any stock, obligations or securities
of, or any other interest in (other than Common Stock of the Borrower so long
as, at the time of such acquisition and after giving effect thereto, no Default
or Event of Default shall have occurred or be continuing), or make any capital
contribution to, any Person, or otherwise make, incur, create, assume or suffer
to exist any Contingent Liability or any Investment of the Borrower or any
Subsidiary to purchase or acquire any assets (exclusive of purchases and
acquisitions of, tangible assets related to the Borrower's or any Subsidiary's
business), except that:
(a) the Borrower or any Subsidiary may acquire and own
stock, obligations or securities received in settlement of debts (created in
the ordinary course of business and not otherwise prohibited hereunder) owing
to the Borrower or any Subsidiary;
(b) the Borrower or any Subsidiary may own, purchase or
acquire (i) commercial paper rated P-1 by Moody's Investors' Service or A-1 by
Standard & Poor's Corporation, due within one (1) year from the date of
purchase, (ii) certificates of deposit (due within one (1) year from the date
of purchase and denominated in Dollars) in, bank repurchase agreements with and
deposits in United States commercial banks or foreign
-51-
<PAGE> 59
branches of United States commercial banks (having capital in excess of
$100,000,000) due within one (1) year from the date of purchase, (iii)
obligations of the United States government or any agency thereof due within
one (1) year from the date of purchase, and (iv) obligations guaranteed by the
United States government due within one (1) year from the date of purchase;
(c) the Borrower or any Subsidiary may own, purchase or
acquire Investments which are also Indebtedness to the extent permitted by
Section 10.01 hereof; and
(d) the Borrower or any Subsidiary may make purchases or
acquisitions that may constitute Investments to the extent that such purchases
or acquisitions are otherwise permitted by this Agreement.
Section 10.04. Dividends, Distributions and Redemptions. The
Borrower will not, and will not permit any Subsidiary (other than a
Wholly-Owned Subsidiary) to, pay or declare any dividend (except dividends and
distributions payable only in Common Stock of the Borrower or such Subsidiary
to the extent that such dividends in stock are payable only with respect to
stock of the same type and class) on any class of its stock or make any other
distribution on account of any class of the Borrower's or any Subsidiary's
stock or redeem purchase or otherwise acquire for cash, directly or indirectly,
any shares of any Subsidiary's stock or any options or warrants to purchase
its stock; provided, however, that so long as no Default or Event of Default
exists at the time of or would exist immediately following such payment, the
Borrower may pay dividends or make any other distribution to its shareholders
in an aggregate amount for all such dividends or distributions in each Fiscal
Year of the Borrower not to exceed $15,000,000; provided, further, that
repurchases by the Borrower of its Common Stock to the extent permitted under
Section 10.03 shall not be included in the foregoing calculation.
Section 10.05. Sale or Other Disposition of Assets. The
Borrower will not, and will not permit any Subsidiary to, sell, assign, lease
or otherwise dispose of (whether in one transaction or in a series of
transactions) all or any part of its Property (other than Property which
constitutes "Margin Stock" as defined in Regulations G, T, U or X) (whether now
owned or hereafter acquired); provided, however, that (a) the Borrower or any
Subsidiary may in the ordinary course of business dispose of Property
consisting of goods or equipment that are, in the opinion of the Borrower or
any Subsidiary, obsolete or unproductive, but if in the good faith judgment of
the Borrower or any Subsidiary such disposition without replacement thereof
would have a Material Adverse Effect, such goods and equipment shall be
replaced, or their utility and function substituted, by new or existing goods
or equipment and (b) the Borrower or any Subsidiary may dispose of Property if,
after giving effect to such disposition:
(a) in the case of a sale of Property, (i) the sum of
Operating Cash Flow attributable to all Property sold during the most recent
Calculation Period with respect to the
-52-
<PAGE> 60
proposed sale; calculated as of the date of such proposed sale of assets, plus
Operating Cash Flow attributable to all assets proposed to be sold, calculated
as of the date of such proposed sale of assets, determined by reference to such
Calculation Period, does not exceed 10% of Operating Cash Flow for such
Calculation Period; and
(b) in the case of an exchange of Property, including
without limitation a CATV system, such exchange satisfies the conditions that:
(i) the Property to be acquired constitutes cable
television assets and such assets are unencumbered; and
(ii) after giving effect to such transaction, there shall
not be a Material Adverse Effect on the Borrower and its Subsidiaries with
respect to the prospect of the future generation of Adjusted Operating Cash
Flow, on a consolidated basis, subscriber penetration levels, general mix of
assets and the condition, quality and development level of technical equipment,
and such transaction shall not render the Borrower and its Subsidiaries
insolvent or generally unable to pay its or their debts as they become due; and
(iii) the Borrower notifies the Bank of such trade or
exchange (including information comparing the Property being traded or
exchanged and the methodology used to establish the equated values); and
(iv) the sum of Operating Cash Flow attributable to all
assets proposed to be exchanged, calculated as of the effective date of any
such exchange, determined by reference to such Calculation Period, does not
exceed 25% of Operating Cash Flow for such Calculation Period; and
(c) In the case of clauses (A) and (B) above;
(i) no Default or Event of Default exists immediately
prior to, or after giving effect to, such sale or exchange; and
(ii) such sale or exchange is made without recourse (other
than as a result of normal and customary representations, warranties and
indemnities given buyers in the cable television business) to the Borrower and
its Subsidiaries; and
(iii) proceeds from the sale of assets not reinvested in
like assets will be used to repay Indebtedness hereunder or Other Senior Debt.
Section 10.06. Merger and Acquisition. The Borrower will not,
and will not permit any Subsidiary to, merge or consolidate with any Person;
provided, however, that
-53-
<PAGE> 61
(a) the Borrower may merge or consolidate with any
Subsidiary so long as the Borrower is the surviving or continuing corporation;
(b) the Borrower or any Subsidiary may merge or
consolidate with any Person so long as (i) either the Borrower or such
Subsidiary is the surviving or continuing entity; (ii) such Person is in the
business of operating CATV Systems; and (iii) after giving effect to such
merger or consolidation, the Adjusted Operating Cash Flow of the surviving
entity is at least equal to or greater than the Adjusted Operating Cash Flow of
the Borrower or such Subsidiary prior to such merger or consolidation.
Section 10.07. Sale-Leaseback. The Borrower will not, and
will not permit any Subsidiary to, enter into or permit to remain in effect any
sale-leaseback or similar arrangement, including, without limitation, any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary (as lessee) of real or personal Property which has been or is to be
sold or transferred by the Borrower or any Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced on the security of
such Property or rental obligations of the Borrower or any Subsidiary.
Section 10.08. Sale or Discount of Receivables. The Borrower
will not, and will not permit any Subsidiary to, sell, discount or otherwise
transfer, whether with or without recourse, any of its notes or accounts
receivable other than in the ordinary course of business for collection of
delinquent notes or accounts receivable.
Section 10.09. Supply and Purchase Contracts. The Borrower
will not, and will not permit any Subsidiary to, enter into or be a party to
any agreement for the purchase of materials, supplies or other Property if such
agreement requires that payment for such materials, supplies or other Property
shall be made regardless of whether or not delivery is ever made or tendered of
such materials, supplies or other Property.
Section 10.10. Use of Proceeds. The Borrower will not use, nor
permit the use of, all or any portion of any Loan for any purpose not permitted
by Section 2.08 or 10.15 hereof.
Section 10.11. Transactions with Affiliates. The Borrower will
not, and will not permit any Subsidiary to, directly or indirectly enter into
any transaction with any Affiliate or holder of 5% or more of any class of
capital stock of the Borrower, except for transactions (including any loans or
advances by or to any Affiliate) in good faith, the terms of which are fair and
reasonable to the Borrower or such Subsidiary, and which are at least as
favorable as the terms which could be obtained by the Borrower or such
Subsidiary in a comparable transaction made on an arm's-length basis between
unaffiliated parties.
Section 10.12. Change of Business. Each of the Borrower and
each Subsidiary will at all times carry on and conduct its business in
substantially the same manner
-54-
<PAGE> 62
and in substantially the same fields of enterprise as it is presently
conducted. The Borrower will not, and will not permit any Subsidiary to, make
any material change in the nature of the business conducted by the Borrower and
its Subsidiaries taken as a whole. Borrower shall, and shall cause all
Subsidiaries to, at all times maintain in full force and effect, and remain in
material compliance with, all Material Franchise Agreements, and licenses and
permits necessary to the operation of such business.
Section 10.13. Acquisitions. The Borrower will not, and will
not permit any Subsidiary to, purchase or otherwise acquire all or
substantially all of the assets or capital stock of any other Person; provided,
however, that the Borrower or any Subsidiary may acquire, all or substantially
all of the assets or capital stock of a Person if (a) immediately prior to, and
after giving effect to such transaction, no Default or Event of Default shall
have occurred hereunder, and (b) (i) in the case of an asset acquisition, the
assets acquired shall be related to or (ii) in the case of a stock acquisition,
the Person whose capital stock is being acquired shall be in, the cable
television business or businesses which are ancillary, incidental or necessary
thereto or reasonably related thereto.
Section 10.14. Certain Financial Covenants.
(a) The Borrower will not at any time permit the ratio of
(i) the aggregate Indebtedness of the Borrower and its Subsidiaries calculated
as at the most recent Calculation Date, to (ii) Adjusted Operating Cash Flow,
calculated for the preceding twelve (12) month period ending on the most recent
Calculation Date, to be greater than the ratios in effect for the periods set
forth below:
<TABLE>
<CAPTION>
For the Period: Maximum Ratio
<S> <C>
From the Closing Date through 5.0 to 1.0
and including 9/30/91
On 10/1/91 and at all times 4.0 to 1.0
thereafter
</TABLE>
(b) The Borrower will not at any time permit the ratio of
(i) Adjusted Operating Cash Flow for the preceding twelve month period to (ii)
Consolidated Debt Service for the next succeeding twelve (12) month period, in
each case calculated as of each Calculation Date of the Borrower, to be less
than 1.25 to 1.0.
(c) The Borrower will not permit its Fixed Charge
Coverage Ratio calculated for any twelve (12) month period preceding the month
of calculation to be, at any time, less than 1.10 to 1.0.
Section 10.15. Limitation On Margin Stock. The Borrower will
not, and will not permit any Subsidiary to, acquire Margin Stock such that at
any time (a) Margin Stock of
-55-
<PAGE> 63
the Borrower and its Subsidiaries represents more than 25% of the value of the
assets of the Borrower and its Subsidiaries, on a consolidated basis, or (b)
any Loan or Loans shall be in violation of Regulation G, T, U or X.
ARTICLE XI
EVENTS OF DEFAULT
Section 11.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay, repay or prepay when
due any amount of principal of the Note; or the Borrower shall fail to pay or
prepay within five (5) Business Days of the due date thereof any amount of
interest on the Note or any amount of any fee provided for in this Agreement or
any other amount owing by it to the Bank pursuant to this Agreement or any
other Loan Document; or
(b) the Borrower shall fail to perform or observe any
term, covenant or agreement contained in Sections 9.01(e), (h), (i), (j) or
Article X of this Agreement; or
(c) the Borrower shall fail to perform or observe any
term, covenant or agreement contained in this Agreement or any other Loan
Document (other than those referred to in paragraph (a) or (b) of this Section
11.01) on its part to be performed or observed and such failure shall remain
unremedied for thirty (30) days; or
(d) any representation or warranty made by the Borrower
or any Subsidiary in this Agreement, or any other Loan Document or any
certificate, financial statement or other document delivered pursuant to this
Agreement or any other Loan Document shall prove to have been incorrect or
misleading in any material respect when made or when deemed made; or
(e) the Borrower or any Subsidiary (i) admits in writing
its inability to pay its debts generally as they become due; (ii) generally
fails to pay its debts as they become due; (iii) files a petition or answer
seeking for itself, or consenting to or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under, any bankruptcy law or any insolvency law or other law for the
relief or aid of debtors (including, without limitation, the United States
Bankruptcy Code or any amendment thereto); or (iv) makes an assignment for
the benefit of its creditors; or
(f) there is appointed a receiver, custodian, liquidator,
fiscal agent or trustee of the Borrower or any Subsidiary or of the whole or
any substantial part of its properties or assets, or any court enters an order,
judgment or decree approving a petition filed against the
-56-
<PAGE> 64
Borrower or any Subsidiary seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law referred
to in paragraph (e) of this Section 11.01 and either such order, judgment or
decree so filed against it is not dismissed or stayed (unless and until such
stay is no longer in effect) within thirty (30) days of entry thereof or an
order for relief is entered pursuant to any such law: or
(g) the failure (unless waived or consented to in
accordance with the documents evidencing such Indebtedness) of the Borrower or
any Subsidiary to pay when due (after giving effect to any grace period
therefor) any Indebtedness of the Borrower or any Subsidiary (other than
Indebtedness referred to in paragraph (a) of this Section 11.01) in aggregate
principal amount greater than $5,000,000, or the default (unless waived or
consented to in accordance with the documents evidencing such Indebtedness) by
the Borrower or any Subsidiary under any such Indebtedness in aggregate
principal amount greater than $5,000,000 (or under any agreement or document
under or by which any such Indebtedness is created, evidenced or secured), in
respect of which any applicable notice has been given and any applicable grace
period has elapsed and the effect of which default is to accelerate, or to
entitle any Person to accelerate, any maturity thereof; or
(h) one or more final judgments or orders for the payment
of money in the aggregate in excess of $1,000,000 (or the equivalent thereof,
if such judgment or order shall be rendered in a currency other than Dollars),
shall be rendered against the Borrower or any Subsidiary on claims not covered
by insurance or as to which the insurance carrier denies responsibility and
such judgments shall continue unsatisfied and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of thirty (30) consecutive days during
which a stay enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) (i) the Borrower, any ERISA Affiliate or any of their
agents or representatives shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) which can be
expected to result in a material liability to the Borrower or any ERISA
Affiliate, (ii) any material "accumulated funding deficiency" (as defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived, shall
exist with respect to any PBGC Plan or Multiple Employer Plan, if in the
reasonable judgment of the Bank, such accumulated funding deficiency would give
rise to a material liability of Borrower or any ERISA Affiliate, (iii) the
Borrower or any ERISA Affiliate shall apply for or be granted a funding waiver
under Section 302 of ERISA or Section 412 of the Code, which waiver or request
for waiver is for a material amount, (iv) a Reportable Event shall occur with
respect to any PBGC Plan or Multiple Employer Plan, which Reportable Event is,
in the reasonable opinion of the Bank, likely to result in the termination of
such PBGC Plan or Multiple Employer Plan for purposes of Title IV of ERISA and
to give rise to a material liability of the Borrower or any ERISA Affiliate,
(v) proceedings shall commence to have a trustee appointed or a trustee shall
be appointed to terminate or administer a PBGC Plan or
-57-
<PAGE> 65
Multiple Employer Plan which proceeding is, in the reasonable opinion of the
Bank, likely to result in the termination of such PBGC Plan or Multiple
Employer Plan and to give rise to a material liability of the Borrower or any
ERISA Affiliate with respect to such termination, (iv) a notice of intent to
terminate a PBGC Plan or Multiple Employer Plan under Section 4041(c) is
filed with the PBGC if such termination would give rise to a material liability
of the Borrower or any ERISA Affiliate, (vii) any Multiemployer Plan is in
reorganization or is insolvent and the circumstances are such that in the
reasonable opinion of the Bank, there could be a material liability incurred by
or imposed upon Borrower or any ERISA Affiliate, (viii) there is a complete or
partial withdrawal from a Multiemployer Plan under circumstances that, in the
reasonable opinion of the Bank, would likely subject the Borrower or any ERISA
Affiliate to material liability, (ix) any Lien arising under Section 4068 of
ERISA or Section 412(n) of the Code shall attach to the assets or property of
the Borrower or any ERISA Affiliate, or (x) any event or condition described in
(i) through (ix) above (determined without regard to whether the event or
condition taken alone would or could result in a material liability) shall
occur or exist with respect to a PBGC Plan, Multiple Employer Plan or
Multiemployer Plan which individually or in combination with one or more of any
events described in (i) through (ix) above (determined without regard to
whether the event or condition taken alone would or could result in a material
liability), if any, in the reasonable opinion of the Bank would likely subject
the Borrower or any ERISA Affiliate to any material tax, penalty or other
liability (for purposes of this Section 11.01(i), an obligation or liability
shall be considered material if it results, in a Material Adverse Effect; or
(j) if at any time (A) Management and the directors of
the Borrower or any Subsidiary, or any heir under a will or by law of the
foregoing, shall in the aggregate own less than 30% of the Common Stock of the
Borrower (on a fully diluted basis), or (B) the Borrower shall own less than
100% of the capital stock of any Subsidiary (other than Margin Stock), except
as otherwise permitted herein: or
(k) the effective revocation or rescission at any time of
all or any part of the Initial Acquisition, other than with respect to the
"Retained Systems," as that term is defined in the Acquisition Agreement, and on
the terms and conditions described in the Acquisition Agreement; or
(l) the revocation, rescission or other termination of
any FCC license, permit or franchise owned by the Borrower or any Subsidiary
that would have a Material Adverse Effect; or
(m) any CATV System comprising more than ten percent (10%)
of the Adjusted Operating Cash Flow of the Borrower and its Subsidiaries shall
be inoperable, for any reason, for a period of sixty (60) calendar days during
any calendar year;
then, (A) with respect to any Event of Default described in Section 11.01(e)
or (f) hereof, the entire unpaid principal amount of the Note, all interest
accrued and unpaid thereon and all
-58-
<PAGE> 66
other amounts payable under this Agreement and the other Loan Documents shall
automatically become immediately due and payable and the obligations of the
Bank to make Loans shall automatically terminate, without presentment, demand,
protest or further notice (including, without limitation, notice of intent to
accelerate and notice of acceleration) of any kind, all of which are hereby
expressly waived by the Borrower, and (B) with respect to any other Event of
Default, the Bank by notice to the Borrower, (y) declare the obligation of the
Bank to make Loans to be terminated, whereupon such obligation and the
Commitments of the Bank shall forthwith terminate, and (z) declare the entire
unpaid principal amount of the Note, all interest accrued and unpaid
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Note, all such accrued
interest and all such amounts shall become and be forthwith due and payable,
without, except as otherwise expressly provided for herein or in the Note,
presentment, demand, protest or further notice (including, without limitation,
notice of intent to accelerate and notice of acceleration) of any kind, all of
which are hereby expressly waived by the Borrower.
Section 11.02. Other Remedies. Upon the occurrence and during
the continuance of any Event of Default, the Bank may (subject to the
provisions of the other Loan Documents) proceed to protect and enforce the
rights of the Bank either by suit in equity or by action at law or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in any other Loan Document or in aid of the exercise of any
power granted in this Agreement or in any other Loan Document; or may proceed
to enforce the payment of the Indebtedness outstanding under the Notes,
hereunder and under the other Loan Documents and interest thereon in the manner
set forth herein or therein; or may proceed to foreclose upon any Liens granted
pursuant to any Loan Documents in the manner set forth therein; it being
intended that no remedy conferred herein or in any of the other Loan Documents
is to be exclusive of any other remedy, and each and every remedy contained
herein or in any other Loan Document shall be cumulative and shall be in
addition to every other remedy given hereunder and under the other Loan
Documents, or now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
-59-
<PAGE> 67
Section 12.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, transmitted, cabled or delivered:
if to the Borrower, at its address at:
3015 Southeast Loop 323
Tyler, Texas 75701
Attention: Jimmie Taylor
if to the Bank, at its address at:
712 Main Street - 3 TCB-N 59
P. 0. Box 2558
Houston, Texas 77252
Attention: Kevin Kelty
Telecopy No.: (713) 236-5880
All such notices and communications shall, when mailed, telegraphed, telexed,
transmitted or cabled, be effective when deposited in the mails, delivered to
the telegraph company, confirmed by telex answerback, transmitted by telecopier
or delivered to the cable company, respectively, except that notices and
communications to the Bank pursuant to Article II or III shall not be effective
until received by the Bank.
Section 12.03. No Waiver; Remedies. No failure on the part of
the Bank to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of an remedies provided by law.
Section 12.04. Indemnification. (a) The Borrower agrees to
indemnify, defend and save harmless the Bank, and its officers, directors,
employees, agents and attorneys, and each of them (the "Indemnified Parties"),
from and against all claims, actions, suits and other legal proceedings,
damages, costs, interest, charges, counsel fees and other expenses and
penalties which any of the Indemnified Parties may sustain or incur by reason
of or arising out of the execution and delivery of any of the Loan Documents,
the consummation of the transactions contemplated thereby or hereby, or in
connection with the purchase or attempted purchase pursuant to the terms of the
Acquisition Documents (collectively, the "Subject Transactions"), including,
without limitation, damages, costs and expenses incurred by any of the
Indemnified Parties in investigating, preparing for, defending against, or
providing evidence, producing documents, or taking any other action in respect
of any commenced or threatened litigation under any federal securities law or
any other law of any jurisdiction or at common law which is alleged to arise
out of or is based upon:
-60-
<PAGE> 68
(i) the claims of any Person (other than claims of the
Borrower, which have been finally adjudicated in favor of the Borrower
and for which no further appeal may be made) that, in connection with
the Subject Transactions, any of the Indemnified Parties has violated
any fiduciary or confidentiality responsibilities, or any
representations, warranties or covenants, express or implied, made or
alleged to have been made by any of the Indemnified Parties, to or in
favor of such Person;
(ii) any untrue statement or alleged untrue statement of
any material fact by the Borrower or any Affiliate in any document or
schedule filed with the Securities and Exchange Commission or any
other Governmental Authority;
(iii) any omission or alleged omission to state any
material fact required to be stated in any document or schedule set
forth in (ii) of this Section 12.04(b) or necessary to make the
statements made therein not misleading in light of the circumstances
under which made;
(iv) any acts or omissions, or alleged acts or omissions
of the Borrower, any Affiliate or their agents related to the
Acquisition Documents, any acquisition, purchase or sale of stock or
assets, or the financing thereof, which are alleged to violate any
federal securities law or any other law of any jurisdiction applicable
to the Acquisition Documents, such acquisition, the purchase or sale
of stock or assets, or the financing thereof;
(v) any withdrawals, termination or cancellation of the
Acquisition Documents:
(vi) any other claims of any nature whatsoever arising from
or related to the Subject Transactions; or
(vii) any losses, claims or other damages arising from any
bulk transfer of assets;
provided that no Indemnified Party shall be entitled to the benefits of this
Section 12.04(b) to the extent its own gross negligence or willful misconduct
contributed to its loss and further provided, that it is the intention of the
Borrower to indemnify the Indemnified Parties against the consequences of their
own negligence.
(b) This Agreement is intended to protect and indemnify
the Indemnified Parties against all risks hereby assumed by the Borrower. The
obligations of the Borrower under Section 12.04(a) shall survive any
termination of this Agreement and the payment of the Note.
-61-
<PAGE> 69
Section 12.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default, the Bank is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under the Loan
Documents, irrespective of whether or not the Bank shall have made any demand
under any Loan Document and although such obligations may be unmatured. The
Bank agrees promptly to notify the Borrower after any such set-off and
application made by the Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Bank may
have.
Section 12.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Bank and
thereafter shall be binding upon and inure to the benefit of the Borrower and
the Bank and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or an interest herein
without the prior written consent of the Bank.
Section 12.07. Assignments and Participations.
(a) The Bank may assign or sell participations to one or
more Persons in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Note held by it); provided, that any such assignee must be a commercial
bank organized under the laws of the United States of America or any State
thereof and having a combined capital and surplus of at least $500,000,000. Any
such assignee hereunder shall be a party hereto, and to the extent rights have
been assigned to it pursuant to this Section 12.07, shall have the rights and
obligations of the Bank under the Loan Documents. Any participant shall be
entitled to the benefits of Section 4.06.
(b) The Bank may, in connection with an assignment or
participation or proposed assignment or participation pursuant to this Section
12.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to the Bank by
or on behalf of the Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information relating to the
Borrower received by it from the Bank.
-62-
<PAGE> 70
Section 12.08. GOVERNING LAW. (a) THIS AGREEMENT, THE NOTES
AND ALL OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH SHALL BE DEEMED TO BE
CONTRACTS AND AGREEMENTS EXECUTED BY THE PARTIES HERETO UNDER THE LAWS OF THE
STATE OF TEXAS, AND SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
(b) Notwithstanding anything in Section 12.08(a) to the
contrary, nothing in this Agreement or in the Note or any Loan Documents shall
be deemed to constitute a waiver of any rights which the Bank may have under
applicable federal law relating to the amount of interest which any Bank may
contract for, take, receive or charge in respect of any Loans, including any
right to take, receive, reserve and charge interest at the rate allowed by the
laws of the state where the Bank is located. To the extent that Texas law is
applicable to the determination of the Highest Lawful Rate, the Bank and the
Borrower agree that (i) if Article 1.04, Subtitle 1, Title 79 of the Revised
Civil Statutes of Texas, 1925, as amended, is applicable to such determination,
the indicated rate ceiling computed from time to time pursuant to Section (a)
of such Article shall apply, provided that, to the extent permitted by such
Article, the Bank may from time to time by notice to the Borrower revise the
election of such interest rate ceiling as such ceiling affects the then current
or future balances of the Loans, and (ii) the provisions of Chapter 15 of
Subtitle 3, Title 79, of the Revised Civil Statutes of Texas, 1925, as amended,
shall not apply to this Agreement or any Note issued hereunder.
Section 12.09. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section 12.10. Limitation on Agreements. All agreements
between the Borrower and the Bank, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand being made on the
Notes or otherwise, shall the amount paid, or agreed to be paid, to the Bank
for the use, forbearance, or detention of the money to be loaned under this
Agreement or otherwise or for the payment or performance of any covenant or
obligation contained herein or in any other Loan Document exceed the Highest
Lawful Rate. If, as a result of any circumstances whatsoever, fulfillment of
any provision hereof or of any of such documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by applicable usury law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if, from any such
circumstance, the Bank shall ever receive interest or anything which might be
deemed interest under applicable law which would exceed the Highest Lawful
Rate, such amount which would be excessive interest shall be applied to the
reduction of the principal amount owing on account of the Note
-63-
<PAGE> 71
or the amounts owing on other obligations of the Borrower to the Bank under the
Loan Documents and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal of the Note and the amounts
owing on other obligations of the Borrower to the Bank under the loan
Documents, as the case may be, such excess shall be refunded to the Borrower.
All sums paid or agreed to be paid to the Bank for the use, forbearance or
detention of the indebtedness of the Borrower to the Bank shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full of the
principal (including the period of any renewal or extension thereof) so that
the interest on account of such indebtedness shall not exceed the Highest
Lawful Rate. The terms and provisions of this Section 12.10 shall control and
supersede every other provision of all agreements between the Borrower and the
Bank.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on and effective as of the date first written above by
their respective officers or agents thereunto duly authorized.
BORROWER:
TCA CABLE TV INC.
By: Robert M. Rogers
Name: Robert M. Rogers
Title: President
-64-
<PAGE> 72
BANK:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: Victoria Williams English
Name: Victoria Williams English
Title: Vice President
Domestic Lending Office:
712 Main Street
Houston, Texas 77002
Eurodollar Lending Office:
712 Main Street
Houston, Texas 77002
-65-
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
Exhibit 2.02 Form of Facility I Note
Exhibit 3.02 Form of Notice of Facility II Borrowing
Exhibit 3.03 Form of Facility II Note
Exhibit 7.01(II)(a)(iv)(I) Form of Notice of Facility I Borrowing
Exhibit 8.04(a)-1 Material Agreements (after giving effect to the Initial
Acquisition)
Exhibit 8.04(a)-2 Violations of Material Agreements and Franchise
Agreements
Exhibit 8.05 Material Agreements and Franchise Agreements Requiring
Consent
Exhibit 8.07 Litigation
Exhibit 8.10 Franchise Agreements (after giving effect to the Initial
Acquisition) and exceptions to the representations set forth
in Section 8.10(a)-(e)
Exhibit 8.16 Subsidiaries
Exhibit 10.01(d) Permitted Existing Indebtedness
Exhibit 10.02(b) Permitted Existing Liens
</TABLE>
-66-
<PAGE> 74
Exhibit 2.02
FACILITY I
REVOLIVING CREDIT NOTE
$50,000,000 September 13, 1989
FOR VALUE RECEIVED, the undersigned, TCA CABLE TV INC., a
Texas corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association (the
"Bank"), on or before the Termination Date, the principal sum of FIFTY MILLION
AND 00/100 Dollars ($50,000,000.00) or, if less, the aggregate unpaid principal
amount of all Facility I Loans made by the Bank pursuant to the terms and
provisions of that certain Credit Agreement dated as of September 13, 1989
between the Borrower and the Bank (the "Credit Agreement": capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in the Credit Agreement).
The outstanding principal balance of each Facility I Loan
shall be due and payable on the Termination Date and as otherwise provided in
the Credit Agreement. Borrower promises to pay interest on the unpaid principal
balance of each Facility I Loan from the date of such Loan until the principal
balance thereof is paid in full. Interest shall accrue on the outstanding
principal balance of each Facility I Loan from and including the date of such
Loan to but excluding the Termination Date at the rate or rates, and shall be
due and payable on the dates, set forth in the Credit Agreement. Any amount not
paid when due with respect to principal (whether at stated maturity, by
acceleration or otherwise), costs or expenses, or, to the extent permitted by
applicable law, interest, shall bear interest from the date when due to and
excluding the date the same is paid in full, payable on demand, at the rate
provided for in Section 2.03(d) of the Credit Agreement.
Payments of principal and interest, and all amounts due with
respect to costs and expenses, shall be made in lawful money of the United
States of America in immediately available funds, without deduction, set-off or
counterclaim, to the Bank not later than 1:00 P.M. (Houston time) on the dates
on which such payments shall become due pursuant to the terms and provisions
set forth in the Credit Agreement.
If any payment of principal or interest on this Revolving
Credit Note shall become due on a Saturday, Sunday, or public holiday on which
the Bank is not open for business, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest in connection with such payment.
In addition to all principal and accrued interest on this
Revolving Credit Note, the Borrower agrees to pay (a) all reasonable costs and
expenses incurred by all owners and holders of this Revolving Credit Note in
collecting this Revolving Credit Note through any probate, reorganization,
bankruptcy or any other proceeding and (b) reasonable attorney's fees when and
if this Revolving Credit Note is placed in the hands of an attorney for
collection after default.
<PAGE> 75
If the maturity of this Revolving Credit Note is accelerated
for any reason before the due date stated, or in the event of voluntary
prepayment by the Borrower, earned interest may never include more than the
Highest Lawful Rate, and any unearned interest otherwise payable under this
Revolving Credit Note which is in excess of the Highest Lawful Rate shall be
cancelled automatically as of the date of such acceleration or prepayment or
other such event and (if theretofore paid) shall, be credited on the
principal of this Note, and thereafter shall be refunded to the Borrower. Any
interest computation under this Revolving Credit Note shall be at not more than
the Highest Lawful Rate upon the portion of the face amount thereof
representing principal which remains unpaid from time to time, it being
intended to conform strictly to the laws of the State of Texas and of the
United States of America applicable to loans by the holder hereof as now in
force, and in the event that it should be held that interest payable under this
Revolving Credit Note is in excess of the Highest Lawful Rate, the interest
chargeable hereunder shall be reduced to the Highest Lawful Rate.
The date, amount, type, interest rate and Interest Period of
each Facility I Loan made by the Bank to the Borrower, and each payment made on
account of principal thereof, shall be recorded by the Bank on its books and,
prior to any transfer of this Revolving Credit Note, endorsed by the Bank on
Schedule I attached hereto or any continuation thereof; provided, however, that
the failure of the Bank to do so or if any such information so recorded by the
Bank on such schedule shall be incorrect or in error, such failure or error
shall not in any way affect the validity, enforceability or effectiveness of
this Revolving Credit Note or the validity or effectiveness of the transfer of
this Revolving Credit Note.
This Revolving Credit Note is the Note provided for in, and is
entitled to the benefits of, the Credit Agreement, which Credit Agreement,
among other things, contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events, for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions and
with the effect therein specified and provisions to the effect that no
provision of the Credit Agreement or this Revolving Credit Note shall require
the payment or permit the collection of interest in excess of the Highest
Lawful Rate. Borrower may borrow, repay and reborrow under this Revolving
Credit Note in accordance with the terms of the Credit Agreement. It is
contemplated that by reason of prepayments or repayments hereon prior to the
Termination Date, there may be times when no indebtedness is owing hereunder
prior to such date; but notwithstanding such occurrences, this Revolving
Credit Note shall remain valid and shall be in full force and effect as to
Facility I Loans made pursuant to the Credit Agreement subsequent to each such
occurrence.
Except as otherwise specifically provided for in the Credit
Agreement, the Borrower and any and all endorsers, guarantors and sureties
severally waive grace, demand, presentment for payment, notice of dishonor or
default, protest, notice of protest, notice of intent to accelerate, notice of
acceleration and diligence in collecting and bringing of suit against any party
hereto, and agree to all renewals, extensions or partial payments hereon and to
any release or substitution of security hereof, in whole or in part, with or
without notice, before or after
-2-
<PAGE> 76
maturity.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
IN WITNESS WHEREOF, the Borrower has caused this Revolving
Credit Note to be executed and delivered by its officer thereunto duly
authorized effective as of the date first above written.
TCA CABLE TV INC.
a Texas corporation
BY:
------------------------------
Title:
------------------------------
-3-
<PAGE> 77
SCHEDULE I
FACILITY I LOANS
<TABLE>
<CAPTION>
Principal
Date Amount Type Maturity Amount Date Unpaid
of of of Int. Date of Paid or Paid or Principal Notation
Loan Loan Loan Rate Loan Prepaid Prepaid Amount Made By
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-4-
<PAGE> 78
Exhibit 3.02
NOTICE OF FACILITY II BORROWING
This notice is given by TCA Cable TV Inc. a Texas corporation
(the "Borrower"), pursuant to Section 3.05(a) of that certain Credit Agreement
dated as of September 13, 1989 (the "Credit Agreement") and executed by and
between the Borrower and Texas Commerce Bank National Association, a national
banking association (the "Bank"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings specified in the Credit
Agreement.
1. The undersigned hereby requests on behalf of the
Borrower that the Bank makes funds available for a
Facility II Loan to the Borrower in the amount of
$_________.
2. The Borrowing Date for the requested Facility II Loan
is _____________, 19___.
3. The type of Facility II Loan and corresponding
Interest Period requested are:
[] Alternate Base Rate Loan for an Interest Period
of: _ Days.
[] Eurodollar Rate Loan for an Interest Period
of: ____ 1 month ____ 2 months ___ 3 months
____ 6 months.
[] Adjusted CD Rate Loan for an Interest Period
of: ____ 30 days ____ 60 days ____ 90 days
____ 180 days.
4. The Borrower hereby certifies to the bank that all
conditions to the Bank's obligations to make the
Facility II Loan requested herein as set forth in
Article VII of the Credit Agreement have been
fulfilled as of the date hereof.
<PAGE> 79
IN WITNESS WHEREOF, this Notice of Facility II Borrowing is
submitted to the Bank on _______ 19___.
TCA CABLE TV INC.
By:
------------------------
Name:
------------------------
Title:
-------------------------
<PAGE> 80
FACILITY II Exhibit 3.03
TERM NOTE
$_________ ________ __, 1991
FOR VALUE RECEIVED, the undersigned, TCA CABLE TV INC., a
Texas corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association (the
"Bank"), on or before the Termination Date, the principal sum of [insert
amount of the Bank's Facility II Commitment in words] Dollars ($[amount of the
Bank's Facility II Commitment in figures]) in accordance with the terms and
provisions of that certain Credit Agreement dated as of September 13, 1989
between the Borrower and the Bank (the "Credit Agreement"; capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in the Credit Agreement).
The outstanding principal balance of this Term Note shall be
due and payable on each Facility II Commitment Reduction Date set forth in
Section 3.06(a) of the Credit Agreement, and as otherwise provided in the
Credit Agreement. Borrower promises to pay interest on the unpaid principal
balance of this Term Note from the date of the Facility II Loan until the
principal balance thereof is paid in full. Interest shall accrue on the
outstanding principal balance of this Term Note from and including the date of
the Facility II Loan to but not including the Termination Date at the rate or
rates, and shall be due and payable on the dates, set forth in the Credit
Agreement. Any amount not paid when due with respect to principal (whether at
stated maturity, by acceleration or otherwise), costs or expenses, or, to the
extent permitted by applicable law, interest, shall bear interest from the date
when due to and excluding the date the same is paid in full, payable on demand,
at the rate provided for in Section 3.04(d) of the Credit Agreement.
Payments of principal and interest, and all amounts due with
respect to costs and expenses, shall be made in lawful money of the United
States of America in immediately available funds, without deduction, set-off or
counterclaim to the Bank not later than 1:00 P.M. (Houston time) on the dates
on which such payments shall become due pursuant to the terms and provisions
set forth in the Credit Agreement.
If any payment of principal or interest on this Term Note
shall become due on a Saturday, Sunday, or public holiday on which the Bank is
not open for business, such payment shall be made on the next succeeding
Business Day and such extension of time shall in such case be included in
computing interest in connection with such payment.
In addition to all principal and accrued interest on this Term
Note, the Borrower agrees to pay (a) all reasonable costs and expenses incurred
by all owners and holders of this Term Note in collecting this Term Note
through any probate, reorganization, bankruptcy or any other proceeding and (b)
reasonable attorneys' fees when and if this Term Note is placed in the hands of
an attorney for collection after default.
<PAGE> 81
If the maturity of this Term Note is accelerated for any
reason before the due date stated, or in the event of voluntary prepayment by
the Borrower, earned interest may never include more than the Highest Lawful
Rate, and any unearned interest otherwise payable under this Term Note which is
in excess of the Highest Lawful Rate shall be cancelled automatically as of the
date of such acceleration or prepayment or other such event and (if theretofore
paid) shall, be credited on the principal of this Term Note, and thereafter
shall be refunded to the Borrower. Any interest computation under this Term
Note shall be at not more than the Highest Lawful Rate upon the portion of the
face amount thereof representing principal which remains unpaid from time to
time, it being intended to conform strictly to the laws of the State of Texas
and of the United States of America applicable to loans by the holder hereof as
now in force, and in the event that it should be held that interest payable
under this Term Note is in excess of the Highest Lawful Rate, the interest
chargeable hereunder shall be reduced to the Highest Lawful Rate.
This Term Note is the Note provided for in, and is entitled to
the benefits of, the Credit Agreement, which Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events, for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions and with the
effect therein specified, and provisions to the effect that no provision of the
Credit Agreement or this Term Note shall require the payment or permit the
collection of interest in excess of the Highest Lawful Rate.
Except as otherwise specifically provided for in the Credit
Agreement, the Borrower and any and all endorsers, guarantors and sureties
severally waive grace, demand, presentment for payment, notice of dishonor or
default, protest, notice of protest, notice of intent to accelerate, notice of
acceleration and diligence in collecting and bringing of suit against any party
hereto, and agree to all renewals, extensions or partial payments hereon and to
any release or substitution of security hereof, in whole or in part, with or
without notice, before or after maturity.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to
be executed and delivered by its officer thereunto duly authorized effective as
of the date first above written.
TCA CABLE TV INC.
a Texas corporation
By:
-------------------------------
Title:
-------------------------------
-2-
<PAGE> 82
Exhibit 7.01(II)(a)(iv)(I)
NOTICE OF FACILITY I BORROWING
This notice is given by TCA Cable TV Inc., a Texas corporation
(the "Borrower"), pursuant to Section 2.04(a) of that certain Credit Agreement
dated as of September 13, 1989 (the "Credit Agreement") and executed by and
between the Borrower and Texas Commerce Bank National Association, a national
banking association (the "Bank"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings specified in the Credit
Agreement.
1. The undersigned hereby requests on behalf of the
Borrower that the Bank makes funds available for a
Facility I Loan to the Borrower in the amount of
$______.
2. The Borrowing Date for the requested Facility I Loan
is ___________, 19___.
3. The type of Facility I Loan and corresponding
Interest Period requested are:
[ ] Alternate Base Rate Loan for an Interest
Period of: ___ Days.
[ ] Eurodollar Rate Loan for an Interest Period of:
___ 1 month ___ 2 months ___ 3 months ___ 6 months.
[ ] Adjusted CD Rate Loan for an Interest Period of:
___ 30 days ___ 60 days ___ 90 days ___ 180 days.
4. The Borrower hereby certifies to the Bank that all
conditions to the Bank's obligations to make the
Facility I Loan requested herein as set forth in
Article VII of the Credit Agreement have been
fulfilled as of the date hereof.
-1-
<PAGE> 83
IN WITNESS WHEREOF, this Notice of Facility I Borrowing is
submitted to the Bank on __________, 19__.
TCA CABLE TV INC.
By: ________________
Name: ________________
Title: ________________
-2-
<PAGE> 84
Exhibit 8.04(a)-I- Credit Agreement
Material Agreements
1. Loan Agreement dated July 13, 1989 between TCA Cable TV, Inc. and
First City, Texas-Tyler providing for loans up to $3,000,000.00 in the
aggregate, terminating June 30, 1996. TCA Cable TV, Inc. has agreed
with First City, Texas-Tyler to enter into a Loan Agreement providing
for loans of up to $10,000,000.00.
2. Loan Agreement between NCNB Texas National Bank-Tyler (formerly First
RepublicBank Tyler, N.A.), TCA Management Company as Borrower and TCA
Cable TV, Inc. as Guarantor dated March 1, 1988, as amended March 1,
1989, providing for a line of credit of up to $1,000,000.00, due
March 1, 1990.
3. Revolving Line of Credit of Southside State Bank, Tyler, Texas, in
favor of TCA Management Company providing a line of credit of up to
$1,250,000.00 guaranteed by TCA Cable TV, Inc.
4. Revolving Credit and Term Loan Agreement dated December 1, 1986
between TCA Cable TV, Inc. and First National Bank of Chicago, as
amended August 31, 1988. TCA Cable TV has agreed with First National
Bank to amend and restate the Agreement to provide for a credit
facility of up to $50,000,000.00.
5. Two Note Purchase Agreements between TCA Cable TV, Inc. and The
Prudential Insurance Company of America dated June 2, 1987 and
December 21, 1987, respectively. TCA Cable TV, Inc. has agreed with
The Prudential Insurance Company of America to enter into an
additional Note Purchase Agreement providing for the issuance of up to
$100,000,000.00 in principal amount of notes.
6. Sales Agreement between TCA Cable of Amarillo, Inc. and Tempo Cable,
Inc. providing for the acquisition of the assets of Tempo Cable, Inc.
as they relate to the cable television system located in Canyon,
Rockwell and Dalhart, Texas for an aggregate purchase price of
approximately $9,997,359.
7. Purchase Agreement (to be executed) between Telecable Associates, Inc.
and Snyder Cablevision Associates, L.P. providing for the acquisition
of the assets of Snyder Cablevision Associates, L.P. as they relate to
the cable television system located in the City of Snyder, Texas for
an aggregate purchase price of approximately $8,400,000.00
($500,000.00 to be held in escrow) together with an Agreement Not to
Compete for an aggregate consideration of $1,100,000.00.
<PAGE> 85
8. Asset Purchase and Sale Agreement dated July 14, 1989 among Jack Kent
Cooke, Incorporated, Cooke Media Group, Inc. and certain of their
subsidiaries, and TCA Cable TV, Inc. providing for the acquisition of
certain assets of Sellers as they relate to the Systems identified
pursuant to a schedule attached to this Agreement, for an aggregate
consideration of approximately $156,300,000.00, plus the assumption of
certain liabilities, together with a Covenant Not to Compete for an
aggregate consideration of approximately $28,000,000.00. (This
Agreement is proposed to be amended to allow the closing of the
transaction on September 29, 1989 despite the failure to obtain
certain consents.)
9. Management Agreement (to be executed) between Cooke South Central
Communications, Inc. and Texas Telecable, Inc. providing for the
operation of the Victoria, Texas System until October 6, 1989.
10. Agreement dated July 14, 1989 among Tele-Communications, Inc., Robin
Cable Systems, L.P., Eastern Tennessee CableVision, L.P., TCA Cable
TV, Inc., John Rigas, Chambers Communications Corporation, Falcon
Cable Systems Company, Intermedia Partners and Frank Washington
regarding the relative rights of each Buyer with respect to the Asset
Purchase Agreement entered into by each Buyer and the applicable
Sellers (as such terms are defined).
11. TCA Cable TV, Inc. Incentive Stock Option Plan.
12. TCA Deferred Savings and Retirement Plan.
<PAGE> 86
Exhibit 8.04(a)-2 and 8.05 - Credit Agreement
Material Agreements Requiring Consent
1. The consent to the transfer of the College Station, Texas franchise is
not yet final, but Borrower anticipates that such consent will be
final on September 24, 1989.
2. Consent of the FCC is required for the transfer of the licenses listed
on Schedule 4.8(c) of the Acquisition Agreement. Consents to the
transfer of certain of the licenses described on Schedule I hereto
have not been obtained as of the date of this Agreement. Borrower has
filed with the FCC all applications necessary for the transfer of such
licenses and anticipates that it will have received the FCC's consent
to the transfer of such licenses prior to September 30, 1989.
Obtaining the consent of the FCC is a condition to consummation of the
transactions contemplated by the Acquisition Agreement.
<PAGE> 87
Schedule I
A. Bryan/College Station System
1. Business Radio
a. WNIB - 452
b. KRC - 318
2. CARS Microwave
a. WSJ - 76
b. E865015
B. Clovis System
1. Business Radio
a. KUK - 437
2. CARS Microwave
a. WDY - 79
C. Greenville System
1. Business Radio
a. WSP - 986
D. Paris System
1. Business Radio
a. KNEC - 361
<PAGE> 88
2 CARS Microwave
a. WHZ - 802
E. Victoria-System
1. Business Radio
a. KOH - 731
2. CARS Microwave
a. WHA - 63
b. WHZ - 722
c. WHZ - 723
<PAGE> 89
Exhibit 8.07 - Credit Agreement
Material Litigation
None
<PAGE> 90
Exhibit 8.10 - Credit Agreement
Franchise Agreements
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Texas Franchises
Amarillo 7/00
Athens 12/97
Big Spring 7/96
Coahoma 3/96
Bryan 9/94 (1)
College Station 9/94 (1)
Texas A&M 3/95 (1)
Canyon 8/90
Dalhart 8/10
Conroe 6/96
Willis 4/01
Panorama 1/06
Floydada 1/93
Gatesville 10/94
Ft. Gates 9/96
Gladewater 1/12
White Oak 11/94
Clarksville 10/05
Warren City 4/08
Union Grove 12/09
Henderson 1/93
Huntsville 9/91
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Mineola 6/96
Lindale 2/91
Grand Saline 8/95
Quitman 8/99
Nacogdoches 8/95
Appleby 4/03
Paris 8/09 (1)
Boswell (Oklahoma) 3/06 (1)
Honey Grove 3/06 (1)
Reno 1/09 (1)
Roxton 8/07 (1)
Talco 5/00 (1)
Toco 11/13(1)
Plainview 1/97
Sulphur Springs 2/92
Como 5/03
Victoria 1/94 (1)
Winnsboro 1/94
</TABLE>
[Additionally, at the present time, Borrower, through a subsidiary is
negotiating the purchase of the Snyder, Texas cable television franchise.]
<TABLE>
<S> <C>
Idaho Franchises
Sun Valley 3/01
Ketchum 9/97
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Bellevue 2/03
Haley 4/05
New Mexico Franchises
Clovis 3/09 (1)
Farwell (Texas) 6/09 (1)
Texico 5/09 (1)
Cannon AFB 6/92 (1)
Mississippi Franchises
Greenville 5/90 (1)
Arkansas Franchises
Arkadelphia 2/04
Gurdon 9/02
Glenwood 3/03
Amity 7/93
Caddo Valley 1/04
Batesville 4/00
Cave City 3/13
Sulphur Rock 1/93
Moorefield 6/95
Bentonville 2/97
Berryville 1/07
Carroll City 9/96
Eureka Springs 12/07
Green Forest 2/07
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Corning 1/97
Clay County 9/96
Harrison 11/13
Bergman 1/13
Bellefonte 1/07
Valley Springs 1/12
Boone County 8/96
Heber Springs 12/98
Shirley 10/12
Helena 9/97
W. Helena 10/97
Marvell 2/06
Lexa 12/08
Magnolia 1/07
Waldo 7/06
Columbia County 10/96
Malvern 8/07
Rockport 5/95
Perla 9/05
Garland County 7/18
McGehee 8/07
Lake Village 6/07
Dermott 5/07
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Dumas 11/05
Mitchelville 5/05
Mena 2/07
Mt. Home 2/06
Cotter 11/93
Gassville 6/94
Lakeview 9/99
Baxter Co. Perpetual
Flippin 1/97
Bull Shoals 4/06
Newport 7/13
Diaz 5/13
Campbell 5/18
Tuckerman 10/17
McCrory 6/03
Patterson 7/04
Bald Knob 3/09
Jacksonport 3/02
Ozark 11/91
Altus 4/95
Lamar 3/13
Franklin Co. 3/13
Pocahontas 4/04
Siloam Springs 7/91
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
W. Siloam 6/03
Gentry 6/92
Decatur 2/93
Springdale 7/07
Johnson 2/25
Lowell Perpetual
Bethel Heights 3/03
Louisiana Franchises
Abbeville 11/04
Kaplan 3/12
Erath 8/10
Delcambre 5/11
Vermilion 8/10
Bastrop 11/05
Mer Rouge 3/06
Morehouse 11/05
Collinston 3/08
Crowley 4/05
Acadia Parish 11/11
DeRidder 10/30
Vernon Parish 11/08
Beauregard 8/06
Rosepine 11/28
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Franklin 7/09
Baldwin 1/92
Lafayette 4/96
Lafayette Parish 12/89
Br. Bridge 12/92
Duson 11/01
Scott 2/07
Broussard 4/92
Carencro 8/09
Youngsville 6/11
Maurice 11/01
Minden 5/92
Webster 6/02
Natchitoches 12/05
Natchitoches Parish 3/07
New Iberia 11/99
Jeanerette 10/92
Iberia Parish 12/08
Loureauville 3/11
Patterson 4/94
Bayou Vista 11/92
Rayne 10/04
Ruston 12/00
Simsboro 2/09
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
Exp.
Date
----
<S> <C>
Vienna 10/07
Lincoln Parish 4/94
Grambling 9/96
St. Martinville 6/04
Parks 7/04
Henderson 11/94
St.M.Par(1,2,3) 11/94
St.M.Par(4,5) 1/95
Winnfield 7/21
Winn Parish 6/36
</TABLE>
(1) To be purchased in connection with Initial Acquisition.
<PAGE> 98
Exhibit 8.16 - Credit Agreement
Subsidiaries
<TABLE>
<CAPTION>
Number of Number of
Name of Wholly- State of Shares Shares
owned Subsidiary Incorporation Authorized** Outstanding
---------------- ------------- ------------ -----------
<S> <C> <C> <C>
TCA Management Company Texas 100 100
Teleservice Corporation of
America Texas 2,000 1,800
Texas Community Antennas,
Inc. Texas 9,000 8,205
Texas Telecable, Inc. Texas 4,000,000 379,772
Telecable Associates, Inc. Texas 5,000,000 450,000
Delta Cablevision, Inc. Arkansas 100,000 40,000
TAL Financial Corporation Nevada 10,000 1,000
Sun Valley Cablevision, Inc. Idaho 1,000,000 50,000
TCA Cable TV of
Amarillo, Inc. Texas 10,000 1,000
New Mexico Telecable,
Inc. *New Mexico
Mississippi Telecable,
Inc. *Mississippi
</TABLE>
* dissolution pending
** All shares consist of Common Stock and are owned by TCA Cable TV, Inc.
<PAGE> 99
Exhibit 10.01(d)
Permitted Existing Indebtedness
1. Loan Agreement between NCNB Texas National Bank-Tyler(formerly First
Republic Bank Tyler, N.A.), TCA Management Company as Borrower and
TCA Cable TV Inc. as Guarantor dated March 1, 1988, as amended
March 1, 1989, providing for a line of credit of up to
$1,000,000.00, due March 1, 1990.
2. Revolving Line of Credit of Southside State Bank, Tyler, Texas, in
favor of TCA Management Company providing for a line of credit of up
to $1,250,000.00 guaranteed by TCA Cable TV Inc.
3. Seller Note - Tom Garrett Trust in the approximate amount of
$275,000.00.
4. Seller Note - Mrs. Williamson in the approximate amount of $7,500.00.
<PAGE> 100
Exhibit 10.02(b) - Credit Agreement
Permitted Existing Liens
1. Seller Note - Tom Garrett Trust in the approximate amount of
$275,000.00.
2. Seller Note - Mrs. Williamson in the approximate amount of $7,500.00.
3. State of Texas Tax Lien covering certain assets to be acquired from
Cooke Cablevision related to the CATV Systems in Victoria, Texas.
<PAGE> 1
EXHIBIT 10(F)
===========================================================================
TCA CABLE TV, INC.
$100,000,000.00
9.0% SENIOR NOTES DUE AUGUST 31, 1999
_____________
NOTE AGREEMENT
_____________
Dated as of September 27, 1989
===========================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. AUTHORIZATION OF ISSUE OF NOTES...................... 1
2. PURCHASE AND SALE OF NOTES........................... 1
3. CONDITIONS PRECEDENT................................. 3
4. PREPAYMENTS.......................................... 6
5. AFFIRMATIVE COVENANTS................................ 8
6. NEGATIVE COVENANTS................................... 11
7. EVENTS OF DEFAULT.................................... 16
8. REPRESENTATIONS, COVENANTS AND WARRANTIES............ 20
9. REPRESENTATIONS OF THE PURCHASER..................... 25
10. DEFINITIONS.......................................... 26
11. MISCELLANEOUS........................................ 33
PURCHASER SCHEDULE
SCHEDULE 6C (10) -- GUARANTEES
SCHEDULE 8C -- LITIGATION
SCHEDULE 8F -- MATERIAL AGREEMENTS
SCHEDULE 80 -- FINANCIAL PROJECTIONS
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT C -- LIST OF AGREEMENTS RESTRICTING DEBT
</TABLE>
(i)
<PAGE> 3
TCA Cable TV, Inc.
3015 SSE Loop 323
Tyler, Texas 75713-1489
September 27, 1989
The Prudential Insurance
Company of America
c/o Prudential Capital Corporation
Gateway Three, 100 Mulberry
Newark, New Jersey 07102
$100,000,000 Senior Notes
Gentlemen:
The undersigned, TCA Cable TV, Inc., (the "Company"), hereby agrees
with you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF NOTES.
1. Authorization of Issue of Notes. The Company will authorize
the issue of its senior promissory notes (the "Notes") in the aggregate
principal amount of $100,000,000, each to be dated the date of issue thereof,
to mature August 31, 1999, to bear interest on the unpaid balance thereof from
the date thereof until the principal thereof shall have become due and payable
at the rate of 9.0% per annum and on overdue principal, premium and interest at
the rate specified therein, and to be substantially in the form of Exhibit A
attached hereto. The term "Notes" as used herein shall include each Note
delivered pursuant to any provision of this Agreement and each Note delivered
in substitution or exchange for any such Note pursuant to any such provision.
Capitalized terms used herein have the meanings specified in paragraph 10.
PARAGRAPH 2. PURCHASE AND SALE OF NOTES
2A. Purchase and Sale of Notes. The Company hereby agrees to sell
to you and, subject to the terms and conditions herein set forth, you agree to
purchase from the Company Notes delivered by the Company to you on any Date of
Closing, up to the amount of $100,000,000 for all Dates of Closing, at a price
equal to 100%
<PAGE> 4
of the principal amount of such Notes. The Company shall give you not less than
five days prior written notice of each date upon which the Company will sell
Notes to you pursuant hereto (a "Date of Closing"), which shall be a Business
Day on or prior to January 31, 1990. Such notice shall specify the Date of
Closing and the principal amount of Notes to be sold on such date which shall
be a multiple of $100,000 not less than the lesser of (i) $25,000,000 or (ii)
the remaining principal amount of Notes which may be sold hereunder. You shall
not be obligated to purchase Notes from the Company on more than three Dates of
Closing or in an amount other than the amount specified in the notice for a
particular Date of Closing. On each Date of Closing the Company will deliver to
you, at the offices of Thompson & Knight in Dallas, Texas, one or more Notes
registered in your name, evidencing the aggregate principal amount of the Notes
to be purchased by you on such Date of Closing and in the denomination or
denominations specified by you prior to such Date of Closing, against such
payment of the purchase price thereof by transfer of immediately available
funds for credit to the Company's account #5302307 at The First National Bank
of Chicago on such Date of Closing.
2B. Cancellation Fee. (i) Should the Company fail to sell to you
Notes in the full principal amount of $100,000,000 on or prior to January 31,
1990, either by reason of delivery to you of written notice that the Company
does not intend to issue such full principal amount of the Notes hereunder or
by reason of a failure by the Company or any other Person (except you) to
satisfy the terms and conditions hereof, you shall be relieved of any
obligation to purchase the Notes in an amount in excess of the Notes
theretofore sold to you hereunder, and the Company shall pay to you forthwith
upon your demand, by transfer of immediately available funds to such account as
you may designate, an amount determined by dividing the Price Increase by 100,
and multiplying such quotient by the difference between $100,000,000 and the
principal amount of Notes sold to you hereunder. You and the Company agree that
the amount payable to you pursuant to the preceding sentence is a reasonable
estimate of your loss under the circumstances contemplated thereby and is not a
penalty since it would be impracticable or extremely difficult to fix the
actual damages; such amount is payable to you as liquidated damages with
respect to losses that you may suffer in reemploying the funds that were to be
used for the purchase of the Notes which were not issued hereunder, and
(without prejudice, however, to your rights and remedies hereunder in respect
of any other breach of this Agreement or as otherwise specifically provided
herein) you shall not be entitled to recover any additional damages hereunder
as a consequence of such losses, if any, for such failure of the Company to
sell to you the full amount of the Notes. Payments made pursuant to this
paragraph 2B shall be in addition to any other costs, expenses, liabilities or
other amounts that may become due to you by the terms hereof or by operation of
law or otherwise. You and the Company further agree
-2-
<PAGE> 5
that your statement in reasonable detail showing the calculation of the
foregoing amount shall be conclusive as to the amount owed under this paragraph
in the absence of manifest error.
(ii) For purposes of clause (i) of this paragraph 2B the term
"Price Increase" shall mean the amount obtained by subtracting (a) the price
(as determined by you) of 7 7/8% Treasury Notes due July 15, 1996 (the
"Treasury Notes"), on July 25, 1989, which was $99.78125, from (b) the price
(as determined by you) of the Treasury Notes on the date you receive a notice
of the Company's intention not to issue the Notes or any portion thereof herein
referred to in subparagraph (i) of this Paragraph 2B or, if no such notice has
been received, but no issuance has occurred, January 31, 1990. In each case,
the price shall be based on the Treasury Note having a par value of $100 and
shall be rounded to the second decimal place. The Company will be required to
make a payment to you under this paragraph 2B only if the price specified in
clause (b) of this subparagraph (ii) exceeds the price specified in clause (a)
of this subparagraph (ii). In no event shall you be required to make a payment
to the Company under this paragraph 2B.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. Conditions of Closing. Your obligation to purchase and pay for
the Notes to be purchased by you hereunder is subject to the satisfaction of
the following conditions:
3A. Conditions of Initial Closing. Your obligation to
purchase and pay for the Notes to be purchased by you at the initial
Date of Closing is subject to the satisfaction of the following
conditions:
(i) Certain Documents. You shall have received
the following, each dated such Date of Closing:
(a) The Notes to be purchased by you on
the initial Date of Closing.
