<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 1, 1996
------------------------
TCA Cable TV, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-11478 75-1798185
-------------- ------------ --------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
3015 S.S.E. Loop 323, Tyler, Texas 75701
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (903) 595-3701
------------------------
<PAGE> 2
Reference is made to the Current Report on Form 8-K (the "Form 8-K")
filed by TCA Cable TV, Inc. on May 13, 1996. The Form 8-K is hereby amended to
read in its entirety as follows:
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 13, 1995, TAL Financial Corporation ("TAL"), a
wholly-owned subsidiary of TCA Cable TV, Inc. (the "Company"), entered into a
General Partnership Agreement (as amended, the "Agreement") with DR Partners
("DR"), pursuant to which TAL and DR agreed to form TCA Cable Partners General
Partnership to operate cable television systems in Arkansas, Oklahoma and
Mississippi. In exchange for TAL's contribution of certain assets of the cable
television systems (the "TAL System") in the cities and adjacent unincorporated
areas set forth below, TAL acquired a 75% partnership interest in the
Partnership. The cities and adjacent unincorporated areas where the TAL
Systems are located are Berryville, AR; Batesville, AR; El Dorado, AR;
Harrison, AR; Heber Springs, AR; Helena, AR; Hot Springs Village, AR; Mena, AR;
Mountain Home, AR; Newport, AR; Ozark, AR; Pocahontas, AR; Arkadelphia, AR;
Bentonville, AR; Magnolia, AR; Malvern, AR; Siloam Springs, AR; Springdale, AR;
Fayetteville, AR; Russellville, AR; Greenville, MS; and McGehee, AR.
In exchange for DR's contribution to the Partnership of certain assets
of the cable television systems (the "DR Systems") owned by it in the following
cities or adjacent unincorporated areas: Bartlesville, OK; Dewey, OK;
Blackwell, OK; Vallejo, CA; Guymon, OK; Rogers, AR; and Little Flock, AR, DR
acquired a 25% partnership interest in the Partnership.
The transfer to the Partnership of the TAL Systems and the DR Systems
was consummated on May 1, 1996.
The assets contributed to the Partnership included, with certain
exceptions as set forth in the Agreement, all the assets and properties, real
and personal, tangible and intangible, used in the operation of the TAL Systems
and the DR Systems. Pursuant to the Agreement, the Partnership assumed certain
liabilities of the TAL Systems and the DR Systems.
The percentage interest received by TAL in the Partnership in
consideration of the contribution of the TAL Systems was determined based on
arm's length negotiations among TAL, DR and the Partnership.
Other than the relationship with Fred W. Smith, who is a director of
the Company and the chairman of the management committee of DR d/b/a Don Rey
Media Group, to the best knowledge of the Company, there is no material
relationship between DR and the Company, or any of its affiliates, any director
or officer of the Company, or any associate of such director or officer.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The audited combined balance sheet of the DR Systems
(referred to therein as Donrey Cablevision) as of December 31,
1995 and the unaudited interim combined balance sheet as of
March 31, 1996 and the related combined statements of
operations, investment and cash flows for the year ended
December 31, 1995 (audited) and the three months ended March
31, 1996 (unaudited) are attached hereto as Annex A and made a
part hereof.
(b) Pro forma Financial Information
The unaudited Pro Forma Balance Sheet of the Company
and Subsidiaries attached hereto as Annex B has been adjusted
to give effect to the acquisition of the DR Systems on May 1,
1996, as though such acquisition had occurred on January 31,
1996. The unaudited Pro Forma Statements of Operations of the
Company and Subsidiaries for the year ended October 31, 1995
and the three-months ended January 31, 1996 also attached
hereto as Annex B present the historical results of the
Company as if the Company had acquired the DR Systems on
November 1, 1994. Such pro forma information is not
necessarily indicative of operating results that would have
been achieved had the acquisition been consummated at the
beginning of the respective periods presented and should not
be construed as representative of future operations.
The unaudited pro forma financial statements should
be read in conjunction with the historical financial
statements of the Company and the financial statements
included in Item 7(a) herein. The unaudited historial
financial statements of the Company for the three-months ended
January 31, 1996 include, in the opinion of management, all
adjustments necessary for a fair presentation of the results of
such periods.
(c) Exhibits.
The following is a list of exhibits filed as part of this Current
Report on Form 8-K/A:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 General Partnership Agreement of TCA Cable Partners
dated as of December 13, 1995.(2)
2.2 Restated and Amended General Partnership Agreement of
TCA Cable Partners dated as of April 11, 1996.(1)
4.1 Articles of Incorporation and Bylaws.(3)
4.2 Articles of Amendment to Articles of Incorporation.(4)
4.3 Articles of Amendment to Articles of Incorporation.(4)
4.4 Articles of Amendment to Articles of Incorporation.(5)
4.5 Form of Stock Certificate.(3)
23.1 Consent of Arthur Andersen LLP.(1)
</TABLE>
- --------------------------
(1) Filed herewith.
(2) Previously filed.
3
<PAGE> 4
(3) Previously filed as an Exhibit to the
Registrant's Registration Statement on Form
S-1, File No. 2-75516, and incorporated
herein by reference.
(4) Previously filed as an Exhibit to the
Registrant's Registration Statement on Form
S-8, File No. 33-21901, and incorporated
herein by reference.
(5) Previously filed as an exhibit to
Registrant's Form 10-K for the fiscal year
ended October 31, 1993, filed January 27,
1994 and incorporated by reference herein.
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TCA CABLE TV, INC.
Date: July 15, 1996 By: /s/ Jimmie F. Taylor
-------------------------------------
Jimmie F. Taylor
Its: VP, CFO & Treasurer
------------------------------------
5
<PAGE> 6
Annex A
[ARTHUR ANDERSEN LLP LETTERHEAD]
DONREY CABLEVISION
(a division of DR Partners)
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
TOGETHER WITH AUDITORS' REPORT AND
UNAUDITED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<PAGE> 7
[ARTHUR ANDERSEN LETTERHEAD]
Report of Independent Public Accountants
To the Partners of DR Partners:
We have audited the accompanying combined balance sheet of Donrey Cablevision
(the "Division," a division of DR Partners as described in Note 1) as of
December 31, 1995, and the related combined statements of operations, parent
company's investment and cash flows for the year then ended. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Donrey Cablevision as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Little Rock, Arkansas,
May 28, 1996.
<PAGE> 8
DONREY CABLEVISION
(a division of DR Partners)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1995 1996
------ ------------ -----------
<S> <C> <C>
(Unaudited)
Cash $ 28,708 $ 17,475
Receivables, net 278,897 369,375
Inventories 972,552 935,171
Property, plant and equipment, net 20,241,396 19,597,899
Intangible assets, net 38,883,683 38,359,509
Other 83,347 150,134
------------ -----------
$ 60,488,583 $59,429,563
============ ===========
LIABILITIES AND PARENT COMPANY'S INVESTMENT
---------------------------------------------
Accounts payable $ 959,264 $ 595,117
Accrued expenses 2,749,763 2,527,633
Deferred income 45,082 58,973
------------ -----------
Total liabilities 3,754,109 3,181,723
------------ -----------
Commitments and contingencies (Notes 3 and 7)
Parent company's investment 56,734,474 56,247,840
------------ -----------
$ 60,488,583 $59,429,563
============ ===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these balance sheets.