(b) Certified copies of the resolutions
of the Board of Directors of the Company approving
this Agreement and the Notes, and of all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Agreement and the Notes.
(c) A certificate of the Secretary or an
Assistant Secretary of the Company certifying the
names and true signatures of the officers of the
Company authorized to sign this Agreement and the
Notes and the other documents to be delivered
hereunder.
-3-
<PAGE> 6
(d) Certified copies of the Certificate
of Incorporation and bylaws of the Company.
(e) A favorable opinion of Jackson &
Walker, special counsel to the Company, satisfactory
to you and substantially in the form of Exhibit B
attached hereto and as to such other matters as you
may reasonably request.
(f) Certified copies of the Purchase
Agreement and each agreement listed on Exhibit C
hereto.
(ii) Opinion of Purchaser's Special Counsel. You
shall have received from Thompson & Knight, who are acting as
special counsel for you in connection with this transaction, a
favorable opinion satisfactory to you as to: (a) the due
organization, existence and good standing of the Company; (b)
the due authorization by all requisite corporate action,
execution and delivery and the validity, legally binding
character and enforceability of this Agreement and the Notes;
(c) the absence of any requirement to register the Notes under
the Securities Act; and (d) such other matters incident to the
matters herein contemplated as you may reasonably request,
including the form of all papers and the validity of all
proceedings. Such opinion shall also state that, based upon
such investigation and inquiry as is deemed relevant and
appropriate by such counsel, the opinion referred to in
paragraph 3A(i)(e) is satisfactory in form and scope to such
counsel and, while such investigation and inquiry into the
matters covered by such opinion (other than the matters
specified in clauses (b) and (c) above) were not sufficient to
enable such counsel independently to render such opinion,
nothing has come to the attention of such counsel which has
caused it to question the legal conclusions expressed in the
opinion referred to in paragraph (i) and such counsel believes
that you are justified in relying on such opinion.
(iii) Accountants' Letter. The Company shall have
delivered to you a letter from Coopers & Lybrand, Certified
Public Accountants, addressed to you, stating that such firm
has reviewed the provisions for Federal, State and other
income taxes of the Company and its Subsidiaries contained in
the financial statements furnished to you pursuant to clause
(i) of paragraph 8B and the financial statements included in
the Company's then most recent annual report furnished to its
stockholders and to you, and that, in the opinion of such
firm, the latest consolidated balance sheet included in such
financial statements includes
-4-
<PAGE> 7
reasonably adequate provisions for all unpaid Federal, State
and other income taxes for the fiscal year ended October 31,
1988 and for all fiscal years ended prior thereto which have
not been examined and reported on by the taxing authorities.
3B. Conditions of Each Closing other than Initial
Closing. Your obligation to purchase and pay for the Notes to be
purchased by you at any Date of Closing other than the initial Date of
Closing is subject to your receipt of the following, each dated such
Date of Closing:
(i) The Notes to be purchased by you on such Date
of Closing.
(ii) A Certificate of the Secretary or an
Assistant Secretary of the Company certifying the names and
true signatures of the officers of the Company authorized to
sign the Notes and the other documents delivered, (or
certifying that the parties named in the certificate delivered
pursuant to Section 3A(i)(c) remain authorized to sign such
Notes and other documents) that the resolutions and other
documents delivered pursuant to paragraph 3A(i)(b) have not
been amended, modified or rescinded and are still in full
force and effect, and that the Certificate of Incorporation
and bylaws of the Company delivered pursuant to paragraph
3A(i)(d) have not been amended, modified or rescinded (or
certifying any amendments thereto) and are still in full force
and effect.
3C. Conditions of Each Closing. Your obligation to
purchase and pay for the Notes to be purchased by you at any Date of
Closing is subject to the satisfaction of the following conditions:
(i) Representations and Warranties; No Default.
The representations and warranties contained in paragraph 8
shall be true on and as of such Date of Closing and shall be
true and correct immediately following the issuance of the
Notes to be issued on such Date of Closing and the completion
of all other transactions or events (including without
limitation the incurrence of other Debt and the acquisition of
any Cable TV Systems pursuant to the Purchase Agreement)
occurring on such Date of Closing; there shall exist on such
Date of Closing no Event of Default or Default; no Event of
Default or Default shall result from or exist upon the
issuance of the Notes to be issued on such Date of Closing nor
upon the completion of all other transactions or events
(including without limitation the incurrence of other Debt and
the acquisition of any Cable TV Systems pursuant to the
Purchase Agreement)
-5-
<PAGE> 8
occurring on such Date of Closing; and the Company shall have
delivered to you an Officer's Certificate, dated such Date of
Closing, to such effects.
(ii) Purchase Permitted By Applicable Laws. The
purchase of and payment for the Notes to be purchased by you
on such Date of Closing on the terms and conditions herein
provided (including the use of the proceeds of the Notes by
the Company) shall not violate any applicable law or
governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation G, T or X of the
Board of Governors of the Federal Reserve System) and shall
not subject you to any tax, penalty, or liability or other
onerous condition under or pursuant to any applicable law or
governmental regulation, and you shall have received such
certificates or other evidence as you may request to establish
compliance with this condition.
(iii) Proceedings. All corporate and other
proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident
thereto shall be satisfactory in substance and form to you,
and you shall have received all such counterpart originals or
certified or other copies of such documents as you may
reasonably request.
PARAGRAPH 4. PREPAYMENTS.
4. Prepayments. The Notes shall be subject to prepayment with
respect to the required prepayments specified in paragraph 4A and also under
the circumstances set forth in paragraph 4B.
4A. Required Prepayments. Until the Notes shall be paid
in full, the Company shall apply to the prepayment of the Notes,
without premium, the sum of $8,000,000 on the last day of February and
August in each of the years 1993 to 1996, inclusive, and the sum of
$6,000,000 on the last day of February and August in each of the years
1997 and 1998 and on the last day of February, 1999, and such
principal amounts of the Notes, together with interest thereon to the
prepayment dates, shall become due on such prepayment dates. Any
prepayment made by the Company pursuant to any other provision of this
paragraph 4 shall not reduce or otherwise affect its obligation to
make any prepayment required by this paragraph 4A. The remaining
$6,000,000 principal amount of the Notes, together with interest
accrued thereon, shall become due on the maturity date of the Notes.
If less than $100,000,000 principal amount of Notes are sold to you,
the amount of each such prepayment shall be reduced to an amount
calculated by multiplying the amount of the prepayment otherwise
required by this paragraph 4A by a fraction, the numerator of which
shall be the principal
-6-
<PAGE> 9
amount of Notes sold to you and the denominator of which shall be
$100,000,000.
4B. Optional Prepayment With Yield-Maintenance Premium.
The Notes shall be subject to prepayment, in whole at any time or from
time to time in part on any required prepayment date (provided that no
prepayment shall be in an amount less than $5,000,000 or an integral
multiple of $1,000,000 in excess of such amount), at the option of the
Company, at 100% of the principal amount so prepaid plus interest
thereon to the prepayment date and the Yield-Maintenance Premium, if
any, with respect to each Note. If the Company and the holder of any
Note shall prior to the prepayment date designate in writing a
different premium, the premium so designated shall be payable on the
prepayment date in lieu of the Yield-Maintenance Premium with respect
to such Note. All prepayments of the Notes pursuant to this paragraph
4B shall be applied to the required payments and prepayments of the
Notes in the inverse order of maturities.
4C. Notice of Optional Prepayment. The Company shall give
the holder of each Note irrevocable written notice of any prepayment
pursuant to paragraph 4B not less than 10 Business Days prior to the
prepayment date, specifying such prepayment date and the principal
amount of the Notes, and of the Notes held by such holder, to be
prepaid on such date and stating that such prepayment is to be made
pursuant to paragraph 4B. Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice,
together with interest thereon to the prepayment date and together
with the premium, if any, herein provided, shall become due and
payable on such prepayment date. So long as you shall hold any Note,
the Company shall, on or before the day on which it gives written
notice of any prepayment pursuant to paragraph 4B, advise the Regional
Vice President of the Dallas Regional Office of your affiliate,
Prudential Capital Corporation, by telephone of the principal amount
of the Notes to be prepaid and the prepayment date.
4D. Partial Payments Pro Rata. Upon any partial
prepayment of the Notes, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding (including, for the
purpose of this paragraph 4D only, all Notes prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates) in proportion to the respective
outstanding principal amounts thereof.
4E. Retirement of Notes. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or
otherwise retire in whole or in part prior to their stated final
maturity (other than upon acceleration of
-7-
<PAGE> 10
such final maturity pursuant to paragraph 7A), or purchase or
otherwise acquire, directly or indirectly, Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered
to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of
Notes held by each other holder of Notes at the time outstanding upon
the same terms and conditions. Any Notes so prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates shall not be deemed to be outstanding
for any purpose under this Agreement, except as provided in paragraph
4D.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. Affirmative Covenants. So long as you shall hold or be
obligated to purchase any Note, the Company covenants that:
5A. The Company will deliver to each Significant Holder
in triplicate
(i) as soon as practicable and in any event
within 60 days after the end of each quarterly period (other
than the last quarterly period) in each fiscal year,
consolidated statements of operations, statements of changes
in shareholders' equity and statements of cash flows of the
Company and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly
period, and a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in
reasonable detail and certified by an authorized financial
officer of the Company, subject to changes resulting from
year-end adjustments;
(ii) as soon as practicable and in any event
within 90 days after the end of each fiscal year, consolidated
statements of operations, statements of changes in
shareholders' equity and statements of cash flows of the
Company and its Subsidiaries for such year, and a consolidated
balance sheet of the Company and its Subsidiaries as at the
end of such year, setting forth in each case in comparative
form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in
scope to you and, as to the consolidated statements, certified
to the Company by independent public accountants of recognized
national standing selected by the Company whose certificate
shall be in scope and substance reasonably satisfactory to
you;
-8-
<PAGE> 11
(iii) promptly upon transmission thereof, copies of
all such financial statements, proxy statements, notices and
reports as it shall send to its stockholders and copies of all
registration statements (without exhibits) and all reports
which it files with the Securities and Exchange Commission (or
any governmental body or agency succeeding to the functions of
the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each
other report submitted to the Company or any Subsidiary by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company or
any Subsidiary; and
(v) with reasonable promptness, such other
financial data as you may reasonably request.
Together with each delivery of financial statements required by
clauses (i) and (ii) above, the Company will deliver to each
Significant Holder an Officer's Certificate demonstrating (with
computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of paragraph 6A and, the Officer's
Certificate delivered with the financial statements required to be
delivered by clause (ii) above shall further set forth, (except to the
extent specifically set forth in such financial statements) (i) the
aggregate amount of interest accrued on Debt and Capitalized Lease
Obligations of the Company and Subsidiaries (if any) during the fiscal
period covered by such financial statements, (ii) the aggregate amount
of operating lease rental payments (other than rental payments for
tower sites and utility poles) made during such fiscal period by the
Company and Subsidiaries (if any) which (stated separately) were of
the kinds subject to the restrictions of paragraph 6C(6), (iii) the
amounts at the end of such fiscal period of Operating Cash Flow (all
computed in accordance with the provisions hereof and showing the
method of computation), and (iv) the aggregate amounts of depreciation
on physical property charged on the books of the Company and
Subsidiaries (if any) during such fiscal period. Each such Officer's
Certificate shall state that to the best of the subject officer's
knowledge, there exists no Event of Default or Default, or, if any
such Event of Default of Default exists, specifying the nature
thereof, the period of existence thereof and what action the Company
proposes to take with respect thereto.
Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to each Significant Holder a
certificate of said accountants stating that, in making the audit
necessary to the certification of such financial statements, they have
obtained no knowledge
-9-
<PAGE> 12
of any Event of Default or Default, or, if any such Event of Default
or Default exists, specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.
The Company also covenants that forthwith upon the President,
Executive Vice President or Treasurer of the Company obtaining
knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature
thereof, the period of existence thereof, and what action the Company
proposes to take with respect thereto. Each Significant Holder is
hereby authorized to deliver a copy of any financial statement
delivered pursuant to this Paragraph 5A to any regulatory body having
jurisdiction over such Significant Holder.
5B. Inspection of Property. The Company will permit any
Person designated by any Significant Holder in writing, at such
Significant Holder's expense, to visit and inspect any of the
properties of the Company and its Subsidiaries, to examine the
corporate books and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and to
discuss the affairs, finances and accounts with the principal officers
of the Company, all at such reasonable times and as often as such
Significant Holder may reasonably request.
5C. Covenant to Secure Notes Equally. If the Company or
any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other
than Liens excepted by the provisions of paragraph 6C(1) (unless prior
written consent to the creation or assumption thereof shall have been
obtained pursuant to paragraph 11C), it will make or cause to be made
effective provision whereby the Notes will be secured by such Lien
equally and ratably with any and all other Debt thereby secured so
long as any such other Debt shall be so secured.
5D. Agreement Assuming Liability on Note. If at any time
any Person should become liable (as co-obligor, endorser, guarantor
or surety) on any Debt of the Company or on any Debt of any
Subsidiary, the Company will, at the same time, cause such Person to
deliver to you an agreement pursuant to which such Person shall become
similarly liable on the Notes.
5E. Maintenance of Insurance. The Company will and will
cause each Subsidiary to maintain insurance in such amounts and
against such liabilities and hazards as
-10-
<PAGE> 13
customarily is maintained by other companies operating similar
businesses and together with each delivery of financial statements
under clause (ii) of paragraph 5A, and upon your written request, it
will deliver an Officer's Certificate specifying the details of such
insurance in effect.
5F. Franchises, Licenses and Agreements. The Company will
maintain, preserve and comply, in all material respects, with the
terms of all franchises, licenses and agreements with public and
private utilities and governmental agencies or instrumentalities
(including the Federal Communications Commission) material to the
conduct, operation and maintenance of each Cable TV System it
operates.
5G. Cable TV System. The Company will use materials and
workmanship in the construction and operation of any Cable TV System
of sufficient quality to conform with applicable standards and
regulations of the FCC and will provide each subscriber with picture
and sound in compliance and conformity with standards set by the FCC,
except for any failure to so conform or comply which could not
directly or indirectly have a material adverse effect on the Company.
5H. Pollution and Other Regulations. The Company will
comply in all material respects, and will cause each of its
Subsidiaries to comply in all material respects, with all laws and
regulations relating to pollution and environmental control, equal
employment opportunity and employee safety in all jurisdictions in
which the Company and its Subsidiaries are doing business.
PARAGRAPH 6. NEGATIVE COVENANTS.
6A(1) Operating Cash Flow Ratio. The Company covenants that
it will not permit the aggregate amount of the Debt of the Company and
all Subsidiaries to be in excess of (i) at any time during the period
from the first Date of Closing through October 31, 1990, 425% of
Operating Cash Flow during the 12 month period preceding such
calculation or (ii) at any time during the period from November 1,
1990 through the payment in full of the Notes, 375% of Operating Cash
Flow during the 12 month period preceding such calculation. For
purposes of this calculation, Operating Cash Flow shall include the
pro forma Operating Cash Flow for corporate acquisitions which have
been actually completed and shall exclude any Operating Cash Flow from
assets which have been sold.
6A(2) Fixed Charge Ratio. The Company covenants that it
will not permit the sum of consolidated net income plus allowances for
depreciation, amortization and deferred tax expenses at any time for
the twelve month period ending as of such time, to be less than 110%
of the sum of (i) all
-11-
<PAGE> 14
cash dividends, Related Investments and capital expenditures (other
than purchases of Cable TV Systems whether directly or through the
purchase of stock in a corporation whose assets consist of Cable TV
Systems, which corporation immediately after such purchase will be a
Subsidiary) for such 12 month period then ended plus (ii) scheduled
principal payments due on all Debt during the 12 month period next
following the date of such calculation.
6A(3) Interest Expense Ratio. The Company covenants that it
will not permit Operating Cash Flow for the Company and all
Subsidiaries at any time for the twelve month period ending as of such
time to be less than 200% of aggregate interest expense for the
Company and all Subsidiaries for such twelve month period.
6B. Subordinated Debt Limitation. The Company covenants
that it will not make any payments of interest or principal on
Subordinated Debt in violation of the terms of subordination
applicable to such Subordinated Debt, and in any event so long as a
Default or an Event of Default exists.
6C. Lien, Debt and Other Restrictions. The Company
covenants that it will not and will not permit any Subsidiary to:
6C(1). Liens. Create, assume or suffer to exist any Lien
upon any of its property or assets, whether now owned or hereafter
acquired (whether or not provision is made for the equal and ratable
securing of the Note in accordance with the provisions of paragraph
5C), except
(i) Liens for taxes not yet due or which are
being actively contested in good faith by appropriate
proceedings,
(ii) other Liens incidental to the conduct of its
business or the ownership of its property and assets which are
not incurred in connection with the borrowing of money or the
obtaining of advances or credit, and which do not in the
aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation
of its business,
(iii) Liens on property or assets of a Subsidiary
to secure obligations of such Subsidiary to the Company or
another Subsidiary,
(iv) Liens on property of the Company securing
Debt of the Company and all Subsidiaries resulting from
-12-
<PAGE> 15
Capitalized Lease Obligations, provided that at the time of
incurrence, such obligation would not create a violation of
any provision of this paragraph 6,
(v) other Liens on property of the Company or
Subsidiaries securing Debt of the Company and all Subsidiaries
not in excess of an aggregate amount of $10,000,000 at any
time outstanding, and
(vi) Liens existing on any property of any
corporation at the time it becomes a Subsidiary, or existing
prior to the time of acquisition upon any property acquired by
the Company or any Subsidiary through purchase, merger or
consolidation or otherwise, whether or not assumed by the
Company or such Subsidiary, or placed on property at the time
(or within 90 days following the time) of acquisition by the
Company or any Subsidiary to secure all or a portion of (or to
secure Debt incurred to pay all or a portion of) the purchase
price thereof, provided that (a) all of such property is not
or shall not thereby become encumbered in any amount in excess
of seventy-five percent (75%) of the cost thereof and (b) any
such Lien shall not encumber any other property of the Company
or such Subsidiary.
6C(2). Debt. Create, incur, assume or suffer to exist any
Debt, except that (i) the Company (but not any Subsidiary) may create,
incur, assume or suffer to exist any Debt if such action would not
cause a violation of paragraph 6A(1), 6A(2), or 6A(3) and (ii) any
Subsidiary may create, incur, assume or suffer to exist any Debt to
the Company or to another Subsidiary.
6C(3). Loans, Advances and Investments. Make or permit to
remain outstanding any loan or advance to, or investments in, or make
any capital contribution to, any Person, except that the Company or
any Subsidiary may
(i) make or permit to remain outstanding loans or
advances to any Subsidiary,
(ii) own, purchase or acquire (1) the assets
contemplated by the Purchase Agreement, (2) other Cable T.V.
Systems or other assets necessarily related to Cable T.V.
Systems (including for example and not by way of limitation,
assets related to programming, syndication, broadcasting,
production, licensing entertainment and microwave and fiber
optic and similar transmission and reception), or (3) the
stock, obligations or other securities of a corporation or
other entity which is engaged in the ownership or operation of
Cable T.V. Systems or businesses necessarily related to Cable
T.V. Systems which
-13-
<PAGE> 16
corporation or other entity is or will, immediately after such
purchase or acquisition, be a Subsidiary.
(iii) acquire and own stock, obligations or
securities received in settlement of debts (created in the
ordinary course of business) owing to the Company or any
Subsidiary,
(iv) own, purchase or acquire (1) certificates of
deposit in United States commercial banks having capital
resources in excess of $100,000,000, (2) certificates of
deposit in United States commercial banks having capital
resources of less than $100,000,000 provided that the entire
amount of said certificates of deposits is insured by the
Federal Deposit Insurance Corporation, (3) prime commercial
paper issued by a United States corporation or utility
provided such obligation is rated A-1 by Standard & Poors or
P-1 by Moody's Investors Services, Inc., in each case due
within one year from the date of purchase and payable in the
United States in United States dollars, (4) obligations of the
United States Government or any agency thereof, and (5)
obligations guaranteed by the United States Government, in
each case due within one year of the date of purchase,
(v) make or permit to remain outstanding travel
and other like advances to officers and employees in the
ordinary course of business,
(vi) make or permit to remain outstanding loans or
advances to, or investments in, any other Person, provided
that the aggregate principal amount of such loans and advances
shall not exceed $1,000,000 at any time outstanding for the
Company and all Subsidiaries, and
(vii) make Related Investments which would not cause
a violation of Section 6A(2).
6C(4). Sale of Stock and Debt of Subsidiaries. Sell or
otherwise dispose of, or part with control of, any shares of stock or
Debt of any Subsidiary, except to the Company or another Subsidiary,
and except that all shares of stock and Debt of any Subsidiary at the
time owned by or owed to the Company and all Subsidiaries may be sold
as an entirety for a cash consideration which represents the fair
value (as determined in good faith by the Board of Directors of the
Company) at the time of sale of the shares of stock and Debt so sold,
provided that the assets of such Subsidiary do not constitute a
substantial part (i.e., assets which constitute more than 10% of the
Consolidated Assets of the Company and its Subsidiaries or which have
contributed more than 10% of Consolidated Net Earnings for any of the
three fiscal years then most recently ended) of the Consolidated
Assets of the
-14-
<PAGE> 17
Company and all Subsidiaries and further provided that, at the time of
such sale, such Subsidiary shall not own, directly or indirectly, any
shares of stock or Debt of any other Subsidiary (unless all of the
shares of stock and Debt of such other Subsidiary owned, directly or
indirectly by the Company and all Subsidiaries are simultaneously
being sold as permitted by this Paragraph 6C(4)) or any Debt of the
Company.
6C(5). Merger and Sale of Assets. Merge or consolidate with
any other corporation or sell, lease or transfer or otherwise dispose
of all or a substantial part (i.e., assets which constitute more than
10% of the Consolidated Assets of the Company and its Subsidiaries or
which have contributed more than 10% of Consolidated Net Earnings for
any of the three fiscal years then most recently ended) of its assets
to any Person, except that
(i) any Subsidiary may merge with the Company
(provided that the Company shall be the continuing or
surviving corporation) or with any one or more other
Subsidiaries,
(ii) any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to the Company or
another Subsidiary,
(iii) the Company may merge with any other
corporation, provided that (a) the Company shall be the
continuing or surviving corporation, and (b) immediately after
giving effect to such merger, no Event of Default or Default
shall exist, and
(iv) the Company may carry out a plan of
reorganization designed solely to change the Company's state
of incorporation, provided that (a) such plan has been
approved by its shareholders, (b) such action would not create
a Default or an Event of Default under this Agreement and (c)
the Company furnishes you such documents relating to said
reorganization as you or your counsel may require.
6C(6). Lease Rentals. Enter into or permit to remain in
effect, any agreements to rent or lease (as lessee) any real or
personal property (other than utility poles and tower sites) for terms
(including any option to renew or extend any term which has been
exercised) of more than one year providing for annual Operating Lease
Rentals to be paid by the Company and all Subsidiaries in excess of an
aggregate of $750,000 per annum.
-15-
<PAGE> 18
6C(7). Sale and Lease-Back. Enter into any arrangement with
any lender or investor or to which such lender or investor is a party
providing for the leasing by the Company or any Subsidiary of real or
personal property which has been or is to be sold or transferred by
the Company or any Subsidiary to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or
investor on the security of such property or rental obligations of the
Company or any Subsidiary, provided that (i) any property acquired or
constructed after the date of this Agreement may be sold or leased
back by the Company or any Subsidiary if such sale and lease-back
occurs within the 12 month period following the date of acquisition or
construction of such property and (ii) such action would not result in
a violation of Paragraph 6C(6).
6C(8). Sale or Discount of Receivables. Sell with recourse,
or discount or otherwise sell for less than face value thereof any of
its notes or accounts receivable, except for receivables arising
through the use by customers of MasterCard, Visa or American Express
charge cards in the ordinary course of business.
6C(9). Transactions with Stockholders. Directly or
indirectly purchase, acquire or lease any property from, or sell,
transfer or lease property (other than shares of stock of the Company)
from, or sell, dispose of or lease any property to, or otherwise deal
with, in the ordinary course of business or otherwise (i) any
Substantial Stockholder, or (ii) any corporation (except a Subsidiary)
in which a Substantial Stockholder or the Company (either directly or
through Subsidiaries) owns 5% or more of the outstanding stock except
that (a) any Substantial Stockholder may be a director, officer or
employee of the Company or any Subsidiary and may be paid reasonable
compensation in connection therewith and (b) such acts and
transactions prohibited by this paragraph 6C(9) may be performed or
engaged in if upon terms not less favorable to the Company or any
Subsidiary than if no relationship described in clauses (i) and (ii)
above existed.
6C(10). Guarantees. Make or permit to remain outstanding
guarantees of the obligations of any Person in excess of an aggregate
of $100,000 except by endorsement of instruments for deposit or
collection in the ordinary course of business and except for existing
guarantees described on Schedule 6C(10).
PARAGRAPH 7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and
-16-
<PAGE> 19
whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any
principal of or premium on any Note when the same shall become
due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any
interest on any Note or the cancellation fee specified in
paragraph 2B for more than 10 days after the date due; or
(iii) the Company or any Subsidiary defaults in any
payment of principal of or interest on any other Debt (other
than any guaranty) in excess of $1,000,000 which continues
beyond any period of grace provided with respect thereto, or
the Company or any Subsidiary fails to perform or observe any
other agreement, term or condition contained in any agreement
under which any such Debt is created (or if any other event
thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is
to cause, or to permit the holder or holders of such Debt (or
a trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to any stated maturity or the
Company fails to pay any guaranty in accordance with its
terms; or
(iv) any representation or warranty made by the
Company herein or by the Company or any of its officers in any
writing furnished in connection with or pursuant to this
Agreement shall be false in any material respect on the date
as of which made; or
(v) the Company fails to perform or observe any
agreement contained in paragraphs 5C, 5D, or 6; or
(vi) the Company fails to perform or observe any
other agreement, term or condition contained herein and such
failure shall not be remedied within 30 days after the earlier
of (a) written notice thereof has been received by the Company
from you or (b) the Company having actual knowledge thereof;
or
(vii) the Company or any Subsidiary (a) makes an
assignment for the benefit of creditors or (b) is generally
not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of
the Company or any Subsidiary is entered under any
-17-
<PAGE> 20
bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment
of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official of the Company or any
Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under
the Bankruptcy Law of the United States or any proceedings
(other than proceedings for the voluntary liquidation and
dissolution of a Subsidiary) relating to the Company or any
Subsidiary under the Bankruptcy Law of any other jurisdiction;
or
(x) any such petition or application is filed, or
any such proceedings are commenced, against the Company or any
Subsidiary and the Company or such Subsidiary by any act
indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in
any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xi) any order, judgment or decree is entered in
any proceedings against the Company decreeing the dissolution
of the Company and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xii) any order, judgment or decree is entered in
any proceedings against the Company or any Subsidiary
decreeing a split-up of the Company or such Subsidiary which
requires the divestiture of assets representing a substantial
part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated
assets of the Company and its Subsidiaries (i.e. assets which
constitute more than twenty percent (20%) of the Company and
its Subsidiaries or which have contributed more than twenty
percent (20%) of the Consolidated Net Earnings of the Company
and its Subsidiaries for any of the three (3) fiscal years
then ended) or which requires the divestiture of assets, or
stock of a Subsidiary, which shall have contributed more than
20% of the Consolidated Net Earnings for any of the three
fiscal
-18-
<PAGE> 21
years then most recently ended, and such order, judgment or
decree remains unstayed and in effect for more than 60 days;
or
(xiii) any judgment or order, or series of judgments
or orders, for the payment of money in an amount in excess of
$1,000,000 is rendered against the Company or any Subsidiary
and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within 30
days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or (iii) within 30
days after the expiration of any such stay, such judgment is
not discharged;
then (a) if such event is an Event of Default specified in clause
(vii)(a), (viii), (ix), (x) or (xi) of this paragraph 7A with respect
to the Company, all of the Notes at the time outstanding shall
automatically become immediately due and payable at par together with
interest accrued thereon, without presentment, demand, protest or
notice of any kind (including, without limitation, notice of intent to
accelerate and notice of acceleration of maturity), all of which are
hereby waived by the Company, and (b) if such event is any other Event
of Default, the Required Holder(s) may at its or their option, by
notice in writing to the Company, declare all of the Notes to be, and
all of the Notes shall thereupon be and become, immediately due and
payable together with interest accrued thereon and together with the
Yield-Maintenance Premium, if any, with respect to each Note, without
presentment, demand, protest or other notice of any kind (including,
without limitation, notice of intent to accelerate and notice of
acceleration of maturity), all of which are hereby waived by the
Company, provided that the Yield-Maintenance Premium, if any, with
respect to each Note shall be due and payable upon such declaration
only if (x) such event is an Event of Default specified in any of
clauses (i) to (vi), inclusive, of this paragraph 7A, (y) the Required
Holder(s) shall have given to the Company, at least 10 Business Days
before such declaration, written notice stating its or their intention
so to declare the Notes to be immediately due and payable and
identifying one or more such Events of Default whose occurrence on or
before the date of such notice permits such declaration and (z) one or
more of the Events of Default so identified shall be continuing at the
time of such declaration.
7B. Other Remedies. If any Event of Default shall occur
and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising
such remedies as are available to
-19-
<PAGE> 22
such holder in respect thereof under applicable law, either by suit in
equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No remedy
conferred in this Agreement upon the holder of any Note is intended to
be exclusive of any other remedy, and each and every such remedy shall
be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute
or otherwise.
PARAGRAPH 8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
8. Representations, Covenants and Warranties. The Company
represents, covenants and warrants:
8A. Organization; Qualification; Corporate Authority. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and the Company has and each
Subsidiary has the corporate power to own its respective property and
to carry on its respective business as now being conducted, and the
Company is and each Subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the Company owns a Cable TV System, or in which
the failure to be so qualified or in good standing could have a
material adverse effect on the Company or such Subsidiary. The
execution, delivery and performance by the Company of this Agreement
and the Notes are within the Company's corporate powers and have been
duly authorized by all necessary corporate action.
8B. Financial Statements. The Company has furnished you
with the following financial statements, identified by a principal
financial officer of the Company: (i) a consolidated balance sheet of
the Company and its Subsidiaries as at October 31 in each of the years
1987 and 1988, and consolidated statements of operations, statements
of changes in shareholders' equity and statements of cash flows of the
Company and its Subsidiaries for each such year, all certified by
Coopers & Lybrand, Certified Public Accountants; and (ii) a
consolidated balance sheet of the Company and its Subsidiaries as at
April 30, 1989 and a consolidated statement of income and statement of
changes in financial position for the six-month period ended on each
such date, prepared by the Company. Such financial statements
(including any related schedules and/or notes) are true and correct in
all material respects (subject, as to interim statements, to changes
resulting from audits and
-20-
<PAGE> 23
year-end adjustments), have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of
the Company and its Subsidiaries required to be shown in accordance
with such principles. The balance sheets fairly present the condition
of the Company and its Subsidiaries as at the dates thereof, and the
statements of income and statements of changes in financial position
fairly present the results of the operations of the Company and its
Subsidiaries for the periods indicated. There has been no material
adverse change in the business, condition or operations (financial or
otherwise) of the Company and its Subsidiaries taken as a whole since
October 31, 1988.
8C. Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or
any properties or rights of the Company or any of its Subsidiaries, by
or before any court, arbitrator or administrative or governmental
body, except the matters described on the Schedule 8C attached hereto.
There is no action, suit, investigation or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of
its Subsidiaries which purports to affect the validity or
enforceability of this Agreement or any Note.
8D. Outstanding Debt. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted pursuant to
this Agreement. There exists no default under the provisions of any
instrument evidencing such Debt or of any agreement relating thereto.
8E. Title to Properties. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to
all of its other respective properties and assets, including, but not
limited to, the properties and assets reflected in the balance sheet
as at October 31, 1988 referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of business),
subject to no Lien of any kind except Liens permitted by paragraph
6C(1). The Company and its Subsidiaries enjoy peaceful and undisturbed
possession of all leases necessary in any material respect for the
operation of their respective properties and assets, none of which
contain any unusual or burdensome provisions which could reasonably be
expected to materially affect or impair the operation of such
properties or assets. All such leases are valid and subsisting and are
in full force and effect.
-21-
<PAGE> 24
8F. Franchises and Licenses; Material Contracts. The
Company and each of its Subsidiaries have obtained all franchises,
licenses, consents, approvals and authorizations granted or issued by
any public or governmental body, agency or authority necessary to own
and operate the Cable TV Systems and all such franchises, licenses,
consents, approvals and authorizations are in full force and effect.
Except for the matters described on Schedule 8F attached hereto, the
Company and each of its Subsidiaries have outstanding no contractual
undertakings or commitments not made in the ordinary course of
business except the Operating Agreements.
8G. Taxes. The Company has and each of its Subsidiaries
has filed all Federal, State and other income tax returns which, to
the best knowledge of the Company, are required to be filed, and each
has paid all taxes as shown on such returns and on all assessments
received by it to the extent that such taxes have become due, except
such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles. Federal,
State and other income tax returns of the Company and its Subsidiaries
have been examined and reported on by the taxing authorities or the
assessment of further income tax deficiency is closed by applicable
statutes and satisfied for all fiscal years prior to and including the
fiscal year ended on October 31, 1985.
8H. Conflicting Agreements and Other Matters. Neither the
Company nor any of its Subsidiaries is a party to any contract or
agreement or subject to any charter or other corporate restriction
which materially and adversely affects its business, property or
assets, or financial condition. Neither the execution nor delivery of
this Agreement or the Notes, nor the offering, issuance and sale of
the Notes, nor fulfillment of nor compliance with the terms and
provisions hereof and of the Notes will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the
creation of any Lien (other than as permitted by clause (i) or (ii) of
Section 6(C)(1)) upon any of the properties or assets of the Company
or any of its Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Subsidiaries, any award of any arbitrator or any
material agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation
to which the Company or any of its Subsidiaries is subject except for
breaches, defaults and violations of any such agreement which have
been permanently waived in writing. Neither the offering, issuance or
sale of the Notes will conflict with,
-22-
<PAGE> 25
or result in a breach of the terms, conditions or provisions of or
constitute a default under or result in any violation of, or result in
the creation of any Lien (other than as permitted by clause (i) or
(ii) of Section 6(C)(1) upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to any agreement
(including any agreement with stockholders), instrument, order,
judgment, decree, statue, law, rule or regulation (whether or not
considered material) to which the Company or any of its subsidiaries
is subject. Neither the Company nor any of its Subsidiaries is a party
to, or otherwise subject to any provision contained in, any instrument
evidencing Debt of the Company or such Subsidiary, any agreement
relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions
on the incurring of, Debt of the Company of the type to be evidenced
by the Notes except as set forth in the agreements listed in Exhibit C
attached hereto.
8I. Offering of Notes. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Notes or
any similar security of the Company for sale to, or solicited any
offers to buy the Notes or any similar security of the Company from,
or otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither the Company nor
any agent acting on its behalf has taken or will take any action which
would subject the issuance or sale of the Notes to the provisions of
Section 5 of the Securities Act or to the provisions of any securities
or Blue Sky law of any applicable jurisdiction.
8J. Regulation G, Etc. Neither the Company nor any
Subsidiary owns or has any present intention of acquiring any "margin
stock" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System (herein called "margin
stock"). The proceeds of sale of the Notes will be used to pay the
purchase price for five Cable TV Systems pursuant to the Purchase
Agreement and to pay related costs and expenses. None of such proceeds
will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any
margin stock or for the purpose of maintaining, reducing or retiring
any indebtedness which was originally incurred to purchase or carry
any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any agent acting
on its behalf has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve
System or to violate the
-23-
<PAGE> 26
Securities Exchange Act of 1934, as amended, in each case as in effect
now or as the same may hereafter be in effect.
8K. Pollution and Other Regulations. The Company and each
of its Subsidiaries is in substantial compliance with all laws and
regulations relating to pollution and environmental control, equal
employment opportunity and employee safety in all jurisdictions in
which the Company and each of its Subsidiaries is doing business.
8L. ERISA. No accumulated funding deficiency (as defined
in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer
Plan). No liability to the Pension Benefit Guaranty Corporation has
been or is expected by the Company to be incurred with respect to any
Plan (other than a Multiemployer Plan) by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company
and its Subsidiaries taken as a whole. Neither the Company nor any of
its Subsidiaries has incurred or presently expects to incur any
withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan which is or would be materially adverse to the
Company and its Subsidiaries taken as a whole. The execution and
delivery of this Agreement and the issuance and sale of the Notes will
not involve any transaction which is subject to the prohibitions of
section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975 of the Code. The representation by
the Company in the next preceding sentence is made in reliance upon
and subject to the accuracy of your representation in paragraph 9 as
to the source of the funds to be used to pay the purchase price of the
Notes to be purchased by you.
8M. Governmental Consent. Neither the nature of the
Company, or of any Subsidiary, nor any of their respective businesses
or properties, nor any relationship between the Company or any
Subsidiary and any other Person, nor any circumstance in connection
with the offering, issuance, sale or delivery of the Notes is such as
to require any authorization, consent, approval, exemption or other
action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the
Date of Closing with the Securities and Exchange Commission and/or
state Blue Sky authorities) in connection with the execution and
delivery of this Agreement, the offering, issuance, sale or delivery
of the Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
8N. Enforceability. This Agreement is, and the Notes when
delivered hereunder will be, legal, valid and binding
-24-
<PAGE> 27
obligations of the Company enforceable against the Company in
accordance with their terms.
8O. Disclosure. Neither this Agreement nor any other
document, certificate or statement furnished to you by or on behalf of
the Company in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained herein and therein not misleading. There
is no fact known to the Company which is peculiar to the Company or
any of its Subsidiaries (as opposed to general economic or industry
conditions) which materially adversely affects or in the future may
(so far as the Company can now foresee) materially adversely affect
the business, property or assets, or financial condition of the
Company or any of its Subsidiaries and which has not been set forth in
this Agreement or in the other documents, certificates and statements
furnished to you by or on behalf of the Company prior to the date
hereof in connection with the transactions contemplated hereby. The
financial projections contained in Schedule 8O are reasonably based on
the assumptions stated therein and the best information available to
the officers of the Company.
8P. Delivery of Agreements. The Company has delivered to
you prior to the date hereof a true, correct and complete copy of the
Purchase Agreement and each agreement listed on Exhibit C attached
hereto, including all amendments and waivers of any provision thereof.
8Q. Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
8R. Public Utility Holding Company Act. The Company is
not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
PARAGRAPH 9. REPRESENTATIONS OF THE PURCHASER.
9. Representations of the Purchaser. You represent and in making
this sale to you it is specifically understood and agreed that you are not
acquiring the Notes to be purchased by you hereunder with a view to or for sale
in connection with any distribution thereof within the meaning of the
Securities Act, provided that the disposition of your property shall at all
times be and remain within your control. You also represent that no part of the
funds being used by you to pay the purchase price of
-25-
<PAGE> 28
the Note being purchased by you hereunder constitutes assets allocated to any
separate account maintained by you in which any employee benefit plan, other
than employee benefit plans identified on a list which has been furnished by
you to the Company, participates to the extent of 5% or more. For the purpose
of this paragraph 9, the terms "separate account" and "employee benefit plan"
shall have the respective meanings specified in section 3 of ERISA.
PARAGRAPH 10. DEFINITIONS.
10A. Certain Defined Terms. An used in this Agreement the
following terms shall have the meanings specified with respect thereto
below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control
with, the Company, except a Subsidiary. A Person shall be deemed to
control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Bankruptcy Law" shall have the meaning specified in clause
(viii) of paragraph 7A.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are
required or authorized to be closed.
"Cable TV System" shall mean all related licenses, franchises
and permits (other than for television and radio broadcasting) issued
under Federal, State or local laws from time to time, or other
authority or right, which authorize a person to receive or distribute,
or both, by cable, satellite or other technology, audio and visual
signals within a geographical area for the purpose of providing
entertainment or other services, together with all agreements with
public utilities and microwave transmission companies, pole
attachment, use, access or rental agreements, utility easements and
all other property owned or used in connection with the entertainment
and services provided pursuant to, and all interest of such person to
receive revenues from, or pursuant to, said licenses, franchises and
permits.
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid
-26-
<PAGE> 29
pursuant to paragraph 4B (any partial prepayment being applied in
satisfaction of required payment of principal in inverse order of
their scheduled due dates) or is declared to be immediately due and
payable pursuant to paragraph 7A.
"Capitalized lease Obligation" shall mean any rental
obligation which, under generally accepted accounting principles, is
or will be required to be capitalized on the books of the Company or
any Subsidiary, in each case taken at the amount thereof accounted for
as indebtedness (net of interest expense) in accordance with such
principles.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Consolidated Assets" shall mean all assets of the Company and
its Subsidiaries.
"Consolidated Net Earnings" shall mean consolidated gross
revenues of the Company and its Subsidiaries less all operating and
nonoperating expenses of the Company and its Subsidiaries including
all charges of a proper character (including current and deferred
taxes on income, and current additions to reserves), but not including
in gross revenues any gains (net of expenses and taxes applicable
thereto) in excess of losses resulting from the sale, conversion or
other disposition of capital assets (i,e., assets other than current
assets), any gains resulting from the write-up of assets, any equity
of the Company or any Subsidiary in the unremitted earnings of any
corporation which is not a Subsidiary, any earnings of any Person
acquired by the Company or any Subsidiary through purchase, merger or
consolidation or otherwise for any year prior to the date of
acquisition, or any deferred credit representing the excess of equity
in any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary; all determined in accordance with
generally accepted accounting principles.
"Date of Closing" shall have the meaning specified in
paragraph 2.
"Debt" shall mean and include without duplication,
(i) any obligation payable more than one year
from the date of creation thereof which, under generally
accepted accounting principles, is shown on the balance sheet
as a liability (including Capitalized Lease Obligations but
excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute an
obligation),
-27-
<PAGE> 30
(ii) any obligation payable on demand or within a
period of one year from the date of the creation thereof for
borrowed money (and any notes payable and drafts accepted
representing extensions of credit whether or not representing
obligations for borrowed money)
(iii) indebtedness which is secured by any Lien on
property owned by the Company or any Subsidiary, whether or
not the indebtedness secured thereby shall have been assumed
by the Company or such Subsidiary,
(iv) guarantees, endorsements (other than
endorsements of negotiable instruments for collection in the
ordinary course of business) and other contingent liabilities
(whether direct or indirect) in connection with the
obligations, stock or dividends of any Person,
(v) obligations under any contract providing for
the making of loans, advances or capital contributions to any
Person, or for the purchase of any property from any Person,
in each case in order to enable such Person primarily to
maintain working capital, net worth or any other balance sheet
condition or to pay debts, dividends or expenses,
(vi) obligations under any contract for the
purchase of materials, supplies or other property or services
if such contract (or any related document) requires that
payment for such materials, supplies or other property or
services shall be made regardless of whether or not delivery
of such materials, supplies or other property or services is
ever made or tendered,
(vii) obligations under any contract to rent or
lease (as lessee) any real or personal property if such
contract (or any related document) provides that the
obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in
commercial leases then in general use or requires that the
lessee purchase or otherwise acquire securities or obligations
of the lessor,
(viii) obligations under any contract for the sale
or use of materials, supplies or other property or services if
such contract (or any related document) requires that payment
for such materials, supplies or other property or services, or
the use thereof, shall be subordinated to any indebtedness (of
the purchaser or user of such materials, supplies or other
property
-28-
<PAGE> 31
or the Person entitled to the benefit of such services) owed
or to be owed to any Person,
(ix) obligations under any other contract which,
in economic effect, is substantially equivalent to a
guarantee,
(x) Subordinated Debt, and
(xi) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA;
all as determined in accordance with generally accepted accounting
principles.
"Discounted Value" shall mean, with respect to the Called
Principal of any Note, the amount calculated by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on a semi-annual
basis) equal to the Reinvestment Yield with respect to such Called
Principal.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Events of Default" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement
in connection with such event for the giving of notice, or the lapse
of time, or the happening of any further condition, event or act, and
"Default" shall mean any of such events, whether or not any such
requirement has been satisfied.
"FCC" shall mean the Federal Communications Commission or any
successor agency providing the same function.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind or any other similar type of
preferential arrangement (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code of any
jurisdiction).
"Notes" shall have the meaning specified in paragraph 1.
-29-
<PAGE> 32
"Multiemployer Plan" shall mean any plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of
ERISA).
"Officer's Certificate" shall mean a certificate signed in the
name of the Company by its President, its Executive Vice President or
its Treasurer.
"Operating Agreements" shall mean all of the franchise
agreements, pole agreements and any and all other agreements executed
by the Company or any Subsidiary in connection with the Company's or
any Subsidiary's operation of Cable TV Systems in compliance with the
rules and regulations of the FCC.
"Operating Cash Flow" shall mean for the period in question,
total revenues less operating expenses plus depreciation and
amortization expense. Operating expenses include programming,
technical, selling, promotion, general and administration expenses but
do not include interest or income tax expense.
"Operating Lease Rentals" shall mean rentals payable under
leases of any property (other than utility poles and tower sites)
which would not be capitalized on the Company's balance sheet as
defined in accordance with generally accepted accounting principles.
"Person" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Plan" shall mean an "employee pension benefit plan" (as
defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the
Company or by any trade or business, whether or not incorporated,
which, together with the Company, is under common control, as
described in section 414(b) or (c) of the Code.
"Price Increase" shall have the meaning specified in
paragraph 2B.
"Purchase Agreement" shall mean the Asset Purchase and Sale
Agreement, dated as of July 14, 1989, among Jack Kent Incorporated,
Cooke Media Group Inc., certain direct and indirect subsidiaries of
such corporations, and the Company which agreement provides for the
purchase of the Cable TV Systems located in Bryan, Texas, Victoria,
Texas, Paris, Texas, Greenville, Mississippi and Clovis, New Mexico,
as the provisions thereof have been or may be from time to time
-30-
<PAGE> 33
amended or waived; provided that no amendment or waiver of any
provision of such Asset Purchase and Sale Agreement that may become
effective after the date hereof which materially increases the
consideration to be paid thereunder or which materially reduces the
assets to be acquired thereunder, and no termination of such Asset
Purchase and Sale Agreement in whole or in material part, shall be
effective for the purpose of this Agreement unless consented to in
writing by the Required Holder(s).
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the Business Day
next preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page 678" on the Telerate
Service (or such other display as may replace Page 678 on the Telerate
Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date, or if such yields shall not be reported as
of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields
reported (for the latest day for which such yields shall have been so
reported as of the Business Day next preceding the Settlement Date
with respect to such Called Principal) in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond
equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between reported yields.
"Related Investment" shall mean any investment in the stock or
other interest in any Person whose principal business is the cable
television business or one or more businesses that are necessary
thereto, including, for example, and not by way of limitation, the
programming, syndication, broadcasting, production, licensing,
entertainment and microwave and fiber optic and similar transmission
and reception businesses.
"Remaining Average Life" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying
(a) each Remaining Scheduled Payment of such Called Principal (but not
of interest thereon) by (b) the number of years (calculated to
-31-
<PAGE> 34
the nearest one-twelfth year) which will elapse between the Settlement
Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due on or after the Settlement Date
with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date.
"Required Holder(s)" shall mean the holder or holders of at
least 66-2/3% of the aggregate principal amount of the Notes from time
to time outstanding.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to
be prepaid pursuant to paragraph 4B or is declared to be immediately
due and payable pursuant to paragraph 7A.
"Significant Holder" shall mean (i) you, so long as you shall
hold (or be committed under this Agreement to purchase) any Note, or
(ii) any other holder of at least 10% of the aggregate principal Notes
from time to time outstanding.
"Subordinated Debt" shall mean Debt of the Company which is
expressly and validly subordinated to the Note under conditions and
pursuant to terms and provisions approved by you in writing.
"Subsidiary" shall mean any corporation organized under the
laws of any State of the United States of America, Canada, or any
Province of Canada, which conducts the major portion of its business
in and makes the major portion of its sales to Persons located in the
United States of America or Canada, and 80% of the stock of every
class of which, except directors' qualifying shares, shall, at the
time as of which any determination is being made, be owned by the
Company either directly or through Subsidiaries.
"Substantial Stockholder" shall mean a Person that directly or
indirectly through one or more Subsidiaries owns 5% or more of the
outstanding stock of the Company or a Subsidiary of the Company.
-32-
<PAGE> 35
"Transferee" shall mean any direct or indirect transferee of
all or any part of any Note purchased by you under this Agreement.
"Treasury Notes" shall have the meaning specified in paragraph
2B.
"Yield-Maintenance Premium" shall mean, with respect to any
Note, a premium equal to the excess, if any, of the Discounted Value
of the Called Principal of such Note over the sum of (i) such Called
Principal plus (ii) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called Principal. The
Yield-Maintenance Premium shall in no event be less than zero.
10B. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles consistent with those applied
in the preparation of the financial statements referred to in
paragraph 8B.
PARAGRAPH 11. MISCELLANEOUS.
11A. Note Payments. So long as you shall hold any Note,
the Company will make payments of principal thereof and premium, if
any, and interest thereon, which comply with the terms of this
Agreement, not later than 12:00 noon (New York City time) on the day
when due in U.S. dollars, by wire transfer of immediately available
funds for credit to your account or accounts as specified in the
Purchaser Schedule attached hereto, or such other account or accounts
in the United States as you may designate in writing, notwithstanding
any contrary provision herein or in any Note with respect to the place
of payment. You agree that, before disposing of any Note, you will
make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 11A to any Transferee which shall have made
the same agreement as you have made in this paragraph 11A.
11B. Expenses. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and
save you and to the extent hereafter provided, any Transferee harmless
against liability for the payment of, all out-of-pocket expenses
arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses
of any special counsel engaged by you in connection with this
Agreement, the transactions contemplated hereby and any subsequent
-33-
<PAGE> 36
proposed modification of, or proposed consent under, this Agreement,
whether or not such proposed modification shall be effected or
proposed consent granted, and (ii) the costs and expenses, including
attorneys' fees, incurred by you or any Transferee in administering
this Agreement and enforcing any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process issued
in connection with this Agreement or the transactions contemplated
hereby or by reason of your or any Transferee's having acquired any
Note, including without limitation costs and expenses incurred in any
bankruptcy case. The obligations of the Company under this paragraph
11B shall survive the transfer of any Note or portion thereof or
interest therein by you or any Transferee and the payment of any Note.
11C. Consent to Amendments. This Agreement may be amended,
and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company
shall obtain the written consent to such amendment, action or omission
to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding,
no amendment to this Agreement shall change the maturity of any Note,
or change the principal of, or the rate or time of payment of interest
or any premium payable with respect to any Note, or affect the time,
amount or allocation of any prepayments, or reduce the proportion of
the principal amount of the Notes required with respect to any
consent. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder
of such Note. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes. The Notes are issuable as registered notes without coupons
in denominations of at least $100,000, except as may be necessary to
reflect any principal amount not evenly divisible by $100,000. The
Company shall keep at its principal office a register in which the
Company shall provide for the registration of Notes and of transfers
of Notes. Upon surrender for registration of transfer of any Note at
the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new
-34-
<PAGE> 37
Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. At the
option of the holder of any Note, such Note may be exchanged for other
Notes of like tenor and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Note to be exchanged
at the principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense, execute
and deliver the Notes which the holder making the exchange is entitled
to receive. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or
such holder's attorney duly authorized in writing. Any Note or Notes
issued in exchange for any Note or upon transfer thereof shall carry
the rights to unpaid interest and interest to accrue which were
carried by the Note so exchanged or transferred, so that neither gain
nor loss of interest shall result from any such transfer or exchange.
Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case
of any such loss, theft or destruction, upon receipt of such holder's
unsecured indemnity agreement, or in the case of any such mutilation
upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Note.
11E. Persons Deemed owners; Participations. Prior to due
presentment for registration of transfer, the Company may treat the
Person in whose name any Note is registered as the owner and holder of
such Note for the purpose of receiving payment of principal of and
premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Note may from time to time grant
participations in all or any part of such Note to any Person on such
terms and conditions as may be determined by such holder in its sole
and absolute discretion.
11F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein or made
in writing by or on behalf of the Company in connection herewith shall
survive the execution and delivery of this Agreement and the Notes,
the transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on behalf of
you or any Transferee. Subject to the preceding sentence, this
Agreement and the Notes embody the entire
-35-
<PAGE> 38
agreement and understanding between you and the Company supersede all
prior agreements and understandings relating to the subject matter
hereof.
11G. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of either of
the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including,
without limitation, any Transferee) whether so expressed or not.
11H. Disclosure to Other Persons. The Company acknowledges
that the holder of any Note may deliver copies of any financial
statements and other documents delivered to such holder, and disclose
any other information disclosed to such holder, by or on behalf of the
Company or any Subsidiary in connection with or pursuant to this
Agreement to (i) such holder's directors, officers, employees, agents
and professional consultants, (ii) any other holder of any Note, (iii)
any Person to which such holder offers to sell such Note or any part
thereof, (iv) any Person to which such holder sells or offers to sell
a participation in all or any part of such Note, (v) any Federal or
State regulatory authority having jurisdiction over such holder, (vi)
the National Association of Insurance Commissioners or any similar
organization or (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance with any
law, rule, regulation or order applicable to such holder, (b) in
response to any subpoena or other legal process, (c) in connection
with any litigation to which such holder is a party or (d) in order to
protect such holder's investment in such Note.
11I. Notices. All notices or other communications provided
for hereunder (except for the telephonic notice required by paragraph
4C) shall be in writing and sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and, (i) if to you,
addressed to you at the address specified for such communications in
the Purchaser Schedule attached hereto, or at such other address as
you shall have specified to the Company in writing, (ii) if to any
other holder of any Note, addressed to such other holder at such
address as such other holder shall have specified to the Company in
writing or, if any such other holder shall not have so specified an
address to the Company, then addressed to such other holder in care of
the last holder of such Note which shall have so specified an address
to the Company, and (iii) if to the Company, addressed to it at TCA
Cable TV, Inc., 3015 SSE Loop 323, Tyler, Texas 75713-0489, Attention:
President, or at such other address as the Company shall have
specified to the holder of each Note in writing; provided. however,
that any
-36-
<PAGE> 39
such communication to the Company may also, at the option of the
holder of any Note, be delivered by any other means either to the
Company at its address specified above or to any officer of the
Company; provided, further, that any notice delivered to the Company
pursuant to Section 7 hereof shall be sent by certified mail, return
receipt requested and shall be deemed given on the third Business Day
following deposit in such mail, properly addressed with postage
prepaid.
11J. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
11K. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken, is
by the terms of this Agreement required to be satisfactory to you or
to the Required Holder(s), the determination of such satisfaction
shall be made by you or the Required Holder(s), as the case may be, in
the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
11L. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE LAW OF THE STATE OF TEXAS. This Agreement may not be
changed orally, but (subject to the provisions of paragraph 11C) only
by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is
sought.
11M. Maximum Interest Payable. The Company, you and any
other holders of the Notes specifically intend and agree to limit
contractually the amount of interest payable under this Agreement, the
Notes and all other instruments and agreements related hereto and
thereto to the maximum amount of interest lawfully permitted to be
charged under applicable law. Therefore, none of the terms of this
Agreement, the Notes or any instrument pertaining to or relating to
this Agreement or the Notes shall ever be construed to create a
contract to pay interest at a rate in excess of the maximum rate
permitted to be charged under applicable law, and neither the Company,
any guarantor nor any other party liable or to become liable
hereunder, under the Notes, under any guaranties or under any other
instruments and agreements related hereto and thereto shall ever be
liable for interest in excess of the amount determined at such maximum
rate, and the provisions of this paragraph shall control over all
other provisions of this Agreement, the Notes, any guaranties or any
other instrument pertaining to or relating to the transactions herein
-37-
<PAGE> 40
contemplated. If any amount of interest taken or received by you or
any holder of a Note shall be in excess of said maximum amount of
interest which, under applicable law, could lawfully have been
collected by you or such holder incident to such transactions, then
such excess shall be deemed to have been the result of a mathematical
error by all parties hereto and shall be refunded promptly by the
Person receiving such amount to the party paying such amount, or, at
the option of the recipient, credited ratably against the unpaid
principal amount of the Note or Notes held by you or such holder,
respectively. All amounts paid or agreed to be paid in connection with
such transactions which would under applicable law be deemed
"interest" shall, to the extent permitted by such applicable law, be
amortized, prorated, allocated and spread throughout the stated term
of this Agreement. "Applicable law" as used in this paragraph means
that law in effect from time to time which permits the charging and
collection of the highest permissible lawful, nonusurious rate of
interest on the transactions herein contemplated including laws of the
State of Texas and of the United States of America, and "maximum rate"
as used in this paragraph means, with respect to each of the Notes,
the maximum lawful, nonusurious rates of interest (if any) which under
applicable law may be charged to the Company from time to time with
respect to such Notes.
11N. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such
counterpart.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement between you
and the Company.
Very truly yours,
TCA CABLE TV, INC.
By /s/ ROBERT M. ROGERS
President
-38-
<PAGE> 41
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ JAMES K. LATIMER, III
Title: Vice President
-39-
<PAGE> 1
EXHIBIT 10(G)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment")
dated and effective as of April 29, 1992, is by and between TCA CABLE TV INC.,
a Texas corporation (the "Borrower") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
WHEREAS, the Bank and the Borrower have entered into that
certain Credit Agreement dated as of September 13, 1989 (as it may be hereafter
amended or otherwise modified and in effect from time to time, the "Credit
Agreement"); and
WHEREAS, the Bank and the Borrower wish to amend the Credit
Agreement to, among other things, (i) extend the Conversion Date to April 30,
1994 and the Termination Date for the Facility II Loans to April 30, 1999;
(ii) change the amortization schedule for the Facility II Loans; and
(iii) reduce the Facility I Commitment of the Bank.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the Bank and the
Borrower agree as follows:
SECTION 1. AMENDMENT.
1.01. The definition of the term "Conversion Date" on page
6 of the Credit Agreement is hereby amended to read in its entirety as follows:
"Conversion Date" means April 30, 1994, or if such
date is not a Business Day, the Business Day next preceding
such date."
1.02. Subsection (ii) of the definition of the term
"Termination Date" on page 19 of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(ii) with respect to the Facility II Loans, April
30, 1999, or if such date is not a Business Day, the Business
Day next preceding such date, and in either event, on any
earlier date on which the Facility I Commitment or the
Facility II Commitment, as the case may be, shall have been
terminated in accordance with this Agreement..."
1.03. The seventh line of Section 2.01 of the Credit
Agreement is hereby amended by substituting the amount of "$32,000,000" for
the amount of "$50,000,000" at the end of such line.