<PAGE> 9
DONREY CABLEVISION
(a division of DR Partners)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
Three Months Ended
Year Ended ------------------------------
December 31, 1995 March 31, 1996 March 31, 1995
----------------- -------------- --------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
Revenues $20,306,956 $5,292,855 $4,889,954
Operating Expenses:
Programming costs 5,640,692 1,537,270 1,343,680
Salaries, wages and benefits 2,559,195 735,142 703,956
Selling, general and administrative 1,622,093 372,917 325,476
Other operating costs 1,675,957 570,981 453,641
Depreciation and amortization 5,183,459 1,255,898 1,185,696
----------- ---------- ----------
16,681,396 4,472,208 4,012,449
----------- ---------- ----------
Operating income 3,625,560 820,647 877,505
Other income 212,211 36,296 85,319
----------- ---------- ----------
Net income $ 3,837,771 $ 856,943 $ 962,824
=========== ========== ==========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE> 10
DONREY CABLEVISION
(a division of DR Partners)
COMBINED STATEMENTS OF PARENT COMPANY'S INVESTMENT
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<S> <C>
Balance at December 31, 1994 $61,288,149
Net income 3,837,771
Distributions, net (8,391,446)
-----------
Balance at December 31, 1995 56,734,474
Net income (Unaudited) 856,943
Distributions, net (Unaudited) (1,343,577)
-----------
Balance at March 31, 1996 (Unaudited) $56,247,840
===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE> 11
DONREY CABLEVISION
(a division of DR Partners)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
Three Months Ended
Year Ended ------------------------------
December 31, 1995 March 31, 1996 March 31, 1995
----------------- -------------- --------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 3,837,771 $ 856,943 $ 962,824
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,183,459 1,255,898 1,185,696
Loss on disposals of property, plant and
equipment 111,047 - -
Deferred income 10,744 13,891 6,351
Other, net 33,125 (52,163) (57,554)
Increase (decrease) in cash resulting from
changes in assets and liabilities:
Receivables 156,643 (90,478) 120,161
Inventories 81,279 37,381 (4,243)
Accounts payable 127,942 (364,147) (360,388)
Accrued expenses 441,064 (222,130) (53,995)
------------ ------------ ------------
Total adjustments 6,145,303 578,252 836,028
------------ ------------ ------------
Net cash provided by operating
activities 9,983,074 1,435,195 1,798,852
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (1,608,379) (102,851) (571,124)
------------ ------------ ------------
Cash flows from financing activities:
Distributions to parent company, net (8,391,446) (1,343,577) (1,255,712)
------------ ------------ ------------
Net decrease in cash (16,751) (11,233) (27,984)
Cash, beginning of period 45,459 28,708 45,459
------------ ------------ ------------
Cash, end of period $ 28,708 $ 17,475 $ 17,475
============ ============ ============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE> 12
DONREY CABLEVISION
(a division of DR Partners)
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Combination-
Donrey Cablevision (the "Division") is a division of DR Partners (the "Parent,"
a Nevada general partnership also known as Donrey Media Group) and consists of
the cable television systems in Vallejo, California, Rogers, Arkansas, and
Bartlesville, Blackwell and Guymon, Oklahoma. On May 1, 1996, the Parent
contributed the franchises and substantially all of the assets of the Division
and TAL Financial Corporation ("TAL") also contributed certain of its cable
system assets and franchises into a new partnership, TCA Cable Partners. The
Parent received a 25% general partnership interest in TCA Cable Partners which
is being operated by an affiliate of TAL. All liabilities of the Division
incurred prior to the date of contribution, including contingent liabilities,
remained the obligations of the Parent.
The accompanying combined financial statements include the accounts of these
five operations. All significant intercompany transactions have been
eliminated in combination.
Interim Financial Statements-
The accompanying interim financial statements and related disclosures have not
been audited by independent accountants. However, they have been prepared in
conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 1995, and include all adjustments of
a normal, recurring nature which, in the opinion of management, are necessary
to present fairly the financial position of the Division and the results of
operations and cash flows for each of the periods presented. The operating
results for the interim periods presented are not necessarily indicative of
results for the full year.
Inventories-
Inventories consist of materials used in installing and maintaining cable plant
and have been recorded at the lower of cost, determined using the
weighted-average method, or market.
<PAGE> 13
-2-
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Property, Plant and Equipment-
Property, plant and equipment have been recorded at cost. Replacements,
renewals and improvements have been capitalized while repairs and maintenance
have been charged to expense as incurred. Interest costs associated with
construction of property, plant and equipment have been capitalized. These
amounts were not significant to the Division's operating results as reported in
the accompanying combined statements of operations. Depreciation has been
computed using the straight-line method over the estimated useful lives of the
related assets which were as follows:
Buildings 40 years
Cable television plant 8-10years
Machinery and equipment 3-10years
Intangible Assets-
Intangible assets result from the application of the purchase method of
accounting for business combinations and are being amortized over the following
estimated periods of benefit:
Goodwill 40 years
Cable television franchises 13-24years
Income Taxes-
For income tax reporting purposes, the earnings of the Division accrue to the
partners of the Parent, and accordingly, no provision or liabilities for income
taxes have been reflected in the accompanying combined financial statements.
Use of Estimates-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses
and disclosure of contingent assets and liabilities. The estimates and
assumptions used in the accompanying combined financial statements are based
upon management's evaluation of the relevant facts and circumstances as of the
date of the financial statements. Actual results may differ from the estimates
and assumptions used in preparing the accompanying combined financial
statements.
<PAGE> 14
-3-
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Recently Issued Accounting Pronouncement-
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," effective for
fiscal years beginning after December 15, 1995. This Statement established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. The Division adopted this pronouncement on January 1, 1996. The
adoption of this pronouncement did not have a material impact on the financial
position or operating results of the Division.
2. RECEIVABLES:
Receivables substantially consist of amounts due from cable television
subscribers of the Vallejo, California system. All amounts are unsecured and
have been reported net of an allowance for doubtful accounts of $2,935 at
December 31, 1995 and $12,216 (unaudited) at March 31, 1996.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment included the following at:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ -----------
<S> <C> <C>
(Unaudited)
Land $ 449,625 $ 449,625
Buildings 1,075,934 1,075,934
Cable television plant 23,296,434 23,361,219
Machinery and equipment 787,634 787,634
------------ -----------
25,609,627 25,674,412
Accumulated depreciation (6,307,082) (7,038,806)
------------ -----------
19,302,545 18,635,606
Construction in progress 938,851 962,293
------------ -----------
$ 20,241,396 $19,597,899
============ ===========
</TABLE>
Depreciation expense totaled $3,086,760 for the year ended December 31, 1995
and $731,724 (unaudited) and $662,521 (unaudited) for the three months ended
March 31, 1996 and 1995, respectively.
Management estimates additional costs of $407,633 will be incurred to complete
the construction in progress at December 31, 1995.
<PAGE> 15
-4-
4. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
Intangible assets consisted of the following at:
December 31, March 31,
1995 1996
------------ -----------
<S> <C> <C>
(Unaudited)
Goodwill $ 23,082,032 $23,082,032
Cable television franchises 20,748,612 20,748,612
------------ -----------
43,830,644 43,830,644
Accumulated amortization (4,946,961) (5,471,135)
------------ -----------
$ 38,883,683 $38,359,509
============ ===========
</TABLE>
Amortization expense totaled $2,096,699 for the year ended December 31, 1995
and $524,174 (unaudited) and $523,175 (unaudited) for the three months ended
March 31, 1996 and 1995, respectively.
5. ACCRUED EXPENSES:
<TABLE>
<CAPTION>
Accrued expenses included the following at:
December 31, March 31,
1995 1996
------------ -----------
<S> <C> <C>
(Unaudited)
Payroll, vacation and related accruals $ 279,712 $ 274,368
Medical and retirement benefits 1,568,270 1,637,323
Cable television franchise fees 740,563 202,849
Other 161,218 413,093
------------ -----------
$ 2,749,763 $ 2,527,633
============ ===========
</TABLE>
Accruals related to medical and retirement benefits represent amounts payable
to benefit plan trusts sponsored by the Parent.
6. EMPLOYEE BENEFIT PLANS:
The Parent maintains a contributory, defined contribution profit-sharing plan
(the "Donrey Retirement Savings Plan") covering all employees who were active
participants in superseded plans or who have attained the age of 18 and have
completed 1,000 hours of service in a 12-month period. Employer contributions
to the Donrey Retirement Savings Plan are made at the discretion of the Parent
and are allocated to eligible participants' accounts based on their
compensation, subject to certain limitations. All eligible employees may also
contribute a percentage of their compensation, subject to certain limitations,
as a 401(k) contribution. The Division's allocations of the Parent's
contributions to the Donrey Retirement Savings Plan totaled $52,477 for the
year ended December 31, 1995 and $14,941 (unaudited) and $15,298 (unaudited)
for the three months ended March 31, 1996 and 1995, respectively, and have been
included in salaries, wages and employee benefits in the accompanying combined
statements of operations.