<PAGE> 2
1.04. Subsection (i) of Sections 2.03(b) and 3.04(b) of the
Credit Agreement is hereby amended to read in its entirety as follows:
"(i) the Eurodollar Rate plus one percent (1%) plus
the applicable Leverage Premium,"
1.05. Subsection (i) of Sections 2.03(c) and 3.04(c) of the
Credit Agreement is hereby amended to read in its entirety as follows:
"(i) the Adjusted CD Rate in effect from time to
time plus one percent (1%) plus the applicable Leverage
Premium,"
1.06. Section 2.06 of the Credit Agreement is hereby
amended by adding thereto the following new subsection (c):
"(c) In the event that (i) on or after April 29,
1992, the interest rate or any fee in effect on April 29, 1992
and payable with respect to the indebtedness evidenced by the
First City Documents, the First Chicago Documents or the NCNB
indebtedness described as item #1 on Exhibit 10.01(d) of this
Agreement is increased to a level that (x) for interest rates
will be equal to or exceed those rates set forth in this
Agreement, as amended by that certain First Amendment to
Credit Agreement dated as of April 29, 1992 by and between the
Borrower and the Bank (the "First Amendment"); (y) for fees
(other than commitment fees) will exceed $25,000.00; and (z)
for commitment fees will exceed 1/4% as set forth in Section
2.06(a) of this Agreement, as amended by the First Amendment,
or (ii) on or after April 29, 1992, any new fee with respect to
such indebtedness is imposed which exceeds $25,000.00, in each
case whether as a result of a refinancing of such indebtedness
or otherwise, the Borrower agrees to pay to the Bank a fee in
the amount of $25,000.00, such fee to be due and payable
within thirty (30) days of the date of any such increase of
the interest rate or fee or the date of the imposition of any
new fee."
1.07. Section 3.02 of the Credit Agreement is hereby amended by substituting
the phrase "Facility II Loans" for the phrase "Facility I Loans" in the second
line thereof.
-2-
<PAGE> 3
1.08. The first sentence of Section 3.06(a) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(a) Commencing July 31, 1994, and continuing
thereafter each October 31, January 31, April 30 and July 31
of each year, the Facility II Commitment shall be reduced by
the Borrower by an amount equal to 5% of the outstanding
Facility II Commitment on the Conversion Date, and on April
30, 1999, the Facility II Commitment shall be reduced to zero
(each such date being a "Facility II Commitment Reduction
Date")."
1.09. Subsection (i) of Section 5.01(b) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(i) as to each Alternate Base Rate Loan, on a
quarterly basis commencing on April 30, 1992, and continuing
thereafter each July 31, October 31, January 31 and April 30
of each year;"
1.10. Article XII of the Credit Agreement is hereby amended
to add thereto a new Section 12.11 which will read in its entirety as follows:
"12.11 NO PRIOR AGREEMENTS. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED
IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES."
1.11. The Credit Agreement is further amended by deleting
therefrom in its entirety Exhibit 2.02 and inserting in lieu thereof the new
Exhibit 2.02 attached hereto as Exhibit A.
-3-
<PAGE> 4
SECTION 2. Conditions to Effectiveness of Amendment. This
Amendment shall become effective upon the occurrence of the following events
and conditions:
(a) Delivery of Documents.
The Bank shall have received on or before the effective date
of the Amendment (the "Effective Date") the following, each dated as of the
Effective Date and in form, substance and scope satisfactory to the Bank:
(i) The Amendment, duly executed by the Borrower
and the Bank.
(ii) The Amended and Restated Facility I Note in
the principal amount of $32,000,000, duly executed by the Borrower.
(iii) Corporate Certificates.
(A) The Borrower's Secretary's
Certificate. A certificate of the Secretary of the Borrower
certifying (1) the names and true signatures of the officers of
the Borrower authorized to sign the Amendment and the other
documents to be delivered by the Borrower pursuant to the
Amendment; (2) the By-laws and Articles or Certificate of
Incorporation of the Borrower as in effect on the date of such
certification; and (3) the resolutions of the Board of
Directors of the Borrower approving and authorizing, among
other things, the execution, delivery, and performance by the
Borrower of the Amendment, the Amended and Restated Facility I
Note, and the other documents to be delivered by the Borrower
pursuant to the Amendment and the transactions contemplated
thereunder.
(b) Representations and Warranties; No Default.
(i) All of the representations and warranties
contained in Article VIII of the Credit Agreement are true and correct
on and as of the date hereof and will be true and correct after giving
effect to this Amendment and the Borrower hereby agrees to be bound by
such representations and warranties.
(ii) No event which constitutes a Default or an
Event of Default under the Credit Agreement, as amended hereby, has
occurred and is continuing, or would result from the execution and
delivery of this Amendment.
-4-
<PAGE> 5
(c) Payment of Fees.
(i) The Borrower shall have paid to the Bank an
amendment fee in the amount of $50,000 as well as the fees and
expenses incurred by counsel to the Bank in connection with the
preparation, negotiation, execution and delivery of the Amendment and
the other documents to be executed in connection therewith.
SECTION 3. CAPITALIZED TERMS. The capitalized terms used
herein which are defined in the Credit Agreement and not otherwise defined
herein shall have the meanings specified therein.
SECTION 4. RATIFICATION. The Credit Agreement, as hereby
amended, is in all respects ratified and confirmed, and all other rights and
powers created thereby or thereunder shall be and remain in full force and
effect.
SECTION 5. COUNTERPARTS. This Amendment may be executed in
several counterparts, and each counterpart, when so executed and delivered,
shall constitute an original instrument, and all such separate counterparts
shall constitute but one and the same instrument.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
-5-
<PAGE> 6
SECTION 7. NO PRIOR AGREEMENTS. THIS AMENDMENT AND THE OTHER
DOCUMENTS EXECUTED IN CONNECTION HEREWITH CONSTITUTES A "LOAN AGREEMENT" AS
DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BORROWER:
TCA CABLE TV INC.
By: /s/ JIMMIE F. TAYLOR
Name: Jimmie F. Taylor
Title: Vice President, CFO &
Treasurer
BANK:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ KEVIN KELTY
Name: Kevin Kelty
Title: Vice President
-6-
<PAGE> 7
EXHIBIT A
EXHIBIT 2.02
AMENDED AND RESTATED FACILITY I REVOLVING CREDIT NOTE
$32,000,000.00 April 29, 1992
FOR VALUE RECEIVED, the undersigned, TCA CABLE TV INC., a
Texas corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
Texas Commerce Bank National Association, a national banking association (the
"Bank"), on or before the Termination Date, the principal sum of Thirty-Two
Million and OO/Dollars ($32,000,000), or if less, the aggregate unpaid
principal amount of all Facility I Loans made by the Bank in accordance with
the terms and provisions of that certain Credit Agreement dated as of
September 13, 1989 between the Borrower and The Bank (as it has been amended
by that certain First Amendment to Credit Agreement dated as of April 29, 1992
between the Borrower and the Bank, and as it may be hereafter amended or
otherwise modified and in effect from time to time, the "Credit Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Credit Agreement.
The outstanding principal balance of each Facility I Loan
shall be due and payable on the Termination Date and as otherwise provided in
the Credit Agreement. The Borrower promises to pay interest on the unpaid
principal balance of each Facility I Loan from the date of such Loan until the
principal balance thereof is paid in full. Interest shall accrue on the
outstanding principal balance of each Facility I Loan from and including the
date of such Loan to but excluding the Termination Date at the rate or rates,
and shall be due and payable on the dates, set forth in the Credit Agreement.
Any amount not paid when due with respect to principal (whether at stated
maturity, by acceleration or otherwise), costs or expenses, or, to the extent
permitted by applicable law, interest, shall bear interest from the date when
due to and excluding the date the same is paid in full, payable on demand, at
the rate provided for in Section 2.03(d) of the Credit Agreement.
Payments of principal and interest, and all amounts due with
respect to costs and expenses, shall be made in lawful money of the United
States of America in immediately available funds, without deduction, set-off or
counterclaim to the Bank not later than 1:00 p.m. (Houston time) on the date on
which such payments shall become due pursuant to the terms and provisions set
forth in the Credit Agreement.
If any payment of principal or interest on this Revolving
Credit Note shall become due on a Saturday, Sunday, or public holiday on which
the Bank is not open for business, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest in connection with such payment.
In addition to all principal and accrued interest on this
Revolving Credit Note, the Borrower agrees to pay (a) all reasonable costs and
expenses incurred by all owners and holders of this Revolving Credit Note in
collecting this Revolving Credit Note through any probate, reor-
-1-
<PAGE> 8
ganization, bankruptcy or any other proceeding and (b) reasonable attorneys'
fees when and if this Revolving Credit Note is placed in the hands of an
attorney for collection after default.
All agreements between the Borrower and the Bank, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
demand being made on this Revolving Credit Note or otherwise, shall the amount
paid, or agreed to be paid, to the Bank for the use, forbearance, or detention
of the money to be loaned under the Credit Agreement and evidenced by this
Revolving Credit Note or otherwise or for the payment or performance of any
covenant or obligation contained in the Credit Agreement, this Revolving Credit
Note or in any other Loan Document exceed the Highest Lawful Rate. If, as a
result of any circumstances whatsoever, fulfillment of any provision hereof or
of the Credit Agreement or any of such documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by applicable usury law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if, from any such
circumstance, the Bank shall ever receive interest or anything which might be
deemed interest under applicable law which would exceed the Highest Lawful
Rate, such amount which would be excessive interest shall be applied to the
reduction of the principal amount owing on account of this Revolving Credit
Note or the amounts owing on other obligations of the Borrower to the Bank under
the Credit Agreement or any Loan Document and not to the payment of interest,
or if such excessive interest exceeds the unpaid principal balance of this
Revolving Credit Note and the amounts owing on other obligations of the
Borrower to the Bank under the Credit Agreement or any Loan Documents, as the
case may be, such excess shall be refunded to the Borrower. In determining
whether or not the interest paid or payable under any specific contingencies
exceeds the Highest Lawful Rate, the Borrower and the Bank shall, to the
maximum extent permitted under applicable law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest; (b)
exclude voluntary prepayments and the effects thereof; and (c) amortize,
prorate, allocate and spread in equal parts during the period of the full
stated term of this Revolving Credit Note, all interest at any time contracted
for, charged, received or reserved in connection with the indebtedness
evidenced by this Revolving Credit Note. Notwithstanding anything to the
contrary contained in this Revolving Credit Note, it is understood and agreed
that if at any time the rate of interest which accrues on the outstanding
principal balance of this Revolving Credit Note shall exceed the Highest Lawful
Rate, the rate of interest which accrues on the outstanding principal balance
of this Revolving Credit Note shall be limited to the Highest Lawful Rate, but
any subsequent reductions in the rate of interest which accrues on the
outstanding principal balance of this Revolving Credit Note shall not reduce
the rate of interest which accrues on the outstanding principal of this
Revolving Credit Note below the Highest Lawful Rate until the total amount of
interest accrued on the outstanding principal balance of this Revolving Note
equals the amount of interest which would have accrued if such rate of
interest had at all times been in effect.
This Revolving Credit Note is given in renewal and extension
(and not extinguishment) of the indebtedness evidenced by that certain Facility
II Term Note dated September 13, 1991, in the original principal amount of
$36,000,000.00 executed by the
-2-
<PAGE> 9
Borrower and payable to the order of the Bank (the "Prior Note"), and is the
Revolving Credit Note provided for in, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events, for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions and with the effect therein
specified, and provisions to the effect that no provision of the Credit
Agreement or this Revolving Credit Note shall require the payment or permit the
collection of interest in excess of the Highest Lawful Rate. It is expressly
understood by the Borrower that the principal amount of this Revolving Credit
Note includes the unpaid principal amount outstanding under the Credit
Agreement heretofore evidenced by the Prior Note and that this Revolving Credit
Note (i) merely reevidences the debt owing pursuant to the Credit Agreement;
(ii) is given in substitution for and modification of, and not as payment of,
the Prior Note; and (iii) is in no way intended to constitute a novation of the
Prior Note.
The date, amount, type, interest rate and Interest Period of
each Facility I Loan made by the Bank to the Borrower, and each payment made on
account of principal thereof, shall be recorded by the Bank on its books and,
prior to any transfer of this Revolving Credit Note, endorsed by the Bank on
Schedule I attached hereto or any continuation thereof; provided, however, that
the failure of the Bank to do so or if any such information so recorded by the
Bank on such schedule shall be incorrect or in error, such failure or error
shall not in any way affect the validity, enforceability or effectiveness of
this Revolving Credit Note or the validity or effectiveness of the transfer of
this Revolving Credit Note.
The Borrower may borrow, repay and reborrow under this
Revolving Credit Note in accordance with the terms of the Credit Agreement. It
is contemplated that by reason of prepayments or repayments hereon prior to the
Termination Date, there may be times when no indebtedness is owing hereunder
prior to such date; but notwithstanding such occurrences, this Revolving Credit
Note shall remain valid and shall be in full force and effect as to Facility I
Loans made pursuant to the Credit Agreement subsequent to each such occurrence.
Except as otherwise specifically provided for in the Credit
Agreement, the Borrower and any and all endorsers, guarantors and sureties
severally waive grace, demand, presentment for payment, notice of dishonor or
default, protest, notice of protest, notice of intent to accelerate, notice of
acceleration and diligence in collecting and bringing of suit against any party
hereto, and agree to all renewals, extensions or partial payments hereon and to
any release or substitution of security hereof, in whole or in part, with or
without notice, before or after maturity.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
-3-
<PAGE> 10
IN WITNESS WHEREOF, the Borrower has caused this Revolving
Credit Note to be executed and delivered by its officer thereunto duly
authorized effective as of the date first above written.
TCA CABLE TV INC.
By: /s/ JIMMIE F. TAYLOR
Title: Vice President, CFO & Treasurer
-4-
<PAGE> 11
SCHEDULE I
FACILITY I LOANS
<TABLE>
<CAPTION>
Date of Principal Type of Int. Maturity Amount Date Unpaid Notation
Loan Amount Loan Rate Date of Paid or Paid or Principal Made By
of loan Loan Prepaid Prepaid Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-5-
<PAGE> 1
EXHIBIT 10(I)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment") dated and
effective as of April 23, 1993, is by and between TCA CABLE TV INC., a Texas
corporation (the "Borrower") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association (the "Bank").
WHEREAS, the Bank and the Borrower have entered into that certain
Credit Agreement dated as of September 13, 1989, as amended by that certain
First Amendment to Credit Agreement dated as of April 29, 1992 (as it may be
hereafter amended or otherwise modified and in effect from time to time, the
"Credit Agreement"); and
WHEREAS, the Bank and the Borrower wish to amend the Credit Agreement
to, among other things, (i) extend the Conversion Date to April 30, 1995 and
the Termination Date for the Facility II Loans to April 30, 2000; (ii) change
the amortization schedule for the Facility II Loans; and (iii) change the
interest rate applicable to Eurodollar Rate Loans and Adjusted CD Rate Loans.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Bank and the Borrower agree
as follows:
SECTION 1. AMENDMENT.
1.01. The definition of the term "Conversion Date" on page 6 of the
Credit Agreement is hereby amended to read in its entirety as follows:
" 'Conversion Date' means April 30, 1995, or if such date is
not a Business Day, the Business Day next preceding such date."
1.02. Subsection (ii) of the definition of the term "Termination
Date" on page 19 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"(ii) with respect to the Facility II Loans, April 30, 2000,
or if such date is not a Business Day, the Business Day next preceding
such date, and in either event, on any earlier date on which the
Facility I Commitment or the Facility II Commitment, as the case may
be, shall have been terminated in accordance with this Agreement..."
<PAGE> 2
1.03. Subsection (i) of Sections 2.03(b) and 3.04(b) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(i) the Eurodollar Rate plus one percent (1%) (the
"Applicable Eurodollar Rate Margin") plus the applicable Leverage
Premium; provided, however, that at such time as the ratio of the
aggregate Indebtedness of the Borrower and its Subsidiaries to
Consolidated Operating Cash Flow is less than 3.5 to 1.0, the
Applicable Eurodollar Rate Margin shall equal three quarters of one
percent (3/4%),"
1.04. Subsection (i) of Sections 2.03(c) and 3.04(c) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(i) the Adjusted CD Rate in effect from time to time plus
one percent (1%) (the "Applicable Adjusted CD Rate Margin") plus the
applicable Leverage Premium; provided however, that at such time as
the ratio of the aggregate Indebtedness of the Borrower and its
Subsidiaries to Consolidated Operating Cash Flow is less than 3.5 to
1.0, the Applicable Adjusted CD Rate Margin shall equal three quarters
of one percent (3/4%),"
1.05. Section 2.06(c) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(c) In the event that (i) on or after March 22, 1993, the
interest rate in effect on March 22, 1993 and payable with respect to
the indebtedness described on Exhibit A attached to that certain
Second Amendment to Credit Agreement dated as of April 23, 1993 (the
"Second Amendment") by and between the Borrower and the Bank (the
"Existing Indebtedness") is increased to a level that will exceed
those rates set forth in this Agreement, as amended by that certain
First Amendment to Credit Agreement dated as of April 29, 1992 by and
between the Borrower and the Bank (the "First Amendment") and the
Second Amendment, whether as a result of a refinancing of the Existing
Indebtedness or otherwise; or (ii) on or after April 1, 1993, the
Borrower incurs new additional Indebtedness in excess of $10,000,000
(the "New Indebtedness") and the interest rate payable with respect to
such New Indebtedness exceeds those rates set forth in this Agreement,
the Borrower agrees that the interest rate payable on any, Loans under
the Credit
-2-
<PAGE> 3
Agreement shall be equal to the greater of (y) the interest rate
payable under Section 2.03 or 3.04 of this Agreement, as the case may
be, or (z) the interest rate payable under the documents evidencing
the Existing Indebtedness or the New", Indebtedness, as the case may
be. Any increase in the interest rate pursuant to the provisions of
this Section 2.06(c) shall become effective on the date that the
documents evidencing the Existing Indebtedness or the New Indebtedness
that result in such increase become effective."
1.06. The first sentence of Section 3.06(a) of the Credit Agreement
is hereby amended to read in its entirety as follows:
"(a) Commencing July 31, 1995, and continuing thereafter each
October 31, January 31, April 30 and July 31 of each year, the
Facility II Commitment shall be reduced by the Borrower by an amount
equal to 5% of the outstanding Facility II Commitment on the
Conversion Date, and on April 30, 2000, the Facility II Commitment
shall be reduced to zero (each such date being a "Facility II
Commitment Reduction Date")."
SECTION 2. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This Amendment
shall become effective upon the occurrence of the following events and
conditions:
(a) Delivery of Documents.
The Bank shall have received on or before the effective date of the
Amendment (the "Effective Date") the following, each dated as of the Effective
Date and in form, substance and scope satisfactory to the Bank:
(i) The Amendment, duly executed by the Borrower and
the Bank.
(ii) Corporate Certificates.
(A) The Borrower's Secretary's Certificate. A certificate of
the Secretary of the Borrower certifying (1) the names and true
signatures of the officers of the Borrower authorized to sign the
Amendment and the other documents to be delivered by the Borrower
pursuant to the Amendment; (2) the By-laws and Articles or Certificate
of Incorporation of the Borrower as in effect on the date of such
certification; and (3) the resolutions of the Board of Directors of
the Borrower approving and authorizing, among other things the
execution, delivery, and performance by the Borrower of the
-3-
<PAGE> 4
SECTION 8. NO PRIOR AGREEMENTS. THIS AMENDMENT AND THE OTHER DOCUMENTS
EXECUTED IN CONNECTION HEREWITH CONSTITUTES A "LOAN AGREEMENT" AS DEFINED IN
SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
BORROWER:
TCA CABLE TV INC.
By: /s/ JIMMIE F. TAYLOR
Name: Jimmie F. Taylor
Title: Vice President, C.F.O.,
Treasurer
BANK:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ KEVIN KELTY
Name: Kevin Kelty
Title: Vice President
-5-
<PAGE> 5
EXHIBIT A
TCA CABLE TV, INC.
EXISTING DEBT
1. Restated credit agreement between Nations Bank of Texas, N.A. and TCA
Cable TV, Inc., dated March 31, 1993 providing for a line of or credit of up to
$10,000,000.
2. Note agreement between TCA Cable TV, Inc. and The Prudential Insurance
Company of America dated September 27, 1989 in the original principal amount of
$100,000,000.
3. Credit agreement between Nations Bank of Texas, N.A. and TCA Cable TV,
Inc. dated March 4, 1993 providing for a line of credit of up to $45,000,000.
4. Credit agreement dated September 13, 1989 and amended April 29, 1992
by and between TCA Cable TV, Inc. and Texas Commerce Bank National Association
providing for a line of credit of up to $32,000,000.
5. Revolving line of credit of Southside State Bank, Tyler, Texas dated
March 2, 1993, in favor of TCA Management Company providing for a line of
credit of up to $1,250,000 guaranteed by TCA Cable TV, Inc.
6. Revolving line of credit of First National Bank of Amarillo dated July
8, 1992, in favor of TCA Cable TV, Inc, providing for a line of credit of
$1,000,000.
7. Promissory note dated May 11, 1990, in the original principal amount
of $70,000 payable to the order of Guy D. Manges and Clarisse Manges and
assumed by TCA Management Company April 21, 1992.
<PAGE> 1
EXHIBIT 10(J)
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment") dated and
effective as of 10-31 1994, is by and between TCA CABLE TV INC., a Texas
corporation (the "Borrower") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association (the "Bank").
WHEREAS, the Bank and the Borrower have entered into that certain
Credit Agreement dated as of September 13, 1989, as amended by that certain
First Amendment to Credit Agreement dated as of April 29, 1992, and that
certain Second Amendment to Credit Agreement dated as of April 23, 1993 (as it
may be hereafter amended or otherwise modified and in effect from time to
time, the "Credit Agreement"); and
WHEREAS, the Bank and the Borrower wish to amend the Credit Agreement
to, among other things, extend the Conversion Date to April 30, 1996 and the
Termination Date for the Facility II Loans to April 30, 2001;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Bank and the Borrower agree
as follows:
SECTION 1. AMENDMENT.
1.01. The definition of the term "Conversion Date" on page 6 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"'Conversion Date' means April 30, 1996, or if such date is
not a Business Day, the Business Day next preceding such date."
1.02. Subsection (ii) of the definition of the term "Termination
Date" on page 19 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"(ii) with respect to the Facility II Loans, April 30, 2001,
or if such date is not a Business Day, the Business Day next preceding
such date, and in either event, on any earlier date on which the
Facility I Commitment or the Facility II Commitment, as the case may
be, shall have been terminated in accordance with this Agreement. . ."
<PAGE> 2
1.03. The first sentence of Section 3.06(a) of the Credit Agreement
is hereby amended to read in its entirety as follows:
"(a) Commencing July 31, 1996, and continuing thereafter each
October 31, January 31, April 30 and July 31 of each year, the
Facility II Commitment shall be reduced by the Borrower by an amount
equal to 5% of the outstanding Facility II Commitment on the
Conversion Date, and on April 30, 2001, the Facility II Commitment
shall be reduced to zero (each such date being a "Facility II
Commitment Reduction Date")."
SECTION 2. Conditions to Effectiveness of Amendment. This Amendment
shall become effective upon the occurrence of the following events and
conditions:
(a) Delivery of Documents.
The Bank shall have received on or before the effective date of the
Amendment (the "Effective Date") the following, each dated as of the Effective
Date and in form, substance and scope satisfactory to the Bank:
(i) The Amendment, duly executed by the Borrower and the Bank.
(ii) Corporate Certificates.
(A) The Borrower's Secretary's Certificate. A
certificate of the Secretary of the Borrower certifying (1) the names
and true signatures of the officers of the Borrower authorized to sign
the Amendment and the other documents to be delivered by the Borrower
pursuant to the Amendment; (2) the By-laws and Articles or Certificate
of Incorporation of the Borrower as in effect on the date of such
certification; and (3) the resolutions of the Board of Directors of
the Borrower approving and authorizing, among other things, the
execution, delivery, and performance by the Borrower of the Amendment
and the other documents to be delivered by the Borrower pursuant to
the Amendment and the transactions contemplated thereunder.
(b) Representations and Warranties; No Default.
(i) All of the representations and warranties contained
in Article VIII of the Credit Agreement are true and correct on and as
of the date hereof and will be true and correct after giving effect to
this Amendment and the Borrower hereby agrees to be bound by such
representations and warranties.
-2-
<PAGE> 3
(ii) No event which constitutes a Default or an
Event of Default under the Credit Agreement, as amended hereby, has
occurred and is continuing, or would result from the execution and
delivery of this Amendment.
SECTION 3. CAPITALIZED TERMS. The capitalized terms used
herein which are defined in the Credit Agreement and not otherwise defined
herein shall have the meaning specified therin.
SECTION 4. RATIFICATION. The Credit Agreement, as hereby
amended, is in all respects ratified and confirmed, and all other rights and
powers created thereby or thereunder shall be and remain in full force and
effect.
SECTION 5. COUNTERPARTS. This Amendment may be executed in
several counterparts, and each counterpart, when so executed and delivered,
shall constitute an original instrument, and all such separate counterparts
shall constitute but one and the same instrument.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
SECTION 7. NO PRIOR AGREEMENTS. THE CREDIT AGREEMENT, THE
NOTES, THIS AMENDMENT AND THE OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH
CONSTITUTES A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS
BUSINESS & COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER:
TCA CABLE TV INC.
By: /s/ JIMMIE F. TAYLOR
Name: Jimmie F. Taylor
Title: Vice President, CFO, Treasurer
BANK:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ KEVIN KELTY
Name: Kevin Kelty
Title: Senior Vice President
-4-
<PAGE> 1
EXHIBIT 10(K)
ASSET PURCHASE AGREEMENT
DATED JANUARY 20, 1995
BETWEEN
TELE-COMMUNICATIONS OF ARKANSAS LIMITED PARTNERSHIP
AND
TIME WARNER ENTERTAINMENT COMPANY, L.P.,
THROUGH ITS DIVISION
TIME WARNER CABLE VENTURES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Covenant of Purchase and Sale; Assets . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Assumed Obligations and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.5 Rate Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.6 Current Items Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Current Items Amount Calculated . . . . . . . . . . . . . . . . . . . . . . . . . . 8
RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Earnest Money Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Tax Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Franchise Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6 Use of Names and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.7 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.8 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
BUYER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Organization of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.1 Organization and Qualification of Seller . . . . . . . . . . . . . . . . . . . . . 11
Section 5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.5 Franchises, Licenses, and Contracts . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.8 Tax Returns; Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.9 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.10 System Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.12 Financial and Operational Information . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.13 No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.14 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 5.15 Franchise Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.16 FCC and Copyright Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.17 Franchise and Pole Attachment Fees . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.18 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.19 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.20 Safe Harbor Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.21 Tax Exempt Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.22 Multi-Employer Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.23 Accuracy of Billing Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Certain Affirmative Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2 Certain Negative Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Certain Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.4 Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.6 Supplements to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.7 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . 24
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.1 Closing; Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.2 Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.3 Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.1 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.2 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.2 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.3 Indemnified Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.4 Determination of Indemnification Amounts and Related Matters . . . . . . . . . . . 31
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 11.5 Time and Manner of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11.6 Other Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.2 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.3 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.5 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.6 Binding Effect; Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.7 Headings, Schedules, and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.11 Third Parties; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.13 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<CAPTION>
PAGE
<S> <C>
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
as of January 20, 1995, by and between Tele-Communications of Arkansas Limited
Partnership, a Delaware limited partnership ("Buyer"), whose U.S. Taxpayer
Identification Number is 75-2576014, and Time Warner Entertainment Company,
L.P., a Delaware limited partnership ("Seller"), whose U.S. Taxpayer
Identification Number is 13-3666692, through its division, Time Warner Cable
Ventures.
RECITALS
A. Seller owns and operates a cable television system which is
franchised or holds other operating authority and operates in and around
Russellville, Booneville, Paris, Clarksville, Johnson City, Pottsville, Pope
County, and the unincorporated areas within Arkansas counties in which the
foregoing cities are located (the "System").
B. Seller is willing to convey to Buyer, and Buyer is willing to
purchase from Seller, certain of the tangible and intangible assets comprising
the System, upon the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth
herein, Buyer and Seller agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Agreement" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant,
right, or other instrument, document, obligation or agreement.
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in Section
2.3.
"Basic Cable" means the cable television services described as Basic
(channels 2-13) in Exhibit 5.10, paragraph 3.
<PAGE> 7
"Bill of Sale" has the meaning given in Section 8.2(a).
"Buyer's Counsel Opinion" has the meaning given in Section 7.2.
"Cable Act of 1992" means the Cable Television Consumer Protection and
Competition Act of 1992.
"CLI" means the Cumulative Leakage Index.
"Closing" has the meaning given in Section 8.1.
"Closing Time" means 12:01 A.M., central time, on the date of Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended and
the regulations thereunder, or any subsequent legislative enactment thereof, as
in effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" has the meaning given in Section 2.1.
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.6.
"Eligible Accounts Receivable" has the meaning given in Section 2.6.
"Employee Benefit Plan" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA to which either the Seller or any entity
related to Seller (under the terms of Sections 414 (b), (c), (m) or (o) of the
Code) contributes or which either of the Seller or any entity related to Seller
(under the terms of Sections 414 (b), (c), (m) or (o) of the Code) sponsors or
maintains, or by which Seller or any such entity is otherwise bound.
"ERISA" has the meaning given in Section 5.6.
"Escrow Agent" means NationsBank of Texas, N.A.
"Excluded Assets" has the meaning given in Section 2.2.
"FAA" means the Federal Aviation Administration.
"Fayetteville System" means a cable television system owned and
operated by Seller which is franchised or holds other
2
<PAGE> 8
operating authority and operates in and around Fayetteville, Elkins,
Farmington, Greenland, and unincorporated areas of Washington County, Arkansas.
"Fayetteville Transaction" means the transaction contemplated under
that certain agreement of even date herewith between Tele-Communications of
Northwest Arkansas Limited Partnership ("TCNA") and Seller relating to the
acquisition by TCNA of the Fayetteville System.
"FCC" has the meaning given in Section 3.2.
"Franchises" has the meaning given in Section 2.1.
"Governmental Authority" means the United States of America, any
state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitee" has the meaning given in Section 11.3.
"Individual Subscriber" means any subscriber of the System at the
System's regular monthly subscription rate for Basic Cable who has been a
subscriber for at least one full month, whose payment for service (including
installation fees, but exclusive of late charges) is not more than 60 days past
due from the first day of the period to which an outstanding bill relates and
who has become a subscriber only pursuant to customary marketing promotions
conducted in the ordinary course of business consistent with past practices.
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice or magistrate.
"Leased Real Property" has the meaning given in Section 2.1.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including Judgments and the
Franchises.
"Licenses" has the meaning given in Section 2.1.
"Lien" means any lien, mortgage, indenture, pledge, option, or
encumbrance.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other activity or procedure that could result in a
Judgment.
3
<PAGE> 9
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses, including, without limitation, reasonable counsel fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by the indemnification, provided for in Article 11 hereof, but
shall in no event include incidental or consequential damages.
"NLRA" means the National Labor Relations Act and all amendments
thereto and decisions thereunder.
"Noncompetition Agreement" has the meaning given in Section 3.5.
"Owned Real Property" has the meaning given in Section 2.1.
"Person" means any natural person, Governmental Authority,
corporation, general or limited partnership, joint venture, trust, association,
limited liability company, or unincorporated entity of any kind.
"Purchase Price" has the meaning given in Section 2.4.
"Rate Adjustment Amount" has the meaning given in Section 2.5.
"Rebuild Expenditures" shall have the meaning given in Section 2.6(d).
"Seller's Counsel Opinion" has the meaning given in Section 7.1.
"Seller's FCC Counsel Opinion" has the meaning given in Section 7.1.
"Subject Property" shall mean the parcel of Owned Real Property
described in Exhibit 2.1(b), paragraph A.1.
"Subscriber Equivalent" means an equivalent to an Individual
Subscriber, the number of Subscriber Equivalents served by the System being
equal, as of any date, to the quotient of (i) the aggregate revenues earned by
the System for Basic Cable and Tier Cable provided by the System during the
last month prior to Closing, from billings to residential multiple dwelling
units, other subscribers that are billed for such service on a bulk basis, and
single family households which pay less than the System's regular Basic Cable
monthly subscription rate or the System's regular Basic Cable plus Tier Cable
monthly subscription rate (as applicable), divided by (ii) the System's regular
monthly subscription rate for Basic Cable plus Tier Cable. For purposes of the
foregoing, aggregate revenues earned shall not include (i) passed-through
franchise fees and sales taxes, (ii) nonrecurring charges or credits and (iii)
billings to any bulk
4
<PAGE> 10
account or discounted family household (a) which has not been a subscriber of
the System for at least one month and paid at least one month's payment in
full, together with any applicable installation fee unless waived in the
ordinary course of business, or (b) which is 60 days or more in arrears in
payment for services, as measured from the first day of the month for which
service was received.
"System" has the meaning given in Recital A.
"Tax Certificate" has the meaning given in Section 3.2.
"Taxes" means all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
"Tier Cable" means the cable television services described as Tier
(channels 14-36 excluding pay channels) in Exhibit 5.10, paragraph 3.
ARTICLE 2.
PURCHASE AND SALE
Section 2.1 Covenant of Purchase and Sale; Assets. Subject to
the terms and conditions set forth in this Agreement, at Closing Seller shall
convey, assign, and transfer to Buyer, and Buyer shall acquire from Seller, for
the Purchase Price, free and clear of all Liens (except Liens for Taxes not yet
due and payable), all right, title and interest of Seller in all of the assets
and properties, real and personal, tangible and intangible, used by Seller in
its operation of the System, including the following (the "Assets"):
(a) Tangible Personal Property. All tangible personal
property, including but not limited to towers, tower equipment, antennae,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, earth satellite receive stations and related equipment,
microwave equipment, converters, testing equipment, office equipment,
furniture, fixtures, supplies, inventory, and other physical assets, including
but not limited to the items described on Exhibit 2.1(a).
(b) Real Property. The interests in real property,
including all improvements thereon owned by Seller, described on Exhibit 2.1(b)
owned by Seller ("Owned Real Property") or leased by Seller ("Leased Real
Property").
5
<PAGE> 11
(c) Franchises. The franchises and similar
authorizations or permits described on Exhibit 2.1(c) (the "Franchises").
(d) Licenses. The intangible CATV channel distribution
rights, cable television relay service (CARS), domestic satellite receive only
(TVRO), business radio and other licenses, authorizations, or permits used in
the operations of the System, as described on Exhibit 2.1(d) (the "Licenses").
(e) Contracts. The leases, private easements or rights
of access, contractual rights to easements, pole attachment or joint line
agreements, underground conduit agreements, crossing agreements, bulk and
commercial service agreements, retransmission consent agreements and other
Agreements described on Exhibit 2.1(e) (the "Contracts").
(f) Accounts Receivable. All subscriber, trade and other
accounts receivable.
(g) Books and Records. All engineering records, files,
data, drawings, blueprints, schematics, reports, lists, plans and processes,
and all files of correspondence, lists, records, and reports concerning
subscribers and prospective subscribers of the System, signal and program
carriage, and dealings with Governmental Authorities, including but not limited
to all reports filed by or on behalf of Seller with the FCC with respect to the
System and statements of account filed by or on behalf of Seller with the U.S.
Copyright Office with respect to the System.
Section 2.2 Excluded Assets. Notwithstanding the provisions of
Section 2.1, the Assets shall not include the following, which shall be
retained by Seller (the "Excluded Assets"): (i) programming Agreements; (ii)
insurance policies and rights and claims thereunder; (iii) bonds, letters of
credit, surety instruments, and other similar items; (iv) cash and cash
equivalents; (v) Seller's trademarks, trade names, service marks, service
names, logos, and similar proprietary rights; and (vi) any other items
described in Exhibit 2.2.
Section 2.3 Assumed Obligations and Liabilities. At Closing,
Buyer shall assume, pay, discharge, and perform the following (the "Assumed
Obligations and Liabilities"): (i) those obligations and liabilities
attributable to periods after the Closing Time under or with respect to the
Assets; (ii) other obligations and liabilities of Seller to the extent that
there shall be an adjustment in favor of Buyer with respect thereto pursuant to
Section 2.6; and (iii) all obligations and liabilities arising out of Buyer's
ownership of the Assets or operation of the System after Closing. All
obligations and liabilities arising out of or relating to the Assets or the
System and all other liabilities and obligations of Seller other
6
<PAGE> 12
than the Assumed Obligations and Liabilities shall remain and be the
obligations and liabilities solely of Seller.
Section 2.4 Purchase Price. The consideration for the Assets and
the Noncompetition Covenant to be paid by Buyer pursuant to this Agreement
shall be $25,440,000 (the "Purchase Price"). The Purchase Price shall be
payable to Seller at Closing by wire transfer of immediately available funds.
Section 2.5 Rate Adjustment Amount. The Purchase Price shall be
reduced or increased by an amount, if any, (the "Rate Adjustment Amount") to be
agreed upon in good faith by the parties in the event that after the date
hereof and before the date of Closing the FCC has taken final action amending
the existing regulations, or publishes new regulations in final form, under the
Cable Act of 1992 which would result in a required reduction or increase of the
basic subscriber rate or any of the optional tier service rates of the System
by a specific date which falls within six months after the date of Closing.
Section 2.6 Current Items Amount. In addition to the payment by
Buyer of the Purchase Price, Buyer or Seller, as appropriate, shall pay to the
other the net amount of the adjustments and prorations effected pursuant to
paragraphs 2.6(a), (b), and (c) (the "Current Items Amount").
(a) Eligible Accounts Receivable. Seller shall be
entitled to an amount equal to 95% of the face amount of all Eligible Accounts
Receivable that are sixty or fewer days past due as of the Closing Time.
"Eligible Accounts Receivable" shall mean accounts receivable resulting from
Seller's provision of cable television service prior to the Closing Time to
System subscribers that are active subscribers as of the Closing Time. For
purposes of making "past due" calculations under this paragraph, the monthly
billing statements of Seller shall be deemed to be due and payable on the first
day of the period during which the service to which such billing statements
relate is provided.
(b) Advance Payments and Deposits. Buyer shall be
entitled to an amount equal to the aggregate of (i) all deposits of subscribers
of the System, and all interest, if any, required to be paid thereon as of the
Closing Time, for converters, decoders, and similar items, and (ii) all
payments for services to be rendered to subscribers of the System after the
Closing Time, or for other services to be rendered to other third parties after
the Closing Time for cable television commercials, channel leasing, or other
services or rentals, to the extent all obligations of Seller relating thereto
are assumed by Buyer at Closing.
7
<PAGE> 13
(c) Expenses. As of the Closing Time, the following
expenses shall be prorated, in accordance with generally accepted accounting
principles, so that all such expenses for periods prior to the Closing Time
shall be for the account of Seller, and all such expenses for periods after the
Closing Time shall be for the account of Buyer:
(i) all payments and charges under the
Franchises, the Licenses, and the Contracts;
(ii) Taxes levied or assessed against any of
the Assets or payable with respect to cable television service and related
sales to System subscribers;
(iii) charges for utilities and other goods or
services furnished to the System;
(iv) copyright fees based on signal carriage
by the System; and
(v) all other items of expense relating to
the System;
provided, however, that Seller and Buyer shall not prorate any items of expense
payable under or with respect to any Excluded Assets, all of which shall remain
and be solely for the account of Seller and provided further that, subject to
paragraph 2.6(d) below, there shall be no adjustment or proration for capital
expenditures made by Seller.
(d) Rebuild Expenses. Seller shall be entitled to the
amount of the Rebuild Expenditures as set forth on Exhibit 2.6(d), including
all expenditures made by Seller consistent with the schedule entitled
"Russellville Upgrade Dollars Spent by 6-30-95" (attached to Exhibit 2.6(d)).
Section 2.7 Current Items Amount Calculated. The Current Items
Amount shall be estimated in good faith by Seller, and set forth, together with
a detailed statement of the calculation thereof, in a certificate (the "Initial
Adjustment Certificate") delivered to Buyer not later than five business days
prior to Closing. The Initial Adjustment Certificate shall constitute the
basis on which the Current Items Amount paid at Closing is calculated. Seller
and Buyer shall endeavor in good faith to agree upon the actual Current Items
Amount within sixty days after Closing. Not later than fifteen days after
Seller and Buyer shall have agreed upon the Current Items Amount, Seller or
Buyer, as appropriate, shall pay to the other an amount equal to the amounts by
which the Current Items Amount as finally determined differs from the Current
Items Amount as estimated in the Initial Adjustment Certificate.
8
<PAGE> 14
ARTICLE 3.
RELATED MATTERS
Section 3.1 Earnest Money Deposit. Concurrently with its
execution and delivery of this Agreement, Buyer has deposited the sum of
$200,000 as earnest money pursuant to the terms of the Earnest Money Escrow
Agreement set forth as Exhibit 3.1 ("Earnest Money Deposit Agreement"). In
accordance with the terms of the Earnest Money Deposit Agreement, the earnest
money and all interest or other income accrued thereon shall be paid to Seller
at Closing, for credit toward payment of the Purchase Price, by wire transfer
in accordance with joint instructions given by Buyer and Seller to the Escrow
Agent.
Section 3.2 Tax Certificate. As soon as reasonably practicable,
and in any event within ten days after the date of this Agreement, Buyer shall
prepare and submit to the Federal Communications Commission (the "FCC"), an
appropriate application to request from the FCC a certificate under Section
1071 of the Internal Revenue Code of 1986, as amended, with respect to the
transactions contemplated hereby (the "Tax Certificate"). Buyer shall
thereafter use all commercially-reasonable efforts to obtain the Tax
Certificate from the FCC prior to Closing.
Section 3.3 Franchise Renewals. Seller shall use all
commercially-reasonable efforts to obtain extensions or renewals of each of the
Franchises identified on Exhibit 3.3 so that the expiration date of each such
franchise is no earlier than four years after the after the date of Closing, on
terms not materially more burdensome than the current terms thereof or
otherwise reasonably acceptable to Buyer. Buyer shall cooperate reasonably
with Seller in such efforts. Seller shall advise Buyer of all meetings with
and proceedings of franchising authorities relating to such renewals or
extensions or the transfer of the Franchises to Buyer, and representatives of
Buyer shall be entitled to, and if requested by Seller shall, attend such
meetings and proceedings.
Section 3.4 HSR Act Compliance. As soon as reasonably
practicable, and in any event within thirty days after the date of this
Agreement, Seller and Buyer shall prepare and file proper Premerger
Notification and Report Forms and related affidavits in compliance with the HSR
Act, with Buyer and Seller sharing equally the filing fee related thereto. The
parties shall reasonably cooperate in the preparation of such filings
(including the exchange of drafts) and shall coordinate filings so as to
minimize the length of any review periods. The parties shall promptly respond
to any requests for additional information from either the United States
Department of Justice or the Federal Trade Commission. However, if following
the filing of such forms any Governmental Authority shall request any
additional filings or information that either Seller or Buyer
9
<PAGE> 15
reasonably considers to be inappropriate, unlawful, unduly burdensome, or
otherwise unacceptable, it shall have no obligation to make or provide such
filing or information and in such event shall be entitled, at its option, to
withdraw its filing and terminate this Agreement without liability or
obligation.
Section 3.5 Noncompetition Agreement. At the Closing Seller
shall deliver a noncompetition agreement in the form of Exhibit 3.5 (the
"Noncompetition Agreement").
Section 3.6 Use of Names and Logos. For a period of sixty days
after Closing, Buyer shall be entitled to use the trademarks, trade names,
service marks, service names, logos, and similar proprietary rights of Seller
to the extent incorporated in or on the Assets, provided that Buyer shall
exercise efforts to remove all such names, marks, logos, and similar
proprietary rights from the Assets as soon as reasonably practicable following
Closing.
Section 3.7 Bulk Sales. Buyer and Seller each waives compliance
by the other with bulk sales Legal Requirements applicable to the transactions
contemplated hereby. Seller shall indemnify and hold Buyer harmless with
respect to all Losses resulting from any noncompliance with bulk sales Legal
Requirements applicable to the transactions contemplated hereby.
Section 3.8 Transfer Taxes. All sales, use, transfer, and
similar Taxes arising from or payable by reason of the transactions
contemplated by this Agreement shall be paid one-half by Seller and one-half by
Buyer, and each shall reimburse the other, promptly upon the request of the
other, for any amounts paid by the other in excess of one- half of the amount
of any such Taxes.
ARTICLE 4.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of Closing, as follows:
Section 4.1 Organization of Buyer. Buyer is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has all requisite partnership power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as such activities are currently
conducted. Buyer is duly qualified to do business as a foreign limited
partnership and is in good standing in Arkansas. Exhibit 4.1 sets forth an
accurate and complete description of the direct and indirect ownership
structure of Buyer, which, based on oral conferences by
10
<PAGE> 16
Buyer's counsel with members of the FCC staff, Buyer believes will satisfy the
Legal Requirements for the issuance by the FCC of the Tax Certificate.
Section 4.2 Authority. Buyer has all requisite partnership power
and authority to execute, deliver, and perform this Agreement and consummate
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated hereby
by Buyer have been duly and validly authorized by all necessary action on the
part of Buyer and its partners. This Agreement has been duly and validly
executed and delivered by Buyer, and is the valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
Section 4.3 No Conflict; Required Consents. Except as described
in Exhibit 4.3 and subject to compliance with the HSR Act, the execution,
delivery, and performance by Buyer of this Agreement do not and will not: (i)
conflict with or violate any provision of the certificate of limited
partnership or partnership agreement of Buyer; (ii) violate any provision of
any Legal Requirements; or (iii) conflict with, violate, result in a breach of,
or constitute a default under any Agreement to which Buyer is a party or by
which Buyer or the assets or properties owned or leased by it are bound or
affected, or (iv) require any consent, approval, or authorization of, or filing
of any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person.
Section 4.4 Taxpayer Identification Number. Buyer's U.S.
Taxpayer Identification Number is as set forth in the introductory paragraph of
this Agreement.
ARTICLE 5.
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of Closing, as follows:
Section 5.1 Organization and Qualification of Seller. Seller is
a limited partnership duly organized, validly existing, and in good standing
under the laws of the State of Delaware, and has all requisite partnership
power and authority to own and lease the properties and assets it currently
owns and leases and to conduct its activities as such activities are currently
conducted. Seller is duly qualified to do business as a foreign limited
partnership and is in good standing in Arkansas. Seller is not a participant
in any joint venture or partnership with any
11
<PAGE> 17
other person or entity with respect to any part of the System's operations or
the Assets.
Section 5.2 Authority. Seller has all requisite partnership
power and authority to execute, deliver, and perform this Agreement and
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby on the part of Seller have been duly and validly authorized
by all necessary action on the part of Seller. This Agreement has been duly
and validly executed and delivered by Seller, and is the valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.
Section 5.3 No Conflict; Required Consents. Except as described
on Exhibit 5.3 and subject to compliance with the HSR Act, the execution,
delivery, and performance by Seller of this Agreement do not and will not: (i)
conflict with or violate any provision of the partnership agreement or
certificate of limited partnership of Seller; (ii) violate any provision of any
Legal Requirements; (iii) conflict with, violate, result in a material breach
of, or constitute a default under any Agreement to which Seller is a party or
by which Seller or the assets or properties owned or leased by it are bound or
affected; or (iv) require any consent, approval or authorization of, or filing
of any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person.
Section 5.4 Title to Assets.
(a) Exhibit 2.1(a) contains descriptions of all material
items of tangible personal property included in the Assets and Exhibit 2.1(b)
contains descriptions of all Owned and Leased Real Property (including the
location of all improvements thereon) included in the Assets, which comprise
all material items of tangible personal property and real property used by
Seller to operate the System as currently operated, except for the 1993
Chevrolet Lumina used by the System manager. Except for the Subject Property,
Seller has good and marketable title to (or in the case of Assets that are
leased, valid leasehold interests in) all of the tangible personal property
included in the Assets and Owned and Leased Real Property, free and clear of
all Liens, except (i) Taxes not due and payable, and (ii) in the case of Owned
and Leased Real Property, recorded easements and rights-of-way, and other
restrictions of record on the Owned and Leased Real Property, which do not
individually or in the aggregate cause title thereto to be unmerchantable or
have a material adverse effect on the use of such property for the purposes for
which currently used by Seller.
12
<PAGE> 18
(b) The Assets that consist of tangible personal property
are in good operating condition, ordinary wear excepted. All items of cable
plant and headend equipment included in the Assets (i) have been maintained in
a manner consistent with generally accepted standards of good engineering
practice, and (ii) will permit the System to operate in accordance with the
terms of the Franchises.
(c) The current use and occupancy of the Owned and Leased
Real Property do not constitute nonconforming uses under any applicable zoning
Legal Requirements. Each parcel of Owned Real Property and each parcel of
Leased Real Property (i) has access to and over public streets, or private
streets for which Seller has a valid right of ingress and egress, (ii) conforms
in its current use to all material zoning requirements without reliance upon a
variance issued by a local government or a classification of the parcel in
question as a nonconforming use, and (iii) conforms in its use to all material
restrictive covenants, if any, or other material encumbrances affecting all or
part of such parcel.
Section 5.5 Franchises, Licenses, and Contracts. Except as
described on Exhibit 2.1(e), Seller has delivered to Buyer true and complete
copies of each of the Franchises, Licenses, and Contracts. Except for the
Franchises, Licenses, and Contracts, and Agreements included in the Excluded
Assets, Seller is not bound or affected by any other Agreement which relates to
the System. To Seller's knowledge, each of the Franchises, Licenses and
Contracts is in full force and effect and is valid, binding and enforceable in
accordance with its terms. Except as described in Exhibit 5.5, there has not
occurred any default by Seller nor, to the knowledge of Seller, any Person
other than Seller, under any of the Franchises, Licenses or Contracts. Except
as set forth in Exhibit 5.5, Seller has received no notice of any intention by
any party to any Franchise, License or Contract (i) to terminate or amend the
terms thereof, (ii) to refuse to renew the same upon expiration of its term, or
(iii) to renew the same upon expiration only on terms and conditions which are
more materially onerous than the current terms thereof.
Section 5.6 Employee Benefits. Neither Seller nor any Employee
Benefit Plan or Multiemployer Plan (as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained by Seller or to
which Seller has or has had the obligation to contribute is in violation of the
provisions of ERISA; no reportable event, within the meaning of Title IV of
ERISA, has occurred and is continuing with respect to any such Employee Benefit
Plan or Multiemployer Plan; and no prohibited transaction, within the meaning
of Title I of ERISA, has occurred with respect to any such Employee Benefit
Plan or Multiemployer Plan.
13
<PAGE> 19
Section 5.7 Litigation. Except as set forth in Exhibit 5.7,
there is no Litigation pending or, to Seller's knowledge, threatened, against
Seller which will adversely affect the financial condition or operations of the
System or the ability of Seller to perform its obligations under this
Agreement, or which seeks or could result in the modification, revocation,
termination, suspension, or other limitation of any of the Franchises, Licenses
or Contracts. In particular, except as set forth in Exhibit 5.7 but without
limiting the generality of the foregoing, there are no applications, complaints
or proceedings pending or, to the best of Seller's knowledge, threatened (i)
before any Governmental Authority relating to the business or operations of the
System, (ii) before any federal or state agency involving charges of illegal
discrimination under any federal or state employment laws or regulations, or
(iii) before any federal, state or local agency relating to any zoning laws or
regulations. Except as set forth in Exhibit 5.7, neither Seller, the Assets,
nor the System are (i) subject to any continuing court or administrative order,
writ, injunction or decree applicable specifically to any of the Assets or the
System or in default with respect to any such order, writ, injunction or
decree. Seller knows of no basis for any such action, proceeding or
investigation.
Section 5.8 Tax Returns; Other Reports. Seller has filed all
federal, state, local, and foreign tax returns and other tax reports relating
to the System that are required to be filed, and has timely paid all Taxes
shown thereon to be due and payable. Seller has received no notice of
deficiency or assessment of proposed deficiency or assessment from any taxing
Governmental Authority pertaining to the System. All Taxes with respect to
Seller, the Assets, or the business or operation of the System that are due and
payable have been paid. Seller has provided Buyer with true and complete
copies of Seller's state and local tax returns filed with respect to Taxes on
the Owned and Leased Real Property and tangible personal property relating to
the System for all time periods beginning after December 31, 1991.
Section 5.9 Compliance with Legal Requirements. Seller has
complied and is in compliance in all material respects with all Legal
Requirements applicable to the operation of the System, including but not
limited to the Communications Act, the Copyright Act, the Occupational Safety
and Health Act, and rules and regulations promulgated thereunder; provided,
however, that to the knowledge of Seller, Seller has complied and is in
compliance in all material respects with the Cable Act of 1992, and rules and
regulations promulgated thereunder. Seller has not received notice from the
FCC of any violation of its rules and regulations insofar as they apply to the
System.
14
<PAGE> 20
Section 5.10 System Information. Exhibit 5.10 sets forth a
materially true and accurate description of the following information:
(i) the number of miles of plant that will be
included in the Assets as of Closing;
(ii) the number of Individual Subscribers as of
December 30, 1994;
(iii) a description of basic and optional or tier
services available from the System and the rates charged by Seller for each;
(iv) the stations and signals carried by the System
and the channel position of each such signal and station;
(v) the MHz capacity of the System; and
(vi) the channel capacity of the System.
Notwithstanding any other provision of this Agreement, the representations and
warranties in Section 5.10(i), (v) and (vi) shall survive for 6 months after
the date of Closing. The representations and warranties in Section 5.10(ii),
(iii) and (iv) shall not survive Closing.
Section 5.11 Environmental.
(a) To Seller's knowledge, none of the Owned Real
Property or Leased 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 on or in connection with the Owned Real
Property or the Leased Real Property.
(b) To Seller's knowledge, except as described on Exhibit
5.11, no surface impoundments or underground storage tanks are located in or on
the Owned or Leased Real Property.
(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 Owned Real Property or
the Leased Real Property, which could reasonably be expected to prevent
compliance by Seller, the Owned Real Property or Leased Real Property 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
15
<PAGE> 21
1980 (42 U.S.C.A. Sections 9601 et seq.) ("CERCLA") as amended, and rules and
regulations promulgated thereunder.
Section 5.12 Financial and Operational Information. Seller has
delivered to Buyer an unaudited trial balance of the System as of December 31,
1994 and unaudited statements of profit and loss of the System for the twelve-
month period ended December 31, 1994, as well as other operational information
relating to the System. The statements of profit and loss are prepared in
accordance with generally accepted accounting principles, and present fairly
the results of operations of the System for the periods indicated. The
unaudited trial balance and operational information were prepared in the
ordinary course of business.
Section 5.13 No Adverse Change. 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.
Section 5.14 Taxpayer Identification Number. Seller's U.S.
Taxpayer Identification Number is as set forth in the introductory paragraph of
this Agreement.
Section 5.15 Franchise Matters. To the knowledge of Seller and
except as described on Exhibit 5.5, other than the Franchises and the Licenses,
Seller requires no franchise, license or permit from any Governmental Authority
to enable it to operate the System as currently operated. Seller has not
received from any Governmental Authority a notice of default under any
Franchise which would require it (in order to preserve its right to assert that
a Governmental Authority has waived a default) to provide written notice to a
Governmental Authority of its failure or inability to cure a default under such
Franchise. Seller has filed with the appropriate franchising Governmental
Authorities all appropriate requests for renewal under the Communications Act
within 30 to 36 months prior to the expiration of each of the Franchises. All
required reports of Seller to any of the franchising authorities or the FCC are
materially true and correct and have been duly filed. To Seller's knowledge,
the System is the only franchised cable television system operating in the
geographic areas served by the System and no franchise other than the
Franchises has been granted for such areas.
16
<PAGE> 22
Section 5.16 FCC and Copyright Compliance.
(a) Seller is presently permitted under all applicable
FCC rules, regulations and orders to distribute the signals and to utilize all
carrier frequencies generated by the operations of the System, and is licensed
to operate all the facilities required by law to be licensed, including any
business radio and any cable television relay service system, being operated as
part of the System. Other than requests for network nonduplication, sports
blackout and syndex protection and notices of election of must-carry status and
retransmission consents or other communications made pursuant to the Cable Act
of 1992, no written requests or notices or demands (written or oral) have been
received by Seller during one year preceding the date of this Agreement from
the FCC, any local or other television station or system or from any
governmental authority challenging or questioning the right of Seller's
operation of the System, or requesting signal carriage or challenging the right
of Seller to carry or deliver any signal. Seller's operation of the System and
of any FCC-licensed or registered facility used in conjunction with Seller's
operation of the System, is in compliance in all material respects with the
FCC's rules and regulations and the provisions of the Communications Act.
(b) Seller has conducted all such system
proof-of-performance tests, microwave tests and such CLI-related tests as are
required to be conducted under FCC regulations with respect to the System.
Seller has (i) maintained appropriate log books and other recordkeeping which
accurately and completely reflect all results required to be shown thereon;
(ii) to the extent required by the rules and regulations of the FCC, corrected
any radiation leakage of the System required to be corrected in connection with
Seller's monitoring obligations under the rules and regulations of the FCC; and
(iii) otherwise complied in all material respects with all applicable CLI rules
and regulations. Seller has filed all required FCC notifications for the
operation of the System in all necessary aeronautical frequency bands.
(c) Seller has deposited with the United States Copyright
Office all statements of account and other documents and instruments, and paid
all royalties, supplemental royalties, fees and other sums to the United States
Copyright Office under the Copyright Act with respect to the business and
operations of the System as are required to obtain, hold and maintain the
compulsory license for cable television systems prescribed in Section 111 of
the Copyright Act. Seller and the System are in compliance with the Copyright
Act and the rules and regulations of the Copyright Office promulgated
thereunder, except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the System. Seller has,
under applicable law or in accordance with the programming agreements relating
to the programs carried by the System, the
17
<PAGE> 23
legal right and authority to carry the signals and the carriage, transmission
or use of the signals has not subjected, and does not subject, the System or
Seller to any suits or actions, including suits or actions for copyright
infringement.
(d) All required FAA no hazard determinations have been
obtained with respect to the construction and/or alteration of towers used in
connection with the operation of the System. The towers have been marked and
lit, where required, in compliance in all material respects with applicable FCC
and FAA rules.
(e) To the knowledge of Seller, there is no inquiry,
claim, action or demand pending before the United States Copyright Office or
from any other party which questions the copyright filings or payments made by
Seller with respect to the System with respect to which Buyer will incur any
Losses.
Section 5.17 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
Exhibit 5.17. 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 Exhibit 5.17, 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.
Section 5.18 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 "Warner," "Time
Warner," 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.
Section 5.19 Accounts Receivable. Seller's accounts receivable
are actual and bona fide receivables representing obligations for the total
dollar amount thereof shown on the books of the Seller which resulted from the
regular course of the Seller's business, and are fully collectible in
accordance with their terms, subject to no offset or reduction of any nature
except for a reserve for uncollectible accounts consistent with the reserve
established by Seller in its most recent trial balance delivered to Buyer in
accordance with Section 5.12.
18
<PAGE> 24
Section 5.20 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.
Section 5.21 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.
Section 5.22 Multi-Employer Pension Plan. The Assets will not be
subject to any withdrawal liability under the Multi-Employer Pension Plan
Amendment Act of 1980 as a result of the consummation of the transactions
contemplated under this Agreement.
Section 5.23 Accuracy of Billing Records. The billing reports and
aging reports provided to Buyer by Seller in connection with this Agreement are
accurate and complete in all material respects.
ARTICLE 6.
COVENANTS
Section 6.1 Certain Affirmative Covenants of Seller. Except as
Buyer may otherwise consent in writing, between the date of this Agreement and
Closing Seller shall:
(a) (i) operate the System in the ordinary course of
business and in accordance with past practices, (ii) maintain the tangible
Assets in their current condition and repair, ordinary wear excepted, (iii)
perform all of its obligations under all of the Franchises, Licenses and
Contracts without material breach or default, and (iv) operate the System in
material compliance with applicable Legal Requirements, and to its knowledge,
with the Cable Act of 1992;
(b) give to Buyer and its counsel, accountants, and other
representatives, access during normal business hours to the System, the Owned
and Leased Real Property, the other tangible Assets and Seller's books and
records relating to the System;
(c) as soon as practicable after the date of this
Agreement make all filings, and exercise commercially-reasonable efforts to
obtain in writing as promptly as practicable all approvals, authorizations and
consents described on Exhibit 5.3, and deliver to Buyer copies thereof promptly
upon receiving them;
19
<PAGE> 25
(d) promptly deliver to Buyer copies of any reports with
respect to the operation of the System regularly prepared by Seller at any time
from the date hereof until Closing;
(e) promptly inform Buyer in writing of any material
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 information by
Seller to Buyer be deemed a waiver by Buyer of, the breach of any
representation or warranty of Seller contained in this Agreement;
(f) continue to carry and maintain in full force and
effect its existing casualty and liability insurance through and including the
Closing Date;
(g) terminate the employment of all employees of Seller
working for the System; and
(h) comply with all of Seller's obligations under the
provisions of the NLRA and other applicable state and federal laws.
Section 6.2 Certain Negative Covenants of Seller. Between the
date hereof and Closing, Seller shall not solicit or participate in
negotiations with (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.
Additionally, except as Buyer may otherwise consent in writing, which consent
Buyer may withhold in its sole discretion, or as contemplated by this
Agreement, between the date of this Agreement and Closing Seller shall not (a)
modify, terminate, renew, suspend, or abrogate any Franchise, License or
Contract other than in the ordinary course of business, or (b) enter into any
transaction or permit the taking of any action that would result in any of
Seller's representations and warranties contained in this Agreement not being
true and correct when made or at Closing; provided, however, that with respect
to clause (a) above, all such modified, renewed, or new Licenses or Contracts
shall not involve either aggregate liabilities exceeding $1,000, or any
material non-monetary obligation.
Section 6.3 Certain Covenants of Buyer.
(a) Except as Seller may otherwise consent in writing, Buyer
shall, as soon as practicable, make all filings, and exercise
commercially-reasonable efforts to obtain in writing as promptly as practicable
all approvals, authorizations and
20
<PAGE> 26
consents, described on Exhibit 4.3, and deliver to Seller copies thereof.
(b) Buyer may offer employment to any or all of the
employees of Seller who primarily perform services with respect to the
operation of the System as of the Closing Date. Not later than March 1, 1995,
Buyer shall deliver to Seller a written notice containing the names, if any, of
employees of the System whom Buyer intends to hire on the Closing Date. Not
later than April 1, 1995, Buyer shall notify those employees whom Buyer intends
to hire on the Closing Date; the form and manner of such notification shall be
reasonably satisfactory to, and approved in advanced by, Seller and shall
specify the terms of employment, including compensation and all benefits
relating thereto.
Section 6.4 Title Insurance. Seller will reasonably cooperate
with Buyer if Buyer elects to obtain title insurance policies on parcels of
Owned Real Property or Leased 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.
Section 6.5 Confidentiality. Any non-public information that
either party (the "Recipient Party") may obtain from the other (the "Disclosing
Party") in connection with this Agreement with respect to Disclosing Party or
the System shall be confidential and, unless and until Closing shall occur,
Recipient Party shall not disclose any such information to any third party
(other than its directors, officers, partners and employees, and
representatives of its advisers and lenders whose knowledge thereof is
necessary in order to facilitate the consummation of the transactions
contemplated hereby) or use such information to the detriment of Disclosing
Party; provided that (i) Recipient Party may use and disclose any such
information once it has been publicly disclosed (other than by Recipient Party
in breach of its obligations under this Section) or which rightfully has come
into the possession of Recipient Party (other than from Disclosing Party), and
(ii) to the extent that Recipient Party may become compelled by Legal
Requirements to disclose any of such information, Recipient Party may disclose
such information if it shall have used all reasonable efforts, and shall have
afforded Disclosing Party the opportunity, to obtain an appropriate protective
order, or other satisfactory assurance of confidential treatment, for the
information compelled to be disclosed. In the event of termination of this
Agreement, Recipient Party shall use all reasonable efforts to cause to be
delivered to Disclosing Party, and retain no copies of, any documents, work
papers and other materials obtained by Recipient Party or on its behalf from
Disclosing Party, whether so obtained before or after the execution hereof.
21
<PAGE> 27
Section 6.6 Supplements to Exhibits. Each of Seller and Buyer
shall, from time to time prior to Closing, supplement the Exhibits to this
Agreement with additional information that, if existing or known to it on the
date of this Agreement, would have been required to be included in one or more
Exhibits to this Agreement. For purposes of determining the satisfaction of
any of the conditions to the obligations of Buyer and Seller in Sections 7.1
and 7.2 and the liability of Seller or of Buyer following Closing for breaches
of its representations and warranties under this Agreement, the Exhibits to
this Agreement shall be deemed to include only (a) the information contained
therein on the date of this Agreement and (b) information added to the Exhibits
by written supplements to this Agreement delivered prior to Closing by the
party making such amendment that (i) are accepted in writing by the other party
or (ii) reflect actions permitted by this Agreement to be taken prior to
Closing.
Section 6.7 Employee Benefit Matters.
(a) Seller shall assume full responsibility and liability
for offering and providing "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 Time.
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. Seller shall hold Buyer and any entity
required to be combined with the Buyer under Section 414 of the Internal
Revenue Code ("Affected Parties") harmless from and fully indemnify such
Affected Parties against any losses incurred or suffered by such Affected
Parties which arise under a group health plan sponsored, maintained or
contributed to by Seller as a result of any action or omission of Seller prior
to the Closing Time or because Buyer is deemed to be a successor employer to
Seller.
(b) Seller acknowledges that Buyer has no obligation to
employ any of Seller's current or prior employees and 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, and shall indemnify
Buyer and hold Buyer harmless from any losses thereunder.
22
<PAGE> 28
ARTICLE 7.
CONDITIONS PRECEDENT
Section 7.1 Conditions to Buyer's Obligations. The obligations
of Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, which may be waived by Buyer:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller in this Agreement shall be true and
accurate in all material respects at and as of Closing with the same effect as
if made at and as of Closing.
(b) Performance Of Agreements. Seller shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to be performed
and complied with by it at or before Closing.
(c) Officer's Certificate. Buyer shall have received a
certificate executed by an executive officer of a general partner of Seller,
dated as of Closing, reasonably satisfactory in form and substance to Buyer,
certifying that the conditions specified in paragraphs 7.1(a) and (b) have been
satisfied.
(d) Legal Proceedings. There shall be no Legal
Requirement, and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or arising
therefrom, which enjoins, restrains, makes illegal, or prohibits consummation
of the transactions contemplated by this Agreement, and there shall be no
Litigation pending or threatened seeking, or which if successful would have the
effect of, any of the foregoing.
(e) HSR Act Compliance. All waiting periods under the
HSR Act applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Seller's Counsel Opinion. Buyer shall have received
an opinion of Linda Weiler, counsel to Seller, dated as of Closing, in the form
of Exhibit 7.1(f).
(g) Seller's FCC Counsel Opinion. Buyer shall have
received an opinion of Bryan Cave special communications counsel to Seller,
dated as of Closing, in the form of Exhibit 7.1(g).
(h) Renewal of Franchises. Each of the Franchises
identified on Exhibit 3.3 shall have been renewed or extended such that each
Franchise at Closing shall have a remaining term of at least four years, on
terms not materially more burdensome than the current terms thereof (other than
matters relating to
23
<PAGE> 29
the Cable Act of 1992 that have become, or are expected to become effective),
or otherwise reasonably acceptable to Buyer.
(i) Consents. Buyer shall have received evidence, in
form and substance reasonably satisfactory to it, that there have been obtained
all consents, approvals and authorizations identified on Exhibit 5.3 as
Material Consents; provided, however, that it shall not be a condition to
Buyer's obligations that the consents of franchising authorities include
consent to transfers of partnership interests of Buyer, or the further transfer
of Franchises, subsequent to Closing.
(j) Subscribers. At Closing, the System and the
Fayetteville System collectively shall serve at least 33,400 Individual
Subscribers and Subscriber Equivalents.
(k) Certain Contracts. Each of the third parties to the
Contracts designated as Material Contracts on Exhibit 2.1(e) shall:
(1) either (i) have given its consent, in form
and substance reasonably satisfactory to Buyer, to the transfer of such
Contract to Buyer, or (ii) not have conditioned its consent, or indicated its
intention to condition its consent, upon the making of modifications to such
Contract rendering its terms materially more burdensome to Buyer; and
(2) not have disturbed or revoked, or indicated
its intention to disturb or revoke, Seller's or Buyer's enjoyment of the rights
and privileges enjoyed or exercised by Seller under such Contract.
(l) Noncompetition Agreement. Seller shall have
delivered to Buyer the Noncompetition Agreement.
(m) Due Diligence Review. Buyer's due diligence review
of the business, operations and financial statements of the System shall be
reasonably satisfactory to Buyer, provided that Buyer's satisfaction shall only
be withheld in the event that issues are found which would result in a
substantial negative impact on the value of the System.
(n) Fayetteville Transaction Closing. Simultaneously
with, or immediately preceding or following the Closing, the Fayetteville
Transaction closing shall take place.
Section 7.2 Conditions to Seller's Obligations. The obligations
of Seller to consummate the transactions contemplated by this Agreement shall
be subject to the following conditions, which may be waived by Seller:
24
<PAGE> 30
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer in this Agreement shall be true and
accurate in all material respects at and as of Closing with the same effect as
if made at and as of Closing.
(b) Performance of Agreements. Buyer shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to which it is a
party to be performed and complied with by it at or before Closing.
(c) Officer's Certificate. Seller shall have received a
certificate executed by an executive officer of the general partner of Buyer,
dated as of Closing, reasonably satisfactory in form and substance to Seller,
certifying that the conditions specified in paragraphs 7.2(a) and (b) have been
satisfied.
(d) Legal Proceedings. There shall be no Legal
Requirement, and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or arising
therefrom, which enjoins, restrains, makes illegal, or prohibits consummation
of the transactions contemplated hereby, and there shall be no Litigation
pending or threatened seeking or which if successful would have the effect of,
any of the foregoing.
(e) HSR Act Compliance. All waiting periods under the
HSR Act applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Buyer's Counsel Opinion. Seller shall have received
an opinion of Jackson & Walker, L.L.P., counsel to Buyer, dated as of Closing,
in the form of Exhibit 7.2(f).
(g) Consents. Seller shall have received (i) evidence,
in form and substance reasonably satisfactory to it, that there have been
obtained all consents, approvals and authorizations identified on Exhibit 5.3
as Material Consents, and (ii) releases from all liabilities and obligations
attributable to periods after Closing under the Contracts.
(h) Tax Certificate. The FCC shall have issued the Tax
Certificate.
(i) Fayetteville Transaction Closing. Simultaneously
with, or immediately preceding or following the Closing, the Fayetteville
Transaction closing shall take place.
25
<PAGE> 31
ARTICLE 8.
CLOSING
Section 8.1 Closing; Time and Place. The closing of the
transactions contemplated by this Agreement ("Closing") shall take place within
twenty business days after the date on which all of the conditions to Closing
have been satisfied, on a date and at a time and location mutually determined
by Seller and Buyer but in no event later than May 15, 1995 (the "Outside
Closing Date"). Seller and Buyer shall, without modifying or expanding their
obligations hereunder, exercise their diligent, good faith efforts to cause
Closing to occur as quickly as reasonably possible.
Section 8.2 Seller's Obligations. At Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) Bill of Sale, Assignment and Assumption. Executed
counterparts of a Bill of Sale, Assignment and Assumption relating to the
Assets in the form of Exhibit 8.2(a) (the "Bill of Sale");
(b) Noncompetition Agreement. The executed
Noncompetition Agreement;
(c) Deeds. Special warranty deeds conveying to Buyer the
Owned Real Property, except for the Subject Property, which shall be conveyed
by Quitclaim deed;
(d) Officer's Certificate. The certificate described in
paragraph 7.1(c);
(e) Evidence of Seller Actions. Evidence reasonably
satisfactory to Buyer that Seller has taken all actions, if any, necessary to
authorize the execution of the Agreement and the consummation of the
transactions contemplated thereby; and
(f) Seller's Counsel Opinion. Seller's Counsel Opinion;
(g) Seller's FCC Counsel Opinion. Seller's FCC Counsel
Opinion;
(h) Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer, and
separate bills of sale therefor, if required by the Legal Requirements of the
jurisdiction in which such vehicles are titled;
(i) Assignment of Leases. An assignment of each lease
related to property comprising a portion of the Assets under which Seller is
lessee or lessor assigning the interest of Seller
26
<PAGE> 32
therein to Buyer in form and substance reasonably satisfactory to counsel for
Buyer;
(j) Conditions Precedent. To the extent not described
above, all items set forth in Section 7.1; and
(k) Other. Such other documents and instruments as shall
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
Section 8.3 Buyer's Obligations. At Closing Buyer shall deliver
or cause to be delivered to Seller the following:
(a) Purchase Price. The Purchase Price, adjusted to
reflect the estimated Current Items Amount.
(b) Bill of Sale. Executed counterparts of the Bill of
Sale;
(c) Officer's Certificate. The certificate described in
paragraph 7.2(c);
(d) Evidence of Partner Actions. Certified resolutions
of the Partners of Buyer, or other evidence reasonably satisfactory to Seller,
that Buyer has taken all partnership action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(e) Buyer's Counsel Opinion. Buyer's Counsel Opinion;
(f) Conditions Precedent. To the extent not described
above, all items set forth in Section 7.2; and
(g) Other. Such other documents and instruments as shall
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
ARTICLE 9.
TERMINATION
Section 9.1 Termination Events. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of the Buyer and
Seller;
(b) by either Buyer or Seller upon written notice to the
other, if any conditions to its obligations set forth in Sections 7.1 and 7.2,
respectively, shall not have been satisfied
27
<PAGE> 33
on or before the Outside Closing Date, for any reason other than a breach or
default by such party of its respective covenants, agreements, or other
obligations hereunder, or any of its representations herein not being true and
accurate when made or when otherwise required by this Agreement to be true and
accurate; or
(c) as otherwise provided herein.
Section 9.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 9.1, all obligations of the parties hereunder
shall terminate, except for the obligations set forth in Sections 6.5, 9.2,
10.2, 10.3, 12.1, 12.2, and 12.9.
ARTICLE 10.
REMEDIES
Section 10.1 Specific Performance. Seller acknowledges that, if
it is in material breach or default of its covenants, agreements or obligations
hereunder that prevents satisfaction of the condition stated in paragraph
7.1(b), Buyer would be irreparably damaged by such breach or default and that,
in addition to the other remedies that may be available at law or in equity,
Buyer shall be entitled to specific performance of this Agreement and
injunctive relief. All rights and remedies under this Agreement are cumulative
of, and not exclusive of, any rights or remedies otherwise available, and the
exercise of any of such rights or remedies shall not bar the exercise of any
other rights or remedies.
Section 10.2 Liquidated Damages. If Buyer is in material breach
or default of its covenants, agreements and obligations hereunder, Seller may,
at its option and in conjunction with its termination of this Agreement
pursuant to paragraph 9.1(b), retain the Earnest Money Deposit and all interest
earned thereon as liquidated damages for such breach or default. Seller and
Buyer acknowledge that Seller's actual damages in the event of such a breach or
default would be difficult or impossible to ascertain, and that the Earnest
Money Deposit and all interest earned thereon represent a fair and reasonable
approximation of such damages and does not constitute a penalty.
Section 10.3 Attorneys' Fees. In the event of any Litigation
between Seller and Buyer with respect to this Agreement or the transactions
contemplated hereby, the party prevailing under such Litigation shall be
entitled, as part of the Judgment rendered in such Litigation, to recover from
the other party its reasonable attorneys' fees and costs and expenses in such
litigation.
28
<PAGE> 34
ARTICLE 11.
INDEMNIFICATION
Section 11.1 Indemnification by Seller. From and after Closing,
Seller shall indemnify and hold harmless Buyer from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in
this Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate;
(b) any breach or default by Seller in the performance of
its covenants, agreements, or obligations in this Agreement;
(c) any liabilities relating to employees of Seller
working for the System asserted under any federal, state or local law or
regulation or otherwise pertaining to any labor or employment matter arising
out of actions or events occurring prior to Closing; and
(d) all liabilities and obligations arising out of or
relating to the operation of the System prior to Closing.
Section 11.2 Indemnification by Buyer. From and after Closing,
Buyer shall indemnify and hold harmless Seller from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in
this Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate;
(b) any breach or default by Buyer in the performance of
its covenants, agreements, or obligations in this Agreement;
(c) the Assumed Obligations and Liabilities;
(d) any liabilities relating to employees hired by Buyer
after the Closing or persons not hired by Buyer after the Closing asserted
under any federal, state or local law or regulation or otherwise pertaining to
any labor or employment matter arising out of actions or events occurring
subsequent to Closing; and
(e) all liabilities and obligations arising out of or
relating to the operation of the System subsequent to Closing.
Section 11.3 Indemnified Third Party Claim.
(a) If any Person not a party to this Agreement shall
make any demand or claim or file or threaten to file or continue any Litigation
with respect to which Buyer or Seller is entitled to indemnification pursuant
to Sections 11.1 or 11.2, respective-
29
<PAGE> 35
ly, then within ten days after notice (the "Notice") by the party entitled to
such indemnification (the "Indemnitee") to the other (the "Indemnitor") of such
demand, claim or Litigation, the Indemnitor shall have the option, at its sole
cost and expense, to retain counsel for the Indemnitee (which counsel shall be
reasonably satisfactory to the Indemnitee), to defend any such Litigation.
Thereafter, the Indemnitee shall be permitted to participate in such defense at
its own expense, provided that, if the named parties to any such Litigation
(including any impleaded parties) include both the Indemnitor and the
Indemnitee or, if the Indemnitor proposes that the same counsel represent both
the Indemnitee and the Indemnitor and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them, then the Indemnitee shall have the right to retain its
own counsel at the cost and expense of the Indemnitor, unless the Indemnitor
shall acknowledge in writing its indemnity obligation, in which event the
retention by Indemnitee of its own counsel shall be at its cost and expense.
If the Indemnitor shall fail to respond within ten days after receipt of the
Notice, the Indemnitee may retain counsel and conduct the defense of such
Litigation as it may in its sole discretion deem proper, at the sole cost and
expense of the Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to
the Indemnitor and provide access to its books, records and personnel as the
Indemnitor reasonably requests in connection with the investigation or defense
of the indemnified Losses. The Indemnitor shall promptly upon receipt of
reasonable supporting documentation reimburse the Indemnitee for out-of-pocket
costs and expenses incurred by the latter in providing the requested
assistance.
(c) With regard to Litigation of third parties for which
Buyer or Seller is entitled to indemnification under Sections 11.1 or 11.4,
such indemnification shall be paid by the indemnifying party upon: (i) the
entry of a Judgment against the Indemnitee and the expiration of any applicable
appeal period; (ii) the entry of an unappealable Judgment or final appellate
Judgment against the Indemnitee; or (iii) a settlement with the consent of the
Indemnitor, which consent shall not be unreasonably withheld, provided that no
such consent need be obtained if the Indemnitor fails to respond to the Notice
as provided in paragraph 11.3(a). Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnitee shall be reimbursed on a current basis by the
Indemnitor if such expenses are a liability of the Indemnitor.
30
<PAGE> 36
Section 11.4 Determination of Indemnification Amounts and Related
Matters.
(a) Seller's liability under Section 11.1 shall be
limited to Losses exceeding in the aggregate $250,000 (the "Deductible"), and
Seller shall have no liability under Section 11.1 for Losses constituting the
Deductible. Seller's liability under Section 11.1 shall be limited to Losses
not exceeding in the aggregate the amount of the Purchase Price.
(b) In calculating amounts payable to an Indemnitee
hereunder, the amount of the indemnified Losses shall be reduced by the amount
of any insurance proceeds paid to the Indemnitee for such Losses.
(c) Subject to the provisions of Section 11.3, all
amounts payable by the Indemnitor to the Indemnitee in respect of any Losses
under Sections 11.1 or 11.2 shall be payable by the Indemnitor as incurred by
the Indemnitee.
Section 11.5 Time and Manner of Certain Claims. The
representations and warranties of Buyer and Seller in this Agreement shall
survive Closing for a period of twenty-four months (the "Survival Period"),
except that such Survival Period shall be the respective, applicable statute of
limitation relating to any claim for Losses arising in connection with Seller's
representations and warranties with respect to Taxes or copyright liabilities,
and fifteen years in the case of any claim for Losses arising with respect to
Seller's representation and warranty stated in Section 5.11. Neither Seller
nor Buyer shall have any liability under paragraphs 11.1(a) or 11.2(a),
respectively, unless a claim for Losses for which indemnification is sought
thereunder is asserted by the party seeking indemnification by written notice
to the party from whom indemnification is sought within the Survival Period.
Section 11.6 Other Indemnification.
(a) The provisions of Sections 11.3 and 11.4 shall be
applicable to any claim for indemnification made under any other provision of
this Agreement, and all references in Sections 11.3 and 11.4 to Sections 11.1
and 11.2 shall be deemed to be references to such other provisions of this
Agreement.
(b) Seller shall indemnify and hold harmless Buyer from
and against any and all direct Losses, including relocation costs, up to a
maximum of $50,000, arising out of or resulting from third party claims made
with respect to the ownership of the Subject Property which are brought within
two years of the date of Closing. The Deductible shall not apply to Losses
incurred by Buyer in connection with this Section 11.6(b).
31
<PAGE> 37
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.1 Expenses. Each of the parties shall pay its own
expenses and the fees and expenses of its counsel, accountants, and other
experts in connection with this Agreement.
Section 12.2 Brokerage. Seller shall indemnify and hold Buyer
harmless from and against any and all Losses arising from any employment by it
of, or services rendered to it by, any finder, broker, agency, or other
intermediary, in connection with the transactions contemplated hereby, or any
allegation of any such employment or services, and Buyer shall indemnify and
hold Seller harmless from and against any and all Losses arising from any
employment by it of, or services rendered to it by, any finder, broker, agency,
or other intermediary, in connection with the transactions contemplated hereby,
or any allegation of any such employment or services.
Section 12.3 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be
deemed to constitute a waiver by the party taking the action of compliance with
any representation, warranty, covenant or agreement contained herein or in any
Transaction Document. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement shall not operate or be construed
as a waiver of any other condition or subsequent breach. The waiver by any
party of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
Section 12.4 Notices. All notices, requests, demands,
applications, services of process, and other communications which are required
to be or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if sent by facsimile transmission, delivered by
overnight or other courier service, or mailed, certified first class mail,
postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
To Seller: Time Warner Cable Ventures
330 First Stamford Place
Stamford, CT 06902-6732
Attn: Jeffrey D. Elberson
Telecopy: (203) 328-0691
32
<PAGE> 38
Copies: Holland & Hart
P.O. Box 8749
555 17th Street
Suite 2900
Denver, CO 80201-8749 (Mail)
80202 (Delivery)
Attn: Mary Ellen Scanlan, Esq.
Telecopy: (303) 295-8261
Buyer: Tele-Communications of Arkansas
Limited Partnership
3015 SSE Loop 323
P.O. Box 130489
Tyler, Texas 75713-0489
Attn: Robert McMillian
Fred R. Nichols
Telecopy: (903) 595-1929
Copies: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attn: James S. Ryan, III, Esq.
Telecopy: (214) 953-5822
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or by facsimile transmission, upon actual
receipt by the intended recipient, or (ii) if mailed, upon the earlier of five
days after deposit in the mail and the date of delivery as shown on the return
receipt therefor.
Section 12.5 Entire Agreement; Amendments. This Agreement
embodies the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect thereto. This Agreement may not be modified
orally, but only by an agreement in writing signed by the party or parties
against whom any waiver, change, amendment, modification, or discharge may be
sought to be enforced.
Section 12.6 Binding Effect; Benefits. This Agreement shall inure
to the benefit of and will be binding upon the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Neither Buyer nor Seller shall assign this Agreement or delegate any of its
duties hereunder to any other Person without the prior written consent of the
other. For purposes of this Section any change in control of Buyer or Seller
shall constitute an assignment of this Agreement.
Section 12.7 Headings, Schedules, and Exhibits. The section and
other headings contained in this Agreement are for
33
<PAGE> 39
reference purposes only and will not affect the meaning of interpretation of
this Agreement. Reference to Exhibits shall, unless otherwise indicated, refer
to the Exhibits attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.
Section 12.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together will be deemed to be one and the same
instrument.
Section 12.9 Publicity. Seller and Buyer shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements, and any oral or written statements to
Seller's employees concerning this Agreement and the transactions contemplated
hereby. Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which shall not be
unreasonably withheld or delayed; provided, however, that Seller or Buyer may
at any time make any announcement required by Legal Requirements so long as
such party, promptly upon learning of such requirement, notifies the other of
such requirement and consults with the other in good faith with respect to the
wording of such announcement.
Section 12.10 Governing Law. The validity, performance, and
enforcement of this Agreement and all transaction documents, unless expressly
provided to the contrary, shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law of such
state.
Section 12.11 Third Parties; Joint Ventures. This Agreement
constitutes an agreement solely among the parties hereto, and, except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person (including but not limited to any employee or
former employee of Seller) other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
Section 12.12 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement shall not
apply in any construction or interpretation of this Agreement.
34
<PAGE> 40
Section 12.13 Risk of Loss. The risk of any loss or damage to the
Assets resulting from fire, theft or any other casualty (except reasonable wear
and tear) shall be borne by Seller at all times prior to Closing. In the event
that any such loss or damage shall be sufficiently substantial so as to
preclude and prevent resumption of normal operations of any material portion of
the System within twenty days from the occurrence of the event resulting in
such loss or damage, Seller shall immediately notify Buyer in writing of its
inability to resume normal operations or to replace or restore the lost or
damaged property, and Buyer, at any time within ten days after receipt of such
notice, may elect by written notice to Seller either to (i) waive such defect
and proceed toward consummation of the transaction contemplated by this
Agreement in accordance with the terms thereof, or (ii) terminate this
Agreement. If Buyer elects to so terminate this Agreement, Buyer and Seller
shall stand fully released and discharged of any and all obligations hereunder.
If Buyer shall elect to consummate the transactions contemplated by this
Agreement notwithstanding such loss or damage and does so, there shall be no
diminution of the Purchase Price on account of such loss or damage but all
insurance proceeds payable as a result of the occurrence of the event resulting
in such loss or damage shall be delivered by Seller to Buyer, or the rights
thereto shall be assigned by Seller to Buyer if not yet paid over to Seller.
Buyer and Seller have executed this Agreement as of the date first
written above.
BUYER
TELE-COMMUNICATIONS OF ARKANSAS LIMITED
PARTNERSHIP
BY: MCMILLIAN HOLDING, L.P., ITS
GENERAL PARTNER
BY: MCMILLIAN, INC., ITS GENERAL
PARTNER
By:________________________________
Name:___________________________
Title:__________________________
35
<PAGE> 41
SELLER
TIME WARNER ENTERTAINMENT COMPANY, L.P.,
A DELAWARE LIMITED PARTNERSHIP, THROUGH
ITS DIVISION TIME WARNER CABLE VENTURES
By:_____________________________________
Jeffrey D. Elberson
Vice President
36
<PAGE> 1
EXHIBIT 10(L)
ASSET PURCHASE AGREEMENT
DATED JANUARY 20, 1995
BETWEEN
TELE-COMMUNICATIONS OF NORTHWEST ARKANSAS LIMITED PARTNERSHIP
AND
TIME WARNER ENTERTAINMENT COMPANY, L.P.,
THROUGH ITS DIVISION
TIME WARNER CABLE VENTURES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Covenant of Purchase and Sale; Assets . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Assumed Obligations and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.5 Rate Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.6 Current Items Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Current Items Amount Calculated . . . . . . . . . . . . . . . . . . . . . . . . . . 8
RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1 Earnest Money Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2 Tax Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Franchise Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6 Use of Names and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.7 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.8 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
BUYER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Organization of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.1 Organization and Qualification of Seller . . . . . . . . . . . . . . . . . . . . . 11
Section 5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.5 Franchises, Licenses, and Contracts . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.8 Tax Returns; Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.9 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.10 System Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.12 Financial and Operational Information . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.13 No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.14 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 5.15 Franchise Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.16 FCC and Copyright Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.17 Franchise and Pole Attachment Fees . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.18 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.19 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.20 Safe Harbor Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.21 Tax Exempt Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.22 Multi-Employer Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.23 Accuracy of Billing Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Certain Affirmative Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2 Certain Negative Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Certain Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.4 Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.6 Supplements to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.7 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.1 Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.2 Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . 24
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.1 Closing; Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.2 Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3 Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.1 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.2 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.2 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.3 Indemnified Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.4 Determination of Indemnification Amounts and Related Matters . . . . . . . . . . . 30
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 11.5 Time and Manner of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11.6 Other Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.2 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.3 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.5 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.6 Binding Effect; Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.7 Headings, Schedules, and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.11 Third Parties; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.13 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
</TABLE>
EXHIBITS
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
as of January 20, 1995, by and between Tele-Communications of Northwest
Arkansas Limited Partnership, a Delaware limited partnership ("Buyer"), whose
U.S. Taxpayer Identification Number is 75-2576015, and Time Warner
Entertainment Company, L.P., a Delaware limited partnership ("Seller"), whose
U.S. Taxpayer Identification Number is 13-3666692, through its division, Time
Warner Cable Ventures.
RECITALS
A. Seller owns and operates a cable television system which is
franchised or holds other operating authority and operates in and around
Fayetteville, Elkins, Farmington, Greenland, and unincorporated areas of
Washington County, Arkansas (the "System").
B. Seller is willing to convey to Buyer, and Buyer is willing to
purchase from Seller, certain of the tangible and intangible assets comprising
the System, upon the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth
herein, Buyer and Seller agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Agreement" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant,
right, or other instrument, document, obligation or agreement.
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in Section
2.3.
"Basic Cable" means the cable television services described as Basic
(channels 2-15) in Exhibit 5.10, paragraph 3.
<PAGE> 7
"Bill of Sale" has the meaning given in Section 8.2(a).
"Buyer's Counsel Opinion" has the meaning given in Section 7.2.
"Cable Act of 1992" means the Cable Television Consumer Protection and
Competition Act of 1992.
"CLI" means the Cumulative Leakage Index.
"Closing" has the meaning given in Section 8.1.
"Closing Time" means 12:01 A.M., central time, on the date of Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended and
the regulations thereunder, or any subsequent legislative enactment thereof, as
in effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" has the meaning given in Section 2.1.
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.6.
"Eligible Accounts Receivable" has the meaning given in Section 2.6.
"Employee Benefit Plan" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA to which either the Seller or any entity
related to Seller (under the terms of Sections 414 (b), (c), (m) or (o) of the
Code) contributes or which either of the Seller or any entity related to Seller
(under the terms of Sections 414 (b), (c), (m) or (o) of the Code) sponsors or
maintains, or by which Seller or any such entity is otherwise bound.
"ERISA" has the meaning given in Section 5.6.
"Escrow Agent" means NationsBank of Texas, N.A.
"Excluded Assets" has the meaning given in Section 2.2.
"FAA" means the Federal Aviation Administration.
"FCC" has the meaning given in Section 3.2.
2
<PAGE> 8
"Franchises" has the meaning given in Section 2.1.
"Governmental Authority" means the United States of America, any
state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitee" has the meaning given in Section 11.3.
"Individual Subscriber" means any subscriber of the System at the
System's regular monthly subscription rate for Basic Cable who has been a
subscriber for at least one full month, whose payment for service (including
installation fees, but exclusive of late charges) is not more than 60 days past
due from the first day of the period to which an outstanding bill relates and
who has become a subscriber only pursuant to customary marketing promotions
conducted in the ordinary course of business consistent with past practices.
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice or magistrate.
"Leased Real Property" has the meaning given in Section 2.1.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including Judgments and the
Franchises.
"Licenses" has the meaning given in Section 2.1.
"Lien" means any lien, mortgage, indenture, pledge, option, or
encumbrance.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other activity or procedure that could result in a
Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses, including, without limitation, reasonable counsel fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by the indemnification, provided for in Article 11 hereof, but
shall in no event include incidental or consequential damages.
"NLRA" means the National Labor Relations Act and all amendments
thereto and decisions thereunder.
3
<PAGE> 9
"Noncompetition Agreement" has the meaning given in Section 3.5.
"Owned Real Property" has the meaning given in Section 2.1.
"Person" means any natural person, Governmental Authority,
corporation, general or limited partnership, joint venture, trust, association,
limited liability company, or unincorporated entity of any kind.
"Purchase Price" has the meaning given in Section 2.4.
"Rate Adjustment Amount" has the meaning given in Section 2.5.
"Russellville System" means a cable television system owned and
operated by Seller which is franchised or holds other operating authority and
operates in and around Russellville, Booneville, Paris, Clarksville, Johnson
City, Pottsville, Pope County, and the unincorporated areas of Arkansas
counties in which the foregoing cities are located.
"Russellville Transaction" means the transaction contemplated under
that certain agreement of even date herewith between Tele-Communications of
Arkansas Limited Partnership ("TCALP") and Seller relating to the acquisition
by TCALP of the Russellville System.
"Seller's Counsel Opinion" has the meaning given in Section 7.1.
"Seller's FCC Counsel Opinion" has the meaning given in Section 7.1.
"Subscriber Equivalent" means an equivalent to an Individual
Subscriber, the number of Subscriber Equivalents served by the System being
equal, as of any date, to the quotient of (i) the aggregate revenues earned by
the System for Basic Cable and Tier Cable provided by the System during the
last month prior to Closing, from billings to residential multiple dwelling
units, other subscribers that are billed for such service on a bulk basis, and
single family households which pay less than the System's regular Basic Cable
monthly subscription rate or the System's regular Basic Cable plus Tier Cable
monthly subscription rate (as applicable), divided by (ii) the System's regular
monthly subscription rate for Basic Cable plus Tier Cable. For purposes of the
foregoing, aggregate revenues earned shall not include (i) passed-through
franchise fees and sales taxes, (ii) nonrecurring charges or credits and (iii)
billings to any bulk account or discounted family household (a) which has not
been a subscriber of the System for at least one month and paid at least one
month's payment in full, together with any applicable
4
<PAGE> 10
installation fee unless waived in the ordinary course of business, or (b) which
is 60 days or more in arrears in payment for services, as measured from the
first day of the month for which service was received.
"System" has the meaning given in Recital A.
"Tax Certificate" has the meaning given in Section 3.2.
"Taxes" means all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
"Tier Cable" means the cable television services described as Tier
(channels 16-42, 44 and 61) in Exhibit 5.10, paragraph 3.
"Union Contract" means that certain Agreement between Warner Cable
Communications Fayetteville, Arkansas and Communications Workers of America
dated August 31, 1992, effective September 1, 1992.
ARTICLE 2.
PURCHASE AND SALE
Section 2.1 Covenant of Purchase and Sale; Assets. Subject to
the terms and conditions set forth in this Agreement, at Closing Seller shall
convey, assign, and transfer to Buyer, and Buyer shall acquire from Seller, for
the Purchase Price, free and clear of all Liens (except Liens for Taxes not yet
due and payable), all right, title and interest of Seller in all of the assets
and properties, real and personal, tangible and intangible, used by Seller in
its operation of the System, including the following (the "Assets"):
(a) Tangible Personal Property. All tangible personal
property, including but not limited to towers, tower equipment, antennae,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, earth satellite receive stations and related equipment,
microwave equipment, converters, testing equipment, office equipment,
furniture, fixtures, supplies, inventory, and other physical assets, including
but not limited to the items described on Exhibit 2.1(a).
(b) Real Property. The interests in real property,
including all improvements thereon owned by Seller, described on Exhibit 2.1(b)
owned by Seller ("Owned Real Property") or leased by Seller ("Leased Real
Property").
5
<PAGE> 11
(c) Franchises. The franchises and similar
authorizations or permits described on Exhibit 2.1(c) (the "Franchises").
(d) Licenses. The intangible CATV channel distribution
rights, cable television relay service (CARS), domestic satellite receive only
(TVRO), business radio and other licenses, authorizations, or permits used in
the operations of the System, as described on Exhibit 2.1(d) (the "Licenses").
(e) Contracts. The leases, private easements or rights
of access, contractual rights to easements, pole attachment or joint line
agreements, underground conduit agreements, crossing agreements, bulk and
commercial service agreements, retransmission consent agreements and other
Agreements described on Exhibit 2.1(e) (the "Contracts").
(f) Accounts Receivable. All subscriber, trade and other
accounts receivable.
(g) Books and Records. All engineering records, files,
data, drawings, blueprints, schematics, reports, lists, plans and processes,
and all files of correspondence, lists, records, and reports concerning
subscribers and prospective subscribers of the System, signal and program
carriage, and dealings with Governmental Authorities, including but not limited
to all reports filed by or on behalf of Seller with the FCC with respect to the
System and statements of account filed by or on behalf of Seller with the U.S.
Copyright Office with respect to the System.
Section 2.2 Excluded Assets. Notwithstanding the provisions of
Section 2.1, the Assets shall not include the following, which shall be
retained by Seller (the "Excluded Assets"): (i) programming Agreements; (ii)
insurance policies and rights and claims thereunder; (iii) bonds, letters of
credit, surety instruments, and other similar items; (iv) cash and cash
equivalents; (v) Seller's trademarks, trade names, service marks, service
names, logos, and similar proprietary rights; and (vi) any other items
described in Exhibit 2.2.
Section 2.3 Assumed Obligations and Liabilities. At Closing,
Buyer shall assume, pay, discharge, and perform the following (the "Assumed
Obligations and Liabilities"): (i) those obligations and liabilities
attributable to periods after the Closing Time under or with respect to the
Assets; (ii) other obligations and liabilities of Seller to the extent that
there shall be an adjustment in favor of Buyer with respect thereto pursuant to
Section 2.6; and (iii) all obligations and liabilities arising out of Buyer's
ownership of the Assets or operation of the System after Closing. All
obligations and liabilities arising out of or relating to the Assets or the
System and all other liabilities and obligations of Seller other
6
<PAGE> 12
than the Assumed Obligations and Liabilities shall remain and be the
obligations and liabilities solely of Seller.
Section 2.4 Purchase Price. The consideration for the Assets and
the Noncompetition Covenant to be paid by Buyer pursuant to this Agreement
shall be $38,160,000 (the "Purchase Price"). The Purchase Price shall be
payable to Seller at Closing by wire transfer of immediately available funds.
Section 2.5 Rate Adjustment Amount. The Purchase Price shall be
reduced or increased by an amount, if any, (the "Rate Adjustment Amount") to be
agreed upon in good faith by the parties in the event that after the date
hereof and before the date of Closing the FCC has taken final action amending
the existing regulations, or publishes new regulations in final form, under the
Cable Act of 1992 which would result in a required reduction or increase of the
basic subscriber rate or any of the optional tier service rates of the System
by a specific date which falls within six months after the date of Closing.
Section 2.6 Current Items Amount. In addition to the payment by
Buyer of the Purchase Price, Buyer or Seller, as appropriate, shall pay to the
other the net amount of the adjustments and prorations effected pursuant to
paragraphs 2.6(a), (b), and (c) (the "Current Items Amount").
(a) Eligible Accounts Receivable. Seller shall be
entitled to an amount equal to 95% of the face amount of all Eligible Accounts
Receivable that are sixty or fewer days past due as of the Closing Time.
"Eligible Accounts Receivable" shall mean accounts receivable resulting from
Seller's provision of cable television service prior to the Closing Time to
System subscribers that are active subscribers as of the Closing Time. For
purposes of making "past due" calculations under this paragraph, the monthly
billing statements of Seller shall be deemed to be due and payable on the first
day of the period during which the service to which such billing statements
relate is provided.
(b) Advance Payments and Deposits. Buyer shall be
entitled to an amount equal to the aggregate of (i) all deposits of subscribers
of the System, and all interest, if any, required to be paid thereon as of the
Closing Time, for converters, decoders, and similar items, and (ii) all
payments for services to be rendered to subscribers of the System after the
Closing Time, or for other services to be rendered to other third parties after
the Closing Time for cable television commercials, channel leasing, or other
services or rentals, to the extent all obligations of Seller relating thereto
are assumed by Buyer at Closing.
7
<PAGE> 13
(c) Expenses. As of the Closing Time, the following
expenses shall be prorated, in accordance with generally accepted accounting
principles, so that all such expenses for periods prior to the Closing Time
shall be for the account of Seller, and all such expenses for periods after the
Closing Time shall be for the account of Buyer:
(i) all payments and charges under the
Franchises, the Licenses, and the Contracts;
(ii) Taxes levied or assessed against any of
the Assets or payable with respect to cable television service and related
sales to System subscribers;
(iii) charges for utilities and other goods or
services furnished to the System;
(iv) copyright fees based on signal carriage
by the System; and
(v) all other items of expense relating to
the System;
provided, however, that Seller and Buyer shall not prorate any items of expense
payable under or with respect to any Excluded Assets, all of which shall remain
and be solely for the account of Seller and provided further that there shall
be no adjustment or proration for capital expenditures made by Seller.
Section 2.7 Current Items Amount Calculated. The Current Items
Amount shall be estimated in good faith by Seller, and set forth, together with
a detailed statement of the calculation thereof, in a certificate (the "Initial
Adjustment Certificate") delivered to Buyer not later than five business days
prior to Closing. The Initial Adjustment Certificate shall constitute the
basis on which the Current Items Amount paid at Closing is calculated. Seller
and Buyer shall endeavor in good faith to agree upon the actual Current Items
Amount within sixty days after Closing. Not later than fifteen days after
Seller and Buyer shall have agreed upon the Current Items Amount, Seller or
Buyer, as appropriate, shall pay to the other an amount equal to the amounts by
which the Current Items Amount as finally determined differs from the Current
Items Amount as estimated in the Initial Adjustment Certificate.
ARTICLE 3.
RELATED MATTERS
Section 3.1 Earnest Money Deposit. Concurrently with its
execution and delivery of this Agreement, Buyer has deposited the sum of
$300,000 as earnest money pursuant to the terms of the
8
<PAGE> 14
Earnest Money Escrow Agreement set forth as Exhibit 3.1 ("Earnest Money Deposit
Agreement"). In accordance with the terms of the Earnest Money Deposit
Agreement, the earnest money and all interest or other income accrued thereon
shall be paid to Seller at Closing, for credit toward payment of the Purchase
Price, by wire transfer in accordance with joint instructions given by Buyer
and Seller to the Escrow Agent.
Section 3.2 Tax Certificate. As soon as reasonably practicable,
and in any event within ten days after the date of this Agreement, Buyer shall
prepare and submit to the Federal Communications Commission (the "FCC"), an
appropriate application to request from the FCC a certificate under Section
1071 of the Internal Revenue Code of 1986, as amended, with respect to the
transactions contemplated hereby (the "Tax Certificate"). Buyer shall
thereafter use all commercially-reasonable efforts to obtain the Tax
Certificate from the FCC prior to Closing.
Section 3.3 Franchise Renewals. Seller shall use all
commercially-reasonable efforts to obtain extensions or renewals of each of the
Franchises identified on Exhibit 3.3 so that the expiration date of each such
franchise is no earlier than four years after the after the date of Closing, on
terms not materially more burdensome than the current terms thereof or
otherwise reasonably acceptable to Buyer. Buyer shall cooperate reasonably
with Seller in such efforts. Seller shall advise Buyer of all meetings with
and proceedings of franchising authorities relating to such renewals or
extensions or the transfer of the Franchises to Buyer, and representatives of
Buyer shall be entitled to, and if requested by Seller shall, attend such
meetings and proceedings.
Section 3.4 HSR Act Compliance. As soon as reasonably
practicable, and in any event within thirty days after the date of this
Agreement, Seller and Buyer shall prepare and file proper Premerger
Notification and Report Forms and related affidavits in compliance with the HSR
Act, with Buyer and Seller sharing equally the filing fee related thereto. The
parties shall reasonably cooperate in the preparation of such filings
(including the exchange of drafts) and shall coordinate filings so as to
minimize the length of any review periods. The parties shall promptly respond
to any requests for additional information from either the United States
Department of Justice or the Federal Trade Commission. However, if following
the filing of such forms any Governmental Authority shall request any
additional filings or information that either Seller or Buyer reasonably
considers to be inappropriate, unlawful, unduly burdensome, or otherwise
unacceptable, it shall have no obligation to make or provide such filing or
information and in such event shall be entitled, at its option, to withdraw its
filing and terminate this Agreement without liability or obligation.
9
<PAGE> 15
Section 3.5 Noncompetition Agreement. At the Closing Seller
shall deliver a noncompetition agreement in the form of Exhibit 3.5 (the
"Noncompetition Agreement").
Section 3.6 Use of Names and Logos. For a period of sixty days
after Closing, Buyer shall be entitled to use the trademarks, trade names,
service marks, service names, logos, and similar proprietary rights of Seller
to the extent incorporated in or on the Assets, provided that Buyer shall
exercise efforts to remove all such names, marks, logos, and similar
proprietary rights from the Assets as soon as reasonably practicable following
Closing.
Section 3.7 Bulk Sales. Buyer and Seller each waives compliance
by the other with bulk sales Legal Requirements applicable to the transactions
contemplated hereby. Seller shall indemnify and hold Buyer harmless with
respect to all Losses resulting from any noncompliance with bulk sales Legal
Requirements applicable to the transactions contemplated hereby.
Section 3.8 Transfer Taxes. All sales, use, transfer, and
similar Taxes arising from or payable by reason of the transactions
contemplated by this Agreement shall be paid one-half by Seller and one-half by
Buyer, and each shall reimburse the other, promptly upon the request of the
other, for any amounts paid by the other in excess of one-half of the amount
of any such Taxes.
ARTICLE 4.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of Closing, as follows:
Section 4.1 Organization of Buyer. Buyer is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has all requisite partnership power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as such activities are currently
conducted. Buyer is duly qualified to do business as a foreign limited
partnership and is in good standing in Arkansas. Exhibit 4.1 sets forth an
accurate and complete description of the direct and indirect ownership
structure of Buyer, which, based on oral conferences by Buyer's counsel with
members of the FCC staff, Buyer believes will satisfy the Legal Requirements
for the issuance by the FCC of the Tax Certificate.
Section 4.2 Authority. Buyer has all requisite partnership power
and authority to execute, deliver, and perform this Agreement and consummate
the transactions contemplated
10
<PAGE> 16
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby by Buyer have been duly
and validly authorized by all necessary action on the part of Buyer and its
partners. This Agreement has been duly and validly executed and delivered by
Buyer, and is the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
Section 4.3 No Conflict; Required Consents. Except as described
in Exhibit 4.3 and subject to compliance with the HSR Act, the execution,
delivery, and performance by Buyer of this Agreement do not and will not: (i)
conflict with or violate any provision of the certificate of limited
partnership or partnership agreement of Buyer; (ii) violate any provision of
any Legal Requirements; or (iii) conflict with, violate, result in a breach of,
or constitute a default under any Agreement to which Buyer is a party or by
which Buyer or the assets or properties owned or leased by it are bound or
affected, or (iv) require any consent, approval, or authorization of, or filing
of any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person.
Section 4.4 Taxpayer Identification Number. Buyer's U.S.
Taxpayer Identification Number is as set forth in the introductory paragraph of
this Agreement.
ARTICLE 5.
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of Closing, as follows:
Section 5.1 Organization and Qualification of Seller. Seller is
a limited partnership duly organized, validly existing, and in good standing
under the laws of the State of Delaware, and has all requisite partnership
power and authority to own and lease the properties and assets it currently
owns and leases and to conduct its activities as such activities are currently
conducted. Seller is duly qualified to do business as a foreign limited
partnership and is in good standing in Arkansas. Seller is not a participant
in any joint venture or partnership with any other person or entity with
respect to any part of the System's operations or the Assets.
Section 5.2 Authority. Seller has all requisite partnership
power and authority to execute, deliver, and perform this Agreement and
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and
11
<PAGE> 17
the consummation of the transactions contemplated hereby on the part of Seller
have been duly and validly authorized by all necessary action on the part of
Seller. This Agreement has been duly and validly executed and delivered by
Seller, and is the valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
Section 5.3 No Conflict; Required Consents. Except as described
on Exhibit 5.3 and subject to compliance with the HSR Act, the execution,
delivery, and performance by Seller of this Agreement do not and will not: (i)
conflict with or violate any provision of the partnership agreement or
certificate of limited partnership of Seller; (ii) violate any provision of any
Legal Requirements; (iii) conflict with, violate, result in a material breach
of, or constitute a default under any Agreement to which Seller is a party or
by which Seller or the assets or properties owned or leased by it are bound or
affected; or (iv) require any consent, approval or authorization of, or filing
of any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person.
Section 5.4 Title to Assets.
(a) Exhibit 2.1(a) contains descriptions of all material
items of tangible personal property included in the Assets and Exhibit 2.1(b)
contains descriptions of all Owned and Leased Real Property (including the
location of all improvements thereon) included in the Assets, which comprise
all material items of tangible personal property and real property used by
Seller to operate the System as currently operated, except for the 1993
Chevrolet Lumina used by the System manager. Except for the Owned Real
Property, Seller has good and marketable title to (or in the case of Assets
that are leased, valid leasehold interests in) all of the tangible personal
property included in the Assets and Leased Real Property, free and clear of all
Liens, except (i) Taxes not due and payable, and (ii) in the case of Leased
Real Property, recorded easements and rights-of-way, and other restrictions of
record on the Leased Real Property, which do not individually or in the
aggregate cause title thereto to be unmerchantable or have a material adverse
effect on the use of such property for the purposes for which currently used by
Seller.
(b) The Assets that consist of tangible personal property
are in good operating condition, ordinary wear excepted. All items of cable
plant and headend equipment included in the Assets (i) have been maintained in
a manner consistent with generally accepted standards of good engineering
practice, and
12
<PAGE> 18
(ii) will permit the System to operate in accordance with the terms of the
Franchises.
(c) The current use and occupancy of the Owned and Leased
Real Property do not constitute nonconforming uses under any applicable zoning
Legal Requirements. Each parcel of Owned Real Property and each parcel of
Leased Real Property (i) has access to and over public streets, or private
streets for which Seller has a valid right of ingress and egress, (ii) conforms
in its current use to all material zoning requirements without reliance upon a
variance issued by a local government or a classification of the parcel in
question as a nonconforming use, and (iii) conforms in its use to all material
restrictive covenants, if any, or other material encumbrances affecting all or
part of such parcel.
Section 5.5 Franchises, Licenses, and Contracts. Except as
described on Exhibit 2.1(e), Seller has delivered to Buyer true and complete
copies of each of the Franchises, Licenses, and Contracts. Except for the
Franchises, Licenses, and Contracts, and Agreements included in the Excluded
Assets, Seller is not bound or affected by any other Agreement which relates to
the System. To Seller's knowledge, each of the Franchises, Licenses and
Contracts is in full force and effect and is valid, binding and enforceable in
accordance with its terms. Except as described in Exhibit 5.5, there has not
occurred any default by Seller nor, to the knowledge of Seller, any Person
other than Seller, under any of the Franchises, Licenses or Contracts. Except
as set forth in Exhibit 5.5, Seller has received no notice of any intention by
any party to any Franchise, License or Contract (i) to terminate or amend the
terms thereof, (ii) to refuse to renew the same upon expiration of its term, or
(iii) to renew the same upon expiration only on terms and conditions which are
more materially onerous than the current terms thereof.
Section 5.6 Employee Benefits. Neither Seller nor any Employee
Benefit Plan or Multiemployer Plan (as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained by Seller or to
which Seller has or has had the obligation to contribute is in violation of the
provisions of ERISA; no reportable event, within the meaning of Title IV of
ERISA, has occurred and is continuing with respect to any such Employee Benefit
Plan or Multiemployer Plan; and no prohibited transaction, within the meaning
of Title I of ERISA, has occurred with respect to any such Employee Benefit
Plan or Multiemployer Plan.
Section 5.7 Litigation. Except as set forth in Exhibit 5.7,
there is no Litigation pending or, to Seller's knowledge, threatened, against
Seller which will adversely affect the financial condition or operations of the
System or the ability of Seller to perform its obligations under this
Agreement, or which
13
<PAGE> 19
seeks or could result in the modification, revocation, termination, suspension,
or other limitation of any of the Franchises, Licenses or Contracts. In
particular, except as set forth in Exhibit 5.7 but without limiting the
generality of the foregoing, there are no applications, complaints or
proceedings pending or, to the best of Seller's knowledge, threatened (i)
before any Governmental Authority relating to the business or operations of the
System, (ii) before any federal or state agency involving charges of illegal
discrimination under any federal or state employment laws or regulations, or
(iii) before any federal, state or local agency relating to any zoning laws or
regulations. Except as set forth in Exhibit 5.7, neither Seller, the Assets,
nor the System are (i) subject to any continuing court or administrative order,
writ, injunction or decree applicable specifically to any of the Assets or the
System or in default with respect to any such order, writ, injunction or
decree. Seller knows of no basis for any such action, proceeding or
investigation.
Section 5.8 Tax Returns; Other Reports. Seller has filed all
federal, state, local, and foreign tax returns and other tax reports relating
to the System that are required to be filed, and has timely paid all Taxes
shown thereon to be due and payable. Seller has received no notice of
deficiency or assessment of proposed deficiency or assessment from any taxing
Governmental Authority pertaining to the System. All Taxes with respect to
Seller, the Assets, or the business or operation of the System that are due and
payable have been paid. Seller has provided Buyer with true and complete
copies of Seller's state and local tax returns filed with respect to Taxes on
the Owned and Leased Real Property and tangible personal property relating to
the System for all time periods beginning after December 31, 1991.
Section 5.9 Compliance with Legal Requirements. Seller has
complied and is in compliance in all material respects with all Legal
Requirements applicable to the operation of the System, including but not
limited to the Communications Act, the Copyright Act, the Occupational Safety
and Health Act, and rules and regulations promulgated thereunder; provided,
however, that to the knowledge of Seller, Seller has complied and is in
compliance in all material respects with the Cable Act of 1992, and rules and
regulations promulgated thereunder. Seller has not received notice from the
FCC of any violation of its rules and regulations insofar as they apply to the
System.
Section 5.10 System Information. Exhibit 5.10 sets forth a
materially true and accurate description of the following information:
(i) the number of miles of plant that will be
included in the Assets as of Closing;
14
<PAGE> 20
(ii) the number of Individual Subscribers as of
December, 1994;
(iii) a description of basic and optional or tier services
available from the System and the rates charged by Seller for each;
(iv) the stations and signals carried by the System
and the channel position of each such signal and station;
(v) the MHz capacity of the System; and
(vi) the channel capacity of the System.
Notwithstanding any other provision of this Agreement, the representations and
warranties in Section 5.10(i), (v) and (vi) shall survive for 6 months after
the date of Closing. The representations and warranties in Section 5.10(ii),
(iii) and (iv) shall not survive Closing.
Section 5.11 Environmental.
(a) To Seller's knowledge, none of the Owned Real
Property or Leased 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 on or in connection with the Owned Real
Property or the Leased Real Property.
(b) To Seller's knowledge, except as described on Exhibit
5.11, no surface impoundments or underground storage tanks are located in or on
the Owned or Leased Real Property.
(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 Owned Real Property or
the Leased Real Property, which could reasonably be expected to prevent
compliance by Seller, the Owned Real Property or Leased Real Property 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 9601 et seq.) ("CERCLA") as amended, and rules and regulations
promulgated thereunder.
Section 5.12 Financial and Operational Information. Seller has
delivered to Buyer an unaudited trial balance of the System as of December 31,
1994 and unaudited statements of profit and loss of the System for the twelve-
month period ended December 31, 1994, as well as other operational information
15
<PAGE> 21
relating to the System. The statements of profit and loss are prepared in
accordance with generally accepted accounting principles, and present fairly
the results of operations of the System for the periods indicated. The
unaudited trial balance and operational information were prepared in the
ordinary course of business.
Section 5.13 No Adverse Change. 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.
Section 5.14 Taxpayer Identification Number. Seller's U.S.
Taxpayer Identification Number is as set forth in the introductory paragraph of
this Agreement.
Section 5.15 Franchise Matters. To the knowledge of Seller and
except as described on Exhibit 5.5, other than the Franchises and the Licenses,
Seller requires no franchise, license or permit from any Governmental Authority
to enable it to operate the System as currently operated. Seller has not
received from any Governmental Authority a notice of default under any
Franchise which would require it (in order to preserve its right to assert that
a Governmental Authority has waived a default) to provide written notice to a
Governmental Authority of its failure or inability to cure a default under such
Franchise. Seller has filed with the appropriate franchising Governmental
Authorities all appropriate requests for renewal under the Communications Act
within 30 to 36 months prior to the expiration of each of the Franchises. All
required reports of Seller to any of the franchising authorities or the FCC are
materially true and correct and have been duly filed. To Seller's knowledge,
the System is the only franchised cable television system operating in the
geographic areas served by the System and no franchise other than the
Franchises has been granted for such areas.
Section 5.16 FCC and Copyright Compliance.
(a) Seller is presently permitted under all applicable
FCC rules, regulations and orders to distribute the signals and to utilize all
carrier frequencies generated by the operations of the System, and is licensed
to operate all the facilities required by law to be licensed, including any
business radio and any cable television relay service system, being operated as
part of the System. Other than requests for network nonduplication, sports
blackout and syndex protection and notices of election of
16
<PAGE> 22
must-carry status and retransmission consents or other communications made
pursuant to the Cable Act of 1992, no written requests or notices or demands
(written or oral) have been received by Seller during one year preceding the
date of this Agreement from the FCC, any local or other television station or
system or from any governmental authority challenging or questioning the right
of Seller's operation of the System, or requesting signal carriage or
challenging the right of Seller to carry or deliver any signal. Seller's
operation of the System and of any FCC-licensed or registered facility used in
conjunction with Seller's operation of the System, is in compliance in all
material respects with the FCC's rules and regulations and the provisions of
the Communications Act.
(b) Seller has conducted all such system
proof-of-performance tests, microwave tests and such CLI-related tests as are
required to be conducted under FCC regulations with respect to the System.
Seller has (i) maintained appropriate log books and other recordkeeping which
accurately and completely reflect all results required to be shown thereon;
(ii) to the extent required by the rules and regulations of the FCC, corrected
any radiation leakage of the System required to be corrected in connection with
Seller's monitoring obligations under the rules and regulations of the FCC; and
(iii) otherwise complied in all material respects with all applicable CLI rules
and regulations. Seller has filed all required FCC notifications for the
operation of the System in all necessary aeronautical frequency bands.
(c) Seller has deposited with the United States Copyright
Office all statements of account and other documents and instruments, and paid
all royalties, supplemental royalties, fees and other sums to the United States
Copyright Office under the Copyright Act with respect to the business and
operations of the System as are required to obtain, hold and maintain the
compulsory license for cable television systems prescribed in Section 111 of
the Copyright Act. Seller and the System are in compliance with the Copyright
Act and the rules and regulations of the Copyright Office promulgated
thereunder, except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the System. Seller has,
under applicable law or in accordance with the programming agreements relating
to the programs carried by the System, the legal right and authority to carry
the signals and the carriage, transmission or use of the signals has not
subjected, and does not subject, the System or Seller to any suits or actions,
including suits or actions for copyright infringement.
(d) All required FAA no hazard determinations have been
obtained with respect to the construction and/or alteration of towers used in
connection with the operation of the System. The towers have been marked and
lit, where required, in
17
<PAGE> 23
compliance in all material respects with applicable FCC and FAA rules.
(e) To the knowledge of Seller, there is no inquiry,
claim, action or demand pending before the United States Copyright Office or
from any other party which questions the copyright filings or payments made by
Seller with respect to the System with respect to which Buyer will incur any
Losses.