<PAGE> 16
7. COMMITMENTS AND CONTINGENCIES:
At December 31, 1995, the Division was obligated under noncancellable operating
leases of real property which required future minimum payments as follows:
<TABLE>
<S> <C>
1996 $21,333
1997 4,800
1998 2,800
-------
$28,933
=======
</TABLE>
Rent expense related to these agreements totaled $24,478 for the year ended
December 31, 1995 and $5,702 (unaudited) and $5,793 (unaudited) for the three
months ended March 31, 1996 and 1995, respectively.
The Federal Communications Commission ("FCC") has alleged that the
Bartlesville, Oklahoma franchise billed customers at rates in excess of maximum
permitted amounts during the period from October 14, 1993 through May 14, 1994.
The FCC has ordered refunds to customers for amounts in excess of the maximum
price permitted during the period. Management of the Division is contesting
the matter vigorously and believes that its billings have continually been
within FCC rate guidelines and, accordingly, that no refund is due.
Additionally, less significant claims against the Division have arisen in the
ordinary course of business. While the ultimate resolution of these matters
are uncertain, based on information currently available, consultation with
legal counsel and the availability of insurance coverage, management is of the
opinion that resolution of these matters will not have a material adverse
effect on the Division's operating results or financial condition.
8. RELATED PARTY TRANSACTIONS:
Certain management and administrative functions have been performed by the
Parent on behalf of the Division, including the payment of certain operating
expenses and cash management. The costs of providing the management and
administrative services have not been allocated to the Division and, therefore,
are not reflected in the accompanying combined statement of operations.
Accordingly, the financial position, results of operations and cash flows
reported in the accompanying combined financial statements could significantly
differ from those experienced by the Division if it operated autonomously.
In connection with this administrative arrangement, the Division has remitted
cash receipts, less necessary operating cash balances, to the Parent. The
excess of cash remitted over expenses paid by the Parent has been reflected as
distributions in the accompanying combined statement of parent company's
investment.
<PAGE> 17
TCA CABLE TV, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
TCA DONREY
JANUARY 31, MARCH 31,
1996 1996 ADJUSTMENTS PRO FORMA
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash............................... $ 2,403,044 $ 17,475 $ (17,475)(a) $ 2,403,044
Accounts receivable, subscribers... 7,177,293 369,375 (369,375)(a) 7,177,293
Accounts receivable, other......... 1,140,460 1,140,460
Inventories........................ 935,171 (935,171)(a) 0
Notes receivable, affiliates....... 3,000,000 3,000,000
Investments........................ 1,638,301 1,638,301
Property, plant and equipment at
cost............................. 349,396,542 26,636,705 (5,036,705)(a) 370,996,542
Less accumulated depreciation...... (184,769,784) (7,038,806) 7,038,806 (a) (184,769,784)
------------ ----------- ------------ ------------
Property, plant and equipment,
net.............................. 164,626,758 19,597,899 2,002,101 186,226,758
------------ ----------- ------------ ------------
Intangible assets, net............. 336,127,911 38,359,509 48,040,491 (a) 422,527,911
Other.............................. 2,234,632 150,134 (150,134)(a) 2,234,532
------------ ----------- ------------ ------------
Total Assets....................... $518,348,299 $59,429,563 $ 48,570,437 $626,348,299
============ =========== ============ ============
LIABILITIES
Accounts payable................... $ 9,845,791 $ 595,117 $ (595,117)(a) $ 9,845,791
Accrued expenses................... 13,015,466 2,586,606 (2,586,606)(a) 13,015,466
Subscriber advance payments........ 3,509,677 3,509,677
Income taxes payable............... 2,121,361 2,121,361
Deferred income taxes.............. 50,580,000 50,580,000
Term debt.......................... 315,950,955 315,950,955
------------ ----------- ------------ ------------
395,023,250 3,181,723 (3,181,723) 395,023,250
------------ ----------- ------------ ------------
Redeemable minority interest....... 108,000,000 (a) 108,000,000
SHAREHOLDERS EQUITY
Common stock....................... 2,478,784 2,478,784
Additional paid-in capital......... 43,841,012 43,841,012
Retained earnings.................. 80,809,007 80,809,007
Parent company investment.......... 56,247,840 (56,247,804)(a) 0
------------ ----------- ------------ ------------
127,128,803 56,247,804 (56,247,840) 127,128,803
Less treasury stock, at cost....... (3,803,754) (3,803,754)
------------ ----------- ------------ ------------
123,325,049 56,247,840 (56,247,840) 123,325,049
------------ ----------- ------------ ------------
$518,348,299 $59,429,563 $ 48,570,437 $626,348,299
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 18
TCA CABLE TV, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
TCA
YEAR ENDED
OCTOBER 31, RECENT
1995 ACQUISITIONS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues................................. $189,170,285 $ 42,978,725 $232,149,010
Operating expenses:
Programming costs...................... 43,713,752 10,728,736 54,442,488
Other operating expenses............... 51,292,018 12,858,760 64,150,778
Depreciation and amortization.......... 28,351,802 11,951,502 (4,484,645)(b) 35,818,659
------------ ----------- ----------- ------------
Total Operating Expenses....... 123,357,572 35,538,998 (4,484,645) 154,411,925
------------ ----------- ----------- ------------
Operating income......................... 65,812,713 7,439,727 4,484,645 77,737,085
Other income............................. 353,221 228,918 582,139
Interest expense......................... (13,847,458) (3,626,078) (5,736,451)(c) (23,209,987)
Minority interest........................ (4,136,617)(d) (4,136,617)
------------ ----------- ----------- ------------
Income before income taxes............. 52,318,476 4,042,567 (5,388,423) 50,972,620
Provision for (benefit from) income
taxes.................................. 21,029,000 460,000 (624,856)(e) 20,864,144
------------ ----------- ----------- ------------
21,029,000 460,000 (624,856) 20,864,144
------------ ----------- ----------- ------------
Income from continuing operations........ $ 31,289,476 $ 3,582,567 $(4,763,567) $ 30,108,476
============ =========== =========== ============
Weighted average number of common
shares................................. 24,582,447 24,582,447 24,582,447 24,582,447
Earnings (loss) per common share......... $ 1.27 $ 0.15 $ (0.19) $ 1.22
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 19
TCA CABLE TV, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
TCA
THREE MONTHS
ENDED RECENT
JANUARY 31, 1996 ACQUISITIONS ADJUSTMENTS PRO FORMA
---------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................. $ 55,000,233 $ 6,673,188 $61,673,421
Operating expenses:
Programming costs.................. 12,774,532 1,830,103 14,604,635
Other operating expenses........... 14,598,061 2,136,873 16,734,934
Depreciation and amortization...... 8,263,757 1,364,565 $ (228,848)(b) 9,399,474
------------ ----------- ----------- -----------
Total Operating Expenses............. 35,636,350 5,331,541 (228,848) 40,739,043
------------ ----------- ----------- -----------
Operating Income..................... 19,363,883 1,341,647 228,848 20,934,378
Other income......................... 92,532 34,463 126,995
Interest expense..................... (5,368,040) (554,358)(c) (5,922,398)
Minority interest.................... (1,064,253)(d) (1,064,253)
------------ ----------- ----------- -----------
Income before income taxes......... 14,088,375 1,376,110 (1,389,763) 14,074,722
Provision for (benefit from) income
taxes.............................. 5,600,000 57,500 (5,544)(e) 5,651,956
------------ ----------- ----------- -----------
5,600,000 57,500 (5,544) 5,651,956
------------ ----------- ----------- -----------
Income from continuing operations.... $ 8,488,375 $ 1,318,610 $(1,384,219) $ 8,422,766
============ =========== =========== ===========
Weighted average number of common
shares............................. 24,613,254 24,582,447 24,582,447 24,582,447
Earnings (loss) per common share..... $ 0.34 $ 0.05 $ (0.06) $ 0.34
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 20
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Financial Statement Presentation
On December 13, 1995, TAL Financial Corporation ("TAL"), a wholly-owned
subsidiary of TCA Cable TV, Inc. (the "Company"), entered into a General
Partnership Agreement with DR Partners ("DR") a subsidiary of Stephens Group,
Inc. ("Stephens"), pursuant to which TAL and DR agreed to form TCA Cable
Partners General Partnership (the "Partnership") to operate cable television
systems in Arkansas, Oklahoma, California and Mississippi.
In exchange for the Company's contribution of its cable television
systems (the "TCA Systems") in Arkansas and Mississippi, TAL received a 75%
partnership interest in the Partnership. In exchange for DR's contribution of
the cable television systems (the "DR Systems") owned by it in Arkansas,
Oklahoma and California, DR received a 25% partnership interest in the
Partnership.
The transfer to the Partnership of the TCA Systems and the DR Systems
was consummated on May 1, 1996. The Partnership will be managed by a subsidiary
of the Company. As the Company controls the partnership, its contribution of
the assets was treated as a transaction between entities under common control
and the contribution of the DR Systems was treated as a purchase transaction in
accordance with Accounting Principles Board Opinion No. 16.
On December 15, 1995 the Company acquired the assets of a cable
television system serving approximately 29,000 subscribers in Alexandria and
Pineville, Louisiana ("Alexandria") through an exchange with Time Warner
Entertainment -- Advance/Newhouse Partnership ("Time Warner"). The transaction
involved the acquisition by the Company of the assets of cable television
systems located in North and South Carolina from Star Cable Associates and the
simultaneous exchange of these to Time Warner for Alexandria. The cost of the
acquisition was approximately $63 million, all of which was paid from the
Company's bank lines of credit.
On July 1, 1995 the Company, through a subsidiary, acquired
substantially all of the assets used by Marcus Cable of San Angelo, L.P.
("Marcus Cable") in the operation of the cable television systems in and around
the following cities, counties and areas in Texas: the cities of San Angelo,
Andrews, Ballinger, Miles and Winters, Andrews and Tom Green counties and
Goodfellow Air Force Base ("San Angelo"). The cost of the acquisition was
approximately $66 million, all of which was paid in cash obtained from the
Company's bank lines of credit and a private placement.
On May 9, 1995 TCA Cable TV, Inc. ("TCA" or the "Company") through its
subsidiaries acquired substantially all of the assets used by Time Warner
Entertainment Company, L.P. ("Time Warner") in the operation of the cable
television systems in and around the following cities of Arkansas:
Fayetteville, Elkins, Farmington, Greenland, and unincorporated areas of
Washington County ("Fayetteville"). The cost of the acquisition was
approximately $39 million, all of which was paid in cash obtained from the
Company's bank lines of credit.
The accompanying pro forma consolidated balance sheet as of January 31,
1996 has been prepared as if the contributions of cable television systems to
the Partnership had occurred as of January 31, 1996. Accordingly, the pro forma
consolidated balance sheet presents the consolidated financial position of the
Company, including the contributed assets, as of January 31, 1996.
The accompanying pro forma consolidated statements of operations have
been prepared as if the contributions of the cable television systems to the
Partnership and the other recent significant acquisitions discussed above had
occurred on November 1, 1994. Accordingly, the pro forma operating results of
the acquired or contributed systems for the year ended October 31, 1995 and
three months ended January 31, 1996.
<PAGE> 21
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
2. Pro Forma Adjustments
Pro Forma Consolidated Balance Sheet
(a) An adjustment was made to eliminate the assets not acquired and liabilities
not assumed. The net book value of the assets acquired was also eliminated
and the related fair value was recorded. Redeemable minority interest is
recorded at the estimated fair value of DR's 25% interest in the Partnership
at May 1, 1996, as DR has the right to require TAL to purchase its
partnership interest at fair value effective January 5, 2004. TAL also has
the right to require DR to sell (to TAL) its partnership interest effective
January 5, 2004.
Pro Forma Consolidated Statements of Operations
(b) Depreciation and amortization expense has been adjusted to reflect a change
in the basis of assets acquired from net book value to fair value and the
revision of the acquired systems depreciation and amortization policy to
conform to the Company's policy.
(c) Additional interest expense has been recorded to reflect the term debt
incurred to finance the acquisitions.
(d) DR's 25% minority interest in the earnings of the Partnership was recorded.
(e) The provision for income taxes has been adjusted to reflect the Company's
historical effective tax rate.
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2.1 General Partnership Agreement of TCA Cable Partners dated as of December 13, 1995.(2)
2.2 Restated and Amended General Partnership Agreement of TCA Cable Partners dated as of April 11, 1996.(1)
4.1 Articles of Incorporation and Bylaws.(3)
4.2 Articles of Amendment to Articles of Incorporation.(4)
4.3 Articles of Amendment to Articles of Incorporation.(4)
4.4 Articles of Amendment to Articles of Incorporation.(5)
4.5 Form of Stock Certificate.(3)
23.1 Consent of Arthur Andersen LLP(1)
</TABLE>
- --------------------------
(1) Filed herewith.
(2) Previously filed.
(3) Previously filed as an Exhibit to the Registrant's
Registration Statement on Form S-1, File No. 2- 75516, and
incorporated herein by reference.
(4) Previously filed as an Exhibit to the Registrant's
Registration Statement on Form S-8, File No. 33- 21901, and
incorporated herein by reference.
(5) Previously filed as an exhibit to Registrant's Form 10-K for
the fiscal year ended October 31, 1993, filed January 27, 1994
and incorporated by reference herein.
<PAGE> 1
EXHIBIT 2.2
================================================================================
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
OF
TCA CABLE PARTNERS
DATED AS OF APRIL 11, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.7 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Partnership Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Partnership Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.3 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.4 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.6 Disclosure Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
CAPITAL ACCOUNTS, CAPITAL CONTRIBUTIONS AND WITHDRAWALS . . . . . . . . . . . . . . 19
Section 4.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2 Initial Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.3 The Closing; Termination Prior to the Effective Time . . . . . . . . . . . . . . . . . . . . . 21
Section 4.4 Deliveries at the Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.5 Donrey Programming Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.6 Conditions to Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.7 Additional Capital Contributions by Partners . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.8 Adjustment of Partnership Interests Upon Additional Capital Contributions . . . . . . . . . . . 26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.9 Jonesboro System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.12 Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.13 Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V
PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Transfer of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.3 Fair Market Value Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 Assignment of Interest in Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
PROFITS AND LOSSES AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . 30
Section 6.1 Allocation of Profits, Gains and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.2 Allocation to Transferred Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
TAX MATTERS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.1 Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.2 Tax and Financial Reports to Current and Former Partners . . . . . . . . . . . . . . . . . . . 35
Section 7.3 Books and Records; Independent Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.4 Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.5 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.6 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
INDEMNIFICATION AND EXCULPATION . . . . . . . . . . . . . . . . . . . . 36
Section 8.1 Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Indemnification of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.3 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
TERMINATION AND DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.1 Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.2 Order of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.3 Capital Account Deficits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.4 Timing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.1 Representations and Warranties of Donrey . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.2 Representations and Warranties of TAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI
EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.1 Post-Closing Obligations to Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XII
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.6 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.8 Successors; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 13.14 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 13.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.5 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.7 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III - MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Partnership Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Partnership Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.3 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.4 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.6 Disclosure Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV - CAPITAL ACCOUNTS, CAPITAL CONTRIBUTIONS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . 19
Section 4.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2 Initial Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.3 The Closing; Termination Prior to the Effective Time . . . . . . . . . . . . . . . . . . . . . 21
Section 4.4 Deliveries at the Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.5 Donrey Programming Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.6 Conditions to Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.7 Additional Capital Contributions by Partners . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.8 Adjustment of Partnership Interests Upon Additional Capital Contributions . . . . . . . . . . . 26
Section 4.9 Jonesboro System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.10 Contribution of Tonkawa System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.11 Withdrawals of Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.12 Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.13 Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V - PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Transfer of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Section 5.3 Fair Market Value Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 Assignment of Interest in Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI - PROFITS AND LOSSES AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.1 Allocation of Profits, Gains and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.2 Allocation to Transferred Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII - TAX MATTERS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.1 Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.2 Tax and Financial Reports to Current and Former Partners . . . . . . . . . . . . . . . . . . . 35
Section 7.3 Books and Records; Independent Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.4 Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.5 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.6 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII - INDEMNIFICATION AND EXCULPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.1 Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Indemnification of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.3 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IX - TERMINATION AND DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.1 Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.2 Order of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.3 Capital Account Deficits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.4 Timing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.1 Representations and Warranties of Donrey . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.2 Representations and Warranties of TAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI - EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.1 Post-Closing Obligations to Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XII - ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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Section 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.6 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.8 Successors; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 13.14 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 13.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affected Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed Donrey Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed TAL Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed TCA Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Book Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cable Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Call Notice Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Call Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Copyright Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Donrey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Donrey Adverse Tax Consequence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Donrey Affected Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Donrey Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Donrey Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Donrey Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Donrey Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Donrey Franchises and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Donrey Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Donrey Programming Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Donrey Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Donrey Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Initial Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Jonesboro System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legal Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Material Contractual Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Materials of Environmental Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Minimum Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Non-TCA Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Nonrecourse Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partner Nonrecourse Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partner Nonrecourse Debt Minimum Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partner Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Partnership Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Put Notice Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Put Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Retirement Plan Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TAL Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TAL Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TAL Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TAL Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TAL Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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TAL Franchises and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TAL Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TAL Retransmission Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TAL Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TCA Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TCA Change of Contro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TCA Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
TCA Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TCA Franchises and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TCA Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TCA Management Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TCA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
TCA Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
TCA Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
This Amended and Restated General Partnership Agreement is
entered into and effective as of April 11, 1996, by and between DR Partners, a
Nevada general partnership ("Donrey"), and TAL Financial Corporation, a Nevada
corporation ("TAL") and a wholly owned subsidiary of TCA Cable TV, Inc., a
Texas corporation ("TCA").