Section 5.17 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
Exhibit 5.17. 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 Exhibit 5.17, 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.
Section 5.18 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 "Warner," "Time
Warner," 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.
Section 5.19 Accounts Receivable. Seller's accounts receivable
are actual and bona fide receivables representing obligations for the total
dollar amount thereof shown on the books of the Seller which resulted from the
regular course of the Seller's business, and are fully collectible in
accordance with their terms, subject to no offset or reduction of any nature
except for a reserve for uncollectible accounts consistent with the reserve
established by Seller in its most recent trial balance delivered to Buyer in
accordance with Section 5.12.
Section 5.20 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.
18
<PAGE> 24
Section 5.21 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.
Section 5.22 Multi-Employer Pension Plan. The Assets will not be
subject to any withdrawal liability under the Multi-Employer Pension Plan
Amendment Act of 1980 as a result of the consummation of the transactions
contemplated under this Agreement.
Section 5.23 Accuracy of Billing Records. The billing reports and
aging reports provided to Buyer by Seller in connection with this Agreement are
accurate and complete in all material respects.
ARTICLE 6.
COVENANTS
Section 6.1 Certain Affirmative Covenants of Seller. Except as
Buyer may otherwise consent in writing, between the date of this Agreement and
Closing Seller shall:
(a) (i) operate the System in the ordinary course of
business and in accordance with past practices, (ii) maintain the tangible
Assets in their current condition and repair, ordinary wear excepted, (iii)
perform all of its obligations under all of the Franchises, Licenses and
Contracts without material breach or default, and (iv) operate the System in
material compliance with applicable Legal Requirements, and to its knowledge,
with the Cable Act of 1992;
(b) give to Buyer and its counsel, accountants, and other
representatives, access during normal business hours to the System, the Owned
and Leased Real Property, the other tangible Assets and Seller's books and
records relating to the System;
(c) as soon as practicable after the date of this
Agreement make all filings, and exercise commercially-reasonable efforts to
obtain in writing as promptly as practicable all approvals, authorizations and
consents described on Exhibit 5.3, and deliver to Buyer copies thereof promptly
upon receiving them;
(d) promptly deliver to Buyer copies of any reports with
respect to the operation of the System regularly prepared by Seller at any time
from the date hereof until Closing;
(e) promptly inform Buyer in writing of any material
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
19
<PAGE> 25
liability for, nor shall the providing of such information by Seller to Buyer
be deemed a waiver by Buyer of, the breach of any representation or warranty of
Seller contained in this Agreement;
(f) continue to carry and maintain in full force and
effect its existing casualty and liability insurance through and including the
Closing Date;
(g) terminate the employment of all employees of Seller
working for the System; and
(h) comply with all of Seller's obligations under the
Union Contract, the provisions of the NLRA, and other applicable state and
federal laws.
Section 6.2 Certain Negative Covenants of Seller. Between the
date hereof and Closing, Seller shall not solicit or participate in
negotiations with (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.
Additionally, except as Buyer may otherwise consent in writing, which consent
Buyer may withhold in its sole discretion, or as contemplated by this
Agreement, between the date of this Agreement and Closing Seller shall not (a)
modify, terminate, renew, suspend, or abrogate any Franchise, License or
Contract other than in the ordinary course of business, or (b) enter into any
transaction or permit the taking of any action that would result in any of
Seller's representations and warranties contained in this Agreement not being
true and correct when made or at Closing; provided, however, that with respect
to clause (a) above, all such modified, renewed, or new Licenses or Contracts
shall not involve either aggregate liabilities exceeding $1,000, or any
material non-monetary obligation.
Section 6.3 Certain Covenants of Buyer.
(a) Except as Seller may otherwise consent in writing, Buyer
shall, as soon as practicable, make all filings, and exercise
commercially-reasonable efforts to obtain in writing as promptly as practicable
all approvals, authorizations and consents, described on Exhibit 4.3, and
deliver to Seller copies thereof.
(b) Buyer may offer employment to any or all of the
employees of Seller who primarily perform services with respect to the
operation of the System as of the Closing Date. Not later than March 1, 1995,
Buyer shall deliver to Seller a written notice containing the names, if any, of
employees of the System whom Buyer intends to hire on the Closing Date. Not
later than
20
<PAGE> 26
April 1, 1995, Buyer shall notify those employees whom Buyer intends to hire on
the Closing Date; the form and manner of such notification shall be reasonably
satisfactory to, and approved in advanced by, Seller and shall specify the
terms of employment, including compensation and all benefits relating thereto.
Section 6.4 Title Insurance. Seller will reasonably cooperate
with Buyer if Buyer elects to obtain title insurance policies on parcels of
Owned Real Property or Leased 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.
Section 6.5 Confidentiality. Any non-public information that
either party (the "Recipient Party") may obtain from the other (the "Disclosing
Party") in connection with this Agreement with respect to Disclosing Party or
the System shall be confidential and, unless and until Closing shall occur,
Recipient Party shall not disclose any such information to any third party
(other than its directors, officers, partners and employees, and
representatives of its advisers and lenders whose knowledge thereof is
necessary in order to facilitate the consummation of the transactions
contemplated hereby) or use such information to the detriment of Disclosing
Party; provided that (i) Recipient Party may use and disclose any such
information once it has been publicly disclosed (other than by Recipient Party
in breach of its obligations under this Section) or which rightfully has come
into the possession of Recipient Party (other than from Disclosing Party), and
(ii) to the extent that Recipient Party may become compelled by Legal
Requirements to disclose any of such information, Recipient Party may disclose
such information if it shall have used all reasonable efforts, and shall have
afforded Disclosing Party the opportunity, to obtain an appropriate protective
order, or other satisfactory assurance of confidential treatment, for the
information compelled to be disclosed. In the event of termination of this
Agreement, Recipient Party shall use all reasonable efforts to cause to be
delivered to Disclosing Party, and retain no copies of, any documents, work
papers and other materials obtained by Recipient Party or on its behalf from
Disclosing Party, whether so obtained before or after the execution hereof.
Section 6.6 Supplements to Exhibits. Each of Seller and Buyer
shall, from time to time prior to Closing, supplement the Exhibits to this
Agreement with additional information that, if existing or known to it on the
date of this Agreement, would have been required to be included in one or more
Exhibits to this Agreement. For purposes of determining the satisfaction of
any of the conditions to the obligations of Buyer and Seller in Sections 7.1
and 7.2 and the liability of Seller or of Buyer
21
<PAGE> 27
following Closing for breaches of its representations and warranties under this
Agreement, the Exhibits to this Agreement shall be deemed to include only (a)
the information contained therein on the date of this Agreement and (b)
information added to the Exhibits by written supplements to this Agreement
delivered prior to Closing by the party making such amendment that (i) are
accepted in writing by the other party or (ii) reflect actions permitted by
this Agreement to be taken prior to Closing.
Section 6.7 Employee Benefit Matters.
(a) Seller shall assume full responsibility and liability
for offering and providing "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 Time.
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. Seller shall hold Buyer and any entity
required to be combined with the Buyer under Section 414 of the Internal
Revenue Code ("Affected Parties") harmless from and fully indemnify such
Affected Parties against any losses incurred or suffered by such Affected
Parties which arise under a group health plan sponsored, maintained or
contributed to by Seller as a result of any action or omission of Seller prior
to the Closing Time or because Buyer is deemed to be a successor employer to
Seller.
(b) Seller acknowledges that Buyer has no obligation to
employ any of Seller's current or prior employees and 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, and shall indemnify
Buyer and hold Buyer harmless from any losses thereunder.
ARTICLE 7.
CONDITIONS PRECEDENT
Section 7.1 Conditions to Buyer's Obligations. The obligations
of Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, which may be waived by Buyer:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller in this Agreement shall be true and
accurate in all material respects at and as of Closing with the same effect as
if made at and as of Closing.
22
<PAGE> 28
(b) Performance Of Agreements. Seller shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to be performed
and complied with by it at or before Closing.
(c) Officer's Certificate. Buyer shall have received a
certificate executed by an executive officer of a general partner of Seller,
dated as of Closing, reasonably satisfactory in form and substance to Buyer,
certifying that the conditions specified in paragraphs 7.1(a) and (b) have been
satisfied.
(d) Legal Proceedings. There shall be no Legal
Requirement, and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or arising
therefrom, which enjoins, restrains, makes illegal, or prohibits consummation
of the transactions contemplated by this Agreement, and there shall be no
Litigation pending or threatened seeking, or which if successful would have the
effect of, any of the foregoing.
(e) HSR Act Compliance. All waiting periods under the
HSR Act applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Seller's Counsel Opinion. Buyer shall have received
an opinion of Linda Weiler, counsel to Seller, dated as of Closing, in the form
of Exhibit 7.1(f).
(g) Seller's FCC Counsel Opinion. Buyer shall have
received an opinion of Bryan Cave special communications counsel to Seller,
dated as of Closing, in the form of Exhibit 7.1(g).
(h) Renewal of Franchises. Each of the Franchises
identified on Exhibit 3.3 shall have been renewed or extended such that each
Franchise at Closing shall have a remaining term of at least four years, on
terms not materially more burdensome than the current terms thereof (other than
matters relating to the Cable Act of 1992 that have become, or are expected to
become effective), or otherwise reasonably acceptable to Buyer.
(i) Consents. Buyer shall have received evidence, in
form and substance reasonably satisfactory to it, that there have been obtained
all consents, approvals and authorizations identified on Exhibit 5.3 as
Material Consents; provided, however, that it shall not be a condition to
Buyer's obligations that the consents of franchising authorities include
consent to transfers of partnership interests of Buyer, or the further transfer
of Franchises, subsequent to Closing.
23
<PAGE> 29
(j) Subscribers. At Closing, the System and the
Russellville System collectively shall serve at least 33,400 Individual
Subscribers and Subscriber Equivalents.
(k) Certain Contracts. Each of the third parties to the
Contracts designated as Material Contracts on Exhibit 2.1(e) shall:
(1) either (i) have given its consent, in form
and substance reasonably satisfactory to Buyer, to the transfer of such
Contract to Buyer, or (ii) not have conditioned its consent, or indicated its
intention to condition its consent, upon the making of modifications to such
Contract rendering its terms materially more burdensome to Buyer; and
(2) not have disturbed or revoked, or indicated
its intention to disturb or revoke, Seller's or Buyer's enjoyment of the rights
and privileges enjoyed or exercised by Seller under such Contract.
(l) Noncompetition Agreement. Seller shall have
delivered to Buyer the Noncompetition Agreement.
(m) Due Diligence Review. Buyer's due diligence review
of the business, operations and financial statements of the System shall be
reasonably satisfactory to Buyer, provided that Buyer's satisfaction shall only
be withheld in the event that issues are found which would result in a
substantial negative impact on the value of the System.
(n) Russellville Transaction Closing. Simultaneously
with, or immediately preceding or following the Closing, the Russellville
Transaction closing shall take place.
Section 7.2 Conditions to Seller's Obligations. The obligations
of Seller to consummate the transactions contemplated by this Agreement shall
be subject to the following conditions, which may be waived by Seller:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer in this Agreement shall be true and
accurate in all material respects at and as of Closing with the same effect as
if made at and as of Closing.
(b) Performance of Agreements. Buyer shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to which it is a
party to be performed and complied with by it at or before Closing.
(c) Officer's Certificate. Seller shall have received a
certificate executed by an executive officer of the general
24
<PAGE> 30
partner of Buyer, dated as of Closing, reasonably satisfactory in form and
substance to Seller, certifying that the conditions specified in paragraphs
7.2(a) and (b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal
Requirement, and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or arising
therefrom, which enjoins, restrains, makes illegal, or prohibits consummation
of the transactions contemplated hereby, and there shall be no Litigation
pending or threatened seeking or which if successful would have the effect of,
any of the foregoing.
(e) HSR Act Compliance. All waiting periods under the
HSR Act applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Buyer's Counsel Opinion. Seller shall have received
an opinion of Jackson & Walker, L.L.P., counsel to Buyer, dated as of Closing,
in the form of Exhibit 7.2(f).
(g) Consents. Seller shall have received (i) evidence,
in form and substance reasonably satisfactory to it, that there have been
obtained all consents, approvals and authorizations identified on Exhibit 5.3
as Material Consents, and (ii) releases from all liabilities and obligations
attributable to periods after Closing under the Contracts.
(h) Tax Certificate. The FCC shall have issued the Tax
Certificate.
(i) Russellville Transaction Closing. Simultaneously
with, or immediately preceding or following the Closing, the Russellville
Transaction closing shall take place.
ARTICLE 8.
CLOSING
Section 8.1 Closing; Time and Place. The closing of the
transactions contemplated by this Agreement ("Closing") shall take place within
twenty business days after the date on which all of the conditions to Closing
have been satisfied, on a date and at a time and location mutually determined
by Seller and Buyer but in no event later than May 15, 1995 (the "Outside
Closing Date"). Seller and Buyer shall, without modifying or expanding their
obligations hereunder, exercise their diligent, good faith efforts to cause
Closing to occur as quickly as reasonably possible.
Section 8.2 Seller's Obligations. At Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
25
<PAGE> 31
(a) Bill of Sale, Assignment and Assumption. Executed
counterparts of a Bill of Sale, Assignment and Assumption relating to the
Assets in the form of Exhibit 8.2(a) (the "Bill of Sale");
(b) Noncompetition Agreement. The executed
Noncompetition Agreement;
(c) Deed. Quitclaim deed conveying to Buyer the Owned
Real Property;
(d) Officer's Certificate. The certificate described in
paragraph 7.1(c);
(e) Evidence of Seller Actions. Evidence reasonably
satisfactory to Buyer that Seller has taken all actions, if any, necessary to
authorize the execution of the Agreement and the consummation of the
transactions contemplated thereby; and
(f) Seller's Counsel Opinion. Seller's Counsel Opinion;
(g) Seller's FCC Counsel Opinion. Seller's FCC Counsel
Opinion;
(h) Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer, and
separate bills of sale therefor, if required by the Legal Requirements of the
jurisdiction in which such vehicles are titled;
(i) Assignment of Leases. An assignment of each lease
related to property comprising a portion of the Assets under which Seller is
lessee or lessor assigning the interest of Seller therein to Buyer in form and
substance reasonably satisfactory to counsel for Buyer;
(j) Conditions Precedent. To the extent not described
above, all items set forth in Section 7.1; and
(k) Other. Such other documents and instruments as shall
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
Section 8.3 Buyer's Obligations. At Closing Buyer shall deliver
or cause to be delivered to Seller the following:
(a) Purchase Price. The Purchase Price, adjusted to
reflect the estimated Current Items Amount.
(b) Bill of Sale. Executed counterparts of the Bill of
Sale;
26
<PAGE> 32
(c) Officer's Certificate. The certificate described in
paragraph 7.2(c);
(d) Evidence of Partner Actions. Certified resolutions
of the Partners of Buyer, or other evidence reasonably satisfactory to Seller,
that Buyer has taken all partnership action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(e) Buyer's Counsel Opinion. Buyer's Counsel Opinion;
(f) Conditions Precedent. To the extent not described
above, all items set forth in Section 7.2; and
(g) Other. Such other documents and instruments as shall
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
ARTICLE 9.
TERMINATION
Section 9.1 Termination Events. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of the Buyer and
Seller;
(b) by either Buyer or Seller upon written notice to the
other, if any conditions to its obligations set forth in Sections 7.1 and 7.2,
respectively, shall not have been satisfied on or before the Outside Closing
Date, for any reason other than a breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or any of its
representations herein not being true and accurate when made or when otherwise
required by this Agreement to be true and accurate; or
(c) as otherwise provided herein.
Section 9.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 9.1, all obligations of the parties hereunder
shall terminate, except for the obligations set forth in Sections 6.5, 9.2,
10.2, 10.3, 12.1, 12.2, and 12.9.
27
<PAGE> 33
ARTICLE 10.
REMEDIES
Section 10.1 Specific Performance. Seller acknowledges that, if
it is in material breach or default of its covenants, agreements or obligations
hereunder that prevents satisfaction of the condition stated in paragraph
7.1(b), Buyer would be irreparably damaged by such breach or default and that,
in addition to the other remedies that may be available at law or in equity,
Buyer shall be entitled to specific performance of this Agreement and
injunctive relief. All rights and remedies under this Agreement are cumulative
of, and not exclusive of, any rights or remedies otherwise available, and the
exercise of any of such rights or remedies shall not bar the exercise of any
other rights or remedies.
Section 10.2 Liquidated Damages. If Buyer is in material breach
or default of its covenants, agreements and obligations hereunder, Seller may,
at its option and in conjunction with its termination of this Agreement
pursuant to paragraph 9.1(b), retain the Earnest Money Deposit and all interest
earned thereon as liquidated damages for such breach or default. Seller and
Buyer acknowledge that Seller's actual damages in the event of such a breach or
default would be difficult or impossible to ascertain, and that the Earnest
Money Deposit and all interest earned thereon represent a fair and reasonable
approximation of such damages and does not constitute a penalty.
Section 10.3 Attorneys' Fees. In the event of any Litigation
between Seller and Buyer with respect to this Agreement or the transactions
contemplated hereby, the party prevailing under such Litigation shall be
entitled, as part of the Judgment rendered in such Litigation, to recover from
the other party its reasonable attorneys' fees and costs and expenses in such
litigation.
ARTICLE 11.
INDEMNIFICATION
Section 11.1 Indemnification by Seller. From and after Closing,
Seller shall indemnify and hold harmless Buyer from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in
this Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate;
(b) any breach or default by Seller in the performance of
its covenants, agreements, or obligations in this Agreement;
28
<PAGE> 34
(c) any liabilities relating to employees of Seller
working for the System asserted under any federal, state or local law or
regulation or otherwise pertaining to any labor or employment matter arising
out of actions or events occurring prior to Closing; and
(d) all liabilities and obligations arising out of or
relating to the operation of the System prior to Closing.
Section 11.2 Indemnification by Buyer. From and after Closing,
Buyer shall indemnify and hold harmless Seller from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in
this Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate;
(b) any breach or default by Buyer in the performance of
its covenants, agreements, or obligations in this Agreement;
(c) the Assumed Obligations and Liabilities;
(d) any liabilities relating to employees hired by Buyer
after the Closing or persons not hired by Buyer after the Closing asserted
under any federal, state or local law or regulation or otherwise pertaining to
any labor or employment matter arising out of actions or events occurring
subsequent to Closing; and
(e) all liabilities and obligations arising out of or
relating to the operation of the System subsequent to Closing.
Section 11.3 Indemnified Third Party Claim.
(a) If any Person not a party to this Agreement shall
make any demand or claim or file or threaten to file or continue any Litigation
with respect to which Buyer or Seller is entitled to indemnification pursuant
to Sections 11.1 or 11.2, respectively, then within ten days after notice (the
"Notice") by the party entitled to such indemnification (the "Indemnitee") to
the other (the "Indemnitor") of such demand, claim or Litigation, the
Indemnitor shall have the option, at its sole cost and expense, to retain
counsel for the Indemnitee (which counsel shall be reasonably satisfactory to
the Indemnitee), to defend any such Litigation. Thereafter, the Indemnitee
shall be permitted to participate in such defense at its own expense, provided
that, if the named parties to any such Litigation (including any impleaded
parties) include both the Indemnitor and the Indemnitee or, if the Indemnitor
proposes that the same counsel represent both the Indemnitee and the Indemnitor
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them, then the
Indemnitee
29
<PAGE> 35
shall have the right to retain its own counsel at the cost and expense of the
Indemnitor, unless the Indemnitor shall acknowledge in writing its indemnity
obligation, in which event the retention by Indemnitee of its own counsel shall
be at its cost and expense. If the Indemnitor shall fail to respond within ten
days after receipt of the Notice, the Indemnitee may retain counsel and conduct
the defense of such Litigation as it may in its sole discretion deem proper, at
the sole cost and expense of the Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to
the Indemnitor and provide access to its books, records and personnel as the
Indemnitor reasonably requests in connection with the investigation or defense
of the indemnified Losses. The Indemnitor shall promptly upon receipt of
reasonable supporting documentation reimburse the Indemnitee for out-of-pocket
costs and expenses incurred by the latter in providing the requested
assistance.
(c) With regard to Litigation of third parties for which
Buyer or Seller is entitled to indemnification under Sections 11.1 or 11.4,
such indemnification shall be paid by the indemnifying party upon: (i) the
entry of a Judgment against the Indemnitee and the expiration of any applicable
appeal period; (ii) the entry of an unappealable Judgment or final appellate
Judgment against the Indemnitee; or (iii) a settlement with the consent of the
Indemnitor, which consent shall not be unreasonably withheld, provided that no
such consent need be obtained if the Indemnitor fails to respond to the Notice
as provided in paragraph 11.3(a). Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnitee shall be reimbursed on a current basis by the
Indemnitor if such expenses are a liability of the Indemnitor.
Section 11.4 Determination of Indemnification Amounts and Related
Matters.
(a) Seller's liability under Section 11.1 shall be
limited to Losses exceeding in the aggregate $250,000 (the "Deductible"), and
Seller shall have no liability under Section 11.1 for Losses constituting the
Deductible. Seller's liability under Section 11.1 shall be limited to Losses
not exceeding in the aggregate the amount of the Purchase Price.
(b) In calculating amounts payable to an Indemnitee
hereunder, the amount of the indemnified Losses shall be reduced by the amount
of any insurance proceeds paid to the Indemnitee for such Losses.
(c) Subject to the provisions of Section 11.3, all
amounts payable by the Indemnitor to the Indemnitee in respect of
30
<PAGE> 36
any Losses under Sections 11.1 or 11.2 shall be payable by the Indemnitor as
incurred by the Indemnitee.
Section 11.5 Time and Manner of Certain Claims. The
representations and warranties of Buyer and Seller in this Agreement shall
survive Closing for a period of twenty-four months (the "Survival Period"),
except that such Survival Period shall be the respective, applicable statute of
limitation relating to any claim for Losses arising in connection with Seller's
representations and warranties with respect to Taxes or copyright liabilities,
and fifteen years in the case of any claim for Losses arising with respect to
Seller's representation and warranty stated in Section 5.11. Neither Seller
nor Buyer shall have any liability under paragraphs 11.1(a) or 11.2(a),
respectively, unless a claim for Losses for which indemnification is sought
thereunder is asserted by the party seeking indemnification by written notice
to the party from whom indemnification is sought within the Survival Period.
Section 11.6 Other Indemnification.
(a) The provisions of Sections 11.3 and 11.4 shall be
applicable to any claim for indemnification made under any other provision of
this Agreement, and all references in Sections 11.3 and 11.4 to Sections 11.1
and 11.2 shall be deemed to be references to such other provisions of this
Agreement.
(b) Seller shall indemnify and hold harmless Buyer from
and against any and all direct Losses, including relocation costs, up to a
maximum of $150,000, arising out of or resulting from third party claims made
with respect to the ownership of the Owned Real Property which are brought
within two years of the date of Closing. The Deductible shall not apply to
Losses incurred by Buyer in connection with this Section 11.6(b).
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.1 Expenses. Each of the parties shall pay its own
expenses and the fees and expenses of its counsel, accountants, and other
experts in connection with this Agreement.
Section 12.2 Brokerage. Seller shall indemnify and hold Buyer
harmless from and against any and all Losses arising from any employment by it
of, or services rendered to it by, any finder, broker, agency, or other
intermediary, in connection with the transactions contemplated hereby, or any
allegation of any such employment or services, and Buyer shall indemnify and
hold Seller harmless from and against any and all Losses arising from any
employment by it of, or services rendered to it by, any finder, broker, agency,
or other intermediary, in connection with
31
<PAGE> 37
the transactions contemplated hereby, or any allegation of any such employment
or services.
Section 12.3 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be
deemed to constitute a waiver by the party taking the action of compliance with
any representation, warranty, covenant or agreement contained herein or in any
Transaction Document. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement shall not operate or be construed
as a waiver of any other condition or subsequent breach. The waiver by any
party of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
Section 12.4 Notices. All notices, requests, demands,
applications, services of process, and other communications which are required
to be or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if sent by facsimile transmission, delivered by
overnight or other courier service, or mailed, certified first class mail,
postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
To Seller: Time Warner Cable Ventures
330 First Stamford Place
Stamford, CT 06902-6732
Attn: Jeffrey D. Elberson
Telecopy: (203) 328-0691
Copies: Holland & Hart
P.O. Box 8749
555 17th Street
Suite 2900
Denver, CO 80201-8749 (Mail)
80202 (Delivery)
Attn: Mary Ellen Scanlan, Esq.
Telecopy: (303) 295-8261
Buyer: Tele-Communications of Northwest Arkansas
Limited Partnership
3015 SSE Loop 323
P.O. Box 130489
Tyler, Texas 75713-0489
Attn: Robert McMillian
Fred R. Nichols
Telecopy: (903) 595-1929
32
<PAGE> 38
Copies: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attn: James S. Ryan, III, Esq.
Telecopy: (214) 953-5822
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or by facsimile transmission, upon actual
receipt by the intended recipient, or (ii) if mailed, upon the earlier of five
days after deposit in the mail and the date of delivery as shown on the return
receipt therefor.
Section 12.5 Entire Agreement; Amendments. This Agreement
embodies the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect thereto. This Agreement may not be modified
orally, but only by an agreement in writing signed by the party or parties
against whom any waiver, change, amendment, modification, or discharge may be
sought to be enforced.
Section 12.6 Binding Effect; Benefits. This Agreement shall inure
to the benefit of and will be binding upon the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Neither Buyer nor Seller shall assign this Agreement or delegate any of its
duties hereunder to any other Person without the prior written consent of the
other. For purposes of this Section any change in control of Buyer or Seller
shall constitute an assignment of this Agreement.
Section 12.7 Headings, Schedules, and Exhibits. The section and
other headings contained in this Agreement are for reference purposes only and
will not affect the meaning of interpretation of this Agreement. Reference to
Exhibits shall, unless otherwise indicated, refer to the Exhibits attached to
this Agreement, which shall be incorporated in and constitute a part of this
Agreement by such reference.
Section 12.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together will be deemed to be one and the same
instrument.
Section 12.9 Publicity. Seller and Buyer shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements, and any oral or written statements to
Seller's employees concerning this Agreement and the transactions contemplated
hereby. Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which
33
<PAGE> 39
shall not be unreasonably withheld or delayed; provided, however, that Seller
or Buyer may at any time make any announcement required by Legal Requirements
so long as such party, promptly upon learning of such requirement, notifies the
other of such requirement and consults with the other in good faith with
respect to the wording of such announcement.
Section 12.10 Governing Law. The validity, performance, and
enforcement of this Agreement and all transaction documents, unless expressly
provided to the contrary, shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law of such
state.
Section 12.11 Third Parties; Joint Ventures. This Agreement
constitutes an agreement solely among the parties hereto, and, except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person (including but not limited to any employee or
former employee of Seller) other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
Section 12.12 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement shall not
apply in any construction or interpretation of this Agreement.
Section 12.13 Risk of Loss. The risk of any loss or damage to the
Assets resulting from fire, theft or any other casualty (except reasonable wear
and tear) shall be borne by Seller at all times prior to Closing. In the event
that any such loss or damage shall be sufficiently substantial so as to
preclude and prevent resumption of normal operations of any material portion of
the System within twenty days from the occurrence of the event resulting in
such loss or damage, Seller shall immediately notify Buyer in writing of its
inability to resume normal operations or to replace or restore the lost or
damaged property, and Buyer, at any time within ten days after receipt of such
notice, may elect by written notice to Seller either to (i) waive such defect
and proceed toward consummation of the transaction contemplated by this
Agreement in accordance with the terms thereof, or (ii) terminate this
Agreement. If Buyer elects to so terminate this Agreement, Buyer and Seller
shall stand fully released and discharged of any and all obligations hereunder.
If Buyer shall elect to consummate the transactions contemplated by this
Agreement notwithstanding such loss or damage and does so, there
34
<PAGE> 40
shall be no diminution of the Purchase Price on account of such loss or damage
but all insurance proceeds payable as a result of the occurrence of the event
resulting in such loss or damage shall be delivered by Seller to Buyer, or the
rights thereto shall be assigned by Seller to Buyer if not yet paid over to
Seller.
Buyer and Seller have executed this Agreement as of the date first
written above.
BUYER
TELE-COMMUNICATIONS OF NORTHWEST
ARKANSAS LIMITED PARTNERSHIP
BY: MCMILLIAN HOLDING, L.P., ITS
GENERAL PARTNER
BY: MCMILLIAN, INC., ITS GENERAL
PARTNER
By:___________________________
Name:______________________
Title:_____________________
SELLER
TIME WARNER ENTERTAINMENT COMPANY,
L.P., A DELAWARE LIMITED PARTNERSHIP,
THROUGH ITS DIVISION TIME WARNER CABLE
VENTURES
By:_____________________________________
Jeffrey D. Elberson
Vice President
35
<PAGE> 1
EXHIBIT 10(M)
LIMITED PARTNERSHIP AGREEMENT
OF
MCMILLIAN PARTNERS, L.P.
JANUARY 20, 1995
THE LIMITED PARTNERSHIP INTERESTS OF MCMILLIAN PARTNERS, L.P. HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN
RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND THOSE LAWS. THE INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY, AND
NEITHER THE INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH (i) THE SECURITIES ACT, (ii) ANY APPLICABLE STATE SECURITIES LAWS AND
(iii) THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE INTERESTS WILL NOT BE
TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH THOSE LAWS AND THIS AGREEMENT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. Purpose and Scope of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.04. Authority of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.05. Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.06. Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.07. Registered Agent and Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.03. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.04. Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.05. Exculpation; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.06. Permitted Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
FINANCING
Section 3.01. Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.02. Limited Liability of Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.03. Treatment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.04. Loans from Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.05. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.06. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.07. Withdrawal of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.02. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.03. Allocations for Book Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.04. Special Allocations for Book Purposes . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.05. Allocations for Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.06. Distributions to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.07. Tax Status, Elections and Modifications to Allocations . . . . . . . . . . . . . . . 16
Section 4.08. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.09. Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.10. Partnership Tax Returns and Annual Statement . . . . . . . . . . . . . . . . . . . . 17
Section 4.11. Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.12. Financial Reports to Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.13. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.14. Minimum Allocation to General Partners . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
REMOVAL OF GENERAL PARTNER
Section 5.01. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02. Effect of Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
ASSIGNMENT
Section 6.01. Transfers Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.02. Consequences of Transfers Generally . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.03. Substituted Partner; Withdrawal of Transferor Partner . . . . . . . . . . . . . . . . 21
Section 6.04. Purchase of General Partner's Partnership Interest at Election of the General
Partner or the Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 7.01. Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.02. Dissolution of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.03. Continuation and Reconstitution of Partnership . . . . . . . . . . . . . . . . . . . 25
Section 7.04. Death, etc. of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.05. Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.06. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VIII
GENERAL
Section 8.01. LIMITED PARTNER REPRESENTATIONS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . 28
Section 8.02. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.03. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.04. Governing Laws and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.05. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.06. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.08. Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.09. Tense and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.10. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.11. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.13. Representations and Warranties of Each Partner . . . . . . . . . . . . . . . . . . . 31
SCHEDULE A
</TABLE>
ii
<PAGE> 4
LIMITED PARTNERSHIP AGREEMENT
OF
MCMILLIAN PARTNERS, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made and
entered into as of the day of January, 1995 (the "Effective Date"), by
and among McMillian Holdings, Inc., a Texas corporation as the General Partner,
and TAL Financial Corporation, a Nevada corporation, as the Limited Partner.
Unless otherwise indicated, all capitalized terms used in this Agreement shall
have the meaning ascribed to them in Section 4.01.
For and in consideration of the mutual covenants set forth herein and
for other good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the undersigned (referred to
collectively as the "Partners" and individually as a "Partner") hereby agree as
follows:
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name. The name of the Partnership is MCMILLIAN
PARTNERS, L.P. All business and affairs of the Partnership shall be conducted
solely under, and all Partnership Assets (as that term is defined in Section
1.03) shall be held solely in, such name.
Section 1.02. Term. The Partnership shall continue under this
Agreement (as amended from time to time) until dissolved upon the occurrence of
an event that causes the dissolution of the Partnership in accordance with the
provisions of this Agreement, and thereafter to the extent provided by
applicable law, until wound up and terminated as provided herein.
Section 1.03. Purpose and Scope of Business. The Partnership is
organized for the following objectives and purposes: (a) to enter into (i) the
Limited Partnership Agreement of Tele-Com and (ii) the Limited Partnership
Agreement of Northwest, (b) to exercise all rights and powers granted to it as
general partner of each of the Tele-Com Entities pursuant to the Limited
Partnership Agreement of Tele-Com and the Limited Partnership Agreement of
Northwest, (c) to carry on the business of the Tele-Com Entities of acquiring,
investing, owning, constructing, maintaining, promoting, selling, disposing and
otherwise developing the Systems and other cable television systems in areas in
which either of the Tele-Com Entities have a franchise; and (d) to do all other
lawful things necessary, appropriate or advisable in connection with these
purposes. The assets of the Partnership, whether now or hereafter owned,
including
<PAGE> 5
without limitation the assets comprising the Systems, are herein sometimes
referred to as the "Partnership Assets."
Section 1.04. Authority of the Partnership. The Partnership shall be
empowered and authorized to do all lawful acts and things necessary,
appropriate, proper, advisable, incidental to, or convenient for the
furtherance and accomplishment of its purposes. The Partnership shall be
empowered and authorized, for itself and as general partner of the Tele-Com
Entities:
(a) to construct, operate, maintain, improve, expand, buy, own,
sell, convey, assign, mortgage, refinance, rent or lease real or personal
property, which may be held in the name of Tele-Com, Northwest, the
Partnership, in the name of the General Partner as nominee or trustee for the
beneficial owner of the property, or in any other manner that the General
Partner reasonably deems to be in the best interest of the Partnership,
Tele-Com and Northwest, so long as all such property is properly reflected on
the books of the Partnership, Tele-Com or Northwest, as applicable;
(b) to enter into, perform, and carry out contracts and agreements
of any kind necessary to, in connection with, or incidental to accomplishing
the purposes of the Partnership;
(c) to borrow money and issue evidences of indebtedness in
furtherance of the purposes of the Partnership and to secure any such
indebtedness by mortgage, security interest, or other lien;
(d) to maintain and operate the assets of the Partnership and the
Tele-Com Entities;
(e) to negotiate for and conclude agreements for the sale,
exchange, or other disposition of all or any part of the property of the
Partnership, Tele-Com or Northwest or for the purchase or lease of additional
property of the Partnership, Tele-Com or Northwest;
(f) to hire and compensate employees, agents, independent
contractors, attorneys, and accountants; and
(g) to bring and defend actions in law and equity.
Section 1.05. Documents. The General Partner shall file the
Certificate of Limited Partnership (the "Certificate") in the office of the
Secretary of State of the State of Delaware in accordance with the provisions
of the Act. If necessary or advisable in order to comply with the laws of the
State of Arkansas, the Partners and the Partnership shall promptly execute and
duly file with the proper offices in the State of Arkansas, one or more
certificates as required by law in order that the Partnership may lawfully
conduct the business, purposes and activities herein authorized and take any
other action or measures necessary for the Partnership to conduct such
activities in the State of Arkansas.
Section 1.06. Principal Place of Business. The principal place of
business of the Partnership shall be 3015 SSE Loop 323, Tyler, Texas 75701 or
at such other place or places as may be determined by the General Partner. The
General Partner shall be responsible for
2
<PAGE> 6
maintaining at the Partnership's principal place of business those records
required by the Act to be maintained there.
Section 1.07. Registered Agent and Office. The Registered Agent (as
defined in the Act) for the Partnership shall be The Corporation Trust Co. The
Registered Office (as defined in the Act) of the Partnership shall be 1209
Orange St., Wilmington, Delaware 19801.
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority.
(a) Subject to the provisions of this Section 2.01, the General
Partner shall have the sole and exclusive right to carry out any and all of the
objectives and purposes of the Partnership in the name of the Partnership and
to perform all acts and enter into and perform all contracts and other
undertakings that it may in its discretion deem necessary or advisable or
incidental thereto, all in accordance with the terms of this Agreement.
Without limiting the generality of the foregoing, and subject to the terms of
this Agreement, including without limitation Section 2.01(b) hereof, the
General Partner shall have the exclusive authority to act for and on behalf of
the Partnership with respect to any of the following matters:
(i) Maintaining, operating, managing and
defending the Partnership Assets, and contracting, as permitted
hereby, with third parties for such purposes and to do such other
things as necessary or appropriate to carry out the terms and
provisions of this Agreement that would be done by a normal and
prudent owner in the ownership, operation and management of his own
property;
(ii) Insuring the Partnership Assets, including,
without limitation, maintaining comprehensive liability coverage, all
as is customarily prudent with respect to the business of the
Partnership;
(iii) Prosecuting, defending, settling, handling,
or otherwise dealing with any threatened or actual claims, litigation,
or similar matters involving the Partnership;
(iv) Subject to the provisions of Section 4.11
hereof, engaging outside accountants, consultants, management
companies, leasing agents and any and all other third-party agents and
assistants, both professional and nonprofessional, on behalf of the
Partnership, and compensating them in such manner and degree as the
General Partner may deem necessary or advisable; and
(v) Performing other obligations and exercising
other rights provided elsewhere in this Agreement to be performed or
exercised by the General Partner.
3
<PAGE> 7
No third party shall ever be required to inquire into the authority of the
General Partner to take any action or consummate any transaction on behalf of
the Partnership, and third parties shall be entitled to rely exclusively on the
representations of the General Partner as to its authority to take such actions
and enter into such transactions. The General Partner shall have the rights,
authority and powers of a general partner with respect to the Partnership
business and the Partnership Assets as set forth in the Act as in effect upon
the Effective Date of this Agreement to the extent necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership. The
General Partner shall not be required to devote its full time and attention to
the business of the Partnership, but only such time as is necessary or
appropriate for the proper conduct of the Partnership's affairs.
(b) Notwithstanding anything in this Agreement to the contrary,
the General Partner shall not have the right or the power to make any
commitment or engage in any undertaking on behalf of the Partnership or the
Tele-Com Entities in respect of any of the actions or matters described below
in this Section 2.01(b) unless and until such undertaking or commitment in
respect of such action or matter has been approved in writing by the Limited
Partner. Such actions or matters are as follows:
(i) acquiring or agreeing to acquire any business other
than the Systems;
(ii) selling or otherwise disposing of, or agreeing to
sell or otherwise dispose of, substantially all the assets of the
Partnership, Tele-Com or Northwest, except in a liquidating sale upon
dissolution of the Partnership and (i) Tele-Com or (ii) Northwest, as
appropriate, in accordance with this Agreement and (i) the Limited
Partnership Agreement of Tele-Com or (ii) the Limited Partnership
Agreement of Northwest, as appropriate;
(iii) merging or consolidating with any other Person;
(iv) making, executing, or delivering any assignment for
the benefit of creditors;
(v) incurring indebtedness for borrowed money outside the
ordinary course of business;
(vi) incurring indebtedness for borrowed money or
refinancing, recasting increasing, modifying, or extending any
indebtedness for borrowed money of the Partnership, Tele-Com or
Northwest where the amount involved exceeds $1,500,000;
(vii) securing any indebtedness of the Partnership,
Tele-Com or Northwest by mortgage, pledge, or other lien on any
substantial part of the property of the Partnership, Tele-Com or
Northwest;
(viii) commencing or settling any litigation where the
amount involved exceeds $50,000;
4
<PAGE> 8
(ix) guarantying the obligation of any Person outside the
ordinary course of business or where the amount involved exceeds
$50,000;
(x) doing any act in contravention of this Agreement, the
Limited Partnership Agreement of Tele-Com, the Limited Partnership
Agreement of Northwest, the Certificate, or the respective Certificate
of Limited Partnership of the Tele-Com Entities;
(xi) doing any act that would make it impossible to carry
on the business of the Partnership, Tele-Com or Northwest except upon
the dissolution of the Partnership and (i) Tele-Com or (ii) Northwest,
as appropriate, in accordance with this Agreement and (i) the Limited
Partnership Agreement of Tele-Com or (ii) the Limited Partnership
Agreement of Northwest, as appropriate;
(xii) confessing a judgment against the Partnership,
Tele-Com or Northwest;
(xiii) using any funds or assets of the Partnership,
Tele-Com or Northwest other than for the benefit of the Partnership
and (i) Tele-Com or (ii) Northwest, as appropriate;
(xiv) possessing property of the Partnership, Tele-Com or
Northwest, or assigning any rights in specific property the
Partnership, Tele-Com or Northwest, for other than a partnership
purpose of the Partnership, Tele-Com or Northwest;
(xv) knowingly taking any action that would subject the
Limited Partner in its capacity as a limited partner to personal
liability as a general partner in any jurisdiction;
(xvi) admitting additional partners to the Partnership,
Tele-Com or Northwest;
(xvii) entering into any transaction with any Partner
Affiliate of the General Partner; or
(xviii) making any determination with respect to
indemnification under Section 2.05.
Section 2.02. Affiliates. The General Partner shall have the right
to cause the Partnership, Tele-Com or Northwest to enter into contracts or
otherwise deal with any Partner Affiliate in any capacity, except that the
terms of any such arrangement shall be commercially reasonable and competitive
with amounts that would be paid to third parties on an "arms-length" basis.
The parties hereto acknowledge and agree that concurrently with the acquisition
by the Tele-Com Entities of the Systems, the Tele-Com Entities will each enter
into a management agreement (the "Management Agreements") with TCA Management
Company, a Partner Affiliate of the Limited Partner, on terms and conditions
mutually agreeable to TCA Management Company and the General Partner. The
parties hereto further acknowledge and agree that the terms and conditions of
the Management Agreements shall be deemed to meet the standards set forth in
the first sentence of this Section 2.02. For purposes of this Agreement, a
"Partner Affiliate" is defined to mean (i) any shareholder, director, officer,
partner in, employee, family member or agent of any Partner, or (ii) any Person
controlling directly or
5
<PAGE> 9
indirectly, any Person controlled directly or indirectly by, or any Person
under common control with, any Partner; "Control" means the possession,
directly or indirectly, of the power to direct the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and "Person" means an individual, corporation, trust, association,
partnership or other entity unless otherwise indicated.
Section 2.03. Expenses. The Partnership shall pay or reimburse the
General Partner for all costs and expenses reasonably and necessarily incurred
by it with respect to the formation of the Partnership and to its duties under
this Agreement, including, without limitation, accounting expenses, legal fees
and other direct costs associated with the formation and operation of the
Partnership and its business.
Section 2.04. Management Fee. In consideration of the General
Partner's services under this Agreement, the Partnership shall pay to the
General Partner a management fee of $12,000 per year, which shall be payable in
equal monthly installments on the last day of each month.
Section 2.05. Exculpation; Indemnities.
(a) Neither any Partner nor any Partner Affiliate (individually an
"Actor" and collectively, the "Actors") shall be liable to the Partnership or
any Partner for (i) any act or omission taken or suffered by any Actor in
connection with the conduct of the business of the Partnership that is in good
faith or not opposed to the best interests of the Partnership, unless such act
or omission constitutes willful misconduct, bad faith, or fraud by such Actor
or involves the receipt of improper personal benefits by such Actor, (ii) any
act or omission taken or suffered by any Actor in the good faith exercise of
discretion or judgment as provided by this Agreement, unless such act or
omission constitutes willful misconduct, bad faith or fraud by such Actor or
involves the receipt of improper personal benefits by such Actor, or (iii) any
mistake, negligence, dishonesty or bad faith of any employee, broker or other
agent of the Partnership selected, engaged or retained by an Actor in good
faith.
(b) The Partnership shall (except as otherwise provided in Section
2.05(d) below) indemnify and hold harmless the General Partner, the Limited
Partner, any of the Partner Affiliates, and any of their respective employees,
agents, directors and officers (each individually, an "Indemnitee") in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, to which an Indemnitee
was or is a party or is threatened to be made a party by reason of the fact
that it is or was a Partner, a Partner Affiliate or an employee, agent,
director, or officer of a Partner or a Partner Affiliate, involving an alleged
cause of action arising from the activities of such Indemnitee and which
activities were on behalf of the Partnership, its property, business or
affairs, or any appeal in such action, suit or proceeding or in any inquiry or
investigation that could lead to such an action, suit or proceeding, and the
Partnership shall (except as otherwise provided in Section 2.05(d) below)
indemnify such Indemnitee against any and all losses, claims, demands,
liabilities, costs and expenses, including reasonable attorneys' fees,
accountants' fees, judgments, penalties (including excise and similar taxes),
fines and amounts paid in settlement, actually incurred by such Indemnitee in
connection with such action, suit or proceeding (collectively "Losses"), if
such Indemnitee acted in good faith and in a manner he or it
6
<PAGE> 10
reasonably believed to be in or not opposed to the best interests of the
Partnership and if such Indemnitee's conduct does not constitute gross
negligence or willful or wanton misconduct or fraud. The termination of a
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, determine or create a
presumption that an Indemnitee did not act in good faith and in a manner that
he or it reasonably believed to be in, or not opposed to, the best interests of
the Partnership, nor shall any such termination of a proceeding, of itself,
determine or create a presumption that the Indemnitee was grossly negligent or
was guilty of willful or wanton misconduct or fraud or the recipient of an
improper personal benefit unless a specific finding to such effect is included
in such judgment, order, settlement, conviction or plea.
(c) If the Partnership determines that there is a reasonable
likelihood that the Indemnitee will be entitled to indemnification in
accordance with the standards set forth in subsection (b) above, all reasonable
expenses (including reasonable legal fees and expenses) incurred in defending
any proceeding shall be paid by the Partnership in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of the Indemnitee to repay such amount if it shall ultimately be determined, by
a court of competent jurisdiction or otherwise, that the Indemnitee is not
entitled to be indemnified by the Partnership as authorized hereunder.
(d) Any such indemnification shall be made only out of the assets
of the Partnership, and in no event may an Indemnitee subject the Limited
Partner or the General Partner to personal liability by reason of these
indemnification provisions.
(e) The indemnification provided by this Section 2.05 shall be in
addition to any other rights to which those indemnified may be entitled, in any
capacity, under any agreement, vote of the Partners, as a matter of law or
otherwise and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitee.
(f) To the extent obtainable on reasonable terms as determined in
the discretion of the General Partner, the Partnership may purchase and
maintain insurance on behalf of the Indemnitees or liability insurance on
behalf of the Partnership relating to claims for indemnification against any
liability which may be asserted against or expense which may be incurred by
such persons in connection with the Partnership's activities, whether or not
the Partnership would have the power to indemnify such Persons against such
liability under the provisions of this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 2.05 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement; provided,
however, that in the event the Indemnitee is a Partner Affiliate other than a
Partner, such Partner Affiliate shall not be exculpated or indemnified under
this Section 2.05 unless such exculpation or indemnification is commercially
reasonable and competitive and consistent with arrangements that would be made
with third parties on an "arms-length" basis.
7
<PAGE> 11
(h) The provisions of this Section 2.05 shall survive any
termination of this Agreement and are for the benefit of the Indemnities, their
heirs, successors, assigns and administrators, and shall not be deemed to
create any rights for the benefit of any other Persons.
(i) To the extent permitted by applicable law, all the
determinations by and actions of the Partnership pursuant to this Section 2.05
shall be made only with the prior written approval of the General Partner and
the Limited Partner. In the event that (i) the Act and applicable law requires
that any determination under this Section 2.05 be made other than as provided
herein or (ii) the General Partner and Limited Partner refuse or are unable to
make any determination or take action under this Section 2.05, then such
determination shall be made by special legal counsel selected by the General
Partner pursuant to the provisions of the Act. Any "special legal counsel"
selected by the General Partner to make any determination required under the
Act or this Section 2.05 shall be a law firm, or member of a law firm,
experienced in matters of corporation and partnership law and which neither
presently is, nor in the past five (5) years has been, retained to represent
the Partnership, any Partner or Partner Affiliate, the Indemnitee or any other
party to the proceeding giving rise to the claim for indemnification, and shall
not include any Person who, under prevailing applicable standards of
professional conduct, would have a conflict of interest with the Indemnitee,
the Partnership, any Partner or Partner Affiliate, or any other party to such
proceeding. No special legal counsel appointed pursuant to the provisions of
this Section 2.05(i) shall be liable, responsible or accountable in damages for
any act, omission or decision of such special legal counsel pursuant to its
authority under this Section 2.05(i) nor shall such special legal counsel have
any liability to the Indemnitee, the Partnership, any of the Partners or their
Partner Affiliates, provided such act, omission or decision was not taken or
made in bad faith.
Section 2.06. Permitted Transactions. Any Partner or any Partner
Affiliate, agent, or representative of any Partner, may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, whether currently existing or hereafter created and whether or
not competitive with or advanced by the business of the Partnership. Neither
the Partnership nor the other Partner shall have any rights in or to the income
or profits derived therefrom, nor shall a Partner have any obligation to the
other Partner with respect to any such enterprise or related transaction.
8
<PAGE> 12
ARTICLE III
FINANCING
Section 3.01. Capital Contributions.
(a) Each Partner has agreed to contribute to the capital of the
Partnership contemporaneously with the execution of this Agreement the amount
of cash set forth opposite such Partner's name in the column headed "Initial
Capital Contribution" on Schedule A hereto (collectively, the "Initial Capital
Contributions").
(b) Each Partner has agreed to contribute to the capital of the
Partnership immediately prior to the consummation by the Tele-Com Entities of
the purchase of the Systems, the amount of cash set forth opposite such
Partner's name in the column headed "Subsequent Capital Contribution" on
Schedule A hereto (collectively, the "Subsequent Capital Contributions," the
Initial Capital Contributions and the Subsequent Capital Contributions being
herein collectively referred to as the "Capital Contributions").
Section 3.02. Limited Liability of Limited Partner. Except as
provided in the Act, the Limited Partner shall not have any personal liability
whatsoever, either to the Partnership or any third party, for the debts of the
Partnership or any of its losses beyond the amount of the capital contribution
required of the Limited Partner under Section 3.01. Accordingly, the Limited
Partner shall not be obligated to provide additional capital to the Partnership
or its creditors by way of contribution, loan or otherwise beyond the amount of
the capital contribution made or required to be made by the Limited Partner
pursuant to Section 3.01 hereof. In the event that the Limited Partner
provides additional capital to the Partnership by way of contribution, the
General Partner will contribute to the capital of the Partnership an amount of
cash equal to the excess, if any, of 1.01% of the total capital contributions
of the Limited Partner to the Partnership since the inception of the
Partnership over the previous capital contributions of the General Partner.
Section 3.03. Treatment of Capital Contributions. Except as may be
provided in this Agreement to the contrary, no Partner shall be entitled to
interest on its capital contributions nor shall any Partner be entitled to
demand the return of all or any part of such capital contributions.
Section 3.04. Loans from Partners. Subject to the approval of the
terms thereof by the General Partner, acting in its reasonable discretion, any
Partner or Partner Affiliate may make a loan to the Partnership upon
commercially reasonable terms. Loans by a Partner or Partner Affiliate to the
Partnership shall not be considered Capital Contributions.
Section 3.05. Financing. To finance the business of the Partnership,
including the acquisition of property, the construction of improvements on land
or leaseholds, or for any other Partnership purposes, the General Partner may,
subject to Section 2.01(b), for the Partnership or on behalf of Tele-Com or
Northwest, arrange for the obtaining of loans or for the refinancing of any
loans, and may pledge the assets of the Partnership, Tele-Com or Northwest,
therefor.
9
<PAGE> 13
Section 3.06. Disbursements. The Partnership shall pay all costs and
expenses of the Partnership business, including financing costs and related
expenses, real estate taxes and other carrying charges, all costs of
construction of improvements on Partnership property or leaseholds, management,
leasing, and loan placement fees, and operating expenses, and including all
reasonable costs and expenses incurred by or on behalf of the Partnership by
the Partners. The Partnership may set aside funds for any items that are
proper Partnership purposes, including operating expenses, debt service,
capital improvements, replacements, repairs, amortization and other capital
requirements, and liabilities, contingent or otherwise, of the Partnership,
Tele-Com or Northwest, in each case as reasonably determined by the General
Partner.
Section 3.07. Withdrawal of Contributions. No Partner shall have the
right to withdraw from the Partnership or to demand a return of all or any part
of its Capital Contribution during the term of the Partnership, and any return
of the Capital Contribution of either Partner shall be made solely from the
Partnership Assets and only in accordance with the terms of this Agreement. No
interest shall be paid to either Partner with respect to its Capital
Contribution to the Partnership. The Partners expressly acknowledge that
certain provisions of this Agreement, which may preclude a Partner from
realizing appreciation in the value of Partnership Assets, are essential to
protect the Partners' mutual interests in the Partnership Assets; accordingly,
the Partners hereby waive any right they otherwise would have to seek a
partition or judicial liquidation of the Partnership or any comparable action.
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions. For purposes of this Agreement,
the following capitalized terms shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership
Act.
"Adjusted Capital Account" means, with respect to a Partner,
the balance in such Partner's Capital Account as of the end of the relevant
Fiscal Year, after giving effect to the following adjustments : (i) increase
such Capital Account by any amounts which the Partner is obligated to restore
or is treated as being obligated to restore pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(c); (ii) increase such Capital Account by an amount
which the Partner is deemed to be obligated to restore represented by such
Partner's share of Partnership Minimum Gain pursuant to Treasury Regulation
Section 1.704-2(g)(1); (iii) decrease such Capital Account by the items
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6);
(iv) increase such Capital Account by the amount, if any, of the Partner's
Modified Economic Risk of Loss that such Partner is treated as bearing within
the meaning of Treasury Regulation Section 1.752-2 with respect to partnership
liabilities; and (v) increase such Capital Account by an amount which the
Partner is deemed to be obligated to restore represented by such Partner's
share of Partner Minimum Gain pursuant to Treasury Regulation Section
1.704-2(i)(5). This definition shall be interpreted consistently with Treasury
Regulation Section 1.704-1(b)(2)(ii)(d).
10
<PAGE> 14
"Business Day" means when used to indicate the time at which a
valuation or accounting is to be made, the close of business (5:00 p.m. Central
Standard time) on the date specified and shall mean a weekday on which national
banks in Dallas, Texas are required to be open for business.
"Capital Account" means for each Partner the account
established pursuant to Section 4.02 hereof and maintained in accordance with
the provisions of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
"Contribution Percentage", as to any Partner, means the
percentage set forth opposite such Partner's name on Schedule A hereto under
the column headed "Contribution Percentage."
"Distributable Cash" means, with respect to the Partnership
for a period of time, all funds of the Partnership on hand or in bank accounts
of the Partnership as, in the reasonable discretion of the General Partner, is
available for distribution to the Partners after provision has been made for
(i) payment of all operating expenses of the Partnership as of such time, (ii)
provision for payment of all outstanding and unpaid current obligations of the
Partnership as of such time, and (iii) provision for such reserves as the
General Partner deems reasonably necessary or appropriate for Partnership
operations.
"Fiscal Year" means the twelve months ended October 31 in each
year (or the twelve months ended December 31 if the Partnership is required to
use the calendar year); provided that the first Fiscal Year of the Partnership
shall commence on the Effective Date and continue through October 31, 1994 (or
December 31, 1993 if the Partnership is required to use the calendar year).
"Income" means, for each Fiscal Year or other period, each
item of income and gain as determined, recognized and classified for federal
income tax purposes, provided that any income or gain that is exempt from
federal income tax shall be included as if it was an item of taxable income.
"Loss" means, for each Fiscal Year or other period, each item
of loss or deduction as determined, recognized and classified for federal
income tax purposes, increased by (i) expenditures described in Section
705(a)(2)(B) of the Code, (ii) expenditures contemplated by Section 709 of the
Code (except for amounts with respect to which an election is properly made
under Section 709(b) of the Code); and (iii) a deduction for a loss incurred in
connection with the sale or exchange of any Partnership Assets that is
disallowed to the Partnership under Section 267(a)(1) or Section 707(b) of the
Code.
"Modified Economic Risk of Loss" of any Partner means, as of
any date, the economic risk of loss borne by such Partner with respect to
recourse debt of the Partnership (determined, as of the date in question, by
assuming, for purposes of Section 1.752-2(b) of the Treasury Regulations, that
the Partnership constructively liquidates on such date [within the
11
<PAGE> 15
meaning of Section 1.752-2(b)(1) of the Treasury Regulations] except that all
Partnership properties shall be deemed thereunder to be transferred in fully
taxable exchanges for an aggregate amount of cash consideration equal to their
respective book bases and such consideration shall be deemed thereunder to be
used, in the appropriate order of priority, in full or partial satisfaction of
all Partnership liabilities).
"Net Income" and "Net Loss" means, for each Fiscal Year or
other period, (i) the excess of the Income for such period over the Loss for
such period, or (ii) the excess of the Loss for such period over the Income for
such period, respectively; provided, however, Net Income and Net Loss for a
Fiscal Year shall be computed by excluding from such computation any Income and
Loss specially allocated under Section 4.04, any Nonrecourse Deductions, any
Partner Nonrecourse Deductions and any Income or Loss specially allocated under
Section 4.03(b).
"Nonrecourse Deductions" means, for any Fiscal Year, an amount
of Partnership deductions that are characterized as "nonrecourse deductions"
pursuant to Section 1.704-2(b)(1) and Section 1.704-2(c) of the Treasury
Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Northwest" shall mean "Tele-Communications of Northwest
Arkansas Limited Partnership, a Delaware limited partnership."
"Operating Cash Flow" means, for any period, the net income of
the Systems, after deducting all expenses, taxes, and other proper charges,
determined on a consolidated basis for all Systems in accordance with generally
accepted accounting principles consistently applied and maintained, plus (to
the extent they were deducted in determining net income) interest expense
(regardless whether accrued or paid), income tax expense, amortization and
depreciation, and all other non-cash charges to income, and minus (to the
extent they were included in net income) all extraordinary non-recurring items
of income and all non-cash income.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations.
"Partnership Interest" means a Partner's ownership interest in
the Partnership which at all times shall be a percentage equal to such
Partner's Contribution Percentage.
12
<PAGE> 16
"Partnership Minimum Gain" has the meaning set forth in and
shall be determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
"Person" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership or other entity or organization.
"Systems" means the cable television systems serving the towns
of Fayetteville, Elkins, Farmington, Greenland, Russellville, Booneville,
Paris, Clarksville, Johnson City, Pottsville, Pope County, unincorporated areas
of Washington County, Arkansas and other unincorporated areas within Arkansas
counties in which the foregoing cities are located to be purchased by the
Tele-Com Entities from Time Warner Entertainment Company, L.P., through its
division Time Warner Cable.
"tax matters partner" has the meaning set forth in Section
4.08 hereof.
"Tele-Com" shall mean "Tele-Communications of Arkansas Limited
Partnership, a Delaware limited partnership."
"Tele-Com Entities" shall mean Tele-Com and Northwest.
"Treasury Regulations" shall mean the Income Tax Regulations
and Temporary Regulations promulgated under the Code, as such regulations may
be amended from time to time (including corresponding provisions of succeeding
regulations).
Section 4.02. Capital Accounts.
(a) The Partnership shall maintain a separate capital account
(each a "Capital Account") for each Partner pursuant to the principles of this
Section 4.02 and Treasury Regulation Section 1.704-1(b)(2)(iv). Each Partner
shall have only one Capital Account, regardless of the number of interests in
the Partnership owned by such Partner and regardless of the time or manner in
which such interests were acquired by such Partner. Pursuant to the rules of
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, the balance of each
Partner's Capital Account shall be increased by (i) the amount of the Capital
Contribution of such Partner to the Partnership under Section 3.01, and (ii)
such Partner's allocable share of Partnership Net Income pursuant to Section
4.03 and special allocations of Income determined pursuant to Section 4.03 and
Section 4.04. Such Capital Account shall be decreased by (i) the amount of
cash distributed to the Partner by the Partnership and (ii) such Partner's
allocable share of Net Loss pursuant to Section 4.03 and special allocations of
Loss determined pursuant to Section 4.03 and Section 4.04.