WHEREAS, Donrey and TAL have entered into a General
Partnership Agreement effective as of December 13, 1995 (the "Original
Partnership Agreement") pursuant to which Donrey and TAL agreed to form TCA
Cable Partners General Partnership, the general partnership provided for
herein, pursuant to the Uniform Partnership Act of the State of Delaware; and
WHEREAS, the assets and liabilities of TAL to be transferred
to the Partnership by TAL pursuant to Article IV hereof are presently held and
operated by TAL Entities, and, to avoid the expense and inconvenience of
multiple distributions and assumptions of such assets and liabilities, TAL will
cause such entities to transfer such assets and liabilities directly to the
Partnership on TAL's behalf;
WHEREAS, TCA has agreed to unconditionally guarantee the
obligations of TAL hereunder;
WHEREAS, Donrey and TAL desire to amend and restate the
Original Partnership Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree that the Original
Partnership Agreement shall be amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings set forth below:
1
<PAGE> 12
"Act" shall mean the Uniform Partnership Act of the State of
Delaware.
"Agreement" shall mean this Amended and Restated TCA Cable
Partners General Partnership Agreement, as it may be further amended from time
to time in accordance with the terms hereof.
"Assets" shall mean the Donrey Assets, and the TAL Assets.
"Assumed Donrey Contracts" shall mean the contracts, leases
and other agreements listed on Schedule 1.1 hereto.
"Assumed TAL Contracts" shall mean the contracts, leases and
other agreements listed on Schedule 1.2 hereto.
"Book Value" means, with respect to any asset of the
Partnership, the adjusted basis of such asset as of the relevant date for
federal income tax purposes, except as follows:
(i) the Book Value of any asset contributed by a
Partner to the Partnership shall be the Fair Market Value of such
asset;
(ii) the Book Value of all Partnership assets
(including intangible assets such as goodwill) shall be adjusted to
equal their respective Fair Market Values as of the following times:
(A) the acquisition of an additional interest in
the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution;
(B) the distribution by the Partnership to a
Partner of more than a de minimis amount of money or
Partnership property as consideration for an interest in the
Partnership; and
(C) the liquidation of the Partnership within the
meaning of Treasury Regulations, Section
1.704-1(b)(2)(iv)(f)(5)(ii); and
(iii) if the Book Value of an asset has been
determined or adjusted pursuant to subsection (i) or (ii) above, such
Book Value shall thereafter be adjusted by the Depreciation taken into
account with respect to
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such asset for purposes of computing Profits and Losses and other
items allocated pursuant to Section 6.1.
The foregoing definition of Book Value is intended to comply
with the provisions of Treasury Regulations, Section 1.704-1(b)(2)(iv) and
shall be interpreted and applied consistently therewith.
"Business" shall mean the business of acquiring, investing,
owning, constructing, maintaining, promoting, selling, disposing and otherwise
operating the Systems.
"Cable Act" shall mean the Cable Television Consumer
Protection and Competition Act of 1992.
"Capital Accounts" shall mean the capital accounts maintained
by the Partnership for each Partner as described in Section 4.1 hereof.
"Capital Contributions" shall mean the contributions made to
the capital of the Partnership by the Partners and credited to their respective
Capital Accounts pursuant to Article IV hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Communications Act" shall mean the Communications Act of
1934, as amended.
"Copyright Act" shall mean the Copyright Act of 1976, as
amended.
"Depreciation" means, for each Fiscal Year or part thereof, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect to an asset
for such Fiscal Year or part thereof, except that if the Book Value of an asset
differs from its adjusted basis for federal income tax purposes, the
depreciation, amortization or other cost recovery deduction for such Fiscal
Year or part thereof shall be an amount which bears the same ratio to such Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such Fiscal Year or part thereof bears to such adjusted
tax basis. If such asset has a zero adjusted tax basis, the depreciation,
amortization or other cost recovery deduction for each Fiscal Year shall be
determined under a method agreed to by the Partners.
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"Distributions" shall mean the distributions from the
Partnership described in Section 6.3 hereof.
"Donrey" shall mean DR Partners, a Nevada general partnership.
"Donrey Adverse Tax Consequence" shall mean the imposition of
tax under Section 1374 of the Code on Donrey or any of its affiliates as a
result of any sale, exchange, transfer or other disposition by the Partnership
of any of the Donrey Assets.
"Donrey Assets" shall mean all right, title and interest of
Donrey in, to and under all of the assets and properties (of every kind,
character and description wherever located) primarily relating to the operation
of the Donrey Systems, including, without limitation:
(a) all tangible personal property, including but not
limited to 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;
(b) the interests in real property owned or leased by
Donrey, including all improvements thereon owned by Donrey;
(c) the Donrey Franchises and Licenses;
(d) the Assumed Donrey Contracts; and
(e) the Donrey Books and Records.
"Donrey Books and Records" shall mean all books and records
(or true and complete copies thereof), including computerized books and records
maintained by Donrey which relate to the Donrey Systems and are necessary for
the Partnership to operate the Donrey Systems after the Effective Time,
including, without limitation, statements of account filed by or on behalf of
Donrey with the U.S. Copyright Office with respect to the Donrey Systems, books
of account, general, financial, tax and personnel records, sales, adverting,
marketing or promotional records and literature and other sales-related
materials with respect to the Donrey
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<PAGE> 15
Systems, and the Donrey Franchises and Licenses (including all correspondence,
orders or related materials).
"Donrey Disclosure Schedules" shall mean the written
disclosure schedules Donrey is delivering to TAL simultaneously with the
execution and delivery hereof, containing various exceptions to the
representations and warranties of Donrey as set forth in this Agreement.
"Donrey Excluded Assets" shall mean the following assets and
properties of Donrey used by Donrey in the operation of the Donrey Systems
which are not being contributed to the Partnership:
(a) all accounts receivable;
(b) all cash and cash equivalents on hand or on deposit
in banks;
(c) insurance policies and rights under or arising from
such policies (including pre-paid premiums and receivables);
(d) all rights of Donrey under this Agreement;
(e) any rights of Donrey to the name "DONREY" or any
variation thereof; provided, however, that for a period of one year
from the Effective Time, the Partnership may use any stationary or
billing forms or other Donrey Assets existing on at the Effective Time
bearing the name "Donrey" or which were in stock or ordered on the
Effective Time;
(f) all rights of Donrey under the Donrey Retransmission
Consent Agreements;
(g) all rights of Donrey under the Donrey Programming
Agreements; and
(h) all assets and properties of Donrey not primarily
relating to or used in the operation of the Donrey Systems.
"Donrey Franchises and Licenses" shall mean the governmental
permits, licenses, registrations, and applications held or filed by Donrey and
required for the ownership of the Donrey Assets and the lawful operation of, or
appropriate with respect to, the Donrey Systems, including, without limitation,
all
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<PAGE> 16
licenses, permits and authorizations issued or granted by the FCC or any state
or local governmental authority, all franchises, permits, intangible CATV
channel distribution rights, cable television relay service (CARS), domestic
satellite receive only (TVRO), business radio and other licenses, permits or
similar authorizations.
"Donrey Liabilities" shall mean (i) liabilities to be paid or
performed after the Effective Time under the Assumed Donrey Contracts which are
assigned to the Partnership at the Effective Time pursuant to Article IV
hereof, and (ii) all liabilities and obligations arising out of the
Partnership's ownership of the Donrey Assets or operation of the Donrey Systems
after the Effective Time.
"Donrey Programming Agreements" shall mean those agreements
listed on Schedule 1.3 hereto.
"Donrey Retransmission Consent Agreements" shall mean those
agreements listed on Schedule 1.4 hereto.
"Donrey Systems" shall mean the cable television systems
serving the towns of Bartlesville and Dewey, Oklahoma, Blackwell, Oklahoma,
Vallejo, California, Guymon, Oklahoma, and Rogers and Little Flock, Arkansas
and unincorporated areas adjacent to the foregoing cities; provided, however
that in the event Donrey contributes the Tonkawa System to the Partnership as
part of its Initial Capital Contribution pursuant to Section 4.10(a) hereof,
the "Donrey Systems" shall be deemed to include the Tonkawa System and provided
further, that in the event Donrey contributes the Tonkawa System to the
Partnership as an additional Capital Contribution pursuant to Section 4.10 (b)
hereof, the "Donrey Systems" shall be deemed to include the Tonkawa System for
purposes of this Agreement other than for purposes of Section 10.1 and Article
VIII hereof.
"Effective Time" shall mean the date and time that Donrey and
TAL make their initial capital contributions pursuant to Article IV hereof.
"Environmental Claim" shall mean any written notice by a
person or entity alleging liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into
the environment, of any Material of Environmental Concern in violation of any
Environmental Law at any location or (b) circumstances forming the basis of any
violation of any Environmental Law.
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"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations (including common law) relating to pollution or
protection of the environment (including, ground water, land surface or
subsurface strata), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, recycling,
reporting or handling of Materials of Environmental Concern and the
construction and siting of facilities.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fair Market Value" shall mean (i) with respect to the Initial
Capital Contributions, the fair market value thereof as agreed to by the
Partners and set forth on Exhibit A attached hereto and (ii) with respect to
any revaluation of any partnership asset on the books of the Partnership and
the valuation of any asset subsequently contributed to the Partnership or
distributed by the Partnership, the fair market value agreed to by the
Partners. With respect to Section 5.2 hereof, Fair Market Value shall mean the
price, determined in accordance with Section 5.3 hereof, at which the
Partnership would be sold in an arm's length transaction between a willing
seller and a willing buyer under no compulsion to buy or sell, but with the
expectation of concluding the purchase or sale within a reasonable time, taking
into account all relevant factors, including, without limitation, the assets
and liabilities associated with the Business, the rights and obligations that
would be assigned to and assumed by any such buyer, and market conditions. For
purposes of Section 5.3 the Fair Market Value of the Partnership shall be
deemed to include the value of any programming agreements, retransmission
consents, must carry agreements or other agreements held by TCA Management Co.
for the benefit of the Partnership, as if such agreements were held directly by
the Partnership.
"FCC" shall mean the Federal Communications Commission.
"Fiscal Year" shall have the meaning set forth in Section 2.7
hereof.
"Free Cash Flow" shall mean the amount of cash received by the
Partnership from operations, any transaction, and any dividends, interest or
other cash distributions from any Person in which the Partnership has an
interest which
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<PAGE> 18
is in excess of 100% of the amount of cash reasonably contemplated by the
Budget as being necessary for the cash payment of the Partnership's operating
expenses, debt service, contingencies, budgeted capital expenditures and
anticipated working capital requirements.
"Initial Capital Contribution" shall mean with respect to each
of Donrey and TAL the initial capital contributions made by such Partner
pursuant to Section 4.2 hereof.
"Interest" means, with respect to any Partner at any time,
such Partner's entire beneficial partnership ownership interest in the
Partnership at such time, including such Partner's Capital Account, voting
rights, and right to share in Profits and Losses, Distributions and all other
benefits of the Partnership as specified in this Agreement, together with such
Partner's obligations to comply with all of the terms of this Agreement.
"Jonesboro System" shall mean the cable television system
serving the towns of Jonesboro, Walnut Ridge and Imboden Arkansas and
unincorporated areas adjacent thereto.
"Legal Expenses" of a Person shall mean any and all fees,
costs and expenses of any kind incurred by such Person and its counsel (whether
one or more) in investigating, preparing for, defending against or providing
evidence, producing documents or taking other action with respect to, any
threatened or asserted claim.
"Liens" shall mean any mortgage, security interest, lien,
pledge, escrow, option, right of first refusal, indenture, easement, license,
security agreement or encumbrance of any kind or character.
"Losses" shall mean all losses, damages, liabilities, claims,
out-of-pocket costs and expenses, of any nature or kind, known or unknown,
fixed, accrued, absolute or contingent, liquidated or unliquidated, including,
without limitation, any and all Legal Expenses.
"Management Agreement" shall mean the agreement, dated the
Effective Time substantially in the form attached hereto as Exhibit A, pursuant
to which TCA Management Co. shall manage the Partnership.
"Material Contractual Consents" shall mean consents under: (i)
the Donrey Franchises and Licenses; (ii) the TAL Franchises and Licenses; (iii)
pole
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attachment or joint line agreements, underground conduit agreements, crossing
agreements, construction permits or retransmission consent agreements; or (iv)
any other contracts that contemplate payments by or to Donrey or TAL in any 12
month period exceeding $50,000 individually or $250,000 in the aggregate.
"Materials of Environmental Concern" shall mean hazardous
materials, hazardous wastes, hazardous substances, other wastes or contaminants
including, without limitation, newspaper ink, and radio frequency energy, the
handling, storage or disposal of which is governed by Environmental Laws.
"Minimum Gain" with respect to any Fiscal Year of the
Partnership shall mean the minimum gain of the Partnership computed in
accordance with the principles of Treasury Regulations, Section 1.704-2(d) and
(k).
"Nonrecourse Liabilities" shall mean liabilities of the
Partnership for which no Partner bears the economic risk of loss, in accordance
with Treasury Regulations, Sections 1.704-2(b)(3) and 1.752-1(a)(2).
"Partner" shall mean each of Donrey and TAL.
"Partner Nonrecourse Debt" shall mean any nonrecourse debt of
the Partnership (as defined in Treasury Regulations, Section 1.1001 - 2) for
which any Partner bears the economic risk of loss, in accordance with Treasury
Regulations, Sections 1.704-2(b)(4) and 1.752-2.
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Treasury Regulations, Section 1.704 - 2(i)(2).
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Treasury Regulations, Section 1.704-2(i)(2) and as determined in
accordance with Treasury Regulations, Section 1.704-2(k).
"Partnership" shall mean the partnership formed by this
Agreement, which partnership is known as TCA Cable Partners, a Delaware general
partnership.
"Partnership Interest" shall mean with respect to each
Partner, the percentage ownership interest of such Partner in the Partnership
specified in Section 5.1, as adjusted in accordance with the terms of this
Agreement.
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"Person" shall mean any individual, partnership, corporation,
trust or other entity.