(b) The provisions of this Section 4.02 and other portions of this
Agreement relating to the proper maintenance of Capital Accounts are designed
to comply with the requirements of Treasury Regulation Section 1.704-1(b). The
Partners intend that such provisions be interpreted and applied in a manner
consistent with such Treasury Regulations.
13
<PAGE> 17
Section 4.03. Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, Income, Loss and Nonrecourse Deductions, and Partner
Nonrecourse Deductions from and after the Effective Date shall first be
specially allocated as provided in Section 4.04. The Partnership's Net Income,
Net Loss, Income or Loss for all Fiscal Years from and after the Effective Date
shall then be allocated as follows and in the following order of priority:
(a) The Partnerships' Net Income or Net Loss, if any, for a Fiscal
Year then shall be allocated to the Partners in accordance with their
respective Contribution Percentages; provided, however, that to the extent Net
Losses allocated to a Partner would create or increase a deficit in such
Partner's Adjusted Capital Account at the end of a Fiscal Year, such Net Losses
shall not be allocated to such Partner and instead shall first be allocated to
any other Partner with a positive balance in its Adjusted Capital Account until
such balance is reduced to zero and thereafter shall be allocated to the
General Partner. Thereafter, allocations of Net Income shall first be
allocated to the General Partner up to an amount equal to the total Net Losses
allocated to the General Partner pursuant to the last portion of the foregoing
proviso and thereafter shall be allocated to the Partners up to an amount equal
to the total Net Losses allocated to such Partners pursuant to the first
portion of the foregoing provision.
(b) Curative Allocations. To minimize any economic distortions
that would alter the economic arrangement of the Partners, special allocations
pursuant to Section 4.04 shall be taken into account in computing subsequent
special allocations of Income or Loss pursuant to this Section 4.03, so that
the net amounts allocated to each Partner pursuant to this Section 4.03 and
Section 4.04 shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Partner pursuant to this Section 4.03 if
such special allocations had not occurred.
Section 4.04. Special Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of Income, Nonrecourse Deductions and
Partner Nonrecourse Deductions shall be specially allocated as provided in this
Section 4.04, prior to any allocations of Net Income, Net Loss, Income and Loss
as set forth in Section 4.03, as follows and in the following order of priority
(after giving effect to all Capital Account adjustments attributable to Capital
Contributions and distributions).
(a) Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during a Partnership Fiscal Year, except as otherwise
provided in Treasury Regulation Section 1.704-2(f) each Partner will be
specially allocated, prior to any other allocation made under Section 704(b) of
the Code of Partnership items for such Fiscal Year, items of Income for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to
such Partner's share of the net decrease in Partnership Minimum Gain
(determined pursuant to Treasury Regulation Section 1.704-2(g)(2)). The items
to be so allocated and the order of such allocation shall be determined in
accordance with Section 1.704-2(f)(6) and Sections 1.704-2(j)(2)(i) and (iii)
of the Treasury Regulations. This Section 4.04(a) is intended to constitute a
"minimum gain chargeback" within the meaning of Treasury Regulation Section
1.704-2(f).
14
<PAGE> 18
(b) Partner Minimum Gain Chargeback. If there is a net decrease
in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during a
Partnership Fiscal Year, except as otherwise provided in Treasury Regulation
Sections 1.704-2(i)(4) and provisions consistent with Treasury Regulation
Sections 1.704-2(f)(2), (3), (4) and (5) each Partner who has a share of
Partner Minimum Gain attributable to such Partner Nonrecourse Debt as of the
beginning of the Fiscal Year, determined in accordance with Section
1.704-2(i)(5) of the Treasury Regulations, will be specially allocated items of
Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain (determined in a manner consistent with the provisions of Treasury
Regulation Section 1.704-2(g)(2)). The items to be so allocated shall be
determined in accordance with Section 1.704-2(i)(4) and Sections
1.704-2(j)(2)(i) and (iii) of the Treasury Regulations. This Section 4.04(b)
is intended to constitute a "minimum gain chargeback" with respect to Partner
Nonrecourse Debt within the meaning of Treasury Regulation Section
1.704-2(i)(4).
(c) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulation Section 1.704-2(i)(1).
(d) Nonrecourse Deductions. Any Nonrecourse Deductions for any
Fiscal Year or other period shall be allocated in accordance with the
Contribution Percentages of the Partners.
(e) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) or receives any other
distributions causing a deficit in such Partner's Adjusted Capital Account at
the end of such Fiscal Year (determined after giving effect to any allocations
required by Section 4.04(a) and (b) but before giving effect to any other
allocations required by this Section 4.04(e)), items of Partnership Income
shall be specially allocated to such Partner (consisting of a pro rata portion
of each item of Partnership Income, including gross income, for such year) in
an amount and manner sufficient to eliminate such deficit, if any, in such
Partner's Adjusted Capital Account (determined after giving effect to any
allocations required by Section 4.04(a) and (b) but before giving effect to any
other allocations required by this Section 4.04(e)), as quickly as possible.
This Section 4.04(e) is intended to constitute a "qualified income offset"
within the meaning of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
Section 4.05. Allocations for Tax Purposes. Except as otherwise
provided herein or required by law, each item of income, gain, loss, deduction
and credit of the Partnership shall be allocated to the Partners in the same
manner as such allocations are made for book purposes pursuant to Sections 4.03
and 4.04. In the event of a transfer of, or other change in, a Partnership
interest during a Fiscal Year, each item of taxable income and loss shall be
prorated in accordance with Section 706 of the Code, using any convention
permitted by law and selected by the General Partner.
15
<PAGE> 19
Section 4.06. Distributions to Partners. Distributable Cash of the
Partnership shall be distributed at such times and in such amounts as the
General Partner may reasonably determine, but not more often than annually.
Distributions shall be made to Partners on a pro rata basis based on the
respective Contribution Percentages of the Partners.
Section 4.07. Tax Status, Elections and Modifications to Allocations.
(a) Notwithstanding any provision contained in this Agreement to
the contrary, solely for federal income tax purposes, each of the Partners
hereby recognizes that the Partnership will be subject to all provisions of
Subchapter K of the Code; provided, however, that the filing of United States
Partnership Returns of Income shall not be construed to extend the purposes of
the Partnership or expand the obligations or liabilities of the Partners.
(b) The General Partner, with the consent of the Limited Partner,
may cause the Partnership to elect pursuant to Section 754 of the Code and the
Treasury Regulations to adjust the basis of the Partnership Assets as provided
by Section 743 or 734 of the Code and the Treasury Regulations thereunder. The
Partnership shall make such elections for federal income tax purposes as may be
determined by the General Partner, with the consent of the Limited Partner.
(c) The General Partner or the Terminating Partner (as defined in
Section 7.05(a) hereof), as appropriate, shall prepare and execute any
amendments to this Agreement necessary for the Partnership to comply with the
provisions of Treasury Regulations Sections 1.704-1(b), 1.704-1(c) and 1.704-2
or that the General Partner considers appropriate upon the happening of any of
the following events: (i) a constructive termination of the Partnership
pursuant to Code Section 708(b)(1)(B) or (ii) the contribution or distribution
of any property, other than cash, to or by the Partnership.
Section 4.08. Tax Matters Partner.
(a) Subject to the provisions hereof, the General Partner is
designated as the "tax matters partner" of the Partnership (as defined in the
Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and
costs associated therewith in a manner which, the General Partner, in its
reasonable business judgment deems to be in the best interests of the
Partnership and the Partners. The Limited Partner agrees to cooperate with the
tax matters partner and to do or refrain from doing any or all things
reasonably required by the tax matters partner to conduct such proceedings.
(b) Notwithstanding anything to the contrary in Section 4.08(a)
above, the General Partner, in its capacity as tax matters partner, may not
take any of the following actions without the prior consent of the Limited
Partner:
(i) Enter into a settlement agreement with the
Internal Revenue Service which purports to bind the Partners
other than the tax matters partner;
16
<PAGE> 20
(ii) File a petition as contemplated in Code
Section 6226(a) or Code Section 6228;
(iii) Intervene in any action as contemplated in
Code Section 6226(b)(5);
(iv) File any request contemplated in Code Section
6227(b); and
(v) Enter into any agreement extending the period
of limitations as contemplated in Code Section 6229(b)(1)(B).
(c) To the extent and in the same manner as provided by applicable
law, the General Partner, as tax matters partner, (i) shall furnish the name,
address, and taxpayer identification number of each Partner to the Secretary of
the Treasury of his delegate, and (ii) shall keep each Partner informed of any
administrative and judicial proceedings for the adjustment at the Partnership
level of any items required to be taken into account by a Partner for income
tax purposes. The General Partner shall give notice to each Partner of a
Partnership audit. The General Partner will consult with the Limited Partner
with respect to the performance of its duties as "tax matters partner."
Section 4.09. Books of Account.
(a) The General Partner shall maintain the Partnership's books and
records and shall determine all items of Income, Loss, Net Income and Net Loss
in accordance with generally accepted accounting practices. All of the
records and books of account of the Partnership shall at all times be
maintained at the principal office of the Partnership and shall be open to the
inspection and examination of the Partners or their representatives during
reasonable business hours. Such right may be exercised through any agent or
employee of a Partner designated by it or by an attorney or independent
certified public accountant designated by such Partner.
(b) All expenses in connection with the keeping of the books and
records of the Partnership and the preparation of audited or unaudited
financial statements required to implement the provisions of the Agreement or
otherwise needed for the conduct of the Partnership's business shall be borne
by the Partnership as an ordinary expense of its business.
Section 4.10. Partnership Tax Returns and Annual Statement. The
General Partner shall cause the Partnership to file a federal income tax return
and all other tax returns required to be filed by the Partnership for each
Fiscal Year or part thereof, and shall provide to each Person who at any time
during the Fiscal Year was a Partner an audited annual statement (including a
copy of Schedule K-1 to Internal Revenue Service Form 1065) indicating such
Partner's share of the Partnership's income, loss, gain, expense and other
items relevant for federal income tax purposes.
Section 4.11. Independent Auditors. The books and records of the
Partnership shall be audited by Coopers & Lybrand or another independent
internationally recognized accounting
17
<PAGE> 21
firm selected by the General Partner and approved in writing by the Limited
Partner as of the end of each Fiscal Year of the Partnership.
Section 4.12. Financial Reports to Limited Partners. Within 90 days
after the end of each Fiscal Year, the Partnership shall prepare and mail to
each Partner, together with a report thereon of the Partnership's independent
auditors setting forth:
(i) a balance sheet of the Partnership at Fiscal
Year end; and
(ii) statements of income and cash flows for the
immediately preceding Fiscal Year.
Section 4.13. Bank Accounts. The bank account or accounts of the
Partnership shall be maintained in the bank approved by the General Partner.
The terms governing such accounts shall be determined by the General Partner
and withdrawals from such bank accounts shall only be made by the General
Partner or such other parties as may be approved by the General Partner.
Section 4.14. Minimum Allocation to General Partners.
Notwithstanding anything to the contrary that may be expressed or implied in
this Agreement (other than allocations required pursuant to Section 704(b) or
Section 704(c)), the interest of the General Partner in each item of income,
gain, loss, deduction and credit will not be less than one percent of each such
item at all times during the existence of the Partnership.
ARTICLE V
REMOVAL OF GENERAL PARTNER
Section 5.01. Generally. The Limited Partner, may remove a General
Partner from the Partnership if:
(a) The General Partner has been found by a court of competent
jurisdiction or an arbitrator appointed jointly by the Partners to have engaged
in conduct constituting fraud, willful misconduct, or negligence against the
Partnership, Tele-Com or Northwest or to have committed a material breach of
its obligations under this Agreement or to have caused the Partnership to have
committed a material breach of its obligations under the Limited Partnership
Agreement of Tele-Com or the Limited Partnership Agreement of Northwest,
regardless whether such finding is subject to reconsideration, review, or
appeal;
(b) The General Partner has been found by the Federal
Communications Commission, any municipality, or any state regulatory agency or
court having jurisdiction to be unqualified to hold any governmental license,
permit, franchise, or other authorization necessary for the conduct of the
business of the Partnership, Tele-Com or Northwest, or if the Partnership,
Tele-Com or Northwest has been found by the Federal Communications Commission,
any municipality, or any state regulatory agency or court having jurisdiction
to be unqualified to hold
18
<PAGE> 22
any governmental license, permit, franchise, or other authorization necessary
for the conduct of its business as a result of the participation of the General
Partner in the ownership or management of the Partnership, in each case
regardless whether such finding is subject to reconsideration, review, or
appeal;
(c) the Partnership, Tele-Com or Northwest shall be in default in
the payment of any indebtedness for borrowed money or the compliance with any
term of any evidence of indebtedness for borrowed money or any agreement
relating thereto, the default shall have caused the indebtedness to be due
prior to its stated maturity, and the aggregate amount of the indebtedness
caused to be due prior to its stated maturity exceeds $100,000; or
(d) a proceeding is commenced by or against the General Partner
under the bankruptcy, arrangement, reorganization or other debtor relief laws
of the United States or any state, or the General Partner makes an assignment
for the benefit of creditors or Robert McMillian dies or is incapacitated.
Section 5.02. Effect of Removal. The removal of the General Partner
as General Partner shall be effective following the receipt of any government
approvals (if any) required prior to a change in control of the Partnership.
Once removed, the General Partner (i) shall not take part, directly or
indirectly, in its capacity as a Partner or otherwise, in the control,
management, direction, or operation of the affairs of the Partnership, and (ii)
shall cease to be a General Partner of the Partnership and shall thereafter be
a Limited Partner of the Partnership without any change in its Capital Account,
Contribution Percentage or Partnership Interest. The Partners shall undertake
to obtain any necessary government approvals as soon as practicable after an
election by the Limited Partner to remove the General Partner as General
Partner. The General Partner irrevocably constitutes and appoints the Limited
Partner as the General Partner's true and lawful attorney-in-fact, with full
power and authority in the name, place, and stead of the General Partner to
agree to continue the business of the Partnership following the removal of the
General Partner as General Partner and to appoint a Person to be a successor
general partner of the Partnership (the "Successor General Partner"), effective
as of the date of the removal of the General Partner. The Successor General
Partner shall be required to purchase from the Limited Partner a Partnership
Interest having a Percentage Interest of at least 1%. At the time of
appointment of the Successor General Partner, the Successor General Partner,
the Limited Partner and the removed General Partner shall execute such
amendments to this Agreement as the Successor General Partner and the Limited
Partner in their sole discretion deem appropriate.
ARTICLE VI
ASSIGNMENT
Section 6.01. Transfers Generally.
(a) Except as specifically provided in this Article VI, (i) the
Limited Partner may not sell, transfer, assign, give, pledge, mortgage,
hypothecate or otherwise encumber or permit or
19
<PAGE> 23
suffer any encumbrance (each a "Transfer") of all or any part of its interest
in the Partnership unless written consent is obtained from the General Partner
(which consent may be withheld by the General Partner arbitrarily in its sole
discretion) and the requirements of Section 6.01(b) below have been met;
provided, however, that notwithstanding anything in this Article VI to the
contrary, a Limited Partner may assign its interest in the Partnership in its
entirety to a Partner Affiliate without the consent of the General Partner so
long as the requirements of Section 6.01(b) below are met in connection with
such an assignment, and (ii) the General Partner may not Transfer all or any
part of its interest in the Partnership unless written consent is obtained from
the Limited Partner (which consent may be withheld by the Limited Partner
arbitrarily in its sole discretion) and the requirements of Section 6.01(b)
below have been met. Any attempt to so transfer or encumber any such interest
without meeting the requirements of the preceding sentence shall be null and
void, ab initio, and the Partners will be excused from accepting the
performance of and rendering performance to any Person other than the Partner
hereunder (including any trustee or assignee of or for such Partner) as to whom
such requirements have not been met.
(b) In addition to the other requirements of Section 6.01(a) and
subject to the provisions thereof, no Transfer of a Partner's interest in the
Partnership may be made unless the transferee of such interest provides the
Partnership with the following:
(1) an opinion of counsel reasonably acceptable to the
General Partner (in the case of a Transfer by a Limited Partner) or
the Limited Partner (in the case of a Transfer by a General Partner)
that:
(i) The prospective assignee or transferee is an
United States person within the meaning of Code Section
7701(a)(30);
(ii) The Transfer will not cause the Partnership
Assets to be "plan assets" or the transactions contemplated
hereunder to be prohibited transactions under ERISA or the
Code;
(iii) The Transfer will not cause the Partnership
to terminate under Code Section 708;
(iv) The Transfer will not cause the Partnership
to be treated as an association taxable as a corporation for
federal income tax purposes;
(v) The Transfer will not violate any applicable
federal or state securities laws; and
(vi) The Transfer will not cause the Partnership
to be treated as a "publicly traded partnership" within the
meaning of Section 7704 of the Code;
(2) a certificate from the transferor Partner to the
effect that such Transfer will not result in the violation of, or
cause the Partnership to incur a penalty under, any statute,
regulation, case law, judicial or administrative order or decree, or
governmental
20
<PAGE> 24
license or permit, or any interpretation thereof by any governmental
or regulatory authority or court of competent jurisdiction;
(3) an agreement in writing to assume all obligations of
the transferor Partner hereunder relating to the interests to be
Transferred; and
(4) a written representation of such transferee that he
or it is acquiring the interest for his or its own account for
investment and not with a view to distribution, and such other
representations and warranties as the General Partner (in the case of
a Transfer by a Limited Partner) or the Limited Partner (in the case
of a Transfer by a General Partner) may reasonably require to ensure
compliance with applicable federal and state securities laws.
Section 6.02. Consequences of Transfers Generally.
(a) In the event of any transfer or transfers permitted under this
Article VI, the interest so transferred shall remain subject to all terms and
provisions of this Agreement, and the transferee shall be deemed, by accepting
the interest so transferred, to have assumed all the liabilities and
unperformed obligations under this Agreement or otherwise, that are appurtenant
to the interest so transferred; shall hold such interest subject to all
unperformed obligations of the transferor Partner; and shall agree in writing
to the foregoing if requested by the General Partner (in the case of a Transfer
by a Limited Partner) or the Limited Partner (in the case of a Transfer by a
General Partner). Notwithstanding any transfer of interest under this Article
VI, the transferor Partner shall remain jointly and severally liable with his
transferee for all liabilities and unperformed obligations under this Agreement
appurtenant to the interest in the Partnership transferred. In the case of a
transferee who is not already a Partner and until such transferee has been
admitted as a Substituted Partner (as defined in Section 6.03 hereof), such
transferee shall be entitled only to share in Partnership income, deductions,
credits, gains, losses and distributions in accordance with the Contribution
Percentage and Capital Account appurtenant to the interest so transferred and
shall only have the rights of an assignee of a partnership interest under the
Act.
(b) Any Partner making or offering to make a transfer of all or
any part of his or its interest in the Partnership shall indemnify, defend and
hold harmless the Partnership and all other Partners from and against any
losses, expenses, judgments, fines, settlements or damages, suffered or
incurred by the Partnership or any such other Partner arising out of or
resulting from any claims by the transferee of such Partnership interest or any
offerees of such Partnership interest in connection with such transfer or
offer, including without limitation costs, expenses and attorney's fees
expended in the settlement or defense of any such claim, and shall advance such
expenses and attorneys' and accountants' fees incurred in defending such
proceeding in the same manner as under Section 2.05(c) hereof.
Section 6.03. Substituted Partner; Withdrawal of Transferor Partner.
A transferee (other than an existing Partner) of the interest of a Partner may
be admitted as a substitute partner ("Substituted Partner"), and a subsequent
transferor Partner who has transferred his entire interest in the Partnership
may withdraw from the Partnership as a Partner, on the terms
21
<PAGE> 25
specified by and only with the written consent of the General Partner (if the
transferor Partner is a Limited Partner) or of the Limited Partner (if the
transferor Partner is the General Partner), which consent shall be granted or
denied for any reason or for no reason in the sole discretion of the General
Partner or such Limited Partner, as appropriate. The General Partner shall
reflect the admission of the transferee as a Substituted Partner by preparing
an amendment to this Agreement, dated as of the date of such admission and
withdrawal, which amendment shall be signed by all Partners. Upon admission,
such Substituted Partner shall be subject to all provisions of the Agreement as
if the Substituted Partner originally was a party to this Agreement. A
transferee not admitted as a Partner shall have the rights only of an assignee
of a partnership interest.
Section 6.04. Purchase of General Partner's Partnership Interest at
Election of the General Partner or the Limited Partner. Either the General
Partner or the Limited Partner may elect, by giving written notice of its
election to the other Partner, to require that the General Partner sell to the
Limited Partner and the Limited Partner purchase from the General Partner the
entire interest of the General Partner in the Partnership in accordance with
the following terms and conditions:
(a) (i) The General Partner may make an election pursuant to
this Section 6.04 at any time after the first anniversary of the
acquisition by the Tele-Com Entities of the Systems.
(ii) The Limited Partner may make an election pursuant to
this Section 6.04 at any time after the earlier of:
(A) the second anniversary of the acquisition by
the Tele-Com Entities of the Systems,
(B) the first date on which the General Partner
either:
(1) withdraws from the Partnership;
(2) sells, assigns, mortgages, pledges,
encumbers, transfers, or otherwise disposes of all or
any part of its interest in the Partnership in
violation of Section 6.01 of this Agreement;
(3) is removed as General Partner of the
Partnership pursuant to this Agreement;
(4) ceases to be a General Partner of
the Partnership under the Act; or
(5) seeks or causes the dissolution of
the Partnership without the consent of the Limited
Partner; or
22
<PAGE> 26
(C) Robert McMillian dies, is incapacitated, is
adjudged incompetent or, is guilty of willful misconduct or
transfers to any other person or entity any portion of his
equity interest in McMillian Holdings, Inc.
(b) The purchase price for the entire interest of the General
Partner in the Partnership shall equal the greater of (x) $100,000 or (y) 10.2%
times the Net Value of the Tele-Com Entities less the amount of any cash
previously distributed by the Partnership to the General Partner. For purposes
of this Section 6.04(b), the Net Value of the Tele-Com Entities shall equal
twelve (12) times the aggregate net income of Tele-Com and Northwest for the
year ended at the end of the most recent calendar quarter of Tele-Com and
Northwest, respectively, (whether or not a full year shall have then elapsed),
as determined in accordance with generally accepted accounting principles
consistently applied, minus (x) all indebtedness of the Tele-Com Entities for
borrowed money, (y) all capital obligations of the Tele-Com Entities, and (z)
the combined total of the capital contributions of the Partnership and the
Limited Partner to the Tele-Com Entities less returns of capital (each of (x),
(y) and (z) being determined as of the date of the election to purchase/sell
made under this Section 6.04.
(c) The closing of any purchase and sale of the General Partner's
interest in the Partnership pursuant to this Section 6.04 shall take place on a
business day, to be designated by the Limited Partner on at least five days'
notice to the General Partner, which shall be within thirty days after the
receipt of all governmental consents and approvals required in connection with
the sale of such interest. The closing shall take place at the principal
offices of the Partnership or at any other location agreed to by the General
Partner and the Limited Partner. At the closing, (A) the General Partner shall
deliver or cause to be delivered to the purchaser all instruments representing
the interests being sold, duly endorsed for transfer, and (B) the purchaser of
such interests shall deliver or cause to be delivered to the General Partner
the purchase price therefor (as estimated in accordance with the following
sentence) in immediately available funds. The purchase price paid at closing
shall be estimated on the basis of the amount of indebtedness of the Tele-Com
Entities as reflected on the last balance sheets prepared by the Tele-Com
Entities, respectively, prior to the closing. Within 90 days after closing,
the General Partner and the Limited Partner shall jointly determine the amount
of indebtedness of the Tele-Com Entities as of the closing, and the General
Partner shall refund to the purchaser the amount, if any, by which the
estimated purchase price paid at closing exceeded the actual purchase price,
and the purchaser shall pay to the General Partner the amount, if any, by which
the estimated purchase price paid at closing was less than the actual purchase
price.
(d) Promptly upon the election by the General Partner or the
Limited Partner pursuant to Section 6.04(a), the Partners shall use their
respective best efforts to obtain as quickly as practicable all governmental
consents and approvals that shall be required for the purchase and sale of the
General Partner's interest in the Partnership.
23
<PAGE> 27
(e) At any time after an election by the General Partner or the
Limited Partner pursuant to Section 6.04(a), the Limited Partner may assign all
or part of its right to purchase the General Partner's interest to one or more
other Persons.
ARTICLE VII
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 7.01. Withdrawal. Except as otherwise provided in the
Agreement, no Partner shall at any time retire or withdraw from the Partnership
or withdraw any amount out of its Capital Account. Any Partner retiring or
withdrawing in contravention of this Section 7.01 shall indemnify, defend and
hold harmless the Partnership and all other Partners (other than a Partner who
is, at the time of such withdrawal, in default under this Agreement) from and
against any losses, expenses, judgments, fines, settlements or damages suffered
or incurred by the Partnership or any such other Partner arising out of or
resulting from such retirement or withdrawal.
Section 7.02. Dissolution of the Partnership. The Partnership shall
be dissolved, wound up and terminated upon the occurrence of any of the
following:
(a) An event occurs such that under the Act a General Partner
ceases to serve as a General Partner (an "event of withdrawal"), unless:
(i) the remaining General Partner, if any, elects in
writing within ninety (90) days after such event to reconstitute the
Partnership, to continue as the General Partner and to continue the
Partnership and its business, and
(ii) if there is no remaining General Partner, within
ninety (90) days after such event, all of the Limited Partners agree
to appoint in writing a successor General Partner, as of the date of
the withdrawal of the General Partner, and agree to reconstitute the
Partnership and to continue the business of the Partnership, and such
successor General Partner agrees in writing to accept such election;
(b) Any Partner (i) is voluntarily adjudicated a debtor, bankrupt
or insolvent, (ii) seeks, consents to or does not contest the appointment of a
receiver or trustee for it or for all or any substantial part of its property,
(iii) files a petition seeking relief under the bankruptcy, arrangement,
reorganization or other debtor relief laws of the United States or any state,
(iv) makes a general assignment for the benefit of its creditors, or (v) admits
in writing its inability to pay its debts as they mature;
(c) (i) a petition is filed against any Partner seeking relief
under the bankruptcy, arrangement, reorganization or other debtor relief laws
of the United States or any state, or (ii)
24
<PAGE> 28
a court of competent jurisdiction enters an order, judgment or decree
appointing, without the consent of said Partner, a receiver or a trustee for
it, or for all or any part of its property, and such petition, order, judgment
or decree shall not be and remain discharged or stayed within one hundred and
eighty (180) days after its entry;
(d) Any Partner fails to perform its obligations hereunder and
such failure continues for a period of thirty (30) days following notice by the
other Partners specifying the nature of such default unless the nature of such
obligation does not permit its cure within thirty (30) days, in which event
such Partner shall be afforded a period not to exceed one hundred twenty (120)
days to cure such default if such Partner commences remedial action within such
thirty (30) day period and diligently prosecutes the same to completion;
(e) The sale or other disposition, not including an exchange, of
substantially all the assets (i) of the Partnership or (ii) of Tele-Com and
Northwest;
(f) December 31, 2023, unless extended by the consent of all
Partners; or
(g) Subject to any restriction in any agreement to which the
Partnership is a party, an election to dissolve the Partnership made by both
the General Partner and the Limited Partner.
Section 7.03. Continuation and Reconstitution of Partnership. If the
Partnership is continued as provided in Section 7.02(a)(i) or (ii), then as of
the date of withdrawal, the General Partner with respect to which an event of
withdrawal under Section 7.02 has occurred (or his or its estate or successor
in interest) (the "Withdrawing General Partner") shall have none of the powers
of a General Partner under the Agreement or applicable law and shall have only
the rights of an assignee of a partnership interest under the Act and the right
to share in Partnership income, deductions, credits, gains, losses and
distributions in accordance with the Contribution Percentage and Capital
Account appurtenant to the General Partner's interest. The Withdrawing General
Partner's estate, legal representatives or successors-in-interest, as the case
may be, shall remain primarily and directly liable for the performance of all
his or its obligations under the Agreement. If the Partnership is
reconstituted pursuant to Section 7.02(a)(i) or (ii), the remaining General
Partner or the successor General Partner (whichever is applicable) shall have
all the rights, powers and obligations of the General Partner hereunder and all
references to the "General Partner" herein shall refer to such remaining or
successor General Partner, as the case may be, unless the context clearly
indicates otherwise. The remaining General Partner or the successor General
Partner, as the case may be, shall reflect the consummation of the transactions
contemplated in Section 7.02(a)(i) or (ii) by preparing an amendment to this
Agreement pursuant to the provisions of Section 8.03, which amendment shall be
signed by all Partners.
25
<PAGE> 29
Section 7.04. Death, etc. of a Limited Partner.
(a) The death, disability, withdrawal, winding-up and termination
(in the case of a Limited Partner that is a partnership), dissolution (in the
case of a Limited Partner that is a corporation), retirement or adjudication as
a bankrupt of a Limited Partner (the "Withdrawing Limited Partner") shall not
dissolve the Partnership, but the interest of the Withdrawing Limited Partner
shall, upon the happening of such event, pass to the Withdrawing Limited
Partner's successor-in-interest, who shall have none of the powers of a Limited
Partner under the Agreement or applicable law and shall have only the right to
share in Partnership income, deductions, credits, gains, losses and
distributions in accordance with the Contribution Percentage and Capital
Account appurtenant to the interest of the Withdrawing Limited Partner. The
Withdrawing Limited Partner's successor-in-interest shall be deemed, by
accepting such interest, to have assumed all the liabilities and unperformed
obligations, under the Agreement or otherwise, that are appurtenant to the
interest received by such successor-in-interest.
(b) The General Partner shall reflect the consummation of the
transactions contemplated in this Section 7.04 by preparing an amendment to
this Agreement pursuant to the provisions of Section 8.03 which amendment shall
be signed by all Partners.
Section 7.05. Termination of Partnership.
(a) Upon dissolution of the Partnership unless continued pursuant
to Section 7.02 or a purchase is consummated pursuant to Section 6.04, the
Partnership shall be terminated as rapidly as business circumstances will
permit. At the direction of the General Partner, or a Partner approved by the
Limited Partner if the dissolution of the Partnership is caused by the
occurrence of an event of withdrawal with respect to the General Partner (the
General Partner or the other Partner, as the case may be, being herein called
the "Terminating Partner"), a full accounting of the assets and liabilities of
the Partnership shall be taken and a statement of the Partnership Assets and a
statement of each Partner's Capital Account shall be furnished to all Partners
as soon as is reasonably practicable. The Terminating Partner shall take such
action as is necessary so that the Partnership's business shall be terminated,
its liabilities discharged and its assets distributed as hereinafter described.
The Terminating Partner may sell all of the Partnership Assets or distribute
the Partnership Assets in kind. A reasonable period of time shall be allowed
for the orderly termination of the Partnership to minimize the normal losses of
a liquidation process.
(b) Subject to (c) below, after the payment of all expenses of
liquidation, of all debts and liabilities of the Partnership in such order or
priority as provided by law (including any debts or liabilities to Partners,
who shall be treated as secured or unsecured creditors, as may be the case, to
the extent permitted by law, for sums loaned to or advanced on behalf of the
Partnership, if any, as distinguished from Capital Contributions) and after all
resulting items of Partnership income, gain, credit, loss or deduction are
credited or debited to the Capital Accounts of the Partners in accordance with
Articles III and IV hereof, all remaining Partnership
26
<PAGE> 30
Assets shall then be distributed among the Partners in accordance with the
respective remaining Capital Account balances of the Partners.
Notwithstanding any indication in this Agreement to the contrary, there shall
be withheld from such distributions such reserves for contingent and unforeseen
liabilities as the Terminating Partner in its reasonable discretion deems
adequate, such reserves to be held and distributed in such manner and at such
times as the Terminating Partner in its reasonable discretion deems advisable
(with such distributions to be made in accordance with this Section 7.05(b)).
Upon termination, a Partner may not demand and receive cash in return for such
Partner's capital contributions and no Partner shall have any obligation to
restore any deficit that may then exist in the Partner's Capital Account.
Distributions on termination may be made by the distribution to each Partner of
an undivided interest in any Partnership Asset that has not been sold at the
time of the termination of the Partnership.
(c) Distributions pursuant to the terms of this Agreement shall be
made in accordance with the timing requirements of Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2). In order to satisfy such timing requirements,
Partnership Assets may be transferred to a trust established for the benefit of
the Partners for the purposes of liquidating Partnership Assets, collecting
amounts owed to the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner arising
out of or in connection with the Partnership. The assets of such trust shall
be distributed to the Partners from time to time, in the reasonable discretion
of the Terminating Partner, in accordance with the terms of this Partnership
Agreement.
(d) Upon the dissolution of the Partnership and liquidation of its
assets pursuant to this Article VII, if the General Partner has a negative
balance in its Capital Account, the General Partner shall contribute to the
Partnership, in cash, an amount equal to the lesser of (i) the deficit balance
in its Capital Account, or (ii) the excess of 1.01% of the total capital
contributions of the Limited Partner over the capital contributions previously
contributed by the General Partner. Any amount contributed by the General
Partner pursuant to this paragraph shall be applied and distributed as provided
in Section 7.05(b).
Section 7.06. Specific Performance. It is expressly agreed that the
remedy at law for breach of any of the obligations set forth in Article VI and
Article VII are inadequate in view of (i) the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of a Partner to comply fully with each of said obligations, and (ii) the
uniqueness of the Partnership Assets and the Partnership relationship.
Accordingly, each of these obligations will be, and is hereby expressly made,
enforceable by specific performance.
27
<PAGE> 31
ARTICLE VIII
GENERAL
Section 8.01. LIMITED PARTNER REPRESENTATIONS AND AGREEMENTS.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, THE
LIMITED PARTNER HEREBY REPRESENTS AND WARRANTS TO THE PARTNERSHIP, THE GENERAL
PARTNER AND TO EACH OFFICER, DIRECTOR, SHAREHOLDER, AND CONTROLLING PERSON OF
THE GENERAL PARTNER THAT: (a) THE INTEREST IN THE PARTNERSHIP OF THE LIMITED
PARTNER IS ACQUIRED FOR INVESTMENT PURPOSES ONLY FOR ITS OWN ACCOUNT AND NOT
WITH A VIEW TO OR IN CONNECTION WITH ANY DISTRIBUTION, REOFFER, RESALE OR OTHER
DISPOSITION NOT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS THEREUNDER (THE "SECURITIES ACT") AND APPLICABLE
STATE SECURITIES LAWS; (b) SUCH LIMITED PARTNER, ALONE OR TOGETHER WITH HIS OR
ITS REPRESENTATIVES, POSSESSES SUCH EXPERTISE, KNOWLEDGE AND SOPHISTICATION IN
FINANCIAL AND BUSINESS MATTERS GENERALLY, AND IN THE TYPE OF TRANSACTIONS IN
WHICH THE PARTNERSHIP PROPOSES TO ENGAGE IN PARTICULAR, THAT IT IS CAPABLE OF
EVALUATING THE MERITS AND ECONOMIC RISKS OF ACQUIRING AND HOLDING ITS
PARTNERSHIP INTEREST AND HE OR IT IS ABLE TO BEAR ALL SUCH ECONOMIC RISKS NOW
AND IN THE FUTURE; (c) SUCH LIMITED PARTNER HAS HAD ACCESS TO ALL OF THE
INFORMATION WITH RESPECT TO THE INTEREST ACQUIRED BY IT UNDER THIS AGREEMENT
THAT IT DEEMS NECESSARY TO MAKE A COMPLETE EVALUATION THEREOF AND HAS HAD THE
OPPORTUNITY TO QUESTION THE GENERAL PARTNER CONCERNING SUCH INTEREST; (d) SUCH
LIMITED PARTNER'S DECISION TO ACQUIRE ITS PARTNERSHIP INTEREST FOR INVESTMENT
HAS BEEN BASED SOLELY UPON THE EVALUATION MADE BY IT; (e) SUCH LIMITED PARTNER
IS AWARE THAT IT MUST BEAR THE ECONOMIC RISK OF ITS INVESTMENT IN THE
PARTNERSHIP FOR AN INDEFINITE PERIOD OF TIME BECAUSE INTERESTS IN THE
PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR UNDER THE
SECURITIES LAWS OF VARIOUS STATES AND, THEREFORE, CANNOT BE SOLD UNLESS SUCH
INTERESTS ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE; (f) SUCH LIMITED PARTNER IS AWARE THAT ONLY THE PARTNERSHIP CAN TAKE
ACTION TO REGISTER SUCH INTEREST IN THE PARTNERSHIP AND THE PARTNERSHIP IS
UNDER NO SUCH OBLIGATION AND DOES NOT PROPOSE TO ATTEMPT TO DO SO; AND (g) SUCH
LIMITED PARTNER IS AWARE THAT THIS AGREEMENT PROVIDES RESTRICTIONS ON THE
ABILITY OF A LIMITED PARTNER TO SELL, TRANSFER, ASSIGN, MORTGAGE, HYPOTHECATE
OR OTHERWISE ENCUMBER ITS INTEREST IN THE PARTNERSHIP; AND (h) SUCH LIMITED
PARTNER AGREES THAT IT WILL TRUTHFULLY AND COMPLETELY
28
<PAGE> 32
ANSWER ALL QUESTIONS, AND MAKE ALL COVENANTS, THAT THE PARTNERSHIP OR THE
GENERAL PARTNER MAY, CONTEMPORANEOUSLY OR HEREAFTER, ASK OR DEMAND FOR THE
PURPOSE OF ESTABLISHING COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
Section 8.02. Notice.
(a) All notices, demands or requests provided for or permitted to
be given pursuant to this Agreement must be in writing.
(b) All notices, demands and requests to be sent to a Partner or
any Substituted or Admitted Limited Partner pursuant to this Agreement shall be
deemed to have been properly given or served if: (i) personally delivered, (ii)
deposited for next day delivery by Federal Express, or other similar overnight
courier services, addressed to such Partner, (iii) deposited in the United
States mail, addressed to such Partner, prepaid and registered or certified
with return receipt requested or (iv) transmitted via telecopier or other
similar device to the attention of such Partner.
(c) All notices, demands and requests so given shall be deemed
received: (i) when personally delivered, (ii) twenty-four (24) hours after
being deposited for next day delivery with an overnight courier, (iii)
forty-eight (48) hours after being deposited in the United States mail or (iv)
twelve (12) hours after being telecopied or otherwise transmitted if receipt
has been confirmed.
(d) The Partners and any Substituted Partners shall have the right
from time to time, and at any time during the term of this Agreement, to change
their respective addresses and each shall have the right to specify as his or
its address any other address within the United States of America by giving to
the other parties at least thirty (30) days written notice thereof, in the
manner prescribed in Section 8.02(b); provided, however, that to be effective,
any such notice must be actually received (as evidenced by a return receipt or
similar proof).
(e) All distributions to any Partner shall be made at the address
at which notices are sent unless otherwise specified in writing by any such
Partner.
Section 8.03. Amendments. This Agreement may be amended or modified
(i) as authorized in this Agreement or (ii) otherwise pursuant to a writing
executed and delivered by the General Partner and the Limited Partner.
Section 8.04. Governing Laws and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
29
<PAGE> 33
Section 8.05. Entire Agreement. This Agreement, including all
exhibits to this Agreement and, if any, exhibits to such exhibits, contains the
entire agreement among the parties relative to the matters contained in this
Agreement.
Section 8.06. Waiver. No consent or waiver, express or implied, by
any Partner to or of any breach or default by any other Partner in the
performance by such other Partner of his or its obligations under this
Agreement shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance by such other Partner of the same or
any other obligations of such other Partner under this Agreement. Failure on
the part of any Partner to complain of any act or failure to act of any of the
other Partners or to declare any of the other Partners in default, regardless
of how long such failure continues, shall not constitute a waiver by such
Partner of his or its rights hereunder.
Section 8.07. Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not be
affected thereby, and the intent of this Agreement shall be enforced to the
greatest extent permitted by law.
Section 8.08. Binding Agreement. Subject to the restrictions on
transfers and encumbrances set forth in this Agreement, this Agreement shall
inure to the benefit of and be binding upon the undersigned Partners and their
respective legal representatives, successors and assigns. Whenever, in this
Agreement, a reference to any party or Partner is made, such reference shall be
deemed to include a reference to the legal representatives, successors and
assigns of such party or Partner.
Section 8.09. Tense and Gender. Unless the context clearly indicates
otherwise, the singular shall include the plural and vice versa. If the
masculine, feminine or neuter gender is used inappropriately in this Agreement,
this Agreement shall be read as if the appropriate gender was used.
Section 8.10. Captions. Captions are included solely for convenience
of reference and if there is any conflict between captions and the text of this
Agreement, the text shall control.
Section 8.11. Benefits of Agreement. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to give to any creditor
of the Partnership or any creditor of any Partner or any other Person
whatsoever, other than the Partners and the Partnership, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any covenant,
condition or provisions herein contained, and such provisions are and shall be
held to be for the sole and exclusive benefit of the Partners and the
Partnership.
Section 8.12. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes and all of which when taken together
30
<PAGE> 34
shall constitute a single counterpart instrument. Executed signature pages to
any counterpart instrument may be detached and affixed to a single counterpart,
which single counterpart with multiple executed signature pages affixed thereto
constitutes the original counterpart instrument. All of these counterpart
pages shall be read as though one and they shall have the same force and effect
as if all of the paries had executed a single signature page.
Section 8.13. Representations and Warranties of Each Partner. Each
Partner hereby acknowledges, represents and warrants to, and agrees with, the
Partnership and the Partners as follows:
(a) The acceptance of this Agreement by such Partner as evidenced
by its signature on the signature pages of this Agreement has been authorized
by all necessary action on behalf of such Partner and this Agreement is the
valid and binding obligation of such Partner, enforceable in accordance with
its terms.
(b) Such Partner's execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not conflict with or
result in any violation of, or default under, any provision of this Agreement,
or any agreement or other instrument to which such Partner is a party or by
which it or any of its properties are bound or, to the best of its knowledge,
any statute, regulation, case law, judicial or administrative order or decree
or governmental license or permit or any interpretation thereof by any
governmental or regulatory authority or court of competent jurisdiction
applicable to it or its business or properties or those of its Partner
Affiliates.
[intentionally blank]
31
<PAGE> 35
Each of the undersigned has executed and delivered this Limited
Partnership Agreement of McMillian Partners, L.P. to be effective as of the
Effective Date.
GENERAL PARTNER
3015 SSE Loop 323 MCMILLIAN HOLDINGS, INC.
Tyler, Texas 75701
By:_____________________________________
Name:___________________________________
Title:__________________________________
LIMITED PARTNER
3015 SSE Loop 323 TAL FINANCIAL CORPORATION
Tyler, Texas 75701
By:_____________________________________
Name:___________________________________
Title:__________________________________
32
<PAGE> 36
SCHEDULE A
to the Limited Partnership Agreement
of
McMillian Partners, L.P.
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
CONTRIBUTION CAPITAL CAPITAL
GENERAL PARTNER PERCENTAGE CONTRIBUTION CONTRIBUTION
--------------- ---------- ------------ ------------
<S> <C> <C> <C>
McMillian Holdings, Inc. 51.0% $510 $ 30,600
LIMITED PARTNERS
----------------
TAL Financial Corporation 49.0% $490 $ 29,400
</TABLE>
<PAGE> 1
EXHIBIT 10(N)
LIMITED PARTNERSHIP AGREEMENT
OF
TELE-COMMUNICATIONS OF ARKANSAS LIMITED PARTNERSHIP
JANUARY 20, 1995
THE LIMITED PARTNERSHIP INTERESTS OF TELE-COMMUNICATIONS OF ARKANSAS LIMITED
PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER
APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND THOSE LAWS. THE INTERESTS MUST BE
ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY PART THEREOF
MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED
AT ANY TIME EXCEPT IN COMPLIANCE WITH (i) THE SECURITIES ACT, (ii) ANY
APPLICABLE STATE SECURITIES LAWS AND (iii) THE TERMS AND CONDITIONS OF THIS
AGREEMENT. THE INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN
COMPLIANCE WITH THOSE LAWS AND THIS AGREEMENT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. Purpose and Scope of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.04. Authority of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.05. Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.06. Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.07. Registered Agent and Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.03. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.04. Exculpation; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.05. Permitted Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
FINANCING
Section 3.01. Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.02. Limited Liability of Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.03. Treatment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.04. Loans from Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.05. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.06. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.07. Withdrawal of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.02. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.03. Allocations for Book Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.04. Special Allocations for Book Purposes . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.05. Allocations for Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.06. Distributions to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.07. Tax Status, Elections and Modifications to Allocations . . . . . . . . . . . . . . . 15
Section 4.08. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.09. Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.10. Partnership Tax Returns and Annual Statement . . . . . . . . . . . . . . . . . . . . 17
Section 4.11. Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.12. Financial Reports to Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.13. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.14. Minimum Allocation to General Partners . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
ASSIGNMENT
Section 5.01. Transfers Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02. Consequences of Transfers Generally . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.03. Substituted Partner; Withdrawal of Transferor Partner . . . . . . . . . . . . . . . . 20
ARTICLE VI
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 6.01. Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.02. Dissolution of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.03. Continuation and Reconstitution of Partnership . . . . . . . . . . . . . . . . . . . 21
Section 6.04. Death, etc. of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.05. Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.06. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII
GENERAL
Section 7.01. LIMITED PARTNER REPRESENTATIONS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . 24
Section 7.02. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.03. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.04. Governing Laws and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.05. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.06. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.08. Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.09. Tense and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.10. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.11. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.13. Representations and Warranties of Each Partner . . . . . . . . . . . . . . . . . . . 26
SCHEDULE A
</TABLE>
ii
<PAGE> 4
LIMITED PARTNERSHIP AGREEMENT
OF
TELE-COMMUNICATIONS OF ARKANSAS LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made and
entered into as of the day of January, 1995 (the "Effective Date"), by
and among McMillian Partners, L.P., a Delaware limited partnership as the
General Partner, and TAL Financial Corporation, a Nevada corporation, as the
Limited Partner. Unless otherwise indicated, all capitalized terms used in
this Agreement shall have the meaning ascribed to them in Section 4.01.
For and in consideration of the mutual covenants set forth herein and
for other good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the undersigned (referred to
collectively as the "Partners" and individually as a "Partner") hereby agree as
follows:
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name. The name of the Partnership is
TELE-COMMUNICATIONS OF ARKANSAS LIMITED PARTNERSHIP. All business and affairs
of the Partnership shall be conducted solely under, and all Partnership Assets
(as that term is defined in Section 1.03) shall be held solely in, such name.
Section 1.02. Term. The Partnership shall continue under this
Agreement (as amended from time to time) until dissolved upon the occurrence of
an event that causes the dissolution of the Partnership in accordance with the
provisions of this Agreement, and thereafter to the extent provided by
applicable law, until wound up and terminated as provided herein.
Section 1.03. Purpose and Scope of Business. The Partnership is
organized for the following objectives and purposes: (a) to acquire from
Time-Warner Cable, a division of Time Warner Entertainment Company, L.P., the
Systems, (b) to carry on the business of acquiring, investing, owning,
constructing, maintaining, promoting, selling, disposing and otherwise
developing the Systems and other cable television systems in areas in which the
Partnership has a franchise; and (c) to do all other lawful things necessary,
appropriate or advisable in connection with these purposes. The assets of the
Partnership, whether now or hereafter owned, including without limitation the
assets comprising the Systems, are herein sometimes referred to as the
"Partnership Assets."
<PAGE> 5
Section 1.04. Authority of the Partnership. The Partnership shall be
empowered and authorized to do all lawful acts and things necessary,
appropriate, proper, advisable, incidental to, or convenient for the
furtherance and accomplishment of its purposes. The Partnership shall be
empowered and authorized:
(a) to construct, operate, maintain, improve, expand, buy, own,
sell, convey, assign, mortgage, refinance, rent or lease real or personal
property, which may be held in the name of the Partnership, in the name of the
General Partner as nominee or trustee for the beneficial owner of the property,
or in any other manner that the General Partner reasonably deems to be in the
best interest of the Partnership, so long as all such property is properly
reflected on the books of the Partnership;
(b) to enter into, perform, and carry out contracts and agreements
of any kind necessary to, in connection with, or incidental to accomplishing
the purposes of the Partnership;
(c) to borrow money and issue evidences of indebtedness in
furtherance of the purposes of the Partnership and to secure any such
indebtedness by mortgage, security interest, or other lien;
(d) to maintain and operate the assets of the Partnership;
(e) to negotiate for and conclude agreements for the sale,
exchange, or other disposition of all or any part of the property of the
Partnership or for the purchase or lease of additional property of the
Partnership;
(f) to hire and compensate employees, agents, independent
contractors, attorneys, and accountants; and
(g) to bring and defend actions in law and equity.
Section 1.05. Documents. The General Partner shall file the
Certificate of Limited Partnership (the "Certificate") in the office of the
Secretary of State of the State of Delaware in accordance with the provisions
of the Act. If necessary in order to comply with the laws of the State of
Arkansas, the Partners and the Partnership shall promptly execute and duly file
with the proper offices in the State of Arkansas, one or more certificates as
required by law in order that the Partnership may lawfully conduct the
business, purposes and activities herein authorized and take any other action
or measures necessary for the Partnership to conduct such activities in the
State of Arkansas.
Section 1.06. Principal Place of Business. The principal place of
business of the Partnership shall be 3015 SSE Loop 323, Tyler, Texas 75701 or
at such other place or places as may be determined by the General Partner. The
General Partner shall be responsible for maintaining at the Partnership's
principal place of business those records required by the Act to be maintained
there.
2
<PAGE> 6
Section 1.07. Registered Agent and Office. The Registered Agent (as
defined in the Act) for the Partnership shall be The Corporation Trust Co. The
Registered Office (as defined in the Act) of the Partnership shall be 1209
Orange Street, Wilmington, Delaware 19801.
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority.
(a) Subject to the provisions of this Section 2.01, the General
Partner shall have the sole and exclusive right to carry out any and all of the
objectives and purposes of the Partnership in the name of the Partnership and
to perform all acts and enter into and perform all contracts and other
undertakings that it may in its discretion deem necessary or advisable or
incidental thereto, all in accordance with the terms of this Agreement.
Without limiting the generality of the foregoing, and subject to the terms of
this Agreement, including without limitation Section 2.01(b) hereof, the
General Partner shall have the exclusive authority to act for and on behalf of
the Partnership with respect to any of the following matters:
(i) Maintaining, operating, managing and
defending the Partnership Assets, and contracting, as permitted
hereby, with third parties for such purposes and to do such other
things as necessary or appropriate to carry out the terms and
provisions of this Agreement that would be done by a normal and
prudent owner in the ownership, operation and management of his own
property;
(ii) Insuring the Partnership Assets, including,
without limitation, maintaining comprehensive liability coverage, all
as is customarily prudent with respect to the business of the
Partnership;
(iii) Prosecuting, defending, settling, handling,
or otherwise dealing with any threatened or actual claims, litigation,
or similar matters involving the Partnership;
(iv) Subject to the provisions of Section 4.11
hereof, engaging outside accountants, consultants, management
companies, leasing agents and any and all other third-party agents and
assistants, both professional and nonprofessional, on behalf of the
Partnership, and compensating them in such manner and degree as the
General Partner may deem necessary or advisable; and
(v) Performing other obligations and exercising
other rights provided elsewhere in this Agreement to be performed or
exercised by the General Partner.
No third party shall ever be required to inquire into the authority of the
General Partner to take any action or consummate any transaction on behalf of
the Partnership, and third parties shall be entitled to rely exclusively on the
representations of the General Partner as to its authority
3
<PAGE> 7
to take such actions and enter into such transactions. The General Partner
shall have the rights, authority and powers of a general partner with respect
to the Partnership business and the Partnership Assets as set forth in the Act
as in effect upon the Effective Date of this Agreement to the extent necessary,
convenient or incidental to the accomplishment of the purposes of the
Partnership. The General Partner shall not be required to devote its full time
and attention to the business of the Partnership, but only such time as is
necessary or appropriate for the proper conduct of the Partnership's affairs.
(b) Notwithstanding anything in this Agreement to the contrary,
the General Partner shall not have the right or the power to make any
commitment or engage in any undertaking on behalf of the Partnership in respect
of any of the actions or matters described below in this Section 2.01(b) unless
and until such undertaking or commitment in respect of such action or matter
has been approved in writing by the Limited Partner. Such actions or matters
are as follows:
(i) acquiring or agreeing to acquire any business other
than the Systems;
(ii) selling or otherwise disposing of, or agreeing to
sell or otherwise dispose of, substantially all the assets of the
Partnership, except in a liquidating sale upon dissolution of the
Partnership in accordance with this Agreement;
(iii) merging or consolidating with any other Person;
(iv) making, executing, or delivering any assignment for
the benefit of creditors;
(v) incurring indebtedness for borrowed money outside the
ordinary course of business;
(vi) incurring indebtedness for borrowed money or
refinancing, recasting increasing, modifying, or extending any
indebtedness for borrowed money of the Partnership where the amount
involved exceeds $1,500,000;
(vii) securing any indebtedness of the Partnership by
mortgage, pledge, or other lien on any substantial part of the
property of the Partnership;
(viii) commencing or settling any litigation where the
amount involved exceeds $50,000;
(ix) guarantying the obligation of any Person outside the
ordinary course of business or where the amount involved exceeds
$50,000;
(x) doing any act in contravention of this Agreement or
the Certificate;
4
<PAGE> 8
(xi) doing any act that would make it impossible to carry
on the business of the Partnership except upon the dissolution of the
Partnership in accordance with this Agreement;
(xii) confessing a judgment against the Partnership;
(xiii) using any funds or assets of the Partnership other
than for the benefit of the Partnership;
(xiv) possessing property of the Partnership or assigning
any rights in specific property of the Partnership for other than a
partnership purpose of the Partnership;
(xv) knowingly taking any action that would subject the
Limited Partner in its capacity as a limited partner to personal
liability as a general partner in any jurisdiction;
(xvi) admitting additional partners to the Partnership;
(xvii) entering into any transaction with any Partner
Affiliate of the General Partner; or
(xviii) making any determination with respect to
indemnification under Section 2.04.
Section 2.02. Affiliates. The General Partner shall have the right
to cause the Partnership to enter into contracts or otherwise deal with any
Partner Affiliate in any capacity, except that the terms of any such
arrangement shall be commercially reasonable and competitive with amounts that
would be paid to third parties on an "arms-length" basis. The parties hereto
acknowledge and agree that concurrently with the acquisition by the Partnership
of the Systems, the Partnership will enter into a management agreement (the
"Management Agreement") with TCA Management Company, a Partner Affiliate of the
Limited Partner, on terms and conditions mutually agreeable to TCA Management
Company and the General Partner. The parties hereto further acknowledge and
agree that the terms and conditions of the Management Agreement shall be deemed
to meet the standards set forth in the first sentence of this Section 2.02.
For purposes of this Agreement, a "Partner Affiliate" is defined to mean (i)
any shareholder, director, officer, partner in, employee, family member or
agent of any Partner, or (ii) any Person controlling directly or indirectly,
any Person controlled directly or indirectly by, or any Person under common
control with, any Partner; "Control" means the possession, directly or
indirectly, of the power to direct the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and "Person" means an individual, corporation, trust, association, partnership
or other entity unless otherwise indicated.
Section 2.03. Expenses. The Partnership shall pay or reimburse the
General Partner for all costs and expenses reasonably and necessarily incurred
by it that are directly attributable to the business of the Partnership.
5
<PAGE> 9
Section 2.04. Exculpation; Indemnities.
(a) Neither any Partner nor any Partner Affiliate (individually an
"Actor" and collectively, the "Actors") shall be liable to the Partnership or
any Partner for (i) any act or omission taken or suffered by any Actor in
connection with the conduct of the business of the Partnership that is in good
faith or not opposed to the best interests of the Partnership, unless such act
or omission constitutes willful misconduct, bad faith, or fraud by such Actor
or involves the receipt of improper personal benefits by such Actor, (ii) any
act or omission taken or suffered by any Actor in the good faith exercise of
discretion or judgment as provided by this Agreement, unless such act or
omission constitutes willful misconduct, bad faith or fraud by such Actor or
involves the receipt of improper personal benefits by such Actor, or (iii) any
mistake, negligence, dishonesty or bad faith of any employee, broker or other
agent of the Partnership selected, engaged or retained by an Actor in good
faith.
(b) The Partnership shall (except as otherwise provided in Section
2.04(d) below) indemnify and hold harmless the General Partner, the Limited
Partner, any of the Partner Affiliates, and any of their respective employees,
agents, directors and officers (each individually, an "Indemnitee") in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, to which an Indemnitee
was or is a party or is threatened to be made a party by reason of the fact
that it is or was a Partner, a Partner Affiliate or an employee, agent,
director, or officer of a Partner or a Partner Affiliate, involving an alleged
cause of action arising from the activities of such Indemnitee and which
activities were on behalf of the Partnership, its property, business or
affairs, or any appeal in such action, suit or proceeding or in any inquiry or
investigation that could lead to such an action, suit or proceeding, and the
Partnership shall (except as otherwise provided in Section 2.04(d) below)
indemnify such Indemnitee against any and all losses, claims, demands,
liabilities, costs and expenses, including reasonable attorneys' fees,
accountants' fees, judgments, penalties (including excise and similar taxes),
fines and amounts paid in settlement, actually incurred by such Indemnitee in
connection with such action, suit or proceeding (collectively "Losses"), if
such Indemnitee acted in good faith and in a manner he or it reasonably
believed to be in or not opposed to the best interests of the Partnership and
if such Indemnitee's conduct does not constitute gross negligence or willful or
wanton misconduct or fraud. The termination of a proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, determine or create a presumption that an
Indemnitee did not act in good faith and in a manner that he or it reasonably
believed to be in, or not opposed to, the best interests of the Partnership,
nor shall any such termination of a proceeding, of itself, determine or create
a presumption that the Indemnitee was grossly negligent or was guilty of
willful or wanton misconduct or fraud or the recipient of an improper personal
benefit unless a specific finding to such effect is included in such judgment,
order, settlement, conviction or plea.
(c) If the Partnership determines that there is a reasonable
likelihood that the Indemnitee will be entitled to indemnification in
accordance with the standards set forth in subsection (b) above, all reasonable
expenses (including reasonable legal fees and expenses) incurred in defending
any proceeding shall be paid by the Partnership in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of the Indemnitee
6
<PAGE> 10
to repay such amount if it shall ultimately be determined, by a court of
competent jurisdiction or otherwise, that the Indemnitee is not entitled to be
indemnified by the Partnership as authorized hereunder.
(d) Any such indemnification shall be made only out of the assets
of the Partnership, and in no event may an Indemnitee subject the Limited
Partner or the General Partner to personal liability by reason of these
indemnification provisions.
(e) The indemnification provided by this Section 2.04 shall be in
addition to any other rights to which those indemnified may be entitled, in any
capacity, under any agreement, vote of the Partners, as a matter of law or
otherwise and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitee.