"Profits" or "Losses" means, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulations, Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profits or Losses shall be subtracted from such taxable income or
loss;
(c) in the event the Book Value of any Partnership asset is
adjusted, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(d) upon any distribution of any Partnership asset other than
cash, the distributed asset shall be treated as if it had been sold
for its Fair Market Value and the resulting gain or loss shall be
taken into account as gain or loss from the disposition of the asset
for purposes of computing Profits or Losses;
(e) gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Book Value of the
property disposed of, rather than the adjusted tax basis of such
property;
(f) in lieu of the depreciation, amortization or other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year or other period; and
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(g) such taxable income or loss shall be deemed not to
include any income, gain, loss, deduction or other item thereof
allocated pursuant to Section 6.1(c).
"Systems" shall mean the Donrey Systems and the TAL Systems.
"TAL Assets" shall mean all right, title and interest of TCA,
TAL or the TAL Entities in, to and under all of the assets and properties (of
every kind, character and description wherever located) primarily relating to
the operation of the TAL Systems, including, without limitation:
(a) all tangible personal property, including but not
limited to 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;
(b) the interests in real property owned or leased by
TCA, TAL or the TAL Entities including all improvements thereon owned
by TCA, TAL or the TAL Entities;
(c) the TAL Franchises and Licenses;
(d) the Assumed TAL Contracts;
(e) the TAL Books and Records; and
(f) the right to use the name "TCA" as set forth in
Section 4.2 hereof.
"TAL Books and Records" shall mean all books and records (or
true and complete copies thereof), including computerized books and records
maintained by TCA, TAL or the TAL Entities which relate to the TAL Systems and
are necessary for the Partnership to operate the TAL Systems after the
Effective Time, including, without limitation, statements of account filed by
or on behalf of TCA, TAL or the TAL Entities with the U.S. Copyright Office
with respect to the TAL Systems, books of account, general, financial, tax and
personnel records, sales, adverting, marketing or promotional records and
literature and other sales-related
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materials with respect to the TAL Systems, and the TAL Franchises and Licenses
(including all correspondence, orders or related materials).
"TAL Disclosure Schedules" shall mean the written disclosure
schedules TAL is delivering to Donrey simultaneously with the execution and
delivery hereof, containing various exceptions to the representations and
warranties of TAL as set forth in this Agreement.
"TAL Entities" shall mean Teleservice Corporation of America,
a Texas Corporation, Texas Community Antennas, Inc. a Texas corporation, Delta
Cablevision, Inc., an Arkansas corporation, Tele-Communications of Northwest
Arkansas, L.P., a Delaware limited partnership, Tele-Communications of
Arkansas, L.P., a Delaware limited partnership and Telecable Associates, a
Texas corporation.
"TAL Excluded Assets" shall mean the following assets and
properties of TAL used by TCA, TAL or the TAL Entities in the operation of the
TAL Systems which are not being contributed to the Partnership:
(a) all accounts receivable;
(b) all cash and cash equivalents on hand or on deposit in
banks;
(c) insurance policies and rights under or arising from such
policies (including pre-paid premiums and receivables);
(d) all rights of TAL under this Agreement;
(e) any rights of TCA, TAL or the TAL Entities to the name
"TCA" or any variation thereof; provided however that TCA shall
contribute to the Partnership the right to use the name "TCA" as set
forth in Section 4.2; and
(f) all assets and properties of TCA, TAL or the TAL Entities
not primarily relating to or used in the operation of the TCA Systems;
and
(g) the TAL Retransmission Agreements, which shall be
retained by TCA Management Co.
"TAL Franchises and Licenses" shall mean the governmental
permits, licenses, registrations, and applications held or filed by TCA, TAL or
the TAL Entities and required for the ownership of the TAL Assets and the
lawful operation
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of, or appropriate with respect to, the TAL Systems, including, without
limitation, all licenses, permits and authorizations issued or granted by the
FCC or any state or local governmental authority, all franchises, permits,
intangible CATV channel distribution rights, cable television relay service
(CARS), domestic satellite receive only (TVRO), business radio and other
licenses, permits or similar authorizations.
"TAL Retransmission Agreements" shall mean those agreements
listed on Schedule 1.4 hereto.
"TAL Liabilities" shall mean (i) liabilities to be paid or
performed after the Effective Time under the Assumed TAL Contracts which are
assigned to the Partnership at the Effective Time pursuant to Article IV
hereof, and (ii) all liabilities and obligations arising out of the
Partnership's ownership of the TAL Assets or operation of the TAL Systems after
the Effective Time.
"TAL Systems" shall mean the cable television systems serving
the towns of Arkadelphia, Arkansas, Batesville, Arkansas, Bentonville,
Arkansas, Berryville, Arkansas, El Dorado, Arkansas, Fayetteville, Arkansas,
Greenville, Mississippi, Harrison, Arkansas, Heber Springs, Arkansas, Helena,
Arkansas, Hot Springs, Arkansas, Mena, Arkansas, McGehee, Arkansas, Magnolia,
Arkansas, Mountain Home, Arkansas, Malvern, Arkansas, Newport, Arkansas, Ozark,
Arkansas, Pocahontas, Arkansas, Russellville, Arkansas, Siloam Springs,
Arkansas and Springdale, Arkansas and unincorpo- rated areas adjacent to the
foregoing cities to be contributed to the Partnership by TAL pursuant to
Article IV hereof.
"Taxes" shall mean all taxes, charges, fees, levies, or other
assessments, including, without limitation, income, net income, profits, gross
receipts, ad valorem, excise, property, sales, gains, transfer, payroll,
employment, severance, withholding, intangibles and franchise taxes, imposed by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, and including any interest, penalties or
additions attributable thereto.
"TCA Change of Control" shall occur upon any of the following:
(i) any "person" (as defined in Section 13(d) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of transactions, of more than
50% of the total voting power of all shares of capital stock of TCA entitled to
vote generally in the election of directors, (ii) the following individuals
cease for any reason to constitute a majority of the number of directors then
serving on the Board of Directors of TCA: individuals who, on the date hereof,
constitute the Board of Directors and any new director
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<PAGE> 24
(other than a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of TCA) whose
appointment or election by the Board or nomination for election by TCA's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously so
approved, (iii) TCA consolidates with or merges with or into another
corporation or conveys, transfers or leases all or substantially all of its
assets to any person (other than an entity that following such transaction is
controlled by the persons who were shareholders of TCA immediately preceding
such transaction), in either event pursuant to a transaction in which the
outstanding shares of capital stock of TCA entitled to vote in the election of
directors is changed into or exchanged for cash, securities or other property,
or (iv) TCA does not own, directly or through wholly owned subsidiaries, 51% of
the issued and outstanding capital stock of TCA Management Co.
"TCA Management Co." shall mean TCA Management Company, a
Texas corporation, in its capacity as operator of the Partnership pursuant to
the Management Agreement.
"Tonkawa System" shall mean the cable television system
serving the towns of Tonkawa, Oklahoma and unincorporated areas adjacent
thereto.
ARTICLE II
GENERAL PROVISIONS
Section 2.1 Formation. The Partners hereby form a general
partnership pursuant to the laws of the State of Delaware.
Section 2.2 Name. The name of the Partnership shall be TCA
Cable Partners.
Section 2.3 Principal Place of Business. The principal place
of business of the Partnership shall be located at 3015 SE Loop 323, Tyler,
Texas 75701. The principal place of business of the Partnership may be changed
by the Partnership Committee. The Partnership may engage in business in such
place or places as may be permitted by law.
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Section 2.4 Agent for Service of Process. The agent for
service of process for the Partnership and its address shall be the Chairman of
the Partnership and the address of the Partnership's principal place of
business, respectively. The agent for service of process may be changed by the
Partnership Committee.
Section 2.5 Purpose. The purpose of the Partnership shall be
to engage in and conduct the Business and to do any and all acts and things
which may be necessary, incidental or convenient to carry on the Business as
contemplated by this Agreement. The Partnership may engage in any business
other than the Business as the Partnership Committee may determine pursuant to
Section 3.4 hereof.
Section 2.6 Term. The term of the Partnership shall be from
the Effective Time through twenty-five (25) years from the Effective Time,
unless extended by the unanimous consent of the Partners or dissolved as
provided herein.
Section 2.7 Fiscal Year. Unless the Partnership Committee
shall at any time determine otherwise, the fiscal year of the Partnership shall
end on October 31.
ARTICLE III
MANAGEMENT
Section 3.1 Partnership Committee.
(a) Except as otherwise expressly provided in this Agreement,
complete and exclusive power to direct and control the business affairs of the
Partnership is delegated to a Partnership Committee (the "Partnership
Committee"), which will initially consist of five members (the "Members"). TAL
will appoint the Members and shall select one of its appointees to serve as
Chairman. Members may be removed only by a majority of the entire Partnership
Committee. Vacancies on the Partnership Committee shall be filled by a majority
of the Partnership Committee then in office.
(b) The Partnership Committee hereby delegates to TCA
Management Co. the authority to manage the day to day affairs of the Business
in accordance with and to the extent provided in this Agreement, the Management
Agreement and the Budget (as hereinafter defined). The Partnership Committee
shall instruct TCA Management Co. not to take any action on behalf of the
Partnership which is not so
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authorized by the Management Agreement, the Budget or the Partnership
Committee.
Section 3.2 Partnership Committee Meetings.
(a) Meetings of the Partnership Committee may be called at
any time by any Member on at least five business days written notice, stating
the purpose of the requested meeting, but must be held at least once each
fiscal quarter.
(b) Members may participate in a meeting of the Partnership
Committee by means of conference telephones or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
(c) Members may act by written consent provided that at least
four Members have signed such consent or counterparts thereof.
Section 3.3 Voting. On any matter on which a vote is taken,
each of the Members shall have one vote. If one of the Members is not present
at a meeting, the Member shall be entitled to appoint a representative to
attend such meeting and cast the absent Member's vote. No action may be taken
at a meeting of the Partnership Committee unless a quorum for the transaction
of business consisting four Members is present. Except as otherwise provided
in this Agreement, all actions by the Partnership Committee shall require the
affirmative vote of three Members on the Partnership Committee.
Section 3.4 Management.
(a) Except as otherwise provided in this Agreement, the
Partnership Committee shall be responsible for taking all actions not otherwise
delegated to TCA Management Co. pursuant to the terms of the Management
Agreement, the Budget and Section 3.4(b) hereof.
(b) The Partnership Committee shall adopt on or before
October 31 of each Fiscal Year an annual budget setting forth the Partnership's
proposed expenditures for repair, maintenance and operations and for expansion
and other capital expenditures for the next fiscal year (as supplemented or
amended from time to time by the unanimous vote of the Partnership Committee,
the "Budget"). The business and affairs of the Partnership shall be conducted
in accordance with the terms of the Budget. Notwithstanding any other
provision of this Agreement, the
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following actions shall require the unanimous approval of the Partnership
Committee:
(i) the adoption of the Budget for all years after
the fiscal year ending October 31, 1996;
(ii) the approval of capital expenditures not
provided for in the Budget in excess of $500,000 in the aggregate
during any fiscal year;
(iii) the incurrence by the Partnership of
indebtedness not provided for in the Budget in excess of $500,000 in
the aggregate during any fiscal year;
(iv) the institution or settlement of any litigation
or arbitration with third parties in excess of $150,000;
(v) the commitment of the Partnership to any
arrangement, contract or agreement which creates a liability of the
Partnership or invoices an expenditure of funds by the Partnership not
provided for in the Budget, in excess of $500,000 in the aggregate,
during any fiscal year;
(vi) the leasing of real or personal property by the
Partnership not provided for in the Budget if the total payments
during the term of the lease exceed $500,000;
(vii) the approval of the annual and quarterly
financial statements which approval will not be unreasonably withheld;
(viii) the advancement or lending of any funds of
the Partnership, or on behalf of the Partnership, the guarantee of a
loan to any other Person, in each case not provided for in the Budget
where the dollar amount involved exceeds $150,000;
(ix) the call for additional Capital Contributions
to the Partnership not provided for in the Budget;
(x) the admission of new partners to the
Partnership;
(xi) except as required by law, a change in the
financial accounting or tax principles used by the Partnership;
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(xii) a sale, transfer or encumbrance of a Partner's
interest in the Partnership, other than (w) a bona fide pledge of a
Partner's Partnership Interest to any financial institution or
institutions as security for the extension of financing to such
Partner by such institution or institutions, (x) a transfer of
Donrey's Partnership Interest to Stephens Group, Inc. ("Stephens
Group") or any of its affiliates, or (y) a transfer of TAL's
Partnership Interest to TCA or any of its affiliates; provided,
however, that no such transfer by a Partner of its Partnership
Interest shall relieve such Partner of its obligations under Article
VIII hereunder;
(xiii) the dissolution, liquidation, merger,
consolidation or other business combination of the Partnership not
provided for in the Budget;
(xiv) the creation of any mortgage, pledge,
consensual lien or other security interest or the sale, transfer,
assignment or other disposition of any assets or properties of the
Partnership, in each case not provided for in the Budget and in excess
of $500,000 in the aggregate during any fiscal year;
(xv) the amendment of this Agreement;
(xvi) the approval of distributions not provided for
in the Budget or contemplated by Section 6.3 hereof;
(xvii) except for the Management Agreement, entering
into agreements or material transactions between the Partnership and
(a) either Partner or any associate, affiliate, subsidiary of such
Partner, (b) a director or executive officer of TCA Management Co.;
(xviii) changing the scope of the Business in a
manner not contemplated by the Budget;
(xix) the disposition of any of the Donrey Assets in
a manner which shall have a Donrey Adverse Tax Consequence;
(xx) the termination, amendment or modification of
the Management Agreement;
(xxi) committing or causing the Partnership to
create or enter into, any corporation, partnership, joint venture,
association, trust or other
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business entity or the acquisition, directly or indirectly, of any
assets from or any participation in any other Person not provided for
in the Budget;
(xxii) the selection of the Partnership's
independent accountants which accountants shall be Coopers & Lybrand,
L.L.P. for the fiscal year ended October 31, 1996; and
(xxiii) causing or permitting any Person to take any
action which, if it had been taken by the Partnership, would require a
unanimous vote of the Members pursuant to any of the foregoing.
(c) Notwithstanding any other provision of this Agreement, in
the event of a TCA Change of Control, Donrey shall be entitled to appoint two
out of the five Members to the Partnership Committee.
(d) Notwithstanding any other provision of this Agreement,
each Partner shall have the unilateral right to cause the Partnership to (i)
seek indemnification against a Partner pursuant to Section 8.2 hereof or (ii)
institute legal proceedings against a Partner pursuant to Section 4.6(b)
hereof.
Section 3.5 Insurance. The Partnership shall carry or cause
to be carried on its behalf with carriers acceptable to the Partnership
Committee all property, liability and workers' compensation insurance and such
other insurance as shall be required under applicable mortgages, leases,
agreements, and other instruments and statutes or as determined by the
Partnership Committee in at least such coverage amounts as are set forth on
Exhibit D hereto unless otherwise determined by the Partnership Committee. All
such insurance policies shall provide coverage to the Partners as named
insureds.
Section 3.6 Disclosure Schedules. Attached hereto as
Exhibits E and F are the Donrey Disclosure Schedules and the TAL Disclosure
Schedules, respectively.
ARTICLE IV
CAPITAL ACCOUNTS, CAPITAL CONTRIBUTIONS AND WITHDRAWALS
Section 4.1 Capital Accounts.
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(a) A Capital Account shall be maintained for each Partner in
accordance with federal income tax accounting principles and Treasury
Regulations, Section 1.704-1(b)(2)(iv). This Section 4.1 is intended to comply
with such principles and requirements and shall be interpreted consistently
therewith. The initial balance of each Partner's Capital Account shall be the
Fair Market Value (net of liabilities secured by the contributed asset which
the Partnership is treated as assuming or taking subject to under Section 752
of the Code) of the Initial Capital