(f) To the extent obtainable on reasonable terms as determined in
the discretion of the General Partner, the Partnership may purchase and
maintain insurance on behalf of the Indemnitees or liability insurance on
behalf of the Partnership relating to claims for indemnification against any
liability which may be asserted against or expense which may be incurred by
such persons in connection with the Partnership's activities, whether or not
the Partnership would have the power to indemnify such Persons against such
liability under the provisions of this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 2.04 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement; provided,
however, that in the event the Indemnitee is a Partner Affiliate other than a
Partner, such Partner Affiliate shall not be exculpated or indemnified under
this Section 2.04 unless such exculpation or indemnification is commercially
reasonable and competitive and consistent with arrangements that would be made
with third parties on an "arms-length" basis.
(h) The provisions of this Section 2.04 shall survive any
termination of this Agreement and are for the benefit of the Indemnities, their
heirs, successors, assigns and administrators, and shall not be deemed to
create any rights for the benefit of any other Persons.
(i) To the extent permitted by applicable law, all the
determinations by and actions of the Partnership pursuant to this Section 2.04
shall be made only with the prior written approval of the General Partner and
the Limited Partner. In the event that (i) the Act and applicable law requires
that any determination under this Section 2.04 be made other than as provided
herein or (ii) the General Partner and Limited Partner refuse or are unable to
make any determination or take action under this Section 2.04, then such
determination shall be made by special legal counsel selected by the General
Partner pursuant to the provisions of the Act. Any "special legal counsel"
selected by the General Partner to make any determination required under the
Act or this Section 2.04 shall be a law firm, or member of a law firm,
experienced in matters of corporation and partnership law and which neither
presently is, nor in the past five (5) years has been, retained to represent
the Partnership, any Partner or Partner Affiliate, the Indemnitee or any other
party to the proceeding giving rise to the claim for indemnification, and
7
<PAGE> 11
shall not include any Person who, under prevailing applicable standards of
professional conduct, would have a conflict of interest with the Indemnitee,
the Partnership, any Partner or Partner Affiliate, or any other party to such
proceeding. No special legal counsel appointed pursuant to the provisions of
this Section 2.04(i) shall be liable, responsible or accountable in damages for
any act, omission or decision of such special legal counsel pursuant to its
authority under this Section 2.04(i) nor shall such special legal counsel have
any liability to the Indemnitee, the Partnership, any of the Partners or their
Partner Affiliates, provided such act, omission or decision was not taken or
made in bad faith.
Section 2.05. Permitted Transactions. Any Partner or any Partner
Affiliate, agent, or representative of any Partner, may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, whether currently existing or hereafter created and whether or
not competitive with or advanced by the business of the Partnership. Neither
the Partnership nor the other Partner shall have any rights in or to the income
or profits derived therefrom, nor shall a Partner have any obligation to the
other Partner with respect to any such enterprise or related transaction.
ARTICLE III
FINANCING
Section 3.01. Capital Contributions.
(a) Each Partner has agreed to contribute to the capital of the
Partnership contemporaneously with the execution of this Agreement, the amount
of cash set forth opposite such Partner's name in the column headed "Initial
Capital Contribution" on Schedule A hereto (collectively, the "Initial Capital
Contributions").
(b) Each Partner has agreed to contribute to the capital of the
Partnership immediately prior to the consummation by the Partnership of the
purchase of the Systems, the amount of cash set forth opposite such Partner's
name in the column headed "Subsequent Capital Contribution" on Schedule A
hereto (collectively the "Subsequent Capital Contributions," the Initial
Capital Contributions and the Subsequent Capital Contributions being herein
collectively referred to as the "Capital Contributions").
Section 3.02. Limited Liability of Limited Partner. Except as
provided in the Act, the Limited Partner shall not have any personal liability
whatsoever, either to the Partnership or any third party, for the debts of the
Partnership or any of its losses beyond the amount of the capital contribution
required of the Limited Partner under Section 3.01. Accordingly, the Limited
Partner shall not be obligated to provide additional capital to the Partnership
or its creditors by way of contribution, loan or otherwise beyond the amount of
the capital contribution made or required to be made by the Limited Partner
pursuant to Section 3.01 hereof. In the event that the Limited Partner
provides additional capital to the Partnership by way of contribution, the
General Partner will contribute to the capital of the Partnership an amount of
cash equal to 1.01% of the amount contributed by the Limited Partner.
8
<PAGE> 12
Section 3.03. Treatment of Capital Contributions. Except as may be
provided in this Agreement to the contrary, no Partner shall be entitled to
interest on its capital contributions nor shall any Partner be entitled to
demand the return of all or any part of such capital contributions.
Section 3.04. Loans from Partners. Subject to the approval of the
terms thereof by the General Partner, acting in its reasonable discretion, any
Partner or Partner Affiliate may make a loan to the Partnership upon
commercially reasonable terms. Loans by a Partner or Partner Affiliate to the
Partnership shall not be considered Capital Contributions.
Section 3.05. Financing. To finance the business of the Partnership,
the General Partner may, subject to Section 2.01(b), arrange for the obtaining
of loans for the Partnership or for the refinancing of any loans, and may
pledge the assets of the Partnership therefor.
Section 3.06. Disbursements. The Partnership shall pay all costs and
expenses of the Partnership business, including financing costs and related
expenses, real estate taxes and other carrying charges, all costs of
construction of improvements on Partnership property or leaseholds, management,
leasing, and loan placement fees, and operating expenses, and including all
reasonable costs and expenses incurred by or on behalf of the Partnership by
the Partners. The Partnership may set aside funds for any items that are
proper Partnership purposes, including operating expenses, debt service,
capital improvements, replacements, repairs, amortization and other capital
requirements, and liabilities, contingent or otherwise, of the Partnership, in
each case as reasonably determined by the General Partner.
Section 3.07. Withdrawal of Contributions. No Partner shall have the
right to withdraw from the Partnership or to demand a return of all or any part
of its Capital Contribution during the term of the Partnership, and any return
of the Capital Contribution of either Partner shall be made solely from the
Partnership Assets and only in accordance with the terms of this Agreement. No
interest shall be paid to either Partner with respect to its Capital
Contribution to the Partnership. The Partners expressly acknowledge that
certain provisions of this Agreement, which may preclude a Partner from
realizing appreciation in the value of Partnership Assets, are essential to
protect the Partners' mutual interests in the Partnership Assets; accordingly,
the Partners hereby waive any right they otherwise would have to seek a
partition or judicial liquidation of the Partnership or any comparable action.
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions. For purposes of this Agreement,
the following capitalized terms shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership
Act.
"Adjusted Capital Account" means, with respect to a Partner,
the balance in such Partner's Capital Account as of the end of the relevant
Fiscal Year, after giving effect to the
9
<PAGE> 13
following adjustments : (i) increase such Capital Account by any amounts which
the Partner is obligated to restore or is treated as being obligated to restore
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c); (ii) increase
such Capital Account by an amount which the Partner is deemed to be obligated
to restore represented by such Partner's share of Partnership Minimum Gain
pursuant to Treasury Regulation Section 1.704-2(g)(1); (iii) decrease such
Capital Account by the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6); (iv) increase such Capital Account by the
amount, if any, of the Partner's Modified Economic Risk of Loss that such
Partner is treated as bearing within the meaning of Treasury Regulation Section
1.752-2 with respect to partnership liabilities; and (v) increase such Capital
Account by an amount which the Partner is deemed to be obligated to restore
represented by such Partner's share of Partner Minimum Gain pursuant to
Treasury Regulation Section 1.704-2(i)(5). This definition shall be
interpreted consistently with Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
"Business Day" means when used to indicate the time at which a
valuation or accounting is to be made, the close of business (5:00 p.m. Central
Standard time) on the date specified and shall mean a weekday on which national
banks in Dallas, Texas are required to be open for business.
"Capital Account" means for each Partner the account
established pursuant to Section 4.02 hereof and maintained in accordance with
the provisions of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
"Contribution Percentage", as to any Partner, means the
percentage set forth opposite such Partner's name on Schedule A hereto under
the column headed "Contribution Percentage."
"Distributable Cash" means, with respect to the Partnership
for a period of time, all funds of the Partnership on hand or in bank accounts
of the Partnership as, in the reasonable discretion of the General Partner, is
available for distribution to the Partners after provision has been made for
(i) payment of all operating expenses of the Partnership as of such time, (ii)
provision for payment of all outstanding and unpaid current obligations of the
Partnership as of such time, and (iii) provision for such reserves as the
General Partner deems reasonably necessary or appropriate for Partnership
operations.
"Fiscal Year" means the twelve months ended October 31 in each
year; provided that the first Fiscal Year of the Partnership shall commence on
the Effective Date and continue through October 31, 1994.
"Income" means, for each Fiscal Year or other period, each
item of income and gain as determined, recognized and classified for federal
income tax purposes, provided that any income or gain that is exempt from
federal income tax shall be included as if it was an item of taxable income.
10
<PAGE> 14
"Loss" means, for each Fiscal Year or other period, each item
of loss or deduction as determined, recognized and classified for federal
income tax purposes, increased by (i) expenditures described in Section
705(a)(2)(B) of the Code, (ii) expenditures contemplated by Section 709 of the
Code (except for amounts with respect to which an election is properly made
under Section 709(b) of the Code); and (iii) a deduction for a loss incurred in
connection with the sale or exchange of any Partnership Assets that is
disallowed to the Partnership under Section 267(a)(1) or Section 707(b) of the
Code.
"Modified Economic Risk of Loss" of any Partner means, as of
any date, the economic risk of loss borne by such Partner with respect to
recourse debt of the Partnership (determined, as of the date in question, by
assuming, for purposes of Section 1.752-2(b) of the Treasury Regulations, that
the Partnership constructively liquidates on such date [within the meaning of
Section 1.752-2(b)(1) of the Treasury Regulations] except that all Partnership
properties shall be deemed thereunder to be transferred in fully taxable
exchanges for an aggregate amount of cash consideration equal to their
respective book bases and such consideration shall be deemed thereunder to be
used, in the appropriate order of priority, in full or partial satisfaction of
all Partnership liabilities).
"Net Income" and "Net Loss" means, for each Fiscal Year or
other period, (i) the excess of the Income for such period over the Loss for
such period, or (ii) the excess of the Loss for such period over the Income for
such period, respectively; provided, however, Net Income and Net Loss for a
Fiscal Year shall be computed by excluding from such computation any Income and
Loss specially allocated under Section 4.04 and any Nonrecourse Deductions, any
Partner Nonrecourse Deductions and any Income or Loss specially allocated under
Section 4.03(c).
"Nonrecourse Deductions" means, for any Fiscal Year, an amount
of Partnership deductions that are characterized as "nonrecourse deductions"
pursuant to Section 1.704-2(b)(1) and Section 1.704-2(c) of the Treasury
Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations.
"Partnership Interest" means a Partner's ownership interest in
the Partnership, which at all times shall be a percentage equal to such
Partner's Contribution Percentage.
11
<PAGE> 15
"Partnership Minimum Gain" has the meaning set forth in and
shall be determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
"Person" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership or other entity or organization.
"Sharing Percentage" as to any Partner, means the percentage
set forth opposite such Partner's name in Schedule A hereto under the column
headed Sharing Percentage.
"Systems" means the cable television systems serving the towns
of Russellville, Booneville, Paris, Clarksville, Johnson City, Pottsville, Pope
County, and unincorporated areas within Arkansas counties in which the
foregoing cities are located to be purchased by the Partnership from Time
Warner Entertainment Company, L.P., through its division Time Warner Cable.
"tax matters partner" has the meaning set forth in Section
4.08 hereof.
"Treasury Regulations" shall mean the Income Tax Regulations
and Temporary Regulations promulgated under the Code, as such regulations may
be amended from time to time (including corresponding provisions of succeeding
regulations).
Section 4.02. Capital Accounts.
(a) The Partnership shall maintain a separate capital account
(each a "Capital Account") for each Partner pursuant to the principles of this
Section 4.02 and Treasury Regulation Section 1.704-1(b)(2)(iv). Each Partner
shall have only one Capital Account, regardless of the number of interests in
the Partnership owned by such Partner and regardless of the time or manner in
which such interests were acquired by such Partner. Pursuant to the rules of
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, the balance of each
Partner's Capital Account shall be increased by (i) the amount of the Capital
Contribution of such Partner to the Partnership under Section 3.01, and (ii)
such Partner's allocable share of Partnership Net Income pursuant to Section
4.03 and special allocations of Income determined pursuant to Section 4.03 and
Section 4.04. Such Capital Account shall be decreased by (i) the amount of
cash distributed to the Partner by the Partnership and (ii) such Partner's
allocable share of Net Loss pursuant to Section 4.03 and special allocations of
Loss determined pursuant to Section 4.03 and Section 4.04.
(b) The provisions of this Section 4.02 and other portions of this
Agreement relating to the proper maintenance of Capital Accounts are designed
to comply with the requirements of Treasury Regulation Section 1.704-1(b). The
Partners intend that such provisions be interpreted and applied in a manner
consistent with such Treasury Regulations.
Section 4.03. Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, Income, Loss and
12
<PAGE> 16
Nonrecourse Deductions and Partner Nonrecourse Deductions from and after the
Effective Date shall first be specially allocated as provided in Section 4.04.
The Partnership's Net Income, Net Loss, Income or Loss for all Fiscal Years
from and after the Effective Date shall then be allocated as follows.
(a) Net Income. The Partnership's Net Income, if any, for a
Fiscal Year then shall be allocated to the Partners as follows and in the
following order of priority:
(i) First, to each Partner until such Partner has
been allocated total Net Income for the current Fiscal Year and
previous Fiscal Years pursuant to this Section 4.03(a)(i) equal to the
total Net Losses allocated to such Partner in previous Fiscal Years
pursuant to Section 4.03(b)(ii) (first offsetting Net Loss allocated
to the General Partner pursuant to the last portion of the proviso,
then offsetting Net Loss allocated to Limited Partners pursuant to the
first part of the proviso and finally offsetting Net Loss allocated in
accordance with Contribution Percentages); and
(ii) Thereafter, to the Partners in accordance
with their Sharing Percentages.
(b) Net Loss. The Partnership's Net Loss, if any, for a Fiscal
Year then shall be allocated to the Partners as follows and in the following
order of priority:
(i) First, to each Partner until such Partner has
been allocated total Net Loss for the current Fiscal Year and previous
Fiscal Years pursuant to this Section 4.03(b)(i) equal to the total
Net Income allocated to such Partner in the current Fiscal Year and
previous Fiscal Years pursuant to Section 4.03(a)(ii); and
(ii) Thereafter, to the Partners in accordance
with their Contribution Percentages; provided, however, that to the
extent Net Losses allocated to a Limited Partner would create or
increase a deficit in such Limited Partner's Adjusted Capital Account
at the end of a Fiscal Year, such Net Losses shall not be allocated to
such Limited Partner and instead shall first be allocated to the other
Limited Partners, on a pro rata basis, having a positive balance in
their Adjusted Capital Accounts until such Adjusted Capital Accounts
are reduced to zero and shall thereafter be allocated to the General
Partners.
(c) Curative Allocations. To minimize any economic distortions
that would alter the economic arrangement of the Partners, special allocations
pursuant to Section 4.04 shall be taken into account in computing subsequent
special allocations of Income or Loss pursuant to this Section 4.03, so that
the net amounts allocated to each Partner pursuant to this Section 4.03 and
Section 4.04 shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Partner pursuant to this Section 4.03 if
such special allocations had not occurred.
Section 4.04. Special Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, the
13
<PAGE> 17
Partnership's items of Income, Nonrecourse Deductions and Partner Nonrecourse
Deductions shall be specially allocated as provided in this Section 4.04, prior
to any allocations of Net Income, Net Loss, Income and Loss, as set forth in
Section 4.03, as follows and in the following order of priority (after giving
effect to all Capital Account adjustments attributable to Capital Contributions
and distributions).
(a) Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during a Partnership Fiscal Year, except as otherwise
provided in Treasury Regulation Section 1.704-2(f) each Partner will be
specially allocated, prior to any other allocation made under Section 704(b) of
the Code of Partnership items for such Fiscal Year, items of Income for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to
such Partner's share of the net decrease in Partnership Minimum Gain
(determined pursuant to Treasury Regulation Section 1.704-2(g)(2)). The items
to be so allocated and the order of such allocation shall be determined in
accordance with Section 1.704-2(f)(6) and Sections 1.704-2(j)(2)(i) and (iii)
of the Treasury Regulations. This Section 4.04(a) is intended to constitute a
"minimum gain chargeback" within the meaning of Treasury Regulation Section
1.704-2(f).
(b) Partner Minimum Gain Chargeback. If there is a net decrease
in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during a
Partnership Fiscal Year, except as otherwise provided in Treasury Regulation
Sections 1.704-2(i)(4) and provisions consistent with Treasury Regulation
Sections 1.704-2(f)(2), (3), (4) and (5) each Partner who has a share of
Partner Minimum Gain attributable to such Partner Nonrecourse Debt as of the
beginning of the Fiscal Year, determined in accordance with Section
1.704-2(i)(5) of the Treasury Regulations, will be specially allocated items of
Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain (determined in a manner consistent with the provisions of Treasury
Regulation Section 1.704-2(g)(2)). The items to be so allocated shall be
determined in accordance with Section 1.704-2(i)(4) and Sections
1.704-2(j)(2)(i) and (iii) of the Treasury Regulations. This Section 4.04(b)
is intended to constitute a "minimum gain chargeback" with respect to Partner
Nonrecourse Debt within the meaning of Treasury Regulation Section
1.704-2(i)(4).
(c) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulation Section 1.704-2(i)(1).
(d) Nonrecourse Deductions. Any Nonrecourse Deductions for any
Fiscal Year or other period shall be allocated in accordance with the Sharing
Percentages of the Partners.
(e) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) or receives any other
distributions causing a deficit in such Partner's Adjusted Capital Account at
the end of such Fiscal Year (determined after giving effect to any allocations
required by Section 4.04(a) and
14
<PAGE> 18
(b) but before giving effect to any other allocations required by this Section
4.04(e)), items of Partnership Income shall be specially allocated to such
Partner (consisting of a pro rata portion of each item of Partnership Income,
including gross income, for such year) in an amount and manner sufficient to
eliminate such deficit, if any, in such Partner's Adjusted Capital Account
(determined after giving effect to any allocations required by Section 4.04(a)
and (b) but before giving effect to any other allocations required by this
Section 4.04(e)), as quickly as possible. This Section 4.04(e) is intended to
constitute a "qualified income offset" within the meaning of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
Section 4.05. Allocations for Tax Purposes. Except as otherwise
provided herein or required by law, each item of income, gain, loss, deduction
and credit of the Partnership shall be allocated to the Partners in the same
manner as such allocations are made for book purposes pursuant to Sections 4.03
and 4.04. In the event of a transfer of, or other change in, a Partnership
interest during a Fiscal Year, each item of taxable income and loss shall be
prorated in accordance with Section 706 of the Code, using any convention
permitted by law and selected by the General Partner.
Section 4.06. Distributions to Partners. Distributable Cash of the
Partnership shall be distributed at such times and in such amounts as the
General Partner may reasonably determine, but not more often than annually.
Distributions shall be made to Partners on a pro rata basis based on the
respective Sharing Percentages of the Partners.
Section 4.07. Tax Status, Elections and Modifications to Allocations.
(a) Notwithstanding any provision contained in this Agreement to
the contrary, solely for federal income tax purposes, each of the Partners
hereby recognizes that the Partnership will be subject to all provisions of
Subchapter K of the Code; provided, however, that the filing of United States
Partnership Returns of Income shall not be construed to extend the purposes of
the Partnership or expand the obligations or liabilities of the Partners.
(b) The General Partner, with the consent of the Limited Partner,
may cause the Partnership to elect pursuant to Section 754 of the Code and the
Treasury Regulations to adjust the basis of the Partnership Assets as provided
by Section 743 or 734 of the Code and the Treasury Regulations thereunder. The
Partnership shall make such elections for federal income tax purposes as may be
determined by the General Partner, with the consent of the Limited Partner.
(c) The General Partner or the Terminating Partner (as defined in
Section 7.05(a) hereof), as appropriate, shall prepare and execute any
amendments to this Agreement necessary for the Partnership to comply with the
provisions of Treasury Regulations Sections 1.704-1(b), 1.704-1(c) and 1.704-2
or that the General Partner considers appropriate upon the happening of any of
the following events: (i) a constructive termination of the Partnership
pursuant to Code Section 708(b)(1)(B) or (ii) the contribution or distribution
of any property, other than cash, to or by the Partnership.
15
<PAGE> 19
Section 4.08. Tax Matters Partner
(a) Subject to the provisions hereof, the General Partner is
designated as the "tax matters partner" of the Partnership (as defined in the
Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and
costs associated therewith. The Limited Partner agrees to cooperate with the
tax matters partner and to do or refrain from doing any or all things
reasonably required by the tax matters partner to conduct such proceedings.
(b) Notwithstanding anything to the contrary in Section 4.08(a)
above, the General Partner, in its capacity as tax matters partner, may not
take any of the following actions without the prior consent of the Limited
Partner:
(i) Enter into a settlement agreement with the
Internal Revenue Service which purports to bind the Partners
other than the tax matters partner;
(ii) File a petition as contemplated in Code
Section 6226(a) or Code Section 6228;
(iii) Intervene in any action as contemplated in
Code Section 6226(b)(5);
(iv) File any request contemplated in Code Section
6227(b); and
(v) Enter into any agreement extending the period
of limitations as contemplated in Code Section 6229(b)(1)(B).
(c) To the extent and in the same manner as provided by applicable
law, the General Partner, as tax matters partner, (i) shall furnish the name,
address, and taxpayer identification number of each Partner to the Secretary of
the Treasury of his delegate, and (ii) shall keep each Partner informed of any
administrative and judicial proceedings for the adjustment at the Partnership
level of any items required to be taken into account by a Partner for income
tax purposes. The General Partner shall give notice to each Partner of a
Partnership audit. The General Partner will consult with the Limited Partner
with respect to the performance of its duties as "tax matters partner."
Section 4.09. Books of Account.
(a) The General Partner shall maintain the Partnership's books and
records and shall determine all items of Income, Loss, Net Income and Net Loss
in accordance with generally accepted accounting practices. All of the
records and books of account of the Partnership shall at all times be
maintained at the principal office of the Partnership and shall be open to the
inspection and examination of the Partners or their representatives during
reasonable business
16
<PAGE> 20
hours. Such right may be exercised through any agent or employee of a Partner
designated by it or by an attorney or independent certified public accountant
designated by such Partner.
(b) All expenses in connection with the keeping of the books and
records of the Partnership and the preparation of audited or unaudited
financial statements required to implement the provisions of the Agreement or
otherwise needed for the conduct of the Partnership's business shall be borne
by the Partnership as an ordinary expense of its business.
Section 4.10. Partnership Tax Returns and Annual Statement. The
General Partner shall cause the Partnership to file a federal income tax return
and all other tax returns required to be filed by the Partnership for each
Fiscal Year or part thereof, and shall provide to each Person who at any time
during the Fiscal Year was a Partner an audited annual statement (including a
copy of Schedule K-1 to Internal Revenue Service Form 1065) indicating such
Partner's share of the Partnership's income, loss, gain, expense and other
items relevant for federal income tax purposes.
Section 4.11. Independent Auditors. The books and records of the
Partnership shall be audited by Coopers & Lybrand or another independent
internationally recognized accounting firm selected by the General Partner and
approved in writing by the Limited Partner as of the end of each Fiscal Year of
the Partnership.
Section 4.12. Financial Reports to Limited Partners. Within 90 days
after the end of each Fiscal Year, the Partnership shall prepare and mail to
each Partner, together with a report thereon of the Partnership's independent
auditors setting forth:
(i) a balance sheet of the Partnership at Fiscal
Year end; and
(ii) statements of income and cash flows for the
immediately preceding Fiscal Year.
Section 4.13. Bank Accounts. The bank account or accounts of the
Partnership shall be maintained in the bank approved by the General Partner.
The terms governing such accounts shall be determined by the General Partner
and withdrawals from such bank accounts shall only be made by the General
Partner or such other parties as may be approved by the General Partner.
Section 4.14. Minimum Allocation to General Partners.
Notwithstanding anything to the contrary that may be expressed or implied in
this Agreement (other than allocations required pursuant to Section 704(b) or
Section 704(c)), the interest of the General Partner in each item of income,
gain, loss, deduction and credit will not be less than one percent of each such
item at all times during the existence of the Partnership.
17
<PAGE> 21
ARTICLE V
ASSIGNMENT
Section 5.01. Transfers Generally.
(a) Except as specifically provided in this Article V, (i) the
Limited Partner may not sell, transfer, assign, give, pledge, mortgage,
hypothecate or otherwise encumber or permit or suffer any encumbrance (each a
"Transfer") of all or any part of its interest in the Partnership unless
written consent is obtained from the General Partner (which consent may be
withheld by the General Partner arbitrarily in its sole discretion) and the
requirements of Section 5.01(b) below have been met; provided, however, that
notwithstanding anything in this Article V to the contrary, a Limited Partner
may assign its interest in the Partnership in its entirety to a Partner
Affiliate without the consent of the General Partner so long as the
requirements of Section 5.01(b) below are met in connection with such an
assignment, and (ii) the General Partner may not Transfer all or any part of
its interest in the Partnership unless written consent is obtained from the
Limited Partner (which consent may be withheld by the Limited Partner
arbitrarily in its sole discretion) and the requirements of Section 5.01(b)
below have been met. Any attempt to so transfer or encumber any such interest
without meeting the requirements of the preceding sentence shall be null and
void, ab initio, and the Partners will be excused from accepting the
performance of and rendering performance to any Person other than the Partner
hereunder (including any trustee or assignee of or for such Partner) as to whom
such requirements have not been met.
(b) In addition to the other requirements of Section 5.01(a) and
subject to the provisions thereof, no Transfer of a Partner's interest in the
Partnership may be made unless the transferee of such interest provides the
Partnership with the following:
(1) an opinion of counsel reasonably acceptable to the
General Partner (in the case of a Transfer by a Limited Partner) or
the Limited Partner (in the case of a Transfer by a General Partner)
that:
(i) The prospective assignee or transferee is an
United States person within the meaning of Code Section
7701(a)(30);
(ii) The Transfer will not cause the Partnership
Assets to be "plan assets" or the transactions contemplated
hereunder to be prohibited transactions under ERISA or the
Code;
(iii) The Transfer will not cause the Partnership
to terminate under Code Section 708;
(iv) The Transfer will not cause the Partnership
to be treated as an association taxable as a corporation for
federal income tax purposes;
18
<PAGE> 22
(v) The Transfer will not violate any applicable
federal or state securities laws; and
(vi) The Transfer will not cause the Partnership
to be treated as a "publicly traded partnership" within the
meaning of Section 7704 of the Code;
(2) a certificate from the transferor Partner to the
effect that such Transfer will not result in the violation of, or
cause the Partnership to incur a penalty under, any statute,
regulation, case law, judicial or administrative order or decree, or
governmental license or permit, or any interpretation thereof by any
governmental or regulatory authority or court of competent
jurisdiction;
(3) an agreement in writing to assume all obligations of
the transferor Partner hereunder relating to the interests to be
Transferred; and
(4) a written representation of such transferee that he
or it is acquiring the interest for his or its own account for
investment and not with a view to distribution, and such other
representations and warranties as the General Partner (in the case of
a Transfer by a Limited Partner) or the Limited Partner (in the case
of a Transfer by a General Partner) may reasonably require to ensure
compliance with applicable federal and state securities laws.
Section 5.02. Consequences of Transfers Generally.
(a) In the event of any transfer or transfers permitted under this
Article V, the interest so transferred shall remain subject to all terms and
provisions of this Agreement, and the transferee shall be deemed, by accepting
the interest so transferred, to have assumed all the liabilities and
unperformed obligations under this Agreement or otherwise, that are appurtenant
to the interest so transferred; shall hold such interest subject to all
unperformed obligations of the transferor Partner; and shall agree in writing
to the foregoing if requested by the General Partner (in the case of a Transfer
by a Limited Partner) or the Limited Partner (in the case of a Transfer by a
General Partner). Notwithstanding any transfer of interest under this Article
V, the transferor Partner shall remain jointly and severally liable with his
transferee for all liabilities and unperformed obligations under this Agreement
appurtenant to the interest in the Partnership transferred. In the case of a
transferee who is not already a Partner and until such transferee has been
admitted as a Substituted Partner (as defined in Section 5.03 hereof), such
transferee shall be entitled only to share in Partnership income, deductions,
credits, gains, losses and distributions in accordance with the Contribution
Percentage, Sharing Percentage and Capital Account appurtenant to the interest
so transferred and shall only have the rights of an assignee of a partnership
interest under the Act.
(b) Any Partner making or offering to make a transfer of all or
any part of his or its interest in the Partnership shall indemnify, defend and
hold harmless the Partnership and all other Partners from and against any
losses, expenses, judgments, fines, settlements or damages, suffered or
incurred by the Partnership or any such other Partner arising out of or
resulting from any claims by the transferee of such Partnership interest or any
offerees of such Partnership
19
<PAGE> 23
interest in connection with such transfer or offer, including without
limitation costs, expenses and attorney's fees expended in the settlement or
defense of any such claim, and shall advance such expenses and attorneys' and
accountants' fees incurred in defending such proceeding in the same manner as
under Section 2.04(c) hereof.
Section 5.03. Substituted Partner; Withdrawal of Transferor Partner.
A transferee (other than an existing Partner) of the interest of a Partner may
be admitted as a substitute partner ("Substituted Partner"), and a subsequent
transferor Partner who has transferred his entire interest in the Partnership
may withdraw from the Partnership as a Partner, on the terms specified by and
only with the written consent of the General Partner (if the transferor Partner
is a Limited Partner) or of the Limited Partner (if the transferor Partner is
the General Partner), which consent shall be granted or denied for any reason
or for no reason in the sole discretion of the General Partner or such Limited
Partner, as appropriate. The General Partner shall reflect the admission of
the transferee as a Substituted Partner by preparing an amendment to this
Agreement, dated as of the date of such admission and withdrawal, which
amendment shall be signed by all Partners. Upon admission, such Substituted
Partner shall be subject to all provisions of the Agreement as if the
Substituted Partner originally was a party to this Agreement. A transferee not
admitted as a Partner shall have the rights only of an assignee of a
partnership interest.
ARTICLE VI
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 6.01. Withdrawal. Except as otherwise provided in the
Agreement, no Partner shall at any time retire or withdraw from the Partnership
or withdraw any amount out of its Capital Account. Any Partner retiring or
withdrawing in contravention of this Section 6.01 shall indemnify, defend and
hold harmless the Partnership and all other Partners (other than a Partner who
is, at the time of such withdrawal, in default under this Agreement) from and
against any losses, expenses, judgments, fines, settlements or damages suffered
or incurred by the Partnership or any such other Partner arising out of or
resulting from such retirement or withdrawal.
Section 6.02. Dissolution of the Partnership. The Partnership shall
be dissolved, wound up and terminated upon the occurrence of any of the
following:
(a) An event occurs such that under the Act a General Partner
ceases to serve as a General Partner (an "event of withdrawal"), unless:
(i) the remaining General Partner, if any, elects in
writing within ninety (90) days after such event to reconstitute the
Partnership, to continue as the General Partner and to continue the
Partnership and its business, and
20
<PAGE> 24
(ii) if there is no remaining General Partner, within
ninety (90) days after such event, all of the Limited Partners agree
to appoint in writing a successor General Partner, as of the date of
the withdrawal of the General Partner, and agree to reconstitute the
Partnership and to continue the business of the Partnership, and such
successor General Partner agrees in writing to accept such election;
(b) Any Partner (i) is voluntarily adjudicated a debtor, bankrupt
or insolvent, (ii) seeks, consents to or does not contest the appointment of a
receiver or trustee for it or for all or any substantial part of its property,
(iii) files a petition seeking relief under the bankruptcy, arrangement,
reorganization or other debtor relief laws of the United States or any state,
(iv) makes a general assignment for the benefit of its creditors, or (v) admits
in writing its inability to pay its debts as they mature;
(c) (i) a petition is filed against any Partner seeking relief
under the bankruptcy, arrangement, reorganization or other debtor relief laws
of the United States or any state, or (ii) a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of said
Partner, a receiver or a trustee for it, or for all or any part of its
property, and such petition, order, judgment or decree shall not be and remain
discharged or stayed within one hundred and eighty (180) days after its entry;
(d) Any Partner fails to perform its obligations hereunder and
such failure continues for a period of thirty (30) days following notice by the
other Partners specifying the nature of such default unless the nature of such
obligation does not permit its cure within thirty (30) days, in which event
such Partner shall be afforded a period not to exceed one hundred twenty (120)
days to cure such default if such Partner commences remedial action within such
thirty (30) day period and diligently prosecutes the same to completion;
(e) The sale or other disposition, not including an exchange, of
substantially all the assets of the Partnership;
(f) December 31, 2024, unless extended by the consent of all
Partners; or
(g) Subject to any restriction in any agreement to which the
Partnership is a party, an election to dissolve the Partnership made by both
the General Partner and the Limited Partner.
Section 6.03. Continuation and Reconstitution of Partnership. If the
Partnership is continued as provided in Section 6.02(a)(i) or (ii), then as of
the date of withdrawal, the General Partner with respect to which an event of
withdrawal under Section 6.02 has occurred (or his or its estate or successor
in interest) (the "Withdrawing General Partner") shall have none of the powers
of a General Partner under the Agreement or applicable law and shall have only
the rights of an assignee of a partnership interest under the Act and the right
to share in Partnership income, deductions, credits, gains, losses and
distributions in accordance with the Contribution Percentage, Sharing
Percentage and Capital Account appurtenant to the General Partner's interest.
The Withdrawing General Partner's estate, legal representatives or
successors-in-interest, as the case may be, shall remain primarily and directly
liable for the performance of
21
<PAGE> 25
all his or its obligations under the Agreement. If the Partnership is
reconstituted pursuant to Section 6.02(a)(i) or (ii), the remaining General
Partner or the successor General Partner (whichever is applicable) shall have
all the rights, powers and obligations of the General Partner hereunder and all
references to the "General Partner" herein shall refer to such remaining or
successor General Partner, as the case may be, unless the context clearly
indicates otherwise. The remaining General Partner or the successor General
Partner, as the case may be, shall reflect the consummation of the transactions
contemplated in Section 6.02(a)(i) or (ii) by preparing an amendment to this
Agreement pursuant to the provisions of Section 7.03, which amendment shall be
signed by all Partners.
Section 6.04. Death, etc. of a Limited Partner.
(a) The death, disability, withdrawal, winding-up and termination
(in the case of a Limited Partner that is a partnership), dissolution (in the
case of a Limited Partner that is a corporation), retirement or adjudication as
a bankrupt of a Limited Partner (the "Withdrawing Limited Partner") shall not
dissolve the Partnership, but the interest of the Withdrawing Limited Partner
shall, upon the happening of such event, pass to the Withdrawing Limited
Partner's successor-in-interest, who shall have none of the powers of a Limited
Partner under the Agreement or applicable law and shall have only the right to
share in Partnership income, deductions, credits, gains, losses and
distributions in accordance with the Contribution Percentage and Capital
Account appurtenant to the interest of the Withdrawing Limited Partner. The
Withdrawing Limited Partner's successor-in-interest shall be deemed, by
accepting such interest, to have assumed all the liabilities and unperformed
obligations, under the Agreement or otherwise, that are appurtenant to the
interest received by such successor-in-interest.
(b) The General Partner shall reflect the consummation of the
transactions contemplated in this Section 6.04 by preparing an amendment to
this Agreement pursuant to the provisions of Section 7.03, which amendment
shall be signed by all Partners.
Section 6.05. Termination of Partnership.
(a) Upon dissolution of the Partnership unless continued pursuant
to Section 6.02, the Partnership shall be terminated as rapidly as business
circumstances will permit. At the direction of the General Partner, or a
Partner approved by the Limited Partner if the dissolution of the Partnership
is caused by the occurrence of an event of withdrawal with respect to the
General Partner (the General Partner or the other Partner, as the case may be,
being herein called the "Terminating Partner"), a full accounting of the assets
and liabilities of the Partnership shall be taken and a statement of the
Partnership Assets and a statement of each Partner's Capital Account shall be
furnished to all Partners as soon as is reasonably practicable. The
Terminating Partner shall take such action as is necessary so that the
Partnership's business shall be terminated, its liabilities discharged and its
assets distributed as hereinafter described. The Terminating Partner may sell
all of the Partnership Assets or distribute the Partnership Assets in kind. A
reasonable period of time shall be allowed for the orderly termination of the
Partnership to minimize the normal losses of a liquidation process.
22
<PAGE> 26
(b) Subject to (c) below, after the payment of all expenses of
liquidation, of all debts and liabilities of the Partnership in such order or
priority as provided by law (including any debts or liabilities to Partners,
who shall be treated as secured or unsecured creditors, as may be the case, to
the extent permitted by law, for sums loaned to or advanced on behalf of the
Partnership, if any, as distinguished from Capital Contributions) and after all
resulting items of Partnership income, gain, credit, loss or deduction are
credited or debited to the Capital Accounts of the Partners in accordance with
Articles III and IV hereof, all remaining Partnership Assets shall then be
distributed among the Partners in accordance with the respective remaining
Capital Account balances of the Partners.
Notwithstanding any indication in this Agreement to the contrary, there shall
be withheld from such distributions such reserves for contingent and unforeseen
liabilities as the Terminating Partner in its reasonable discretion deems
adequate, such reserves to be held and distributed in such manner and at such
times as the Terminating Partner in its reasonable discretion deems advisable
(with such distributions to be made in accordance with this Section 6.05(b)).
Upon termination, a Partner may not demand and receive cash in return for such
Partner's capital contributions and no Partner shall have any obligation to
restore any deficit that may then exist in the Partner's Capital Account.
Distributions on termination may be made by the distribution to each Partner of
an undivided interest in any Partnership Asset that has not been sold at the
time of the termination of the Partnership.
(c) Distributions pursuant to the terms of this Agreement shall be
made in accordance with the timing requirements of Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2). In order to satisfy such timing requirements,
Partnership Assets may be transferred to a trust established for the benefit of
the Partners for the purposes of liquidating Partnership Assets, collecting
amounts owed to the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner arising
out of or in connection with the Partnership. The assets of such trust shall
be distributed to the Partners from time to time, in the reasonable discretion
of the Terminating Partner, in accordance with the terms of this Partnership
Agreement.
(d) Upon the dissolution of the Partnership and liquidation of its
assets pursuant to this Article VII, if the General Partner has a negative
balance in its Capital Account, the General Partner shall contribute to the
Partnership, in cash, an amount equal to the lesser of (i) the deficit balance
in its Capital Account, or (ii) the excess of 1.01% of the total capital
contributions of the Limited Partner over the capital contributions previously
contributed by the General Partner. Any amount contributed by the General
Partner pursuant to this paragraph shall be applied and distributed as provided
in Section 6.05(b).
Section 6.06. Specific Performance. It is expressly agreed that the
remedy at law for breach of any of the obligations set forth in Article V and
Article VI are inadequate in view of (i) the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of a Partner to comply fully with each of said obligations, and (ii) the
uniqueness of the Partnership Assets and the Partnership relationship.
Accordingly, each of these obligations will be, and is hereby expressly made,
enforceable by specific performance.
23
<PAGE> 27
ARTICLE VII
GENERAL
Section 7.01. LIMITED PARTNER REPRESENTATIONS AND AGREEMENTS.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, THE
LIMITED PARTNER HEREBY REPRESENTS AND WARRANTS TO THE PARTNERSHIP, THE GENERAL
PARTNER AND TO EACH OFFICER, DIRECTOR, SHAREHOLDER, AND CONTROLLING PERSON OF
THE GENERAL PARTNER THAT: (a) THE INTEREST IN THE PARTNERSHIP OF THE LIMITED
PARTNER IS ACQUIRED FOR INVESTMENT PURPOSES ONLY FOR ITS OWN ACCOUNT AND NOT
WITH A VIEW TO OR IN CONNECTION WITH ANY DISTRIBUTION, REOFFER, RESALE OR OTHER
DISPOSITION NOT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS THEREUNDER (THE "SECURITIES ACT") AND APPLICABLE
STATE SECURITIES LAWS; (b) SUCH LIMITED PARTNER, ALONE OR TOGETHER WITH HIS OR
ITS REPRESENTATIVES, POSSESSES SUCH EXPERTISE, KNOWLEDGE AND SOPHISTICATION IN
FINANCIAL AND BUSINESS MATTERS GENERALLY, AND IN THE TYPE OF TRANSACTIONS IN
WHICH THE PARTNERSHIP PROPOSES TO ENGAGE IN PARTICULAR, THAT IT IS CAPABLE OF
EVALUATING THE MERITS AND ECONOMIC RISKS OF ACQUIRING AND HOLDING ITS
PARTNERSHIP INTEREST AND HE OR IT IS ABLE TO BEAR ALL SUCH ECONOMIC RISKS NOW
AND IN THE FUTURE; (c) SUCH LIMITED PARTNER HAS HAD ACCESS TO ALL OF THE
INFORMATION WITH RESPECT TO THE INTEREST ACQUIRED BY IT UNDER THIS AGREEMENT
THAT IT DEEMS NECESSARY TO MAKE A COMPLETE EVALUATION THEREOF AND HAS HAD THE
OPPORTUNITY TO QUESTION THE GENERAL PARTNER CONCERNING SUCH INTEREST; (d) SUCH
LIMITED PARTNER'S DECISION TO ACQUIRE ITS PARTNERSHIP INTEREST FOR INVESTMENT
HAS BEEN BASED SOLELY UPON THE EVALUATION MADE BY IT; (e) SUCH LIMITED PARTNER
IS AWARE THAT IT MUST BEAR THE ECONOMIC RISK OF ITS INVESTMENT IN THE
PARTNERSHIP FOR AN INDEFINITE PERIOD OF TIME BECAUSE INTERESTS IN THE
PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR UNDER THE
SECURITIES LAWS OF VARIOUS STATES AND, THEREFORE, CANNOT BE SOLD UNLESS SUCH
INTERESTS ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE; (f) SUCH LIMITED PARTNER IS AWARE THAT ONLY THE PARTNERSHIP CAN TAKE
ACTION TO REGISTER SUCH INTEREST IN THE PARTNERSHIP AND THE PARTNERSHIP IS
UNDER NO SUCH OBLIGATION AND DOES NOT PROPOSE TO ATTEMPT TO DO SO; AND (g) SUCH
LIMITED PARTNER IS AWARE THAT THIS AGREEMENT PROVIDES RESTRICTIONS ON THE
ABILITY OF A LIMITED PARTNER TO SELL, TRANSFER, ASSIGN, MORTGAGE, HYPOTHECATE
OR OTHERWISE ENCUMBER ITS INTEREST IN THE PARTNERSHIP; AND (h) SUCH LIMITED
PARTNER AGREES THAT IT WILL TRUTHFULLY AND COMPLETELY ANSWER ALL QUESTIONS, AND
MAKE ALL COVENANTS, THAT THE PARTNERSHIP OR THE GENERAL PARTNER MAY,
CONTEMPORANEOUSLY OR HEREAFTER, ASK
24
<PAGE> 28
OR DEMAND FOR THE PURPOSE OF ESTABLISHING COMPLIANCE WITH THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.
Section 7.02. Notice.
(a) All notices, demands or requests provided for or permitted to
be given pursuant to this Agreement must be in writing.
(b) All notices, demands and requests to be sent to a Partner or
any Substituted or Admitted Limited Partner pursuant to this Agreement shall be
deemed to have been properly given or served if: (i) personally delivered, (ii)
deposited for next day delivery by Federal Express, or other similar overnight
courier services, addressed to such Partner, (iii) deposited in the United
States mail, addressed to such Partner, prepaid and registered or certified
with return receipt requested or (iv) transmitted via telecopier or other
similar device to the attention of such Partner.
(c) All notices, demands and requests so given shall be deemed
received: (i) when personally delivered, (ii) twenty-four (24) hours after
being deposited for next day delivery with an overnight courier, (iii)
forty-eight (48) hours after being deposited in the United States mail or (iv)
twelve (12) hours after being telecopied or otherwise transmitted if receipt
has been confirmed.
(d) The Partners and any Substituted Partners shall have the right
from time to time, and at any time during the term of this Agreement, to change
their respective addresses and each shall have the right to specify as his or
its address any other address within the United States of America by giving to
the other parties at least thirty (30) days written notice thereof, in the
manner prescribed in Section 7.02(b); provided, however, that to be effective,
any such notice must be actually received (as evidenced by a return receipt or
similar proof).
(e) All distributions to any Partner shall be made at the address
at which notices are sent unless otherwise specified in writing by any such
Partner.
Section 7.03. Amendments. This Agreement may be amended or modified
(i) as authorized in this Agreement or (ii) otherwise pursuant to a writing
executed and delivered by the General Partner and the Limited Partner.
Section 7.04. Governing Laws and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
Section 7.05. Entire Agreement. This Agreement, including all
exhibits to this Agreement and, if any, exhibits to such exhibits, contains the
entire agreement among the parties relative to the matters contained in this
Agreement.
Section 7.06. Waiver. No consent or waiver, express or implied, by
any Partner to or of any breach or default by any other Partner in the
performance by such other Partner of his or its obligations under this
Agreement shall be deemed or construed to be a consent or waiver
25
<PAGE> 29
to or of any other breach or default in the performance by such other Partner
of the same or any other obligations of such other Partner under this
Agreement. Failure on the part of any Partner to complain of any act or
failure to act of any of the other Partners or to declare any of the other
Partners in default, regardless of how long such failure continues, shall not
constitute a waiver by such Partner of his or its rights hereunder.
Section 7.07. Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not be
affected thereby, and the intent of this Agreement shall be enforced to the
greatest extent permitted by law.
Section 7.08. Binding Agreement. Subject to the restrictions on
transfers and encumbrances set forth in this Agreement, this Agreement shall
inure to the benefit of and be binding upon the undersigned Partners and their
respective legal representatives, successors and assigns. Whenever, in this
Agreement, a reference to any party or Partner is made, such reference shall be
deemed to include a reference to the legal representatives, successors and
assigns of such party or Partner.
Section 7.09. Tense and Gender. Unless the context clearly indicates
otherwise, the singular shall include the plural and vice versa. If the
masculine, feminine or neuter gender is used inappropriately in this Agreement,
this Agreement shall be read as if the appropriate gender was used.
Section 7.10. Captions. Captions are included solely for convenience
of reference and if there is any conflict between captions and the text of this
Agreement, the text shall control.
Section 7.11. Benefits of Agreement. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to give to any creditor
of the Partnership or any creditor of any Partner or any other Person
whatsoever, other than the Partners and the Partnership, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any covenant,
condition or provisions herein contained, and such provisions are and shall be
held to be for the sole and exclusive benefit of the Partners and the
Partnership.
Section 7.12. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes and all of which when taken together shall constitute a single
counterpart instrument. Executed signature pages to any counterpart instrument
may be detached and affixed to a single counterpart, which single counterpart
with multiple executed signature pages affixed thereto constitutes the original
counterpart instrument. All of these counterpart pages shall be read as though
one and they shall have the same force and effect as if all of the paries had
executed a single signature page.
Section 7.13. Representations and Warranties of Each Partner. Each
Partner hereby acknowledges, represents and warrants to, and agrees with, the
Partnership and the Partners as follows:
26
<PAGE> 30
(a) The acceptance of this Agreement by such Partner as evidenced
by its signature on the signature pages of this Agreement has been authorized
by all necessary action on behalf of such Partner and this Agreement is the
valid and binding obligation of such Partner, enforceable in accordance with
its terms.
(b) Such Partner's execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not conflict with or
result in any violation of, or default under, any provision of this Agreement,
or any agreement or other instrument to which such Partner is a party or by
which it or any of its properties are bound or, to the best of its knowledge,
any statute, regulation, case law, judicial or administrative order or decree
or governmental license or permit or any interpretation thereof by any
governmental or regulatory authority or court of competent jurisdiction
applicable to it or its business or properties or those of its Partner
Affiliates.
[intentionally blank]
27
<PAGE> 31
Each of the undersigned has executed and delivered this Limited
Partnership Agreement of Tele-Communications of Arkansas Limited Partnership to
be effective as of the Effective Date.
GENERAL PARTNER
3015 SSE Loop 323 MCMILLIAN PARTNERS, L.P.
Tyler, Texas 75701
By: McMillian Holdings, Inc., General
Partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
LIMITED PARTNER
3015 SSE Loop 323 TAL FINANCIAL CORPORATION
Tyler, Texas 75701
By:_____________________________________
Name:___________________________________
Title:__________________________________
28
<PAGE> 32
SCHEDULE A
to the Limited Partnership Agreement
of
Tele-Communications of Arkansas Limited Partnership
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
SHARING CONTRIBUTION CAPITAL CAPITAL
GENERAL PARTNER PERCENTAGE PERCENTAGE CONTRIBUTION Contribution
--------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
McMillian Partners, L.P. 20% 1.0% $40 $ 23,960
LIMITED PARTNERS
----------------
TAL Financial Corporation 80% 99.0% $3,960 $ 2,372,040
</TABLE>
<PAGE> 1
EXHIBIT 10(O)
LIMITED PARTNERSHIP AGREEMENT
OF
TELE-COMMUNICATIONS OF NORTHWEST ARKANSAS
LIMITED PARTNERSHIP
JANUARY 20, 1995
THE LIMITED PARTNERSHIP INTERESTS OF TELE-COMMUNICATIONS OF NORTHWEST
ARKANSAS LIMITED PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY
STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THOSE LAWS.
THE INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE
INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN
COMPLIANCE WITH (i) THE SECURITIES ACT, (ii) ANY APPLICABLE STATE
SECURITIES LAWS AND (iii) THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE
INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH THOSE
LAWS AND THIS AGREEMENT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Term . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. Purpose and Scope of Business . . . . . . . . 1
Section 1.04. Authority of the Partnership . . . . . . . . . 2
Section 1.05. Documents . . . . . . . . . . . . . . . . . . 2
Section 1.06. Principal Place of Business . . . . . . . . . 2
Section 1.07. Registered Agent and Office . . . . . . . . . 3
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority . . . . . 3
Section 2.02. Affiliates . . . . . . . . . . . . . . . . . . 5
Section 2.03. Expenses . . . . . . . . . . . . . . . . . . . 5
Section 2.04. Exculpation; Indemnities . . . . . . . . . . . 5
Section 2.05. Permitted Transactions . . . . . . . . . . . . 8
ARTICLE III
FINANCING
Section 3.01. Capital Contributions . . . . . . . . . . . . 8
Section 3.02. Limited Liability of Limited Partner . . . . . 8
Section 3.03. Treatment of Capital Contributions . . . . . . 8
Section 3.04. Loans from Partners . . . . . . . . . . . . . 8
Section 3.05. Financing . . . . . . . . . . . . . . . . . . 9
Section 3.06. Disbursements . . . . . . . . . . . . . . . . 9
Section 3.07. Withdrawal of Contributions . . . . . . . . . 9
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions . . . . . . . . . . . . . 9
Section 4.02. Capital Accounts . . . . . . . . . . . . . . . 12
Section 4.03. Allocations for Book Purposes . . . . . . . . 12
Section 4.04. Special Allocations for Book Purposes . . . . 13
Section 4.05. Allocations for Tax Purposes . . . . . . . . . 14
Section 4.06. Distributions to Partners . . . . . . . . . . 15
Section 4.07. Tax Status, Elections and Modifications to
Allocations . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.08. Tax Matters Partner . . . . . . . . . . . . . 15
Section 4.09. Books of Account . . . . . . . . . . . . . . . 16
Section 4.10. Partnership Tax Returns and Annual Statement . 16
Section 4.11. Independent Auditors . . . . . . . . . . . . . 17
Section 4.12. Financial Reports to Limited Partners . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.13. Bank Accounts . . . . . . . . . . . . . . . . 17
Section 4.14. Minimum Allocation to General Partners . . . . 17
ARTICLE V
ASSIGNMENT
Section 5.01. Transfers Generally . . . . . . . . . . . . . 17
Section 5.02. Consequences of Transfers Generally . . . . . 19
Section 5.03. Substituted Partner; Withdrawal of Transferor
Partner . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 6.01. Withdrawal . . . . . . . . . . . . . . . . . . 20
Section 6.02. Dissolution of the Partnership . . . . . . . . 20
Section 6.03. Continuation and Reconstitution of
Partnership . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.04. Death, etc. of a Limited Partner . . . . . . . 21
Section 6.05. Termination of Partnership . . . . . . . . . . 22
Section 6.06. Specific Performance . . . . . . . . . . . . . 23
ARTICLE VII
GENERAL
Section 7.01. LIMITED PARTNER REPRESENTATIONS AND
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.02. Notice . . . . . . . . . . . . . . . . . . . . 24
Section 7.03. Amendments . . . . . . . . . . . . . . . . . . 25
Section 7.04. Governing Laws and Venue . . . . . . . . . . . 25
Section 7.05. Entire Agreement . . . . . . . . . . . . . . . 25
Section 7.06. Waiver . . . . . . . . . . . . . . . . . . . . 25
Section 7.07. Severability . . . . . . . . . . . . . . . . . 25
Section 7.08. Binding Agreement . . . . . . . . . . . . . . 25
Section 7.09. Tense and Gender . . . . . . . . . . . . . . . 25
Section 7.10. Captions . . . . . . . . . . . . . . . . . . . 25
Section 7.11. Benefits of Agreement . . . . . . . . . . . . 25
Section 7.12. Counterparts . . . . . . . . . . . . . . . . . 26
Section 7.13. Representations and Warranties of Each
Partner . . . . . . . . . . . . . . . . . . . . . . . . 26
SCHEDULE A
</TABLE>
ii
<PAGE> 4
LIMITED PARTNERSHIP AGREEMENT
OF
TELE-COMMUNICATIONS OF NORTHWEST ARKANSAS
LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made and
entered into as of the day of January, 1995 (the "Effective
Date"), by and among McMillian Partners, L.P., a Delaware limited
partnership as the General Partner, and TAL Financial Corporation, a Nevada
corporation, as the Limited Partner. Unless otherwise indicated, all
capitalized terms used in this Agreement shall have the meaning ascribed to
them in Section 4.01.
For and in consideration of the mutual covenants set forth herein and
for other good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the undersigned (referred to
collectively as the "Partners" and individually as a "Partner") hereby
agree as follows:
ARTICLE I
ORGANIZATION AND PURPOSE
Section 1.01. Name. The name of the Partnership is TELE-
COMMUNICATIONS OF NORTHWEST ARKANSAS LIMITED PARTNERSHIP. All business and
affairs of the Partnership shall be conducted solely under, and all
Partnership Assets (as that term is defined in Section 1.03) shall be held
solely in, such name.
Section 1.02. Term. The Partnership shall continue under this
Agreement (as amended from time to time) until dissolved upon the
occurrence of an event that causes the dissolution of the Partnership in
accordance with the provisions of this Agreement, and thereafter to the
extent provided by applicable law, until wound up and terminated as
provided herein.
Section 1.03. Purpose and Scope of Business. The Partnership is
organized for the following objectives and purposes: (a) to acquire from
Time-Warner Cable, a division of Time Warner Entertainment Company, L.P.,
the Systems, (b) to carry on the business of acquiring, investing, owning,
constructing, maintaining, promoting, selling, disposing and otherwise
developing the Systems and other cable television systems in areas in which
the Partnership has a franchise; and (c) to do all other lawful things
necessary, appropriate or advisable in connection with these purposes. The
assets of the Partnership, whether now or hereafter owned, including
without limitation the assets comprising the Systems, are herein sometimes
referred to as the "Partnership Assets."
<PAGE> 5
Section 1.04. Authority of the Partnership. The Partnership shall be
empowered and authorized to do all lawful acts and things necessary,
appropriate, proper, advisable, incidental to, or convenient for the
furtherance and accomplishment of its purposes. The Partnership shall be
empowered and authorized:
(a) to construct, operate, maintain, improve, expand, buy, own, sell,
convey, assign, mortgage, refinance, rent or lease real or personal
property, which may be held in the name of the Partnership, in the name of
the General Partner as nominee or trustee for the beneficial owner of the
property, or in any other manner that the General Partner reasonably deems
to be in the best interest of the Partnership, so long as all such property
is properly reflected on the books of the Partnership;
(b) to enter into, perform, and carry out contracts and agreements of
any kind necessary to, in connection with, or incidental to accomplishing
the purposes of the Partnership;
(c) to borrow money and issue evidences of indebtedness in
furtherance of the purposes of the Partnership and to secure any such
indebtedness by mortgage, security interest, or other lien;
(d) to maintain and operate the assets of the Partnership;
(e) to negotiate for and conclude agreements for the sale, exchange,
or other disposition of all or any part of the property of the Partnership
or for the purchase or lease of additional property of the Partnership;
(f) to hire and compensate employees, agents, independent
contractors, attorneys, and accountants; and
(g) to bring and defend actions in law and equity.
Section 1.05. Documents. The General Partner shall file the
Certificate of Limited Partnership (the "Certificate") in the office of the
Secretary of State of the State of Delaware in accordance with the
provisions of the Act. If necessary in order to comply with the laws of
the State of Arkansas, the Partners and the Partnership shall promptly
execute and duly file with the proper offices in the State of Arkansas, one
or more certificates as required by law in order that the Partnership may
lawfully conduct the business, purposes and activities herein authorized
and take any other action or measures necessary for the Partnership to
conduct such activities in the State of Arkansas.
Section 1.06. Principal Place of Business. The principal place of
business of the Partnership shall be 3015 SSE Loop 323, Tyler, Texas 75701
or at such other place or places as may be determined by the General
Partner. The General Partner shall be responsible for maintaining at the
Partnership's principal place of business those records required by the Act
to be maintained there.
2
<PAGE> 6
Section 1.07. Registered Agent and Office. The Registered Agent (as
defined in the Act) for the Partnership shall be The Corporation Trust Co.
The Registered Office (as defined in the Act) of the Partnership shall be
1209 Orange Street, Wilmington, Delaware 19801.
ARTICLE II
OPERATIONS; INDEMNIFICATION
Section 2.01. Management of Partnership; Authority.
(a) Subject to the provisions of this Section 2.01, the General
Partner shall have the sole and exclusive right to carry out any and all of
the objectives and purposes of the Partnership in the name of the
Partnership and to perform all acts and enter into and perform all
contracts and other undertakings that it may in its discretion deem
necessary or advisable or incidental thereto, all in accordance with the
terms of this Agreement. Without limiting the generality of the foregoing,
and subject to the terms of this Agreement, including without limitation
Section 2.01(b) hereof, the General Partner shall have the exclusive
authority to act for and on behalf of the Partnership with respect to any
of the following matters:
(i) Maintaining, operating, managing and defending the
Partnership Assets, and contracting, as permitted hereby, with third
parties for such purposes and to do such other things as necessary or
appropriate to carry out the terms and provisions of this Agreement
that would be done by a normal and prudent owner in the ownership,
operation and management of his own property;
(ii) Insuring the Partnership Assets, including, without
limitation, maintaining comprehensive liability coverage, all as is
customarily prudent with respect to the business of the Partnership;
(iii) Prosecuting, defending, settling, handling, or
otherwise dealing with any threatened or actual claims, litigation, or
similar matters involving the Partnership;
(iv) Subject to the provisions of Section 4.11 hereof,
engaging outside accountants, consultants, management companies,
leasing agents and any and all other third-party agents and
assistants, both professional and nonprofessional, on behalf of the
Partnership, and compensating them in such manner and degree as the
General Partner may deem necessary or advisable; and
(v) Performing other obligations and exercising other
rights provided elsewhere in this Agreement to be performed or
exercised by the General Partner.
No third party shall ever be required to inquire into the authority of the
General Partner to take any action or consummate any transaction on behalf
of the Partnership, and third parties shall be entitled to rely exclusively
on the representations of the General Partner as to its authority to take
such actions and enter into such transactions. The General Partner shall
have the rights,
3
<PAGE> 7
authority and powers of a general partner with respect to the Partnership
business and the Partnership Assets as set forth in the Act as in effect
upon the Effective Date of this Agreement to the extent necessary,
convenient or incidental to the accomplishment of the purposes of the
Partnership. The General Partner shall not be required to devote its full
time and attention to the business of the Partnership, but only such time
as is necessary or appropriate for the proper conduct of the Partnership's
affairs.
(b) Notwithstanding anything in this Agreement to the contrary, the
General Partner shall not have the right or the power to make any
commitment or engage in any undertaking on behalf of the Partnership in
respect of any of the actions or matters described below in this Section
2.01(b) unless and until such undertaking or commitment in respect of such
action or matter has been approved in writing by the Limited Partner. Such
actions or matters are as follows:
(i) acquiring or agreeing to acquire any business other than the
Systems;
(ii) selling or otherwise disposing of, or agreeing to sell or
otherwise dispose of, substantially all the assets of the Partnership,
except in a liquidating sale upon dissolution of the Partnership in
accordance with this Agreement;
(iii) merging or consolidating with any other Person;
(iv) making, executing, or delivering any assignment for the
benefit of creditors;
(v) incurring indebtedness for borrowed money outside the
ordinary course of business;
(vi) incurring indebtedness for borrowed money or refinancing,
recasting increasing, modifying, or extending any indebtedness for
borrowed money of the Partnership where the amount involved exceeds
$1,500,000;
(vii) securing any indebtedness of the Partnership by mortgage,
pledge, or other lien on any substantial part of the property of the
Partnership;
(viii) commencing or settling any litigation where the amount
involved exceeds $50,000;
(ix) guarantying the obligation of any Person outside the
ordinary course of business or where the amount involved exceeds
$50,000;
(x) doing any act in contravention of this Agreement or the
Certificate;
(xi) doing any act that would make it impossible to carry on the
business of the Partnership except upon the dissolution of the
Partnership in accordance with this Agreement;
4
<PAGE> 8
(xii) confessing a judgment against the Partnership;
(xiii) using any funds or assets of the Partnership other than for
the benefit of the Partnership;
(xiv) possessing property of the Partnership or assigning any
rights in specific property of the Partnership for other than a
partnership purpose of the Partnership;
(xv) knowingly taking any action that would subject the Limited
Partner in its capacity as a limited partner to personal liability as
a general partner in any jurisdiction;
(xvi) admitting additional partners to the Partnership;
(xvii) entering into any transaction with any Partner Affiliate of
the General Partner; or
(xviii) making any determination with respect to indemnification
under Section 2.04.
Section 2.02. Affiliates. The General Partner shall have the right
to cause the Partnership to enter into contracts or otherwise deal with any
Partner Affiliate in any capacity, except that the terms of any such
arrangement shall be commercially reasonable and competitive with amounts
that would be paid to third parties on an "arms-length" basis. The parties
hereto acknowledge and agree that concurrently with the acquisition by the
Partnership of the Systems, the Partnership will enter into a management
agreement (the "Management Agreement") with TCA Management Company, a
Partner Affiliate of the Limited Partner, on terms and conditions mutually
agreeable to TCA Management Company and the General Partner. The parties
hereto further acknowledge and agree that the terms and conditions of the
Management Agreement shall be deemed to meet the standards set forth in the
first sentence of this Section 2.02. For purposes of this Agreement, a
"Partner Affiliate" is defined to mean (i) any shareholder, director,
officer, partner in, employee, family member or agent of any Partner, or
(ii) any Person controlling directly or indirectly, any Person controlled
directly or indirectly by, or any Person under common control with, any
Partner; "Control" means the possession, directly or indirectly, of the
power to direct the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and "Person"
means an individual, corporation, trust, association, partnership or other
entity unless otherwise indicated.
Section 2.03. Expenses. The Partnership shall pay or reimburse the
General Partner for all costs and expenses reasonably and necessarily
incurred by it that are directly attributable to the business of the
Partnership.
Section 2.04. Exculpation; Indemnities.
(a) Neither any Partner nor any Partner Affiliate (individually an
"Actor" and collectively, the "Actors") shall be liable to the Partnership
or any Partner for (i) any act or omission taken or suffered by any Actor
in connection with the conduct of the business of the Partnership that is
in good faith or not opposed to the best interests of the Partnership,
unless
5
<PAGE> 9
such act or omission constitutes willful misconduct, bad faith, or fraud by
such Actor or involves the receipt of improper personal benefits by such
Actor, (ii) any act or omission taken or suffered by any Actor in the good
faith exercise of discretion or judgment as provided by this Agreement,
unless such act or omission constitutes willful misconduct, bad faith or
fraud by such Actor or involves the receipt of improper personal benefits
by such Actor, or (iii) any mistake, negligence, dishonesty or bad faith of
any employee, broker or other agent of the Partnership selected, engaged or
retained by an Actor in good faith.
(b) The Partnership shall (except as otherwise provided in Section
2.04(d) below) indemnify and hold harmless the General Partner, the Limited
Partner, any of the Partner Affiliates, and any of their respective
employees, agents, directors and officers (each individually, an
"Indemnitee") in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, to which an Indemnitee was or is a party or is threatened to
be made a party by reason of the fact that it is or was a Partner, a
Partner Affiliate or an employee, agent, director, or officer of a Partner
or a Partner Affiliate, involving an alleged cause of action arising from
the activities of such Indemnitee and which activities were on behalf of
the Partnership, its property, business or affairs, or any appeal in such
action, suit or proceeding or in any inquiry or investigation that could
lead to such an action, suit or proceeding, and the Partnership shall
(except as otherwise provided in Section 2.04(d) below) indemnify such
Indemnitee against any and all losses, claims, demands, liabilities, costs
and expenses, including reasonable attorneys' fees, accountants' fees,
judgments, penalties (including excise and similar taxes), fines and
amounts paid in settlement, actually incurred by such Indemnitee in
connection with such action, suit or proceeding (collectively "Losses"), if
such Indemnitee acted in good faith and in a manner he or it reasonably
believed to be in or not opposed to the best interests of the Partnership
and if such Indemnitee's conduct does not constitute gross negligence or
willful or wanton misconduct or fraud. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere,
or its equivalent, shall not, of itself, determine or create a presumption
that an Indemnitee did not act in good faith and in a manner that he or it
reasonably believed to be in, or not opposed to, the best interests of the
Partnership, nor shall any such termination of a proceeding, of itself,
determine or create a presumption that the Indemnitee was grossly negligent
or was guilty of willful or wanton misconduct or fraud or the recipient of
an improper personal benefit unless a specific finding to such effect is
included in such judgment, order, settlement, conviction or plea.
(c) If the Partnership determines that there is a reasonable
likelihood that the Indemnitee will be entitled to indemnification in
accordance with the standards set forth in subsection (b) above, all
reasonable expenses (including reasonable legal fees and expenses) incurred
in defending any proceeding shall be paid by the Partnership in advance of
the final disposition of such proceeding upon receipt of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall ultimately
be determined, by a court of competent jurisdiction or otherwise, that the
Indemnitee is not entitled to be indemnified by the Partnership as
authorized hereunder.
(d) Any such indemnification shall be made only out of the assets of
the Partnership, and in no event may an Indemnitee subject the Limited
Partner or the General Partner to personal liability by reason of these
indemnification provisions.
6
<PAGE> 10
(e) The indemnification provided by this Section 2.04 shall be in
addition to any other rights to which those indemnified may be entitled, in
any capacity, under any agreement, vote of the Partners, as a matter of law
or otherwise and shall continue as to an Indemnitee who has ceased to serve
in such capacity and shall inure to the benefit of the heirs, successors,
assigns and administrators of the Indemnitee.
(f) To the extent obtainable on reasonable terms as determined in the
discretion of the General Partner, the Partnership may purchase and
maintain insurance on behalf of the Indemnitees or liability insurance on
behalf of the Partnership relating to claims for indemnification against
any liability which may be asserted against or expense which may be
incurred by such persons in connection with the Partnership's activities,
whether or not the Partnership would have the power to indemnify such
Persons against such liability under the provisions of this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 2.04 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement;
provided, however, that in the event the Indemnitee is a Partner Affiliate
other than a Partner, such Partner Affiliate shall not be exculpated or
indemnified under this Section 2.04 unless such exculpation or
indemnification is commercially reasonable and competitive and consistent
with arrangements that would be made with third parties on an "arms-length"
basis.
(h) The provisions of this Section 2.04 shall survive any termination
of this Agreement and are for the benefit of the Indemnities, their heirs,
successors, assigns and administrators, and shall not be deemed to create
any rights for the benefit of any other Persons.
(i) To the extent permitted by applicable law, all the determinations
by and actions of the Partnership pursuant to this Section 2.04 shall be
made only with the prior written approval of the General Partner and the
Limited Partner. In the event that (i) the Act and applicable law requires
that any determination under this Section 2.04 be made other than as
provided herein or (ii) the General Partner and Limited Partner refuse or
are unable to make any determination or take action under this Section
2.04, then such determination shall be made by special legal counsel
selected by the General Partner pursuant to the provisions of the Act. Any
"special legal counsel" selected by the General Partner to make any
determination required under the Act or this Section 2.04 shall be a law
firm, or member of a law firm, experienced in matters of corporation and
partnership law and which neither presently is, nor in the past five (5)
years has been, retained to represent the Partnership, any Partner or
Partner Affiliate, the Indemnitee or any other party to the proceeding
giving rise to the claim for indemnification, and shall not include any
Person who, under prevailing applicable standards of professional conduct,
would have a conflict of interest with the Indemnitee, the Partnership, any
Partner or Partner Affiliate, or any other party to such proceeding. No
special legal counsel appointed pursuant to the provisions of this Section
2.04(i) shall be liable, responsible or accountable in damages for any act,
omission or decision of such special legal counsel pursuant to its
authority under this Section 2.04(i) nor shall such special legal counsel
have any liability to the Indemnitee, the Partnership, any of the Partners
or their Partner Affiliates, provided such act, omission or decision was
not taken or made in bad faith.
7
<PAGE> 11
Section 2.05. Permitted Transactions. Any Partner or any Partner
Affiliate, agent, or representative of any Partner, may engage in or
possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Partnership. Neither the Partnership nor the other Partner
shall have any rights in or to the income or profits derived therefrom, nor
shall a Partner have any obligation to the other Partner with respect to
any such enterprise or related transaction.
ARTICLE III
FINANCING
Section 3.01. Capital Contributions.
(a) Each Partner has agreed to contribute to the capital of the
Partnership contemporaneously with the execution of this Agreement, the
amount of cash set forth opposite such Partner's name in the column headed
"Initial Capital Contribution" on Schedule A hereto (collectively, the
"Initial Capital Contributions").
(b) Each Partner has agreed to contribute to the capital of the
Partnership immediately prior to the consummation by the Partnership of the
purchase of the Systems, the amount of cash set forth opposite such
Partner's name in the column headed "Subsequent Capital Contribution" on
Schedule A hereto (collectively the "Subsequent Capital Contributions," the
Initial Capital Contributions and the Subsequent Capital Contributions
being herein collectively referred to as the "Capital Contributions").
Section 3.02. Limited Liability of Limited Partner. Except as
provided in the Act, the Limited Partner shall not have any personal
liability whatsoever, either to the Partnership or any third party, for the
debts of the Partnership or any of its losses beyond the amount of the
capital contribution required of the Limited Partner under Section 3.01.
Accordingly, the Limited Partner shall not be obligated to provide
additional capital to the Partnership or its creditors by way of
contribution, loan or otherwise beyond the amount of the capital
contribution made or required to be made by the Limited Partner pursuant to
Section 3.01 hereof. In the event that the Limited Partner provides
additional capital to the Partnership by way of contribution, the General
Partner will contribute to the capital of the Partnership an amount of cash
equal to 1.01% of the amount contributed by the Limited Partner.
Section 3.03. Treatment of Capital Contributions. Except as may be
provided in this Agreement to the contrary, no Partner shall be entitled to
interest on its capital contributions nor shall any Partner be entitled to
demand the return of all or any part of such capital contributions.
Section 3.04. Loans from Partners. Subject to the approval of the
terms thereof by the General Partner, acting in its reasonable discretion,
any Partner or Partner Affiliate may make a loan to the Partnership upon
commercially reasonable terms. Loans by a Partner or Partner Affiliate to
the Partnership shall not be considered Capital Contributions.
8
<PAGE> 12
Section 3.05. Financing. To finance the business of the Partnership,
the General Partner may, subject to Section 2.01(b), arrange for the
obtaining of loans for the Partnership or for the refinancing of any loans,
and may pledge the assets of the Partnership therefor.
Section 3.06. Disbursements. The Partnership shall pay all costs and
expenses of the Partnership business, including financing costs and related
expenses, real estate taxes and other carrying charges, all costs of
construction of improvements on Partnership property or leaseholds,
management, leasing, and loan placement fees, and operating expenses, and
including all reasonable costs and expenses incurred by or on behalf of the
Partnership by the Partners. The Partnership may set aside funds for any
items that are proper Partnership purposes, including operating expenses,
debt service, capital improvements, replacements, repairs, amortization and
other capital requirements, and liabilities, contingent or otherwise, of
the Partnership, in each case as reasonably determined by the General
Partner.
Section 3.07. Withdrawal of Contributions. No Partner shall have the
right to withdraw from the Partnership or to demand a return of all or any
part of its Capital Contribution during the term of the Partnership, and
any return of the Capital Contribution of either Partner shall be made
solely from the Partnership Assets and only in accordance with the terms of
this Agreement. No interest shall be paid to either Partner with respect
to its Capital Contribution to the Partnership. The Partners expressly
acknowledge that certain provisions of this Agreement, which may preclude a
Partner from realizing appreciation in the value of Partnership Assets, are
essential to protect the Partners' mutual interests in the Partnership
Assets; accordingly, the Partners hereby waive any right they otherwise
would have to seek a partition or judicial liquidation of the Partnership
or any comparable action.
ARTICLE IV
DEFINITIONS, ALLOCATIONS, DISTRIBUTIONS AND TAX MATTERS
Section 4.01. Certain Definitions. For purposes of this Agreement,
the following capitalized terms shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act.
"Adjusted Capital Account" means, with respect to a Partner, the
balance in such Partner's Capital Account as of the end of the relevant
Fiscal Year, after giving effect to the following adjustments : (i)
increase such Capital Account by any amounts which the Partner is obligated
to restore or is treated as being obligated to restore pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(c); (ii) increase such Capital Account
by an amount which the Partner is deemed to be obligated to restore
represented by such Partner's share of Partnership Minimum Gain pursuant to
Treasury Regulation Section 1.704-2(g)(1); (iii) decrease such Capital
Account by the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6); (iv) increase such Capital Account by
the amount, if any, of the Partner's Modified Economic Risk of Loss that
such Partner is treated as bearing within the meaning of Treasury
Regulation Section 1.752-2 with respect to partnership liabilities; and (v)
increase such Capital Account by an amount which the Partner is deemed to
be obligated to restore represented by such Partner's
9
<PAGE> 13
share of Partner Minimum Gain pursuant to Treasury Regulation Section
1.704-2(i)(5). This definition shall be interpreted consistently with
Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
"Business Day" means when used to indicate the time at which a
valuation or accounting is to be made, the close of business (5:00 p.m.
Central Standard time) on the date specified and shall mean a weekday on
which national banks in Dallas, Texas are required to be open for business.
"Capital Account" means for each Partner the account established
pursuant to Section 4.02 hereof and maintained in accordance with the
provisions of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
"Contribution Percentage", as to any Partner, means the
percentage set forth opposite such Partner's name on Schedule A hereto
under the column headed "Contribution Percentage."
"Distributable Cash" means, with respect to the Partnership for a
period of time, all funds of the Partnership on hand or in bank accounts of
the Partnership as, in the reasonable discretion of the General Partner, is
available for distribution to the Partners after provision has been made
for (i) payment of all operating expenses of the Partnership as of such
time, (ii) provision for payment of all outstanding and unpaid current
obligations of the Partnership as of such time, and (iii) provision for
such reserves as the General Partner deems reasonably necessary or
appropriate for Partnership operations.
"Fiscal Year" means the twelve months ended October 31 in each
year; provided that the first Fiscal Year of the Partnership shall
commence on the Effective Date and continue through October 31, 1994.
"Income" means, for each Fiscal Year or other period, each item
of income and gain as determined, recognized and classified for federal
income tax purposes, provided that any income or gain that is exempt from
federal income tax shall be included as if it was an item of taxable
income.
"Loss" means, for each Fiscal Year or other period, each item of
loss or deduction as determined, recognized and classified for federal
income tax purposes, increased by (i) expenditures described in Section
705(a)(2)(B) of the Code, (ii) expenditures contemplated by Section 709 of
the Code (except for amounts with respect to which an election is properly
made under Section 709(b) of the Code); and (iii) a deduction for a loss
incurred in connection with the sale or exchange of any Partnership Assets
that is disallowed to the Partnership under Section 267(a)(1) or Section
707(b) of the Code.
"Modified Economic Risk of Loss" of any Partner means, as of any
date, the economic risk of loss borne by such Partner with respect to
recourse debt of the Partnership (determined, as of the date in question,
by assuming, for purposes of Section 1.752-2(b) of the Treasury
Regulations, that the Partnership constructively liquidates on such date
[within the
10
<PAGE> 14
meaning of Section 1.752-2(b)(1) of the Treasury Regulations] except that
all Partnership properties shall be deemed thereunder to be transferred in
fully taxable exchanges for an aggregate amount of cash consideration equal
to their respective book bases and such consideration shall be deemed
thereunder to be used, in the appropriate order of priority, in full or
partial satisfaction of all Partnership liabilities).
"Net Income" and "Net Loss" means, for each Fiscal Year or other
period, (i) the excess of the Income for such period over the Loss for such
period, or (ii) the excess of the Loss for such period over the Income for
such period, respectively; provided, however, Net Income and Net Loss for a
Fiscal Year shall be computed by excluding from such computation any Income
and Loss specially allocated under Section 4.04 and any Nonrecourse
Deductions, any Partner Nonrecourse Deductions and any Income or Loss
specially allocated under Section 4.03(c).
"Nonrecourse Deductions" means, for any Fiscal Year, an amount of
Partnership deductions that are characterized as "nonrecourse deductions"
pursuant to Section 1.704-2(b)(1) and Section 1.704-2(c) of the Treasury
Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Treasury Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations.
"Partnership Interest" means a Partner's ownership interest in
the Partnership, which at all times shall be a percentage equal to such
Partner's Contribution Percentage.
"Partnership Minimum Gain" has the meaning set forth in and shall
be determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
"Person" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company,
limited liability partnership or other entity or organization.
"Sharing Percentage" as to any Partner, means the percentage set
forth opposite such Partner's name in Schedule A hereto under the column
headed Sharing Percentage.
"Systems" means the cable television systems serving the towns of
Fayetteville, Elkins, Farmington, Greenland, unincorporated areas of
Washington County, Arkansas and other
11
<PAGE> 15
unincorporated areas within Arkansas counties in which the foregoing cities
are located to be purchased by the Partnership from Time Warner
Entertainment Company, L.P., through its division Time Warner Cable.
"tax matters partner" has the meaning set forth in Section 4.08
hereof.
"Treasury Regulations" shall mean the Income Tax Regulations and
Temporary Regulations promulgated under the Code, as such regulations may
be amended from time to time (including corresponding provisions of
succeeding regulations).
Section 4.02. Capital Accounts.
(a) The Partnership shall maintain a separate capital account (each a
"Capital Account") for each Partner pursuant to the principles of this
Section 4.02 and Treasury Regulation Section 1.704-1(b)(2)(iv). Each
Partner shall have only one Capital Account, regardless of the number of
interests in the Partnership owned by such Partner and regardless of the
time or manner in which such interests were acquired by such Partner.
Pursuant to the rules of Section 1.704-1(b)(2)(iv) of the Treasury
Regulations, the balance of each Partner's Capital Account shall be
increased by (i) the amount of the Capital Contribution of such Partner to
the Partnership under Section 3.01, and (ii) such Partner's allocable share
of Partnership Net Income pursuant to Section 4.03 and special allocations
of Income determined pursuant to Section 4.03 and Section 4.04. Such
Capital Account shall be decreased by (i) the amount of cash distributed to
the Partner by the Partnership and (ii) such Partner's allocable share of
Net Loss pursuant to Section 4.03 and special allocations of Loss
determined pursuant to Section 4.03 and Section 4.04.
(b) The provisions of this Section 4.02 and other portions of this
Agreement relating to the proper maintenance of Capital Accounts are
designed to comply with the requirements of Treasury Regulation Section
1.704-1(b). The Partners intend that such provisions be interpreted and
applied in a manner consistent with such Treasury Regulations.
Section 4.03. Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, Income, Loss and Nonrecourse Deductions and Partner
Nonrecourse Deductions from and after the Effective Date shall first be
specially allocated as provided in Section 4.04. The Partnership's Net
Income, Net Loss, Income or Loss for all Fiscal Years from and after the
Effective Date shall then be allocated as follows.
(a) Net Income. The Partnership's Net Income, if any, for a Fiscal
Year then shall be allocated to the Partners as follows and in the
following order of priority:
(i) First, to each Partner until such Partner has been
allocated total Net Income for the current Fiscal Year and previous
Fiscal Years pursuant to this Section 4.03(a)(i) equal to the total
Net Losses allocated to such Partner in previous Fiscal Years pursuant
to Section 4.03(b)(ii) (first offsetting Net Loss allocated to the
General Partner pursuant to the last portion of the proviso, then
offsetting Net Loss allocated to Limited
12
<PAGE> 16
Partners pursuant to the first part of the proviso and finally
offsetting Net Loss allocated in accordance with Contribution
Percentages); and
(ii) Thereafter, to the Partners in accordance with their
Sharing Percentages.
(b) Net Loss. The Partnership's Net Loss, if any, for a Fiscal Year
then shall be allocated to the Partners as follows and in the following
order of priority:
(i) First, to each Partner until such Partner has been
allocated total Net Loss for the current Fiscal Year and previous
Fiscal Years pursuant to this Section 4.03(b)(i) equal to the total
Net Income allocated to such Partner in the current Fiscal Year and
previous Fiscal Years pursuant to Section 4.03(a)(ii); and
(ii) Thereafter, to the Partners in accordance with their
Contribution Percentages; provided, however, that to the extent Net
Losses allocated to a Limited Partner would create or increase a
deficit in such Limited Partner's Adjusted Capital Account at the end
of a Fiscal Year, such Net Losses shall not be allocated to such
Limited Partner and instead shall first be allocated to the other
Limited Partners, on a pro rata basis, having a positive balance in
their Adjusted Capital Accounts until such Adjusted Capital Accounts
are reduced to zero and shall thereafter be allocated to the General
Partners.
(c) Curative Allocations. To minimize any economic distortions that
would alter the economic arrangement of the Partners, special allocations
pursuant to Section 4.04 shall be taken into account in computing
subsequent special allocations of Income or Loss pursuant to this Section
4.03, so that the net amounts allocated to each Partner pursuant to this
Section 4.03 and Section 4.04 shall, to the extent possible, be equal to
the net amount that would have been allocated to each such Partner pursuant
to this Section 4.03 if such special allocations had not occurred.
Section 4.04. Special Allocations for Book Purposes. For purposes of
maintaining Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of Income, Nonrecourse Deductions
and Partner Nonrecourse Deductions shall be specially allocated as provided
in this Section 4.04, prior to any allocations of Net Income, Net Loss,
Income and Loss, as set forth in Section 4.03, as follows and in the
following order of priority (after giving effect to all Capital Account
adjustments attributable to Capital Contributions and distributions).
(a) Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during a Partnership Fiscal Year, except as
otherwise provided in Treasury Regulation Section 1.704-2(f) each Partner
will be specially allocated, prior to any other allocation made under
Section 704(b) of the Code of Partnership items for such Fiscal Year, items
of Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years)
in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain (determined pursuant to Treasury Regulation
Section 1.704-2(g)(2)). The items to be so allocated and the order of such
allocation shall be determined in accordance with Section 1.704-2(f)(6) and
Sections
13
<PAGE> 17
1.704-2(j)(2)(i) and (iii) of the Treasury Regulations. This Section
4.04(a) is intended to constitute a "minimum gain chargeback" within the
meaning of Treasury Regulation Section 1.704-2(f).
(b) Partner Minimum Gain Chargeback. If there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during a
Partnership Fiscal Year, except as otherwise provided in Treasury
Regulation Sections 1.704-2(i)(4) and provisions consistent with Treasury
Regulation Sections 1.704-2(f)(2), (3), (4) and (5) each Partner who has a
share of Partner Minimum Gain attributable to such Partner Nonrecourse Debt
as of the beginning of the Fiscal Year, determined in accordance with
Section 1.704-2(i)(5) of the Treasury Regulations, will be specially
allocated items of Income for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Partner's share of the
net decrease in Partner Minimum Gain (determined in a manner consistent
with the provisions of Treasury Regulation Section 1.704-2(g)(2)). The
items to be so allocated shall be determined in accordance with Section
1.704-2(i)(4) and Sections 1.704-2(j)(2)(i) and (iii) of the Treasury
Regulations. This Section 4.04(b) is intended to constitute a "minimum
gain chargeback" with respect to Partner Nonrecourse Debt within the
meaning of Treasury Regulation Section 1.704-2(i)(4).
(c) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated
to the Partner who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treasury Regulation Section 1.704-2(i)(1).
(d) Nonrecourse Deductions. Any Nonrecourse Deductions for any
Fiscal Year or other period shall be allocated in accordance with the
Sharing Percentages of the Partners.
(e) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations, or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) or receives any other
distributions causing a deficit in such Partner's Adjusted Capital Account
at the end of such Fiscal Year (determined after giving effect to any
allocations required by Section 4.04(a) and (b) but before giving effect to
any other allocations required by this Section 4.04(e)), items of
Partnership Income shall be specially allocated to such Partner (consisting
of a pro rata portion of each item of Partnership Income, including gross
income, for such year) in an amount and manner sufficient to eliminate such
deficit, if any, in such Partner's Adjusted Capital Account (determined
after giving effect to any allocations required by Section 4.04(a) and (b)
but before giving effect to any other allocations required by this Section
4.04(e)), as quickly as possible. This Section 4.04(e) is intended to
constitute a "qualified income offset" within the meaning of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
Section 4.05. Allocations for Tax Purposes. Except as otherwise
provided herein or required by law, each item of income, gain, loss,
deduction and credit of the Partnership shall be allocated to the Partners
in the same manner as such allocations are made for book purposes pursuant
to Sections 4.03 and 4.04. In the event of a transfer of, or other change
in, a Partnership interest during a Fiscal Year, each item of taxable
income and loss shall be prorated
14
<PAGE> 18
in accordance with Section 706 of the Code, using any convention permitted
by law and selected by the General Partner.
Section 4.06. Distributions to Partners. Distributable Cash of the
Partnership shall be distributed at such times and in such amounts as the
General Partner may reasonably determine, but not more often than annually.
Distributions shall be made to Partners on a pro rata basis based on the
respective Sharing Percentages of the Partners.
Section 4.07. Tax Status, Elections and Modifications to Allocations.
(a) Notwithstanding any provision contained in this Agreement to the
contrary, solely for federal income tax purposes, each of the Partners
hereby recognizes that the Partnership will be subject to all provisions of
Subchapter K of the Code; provided, however, that the filing of United
States Partnership Returns of Income shall not be construed to extend the
purposes of the Partnership or expand the obligations or liabilities of the
Partners.
(b) The General Partner, with the consent of the Limited Partner, may
cause the Partnership to elect pursuant to Section 754 of the Code and the
Treasury Regulations to adjust the basis of the Partnership Assets as
provided by Section 743 or 734 of the Code and the Treasury Regulations
thereunder. The Partnership shall make such elections for federal income
tax purposes as may be determined by the General Partner, with the consent
of the Limited Partner.
(c) The General Partner or the Terminating Partner (as defined in
Section 7.05(a) hereof), as appropriate, shall prepare and execute any
amendments to this Agreement necessary for the Partnership to comply with
the provisions of Treasury Regulations Sections 1.704-1(b), 1.704-1(c) and
1.704-2 or that the General Partner considers appropriate upon the
happening of any of the following events: (i) a constructive termination
of the Partnership pursuant to Code Section 708(b)(1)(B) or (ii) the
contribution or distribution of any property, other than cash, to or by the
Partnership.
Section 4.08. Tax Matters Partner
(a) Subject to the provisions hereof, the General Partner is
designated as the "tax matters partner" of the Partnership (as defined in
the Code) and is authorized and required to represent the Partnership (at
the Partnership's expense) in connection with all examinations of the
Partnership's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds
for professional services and costs associated therewith. The Limited
Partner agrees to cooperate with the tax matters partner and to do or
refrain from doing any or all things reasonably required by the tax matters
partner to conduct such proceedings.
(b) Notwithstanding anything to the contrary in Section 4.08(a)
above, the General Partner, in its capacity as tax matters partner, may not
take any of the following actions without the prior consent of the Limited
Partner:
15
<PAGE> 19
(i) Enter into a settlement agreement with the Internal
Revenue Service which purports to bind the Partners other than
the tax matters partner;
(ii) File a petition as contemplated in Code Section 6226(a)
or Code Section 6228;
(iii) Intervene in any action as contemplated in Code
Section 6226(b)(5);
(iv) File any request contemplated in Code Section 6227(b);
and
(v) Enter into any agreement extending the period of
limitations as contemplated in Code Section 6229(b)(1)(B).
(c) To the extent and in the same manner as provided by applicable
law, the General Partner, as tax matters partner, (i) shall furnish the
name, address, and taxpayer identification number of each Partner to the
Secretary of the Treasury of his delegate, and (ii) shall keep each Partner
informed of any administrative and judicial proceedings for the adjustment
at the Partnership level of any items required to be taken into account by
a Partner for income tax purposes. The General Partner shall give notice
to each Partner of a Partnership audit. The General Partner will consult
with the Limited Partner with respect to the performance of its duties as
"tax matters partner."
Section 4.09. Books of Account.
(a) The General Partner shall maintain the Partnership's books and
records and shall determine all items of Income, Loss, Net Income and Net
Loss in accordance with generally accepted accounting practices. All of
the records and books of account of the Partnership shall at all times be
maintained at the principal office of the Partnership and shall be open to
the inspection and examination of the Partners or their representatives
during reasonable business hours. Such right may be exercised through any
agent or employee of a Partner designated by it or by an attorney or
independent certified public accountant designated by such Partner.
(b) All expenses in connection with the keeping of the books and
records of the Partnership and the preparation of audited or unaudited
financial statements required to implement the provisions of the Agreement
or otherwise needed for the conduct of the Partnership's business shall be
borne by the Partnership as an ordinary expense of its business.
Section 4.10. Partnership Tax Returns and Annual Statement. The
General Partner shall cause the Partnership to file a federal income tax
return and all other tax returns required to be filed by the Partnership
for each Fiscal Year or part thereof, and shall provide to each Person who
at any time during the Fiscal Year was a Partner an audited annual
statement (including a copy of Schedule K-1 to Internal Revenue Service
Form 1065) indicating such Partner's share of the Partnership's income,
loss, gain, expense and other items relevant for federal income tax
purposes.
16
<PAGE> 20
Section 4.11. Independent Auditors. The books and records of the
Partnership shall be audited by Coopers & Lybrand or another independent
internationally recognized accounting firm selected by the General Partner
and approved in writing by the Limited Partner as of the end of each Fiscal
Year of the Partnership.
Section 4.12. Financial Reports to Limited Partners. Within 90 days
after the end of each Fiscal Year, the Partnership shall prepare and mail
to each Partner, together with a report thereon of the Partnership's
independent auditors setting forth:
(i) a balance sheet of the Partnership at Fiscal Year end;
and
(ii) statements of income and cash flows for the immediately
preceding Fiscal Year.
Section 4.13. Bank Accounts. The bank account or accounts of the
Partnership shall be maintained in the bank approved by the General
Partner. The terms governing such accounts shall be determined by the
General Partner and withdrawals from such bank accounts shall only be made
by the General Partner or such other parties as may be approved by the
General Partner.
Section 4.14. Minimum Allocation to General Partners.
Notwithstanding anything to the contrary that may be expressed or implied
in this Agreement (other than allocations required pursuant to Section
704(b) or Section 704(c)), the interest of the General Partner in each item
of income, gain, loss, deduction and credit will not be less than one
percent of each such item at all times during the existence of the
Partnership.
ARTICLE V
ASSIGNMENT
Section 5.01. Transfers Generally.
(a) Except as specifically provided in this Article V, (i) the
Limited Partner may not sell, transfer, assign, give, pledge, mortgage,
hypothecate or otherwise encumber or permit or suffer any encumbrance (each
a "Transfer") of all or any part of its interest in the Partnership unless
written consent is obtained from the General Partner (which consent may be
withheld by the General Partner arbitrarily in its sole discretion) and the
requirements of Section 5.01(b) below have been met; provided, however,
that notwithstanding anything in this Article V to the contrary, a Limited
Partner may assign its interest in the Partnership in its entirety to a
Partner Affiliate without the consent of the General Partner so long as the
requirements of Section 5.01(b) below are met in connection with such an
assignment, and (ii) the General Partner may not Transfer all or any part
of its interest in the Partnership unless written consent is obtained from
the Limited Partner (which consent may be withheld by the Limited Partner
arbitrarily in its sole discretion) and the requirements of Section 5.01(b)
below have been met. Any attempt to so transfer or encumber any such
interest without meeting the requirements of the preceding
17
<PAGE> 21
sentence shall be null and void, ab initio, and the Partners will be
excused from accepting the performance of and rendering performance to any
Person other than the Partner hereunder (including any trustee or assignee
of or for such Partner) as to whom such requirements have not been met.
(b) In addition to the other requirements of Section 5.01(a) and
subject to the provisions thereof, no Transfer of a Partner's interest in
the Partnership may be made unless the transferee of such interest provides
the Partnership with the following:
(1) an opinion of counsel reasonably acceptable to the General
Partner (in the case of a Transfer by a Limited Partner) or the
Limited Partner (in the case of a Transfer by a General Partner) that:
(i) The prospective assignee or transferee is an United
States person within the meaning of Code Section 7701(a)(30);
(ii) The Transfer will not cause the Partnership Assets to
be "plan assets" or the transactions contemplated hereunder to be
prohibited transactions under ERISA or the Code;
(iii) The Transfer will not cause the Partnership to
terminate under Code Section 708;
(iv) The Transfer will not cause the Partnership to be
treated as an association taxable as a corporation for federal
income tax purposes;
(v) The Transfer will not violate any applicable federal or
state securities laws; and
(vi) The Transfer will not cause the Partnership to be
treated as a "publicly traded partnership" within the meaning of
Section 7704 of the Code;
(2) a certificate from the transferor Partner to the effect that
such Transfer will not result in the violation of, or cause the
Partnership to incur a penalty under, any statute, regulation, case
law, judicial or administrative order or decree, or governmental
license or permit, or any interpretation thereof by any governmental
or regulatory authority or court of competent jurisdiction;
(3) an agreement in writing to assume all obligations of the
transferor Partner hereunder relating to the interests to be
Transferred; and
(4) a written representation of such transferee that he or it is
acquiring the interest for his or its own account for investment and
not with a view to distribution, and such other representations and
warranties as the General Partner (in the case of a Transfer by a
Limited Partner) or the Limited Partner (in the case of a Transfer by
a General Partner) may reasonably require to ensure compliance with
applicable federal and state securities laws.
18
<PAGE> 22
Section 5.02. Consequences of Transfers Generally.
(a) In the event of any transfer or transfers permitted under this
Article V, the interest so transferred shall remain subject to all terms
and provisions of this Agreement, and the transferee shall be deemed, by
accepting the interest so transferred, to have assumed all the liabilities
and unperformed obligations under this Agreement or otherwise, that are
appurtenant to the interest so transferred; shall hold such interest
subject to all unperformed obligations of the transferor Partner; and shall
agree in writing to the foregoing if requested by the General Partner (in
the case of a Transfer by a Limited Partner) or the Limited Partner (in the
case of a Transfer by a General Partner). Notwithstanding any transfer of
interest under this Article V, the transferor Partner shall remain jointly
and severally liable with his transferee for all liabilities and
unperformed obligations under this Agreement appurtenant to the interest in
the Partnership transferred. In the case of a transferee who is not
already a Partner and until such transferee has been admitted as a
Substituted Partner (as defined in Section 5.03 hereof), such transferee
shall be entitled only to share in Partnership income, deductions, credits,
gains, losses and distributions in accordance with the Contribution
Percentage, Sharing Percentage and Capital Account appurtenant to the
interest so transferred and shall only have the rights of an assignee of a
partnership interest under the Act.
(b) Any Partner making or offering to make a transfer of all or any
part of his or its interest in the Partnership shall indemnify, defend and
hold harmless the Partnership and all other Partners from and against any
losses, expenses, judgments, fines, settlements or damages, suffered or
incurred by the Partnership or any such other Partner arising out of or
resulting from any claims by the transferee of such Partnership interest or
any offerees of such Partnership interest in connection with such transfer
or offer, including without limitation costs, expenses and attorney's fees
expended in the settlement or defense of any such claim, and shall advance
such expenses and attorneys' and accountants' fees incurred in defending
such proceeding in the same manner as under Section 2.04(c) hereof.
Section 5.03. Substituted Partner; Withdrawal of Transferor Partner.
A transferee (other than an existing Partner) of the interest of a Partner
may be admitted as a substitute partner ("Substituted Partner"), and a
subsequent transferor Partner who has transferred his entire interest in
the Partnership may withdraw from the Partnership as a Partner, on the
terms specified by and only with the written consent of the General Partner
(if the transferor Partner is a Limited Partner) or of the Limited Partner
(if the transferor Partner is the General Partner), which consent shall be
granted or denied for any reason or for no reason in the sole discretion of
the General Partner or such Limited Partner, as appropriate. The General
Partner shall reflect the admission of the transferee as a Substituted
Partner by preparing an amendment to this Agreement, dated as of the date
of such admission and withdrawal, which amendment shall be signed by all
Partners. Upon admission, such Substituted Partner shall be subject to all
provisions of the Agreement as if the Substituted Partner originally was a
party to this Agreement. A transferee not admitted as a Partner shall have
the rights only of an assignee of a partnership interest.
19
<PAGE> 23
ARTICLE VI
WITHDRAWAL, DISSOLUTION, AND TERMINATION
Section 6.01. Withdrawal. Except as otherwise provided in the
Agreement, no Partner shall at any time retire or withdraw from the
Partnership or withdraw any amount out of its Capital Account. Any Partner
retiring or withdrawing in contravention of this Section 6.01 shall
indemnify, defend and hold harmless the Partnership and all other Partners
(other than a Partner who is, at the time of such withdrawal, in default
under this Agreement) from and against any losses, expenses, judgments,
fines, settlements or damages suffered or incurred by the Partnership or
any such other Partner arising out of or resulting from such retirement or
withdrawal.
Section 6.02. Dissolution of the Partnership. The Partnership shall
be dissolved, wound up and terminated upon the occurrence of any of the
following:
(a) An event occurs such that under the Act a General Partner ceases
to serve as a General Partner (an "event of withdrawal"), unless:
(i) the remaining General Partner, if any, elects in writing
within ninety (90) days after such event to reconstitute the
Partnership, to continue as the General Partner and to continue the
Partnership and its business, and
(ii) if there is no remaining General Partner, within ninety (90)
days after such event, all of the Limited Partners agree to appoint in
writing a successor General Partner, as of the date of the withdrawal
of the General Partner, and agree to reconstitute the Partnership and
to continue the business of the Partnership, and such successor
General Partner agrees in writing to accept such election;
(b) Any Partner (i) is voluntarily adjudicated a debtor, bankrupt or
insolvent, (ii) seeks, consents to or does not contest the appointment of a
receiver or trustee for it or for all or any substantial part of its
property, (iii) files a petition seeking relief under the bankruptcy,
arrangement, reorganization or other debtor relief laws of the United
States or any state, (iv) makes a general assignment for the benefit of its
creditors, or (v) admits in writing its inability to pay its debts as they
mature;
(c) (i) a petition is filed against any Partner seeking relief under
the bankruptcy, arrangement, reorganization or other debtor relief laws of
the United States or any state, or (ii) a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of said
Partner, a receiver or a trustee for it, or for all or any part of its
property, and such petition, order, judgment or decree shall not be and
remain discharged or stayed within one hundred and eighty (180) days after
its entry;
(d) Any Partner fails to perform its obligations hereunder and such
failure continues for a period of thirty (30) days following notice by the
other Partners specifying the nature of such default unless the nature of
such obligation does not permit its cure within thirty (30) days, in which
event such Partner shall be afforded a period not to exceed one hundred
twenty (120)
20
<PAGE> 24
days to cure such default if such Partner commences remedial action within
such thirty (30) day period and diligently prosecutes the same to
completion;
(e) The sale or other disposition, not including an exchange, of
substantially all the assets of the Partnership;
(f) December 31, 2024, unless extended by the consent of all
Partners; or
(g) Subject to any restriction in any agreement to which the
Partnership is a party, an election to dissolve the Partnership made by
both the General Partner and the Limited Partner.
Section 6.03. Continuation and Reconstitution of Partnership. If the
Partnership is continued as provided in Section 6.02(a)(i) or (ii), then as
of the date of withdrawal, the General Partner with respect to which an
event of withdrawal under Section 6.02 has occurred (or his or its estate
or successor in interest) (the "Withdrawing General Partner") shall have
none of the powers of a General Partner under the Agreement or applicable
law and shall have only the rights of an assignee of a partnership interest
under the Act and the right to share in Partnership income, deductions,
credits, gains, losses and distributions in accordance with the
Contribution Percentage, Sharing Percentage and Capital Account appurtenant
to the General Partner's interest. The Withdrawing General Partner's
estate, legal representatives or successors-in-interest, as the case may
be, shall remain primarily and directly liable for the performance of all
his or its obligations under the Agreement. If the Partnership is
reconstituted pursuant to Section 6.02(a)(i) or (ii), the remaining General
Partner or the successor General Partner (whichever is applicable) shall
have all the rights, powers and obligations of the General Partner
hereunder and all references to the "General Partner" herein shall refer to
such remaining or successor General Partner, as the case may be, unless the
context clearly indicates otherwise. The remaining General Partner or the
successor General Partner, as the case may be, shall reflect the
consummation of the transactions contemplated in Section 6.02(a)(i) or (ii)
by preparing an amendment to this Agreement pursuant to the provisions of
Section 7.03, which amendment shall be signed by all Partners.
Section 6.04. Death, etc. of a Limited Partner.
(a) The death, disability, withdrawal, winding-up and termination (in
the case of a Limited Partner that is a partnership), dissolution (in the
case of a Limited Partner that is a corporation), retirement or
adjudication as a bankrupt of a Limited Partner (the "Withdrawing Limited
Partner") shall not dissolve the Partnership, but the interest of the
Withdrawing Limited Partner shall, upon the happening of such event, pass
to the Withdrawing Limited Partner's successor-in-interest, who shall have
none of the powers of a Limited Partner under the Agreement or applicable
law and shall have only the right to share in Partnership income,
deductions, credits, gains, losses and distributions in accordance with the
Contribution Percentage and Capital Account appurtenant to the interest of
the Withdrawing Limited Partner. The Withdrawing Limited Partner's
successor-in-interest shall be deemed, by accepting such interest, to have
assumed all the liabilities and unperformed obligations, under the
Agreement or otherwise, that are appurtenant to the interest received by
such successor-in-interest.
21
<PAGE> 25
(b) The General Partner shall reflect the consummation of the
transactions contemplated in this Section 6.04 by preparing an amendment to
this Agreement pursuant to the provisions of Section 7.03, which amendment
shall be signed by all Partners.
Section 6.05. Termination of Partnership.
(a) Upon dissolution of the Partnership unless continued pursuant to
Section 6.02, the Partnership shall be terminated as rapidly as business
circumstances will permit. At the direction of the General Partner, or a
Partner approved by the Limited Partner if the dissolution of the
Partnership is caused by the occurrence of an event of withdrawal with
respect to the General Partner (the General Partner or the other Partner,
as the case may be, being herein called the "Terminating Partner"), a full
accounting of the assets and liabilities of the Partnership shall be taken
and a statement of the Partnership Assets and a statement of each Partner's
Capital Account shall be furnished to all Partners as soon as is reasonably
practicable. The Terminating Partner shall take such action as is
necessary so that the Partnership's business shall be terminated, its
liabilities discharged and its assets distributed as hereinafter described.
The Terminating Partner may sell all of the Partnership Assets or
distribute the Partnership Assets in kind. A reasonable period of time
shall be allowed for the orderly termination of the Partnership to minimize
the normal losses of a liquidation process.
(b) Subject to (c) below, after the payment of all expenses of
liquidation, of all debts and liabilities of the Partnership in such order
or priority as provided by law (including any debts or liabilities to
Partners, who shall be treated as secured or unsecured creditors, as may be
the case, to the extent permitted by law, for sums loaned to or advanced on
behalf of the Partnership, if any, as distinguished from Capital
Contributions) and after all resulting items of Partnership income, gain,
credit, loss or deduction are credited or debited to the Capital Accounts
of the Partners in accordance with Articles III and IV hereof, all
remaining Partnership Assets shall then be distributed among the Partners
in accordance with the respective remaining Capital Account balances of the
Partners.
Notwithstanding any indication in this Agreement to the contrary, there
shall be withheld from such distributions such reserves for contingent and
unforeseen liabilities as the Terminating Partner in its reasonable
discretion deems adequate, such reserves to be held and distributed in such
manner and at such times as the Terminating Partner in its reasonable
discretion deems advisable (with such distributions to be made in
accordance with this Section 6.05(b)). Upon termination, a Partner may not
demand and receive cash in return for such Partner's capital contributions
and no Partner shall have any obligation to restore any deficit that may
then exist in the Partner's Capital Account. Distributions on termination
may be made by the distribution to each Partner of an undivided interest in
any Partnership Asset that has not been sold at the time of the termination
of the Partnership.
(c) Distributions pursuant to the terms of this Agreement shall be
made in accordance with the timing requirements of Treasury Regulation
Section 1.704-1(b)(2)(ii)(b)(2). In order to satisfy such timing
requirements, Partnership Assets may be transferred to a trust established
for the benefit of the Partners for the purposes of liquidating Partnership
Assets, collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the Partnership or
of the General Partner arising out of or in connection with the
22
<PAGE> 26
Partnership. The assets of such trust shall be distributed to the Partners
from time to time, in the reasonable discretion of the Terminating Partner,
in accordance with the terms of this Partnership Agreement.
(d) Upon the dissolution of the Partnership and liquidation of its
assets pursuant to this Article VII, if the General Partner has a negative
balance in its Capital Account, the General Partner shall contribute to the
Partnership, in cash, an amount equal to the lesser of (i) the deficit
balance in its Capital Account, or (ii) the excess of 1.01% of the total
capital contributions of the Limited Partner over the capital contributions
previously contributed by the General Partner. Any amount contributed by
the General Partner pursuant to this paragraph shall be applied and
distributed as provided in Section 6.05(b).
Section 6.06. Specific Performance. It is expressly agreed that the
remedy at law for breach of any of the obligations set forth in Article V
and Article VI are inadequate in view of (i) the complexities and
uncertainties in measuring the actual damages that would be sustained by
reason of the failure of a Partner to comply fully with each of said
obligations, and (ii) the uniqueness of the Partnership Assets and the
Partnership relationship. Accordingly, each of these obligations will be,
and is hereby expressly made, enforceable by specific performance.
ARTICLE VII
GENERAL
Section 7.01. LIMITED PARTNER REPRESENTATIONS AND AGREEMENTS.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, THE
LIMITED PARTNER HEREBY REPRESENTS AND WARRANTS TO THE PARTNERSHIP, THE
GENERAL PARTNER AND TO EACH OFFICER, DIRECTOR, SHAREHOLDER, AND CONTROLLING
PERSON OF THE GENERAL PARTNER THAT: (a) THE INTEREST IN THE PARTNERSHIP OF
THE LIMITED PARTNER IS ACQUIRED FOR INVESTMENT PURPOSES ONLY FOR ITS OWN
ACCOUNT AND NOT WITH A VIEW TO OR IN CONNECTION WITH ANY DISTRIBUTION,
REOFFER, RESALE OR OTHER DISPOSITION NOT IN COMPLIANCE WITH THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER (THE
"SECURITIES ACT") AND APPLICABLE STATE SECURITIES LAWS; (b) SUCH LIMITED
PARTNER, ALONE OR TOGETHER WITH HIS OR ITS REPRESENTATIVES, POSSESSES SUCH
EXPERTISE, KNOWLEDGE AND SOPHISTICATION IN FINANCIAL AND BUSINESS MATTERS
GENERALLY, AND IN THE TYPE OF TRANSACTIONS IN WHICH THE PARTNERSHIP
PROPOSES TO ENGAGE IN PARTICULAR, THAT IT IS CAPABLE OF EVALUATING THE
MERITS AND ECONOMIC RISKS OF ACQUIRING AND HOLDING ITS PARTNERSHIP INTEREST
AND HE OR IT IS ABLE TO BEAR ALL SUCH ECONOMIC RISKS NOW AND IN THE FUTURE;
(c) SUCH LIMITED PARTNER HAS HAD ACCESS TO ALL OF THE INFORMATION WITH
RESPECT TO THE INTEREST ACQUIRED BY IT UNDER THIS AGREEMENT THAT IT DEEMS
NECESSARY TO MAKE A COMPLETE EVALUATION THEREOF AND HAS HAD THE OPPORTUNITY
TO QUESTION THE GENERAL PARTNER CONCERNING SUCH INTEREST; (d) SUCH LIMITED
PARTNER'S DECISION TO ACQUIRE ITS PARTNERSHIP INTEREST FOR
23
<PAGE> 27
INVESTMENT HAS BEEN BASED SOLELY UPON THE EVALUATION MADE BY IT; (e) SUCH
LIMITED PARTNER IS AWARE THAT IT MUST BEAR THE ECONOMIC RISK OF ITS
INVESTMENT IN THE PARTNERSHIP FOR AN INDEFINITE PERIOD OF TIME BECAUSE
INTERESTS IN THE PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR UNDER THE SECURITIES LAWS OF VARIOUS STATES AND, THEREFORE, CANNOT
BE SOLD UNLESS SUCH INTERESTS ARE SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE; (f) SUCH LIMITED PARTNER IS AWARE THAT ONLY
THE PARTNERSHIP CAN TAKE ACTION TO REGISTER SUCH INTEREST IN THE
PARTNERSHIP AND THE PARTNERSHIP IS UNDER NO SUCH OBLIGATION AND DOES NOT
PROPOSE TO ATTEMPT TO DO SO; AND (g) SUCH LIMITED PARTNER IS AWARE THAT
THIS AGREEMENT PROVIDES RESTRICTIONS ON THE ABILITY OF A LIMITED PARTNER TO
SELL, TRANSFER, ASSIGN, MORTGAGE, HYPOTHECATE OR OTHERWISE ENCUMBER ITS
INTEREST IN THE PARTNERSHIP; AND (h) SUCH LIMITED PARTNER AGREES THAT IT
WILL TRUTHFULLY AND COMPLETELY ANSWER ALL QUESTIONS, AND MAKE ALL
COVENANTS, THAT THE PARTNERSHIP OR THE GENERAL PARTNER MAY,
CONTEMPORANEOUSLY OR HEREAFTER, ASK OR DEMAND FOR THE PURPOSE OF
ESTABLISHING COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
Section 7.02. Notice.
(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Agreement must be in writing.
(b) All notices, demands and requests to be sent to a Partner or any
Substituted or Admitted Limited Partner pursuant to this Agreement shall be
deemed to have been properly given or served if: (i) personally delivered,
(ii) deposited for next day delivery by Federal Express, or other similar
overnight courier services, addressed to such Partner, (iii) deposited in
the United States mail, addressed to such Partner, prepaid and registered
or certified with return receipt requested or (iv) transmitted via
telecopier or other similar device to the attention of such Partner.
(c) All notices, demands and requests so given shall be deemed
received: (i) when personally delivered, (ii) twenty-four (24) hours after
being deposited for next day delivery with an overnight courier, (iii)
forty-eight (48) hours after being deposited in the United States mail or
(iv) twelve (12) hours after being telecopied or otherwise transmitted if
receipt has been confirmed.
(d) The Partners and any Substituted Partners shall have the right
from time to time, and at any time during the term of this Agreement, to
change their respective addresses and each shall have the right to specify
as his or its address any other address within the United States of America
by giving to the other parties at least thirty (30) days written notice
thereof, in the manner prescribed in Section 7.02(b); provided, however,
that to be effective, any such notice must be actually received (as
evidenced by a return receipt or similar proof).
24
<PAGE> 28
(e) All distributions to any Partner shall be made at the address at
which notices are sent unless otherwise specified in writing by any such
Partner.
Section 7.03. Amendments. This Agreement may be amended or modified
(i) as authorized in this Agreement or (ii) otherwise pursuant to a writing
executed and delivered by the General Partner and the Limited Partner.
Section 7.04. Governing Laws and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware.
Section 7.05. Entire Agreement. This Agreement, including all
exhibits to this Agreement and, if any, exhibits to such exhibits, contains
the entire agreement among the parties relative to the matters contained in
this Agreement.
Section 7.06. Waiver. No consent or waiver, express or implied, by
any Partner to or of any breach or default by any other Partner in the
performance by such other Partner of his or its obligations under this
Agreement shall be deemed or construed to be a consent or waiver to or of
any other breach or default in the performance by such other Partner of the
same or any other obligations of such other Partner under this Agreement.
Failure on the part of any Partner to complain of any act or failure to act
of any of the other Partners or to declare any of the other Partners in
default, regardless of how long such failure continues, shall not
constitute a waiver by such Partner of his or its rights hereunder.
Section 7.07. Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not
be affected thereby, and the intent of this Agreement shall be enforced to
the greatest extent permitted by law.
Section 7.08. Binding Agreement. Subject to the restrictions on
transfers and encumbrances set forth in this Agreement, this Agreement
shall inure to the benefit of and be binding upon the undersigned Partners
and their respective legal representatives, successors and assigns.
Whenever, in this Agreement, a reference to any party or Partner is made,
such reference shall be deemed to include a reference to the legal
representatives, successors and assigns of such party or Partner.
Section 7.09. Tense and Gender. Unless the context clearly indicates
otherwise, the singular shall include the plural and vice versa. If the
masculine, feminine or neuter gender is used inappropriately in this
Agreement, this Agreement shall be read as if the appropriate gender was
used.
Section 7.10. Captions. Captions are included solely for convenience
of reference and if there is any conflict between captions and the text of
this Agreement, the text shall control.
Section 7.11. Benefits of Agreement. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to give to any
creditor of the Partnership or any creditor of any Partner or any other
Person whatsoever, other than the Partners and the Partnership, any legal
25
<PAGE> 29
or equitable right, remedy or claim under or in respect of this Agreement
or any covenant, condition or provisions herein contained, and such
provisions are and shall be held to be for the sole and exclusive benefit
of the Partners and the Partnership.
Section 7.12. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes and all of which when taken together shall constitute a single
counterpart instrument. Executed signature pages to any counterpart
instrument may be detached and affixed to a single counterpart, which
single counterpart with multiple executed signature pages affixed thereto
constitutes the original counterpart instrument. All of these counterpart
pages shall be read as though one and they shall have the same force and
effect as if all of the paries had executed a single signature page.
Section 7.13. Representations and Warranties of Each Partner. Each
Partner hereby acknowledges, represents and warrants to, and agrees with,
the Partnership and the Partners as follows:
(a) The acceptance of this Agreement by such Partner as evidenced by
its signature on the signature pages of this Agreement has been authorized
by all necessary action on behalf of such Partner and this Agreement is the
valid and binding obligation of such Partner, enforceable in accordance
with its terms.
(b) Such Partner's execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not conflict with
or result in any violation of, or default under, any provision of this
Agreement, or any agreement or other instrument to which such Partner is a
party or by which it or any of its properties are bound or, to the best of
its knowledge, any statute, regulation, case law, judicial or
administrative order or decree or governmental license or permit or any
interpretation thereof by any governmental or regulatory authority or court
of competent jurisdiction applicable to it or its business or properties or
those of its Partner Affiliates.
[intentionally blank]
26
<PAGE> 30
Each of the undersigned has executed and delivered this Limited
Partnership Agreement of Tele-Communications of Northwest Arkansas Limited
Partnership to be effective as of the Effective Date.
GENERAL PARTNER
3015 SSE Loop 323 MCMILLIAN PARTNERS, L.P.
Tyler, Texas 75701
By: McMillian Holdings, Inc., General
Partner
By:______________________________________
Name:____________________________________
Title:___________________________________
LIMITED PARTNER
3015 SSE Loop 323 TAL FINANCIAL CORPORATION
Tyler, Texas 75701
By:______________________________________
Name:____________________________________
Title:___________________________________
27
<PAGE> 31
SCHEDULE A
to the Limited Partnership Agreement
of
Tele-Communications of Northwest Arkansas Limited Partnership
<TABLE>
<CAPTION>
Initial Subsequent
Sharing Contribution Capital Capital
General Partner Percentage Percentage Contribution Contribution
--------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
McMillian Partners, L.P. 20% 1.0% $60 $ 35,940
LIMITED PARTNERS
----------------
TAL Financial 80% 99.0% $5,940 $ 3,558,060
Corporation
</TABLE>
<PAGE> 1
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Form 10-K - January 6, 1995
TAL Financial Corporation, a Nevada corporation and a wholly-owned
subsidiary of the Company
The following companies are wholly-owned subsidiaries of TAL Financial
Corporation:
<TABLE>
<CAPTION>
Corporation State of Incorporation
----------------------------------------- ----------------------
<S> <C>
TCA Management Company Texas
Teleservice Corporation of America Texas
Texas Community Antennas, Inc. Texas
Texas Telecable, Inc. Texas
TCA Cable of Amarillo, Inc. Texas
Telecable Associates, Inc. Texas
Delta Cablevision, Inc. Arkansas
Sun Valley Cablevision, Inc. Idaho
VPI Communications, Inc. Texas
AvComm Corporation Texas
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
TCA Cable TV, Inc. on Form S-8 (File Nos. 2-82934, 2-88892, 33-21901, 33-49172,
33-33898 and 33-55895) and Form S-3 (File Nos. 33-61616, 33-44289 and 33-40273)
of our report dated January 20, 1995, on our audits of the consolidated
financial statements of TCA Cable TV, Inc. and Subsidiaries as of October 31,
1994 and 1993 and for the years ended October 31, 1994, 1993, and 1992 which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L. L. P.
Dallas, Texas
January 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<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
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 275,334,589
<DEPRECIATION> 162,749,992
<TOTAL-ASSETS> 286,212,935
<CURRENT-LIABILITIES> 0
<BONDS> 126,447,345
<COMMON> 2,473,326
0
0
<OTHER-SE> 92,127,337
<TOTAL-LIABILITY-AND-EQUITY> 286,212,935
<SALES> 0
<TOTAL-REVENUES> 162,300,265
<CGS> 0
<TOTAL-COSTS> 36,476,851
<OTHER-EXPENSES> 62,977,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,747,932
<INCOME-PRETAX> 37,866,719
<INCOME-TAX> 14,892,114
<INCOME-CONTINUING> 22,974,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,900,000)
<NET-INCOME> 21,074,605
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
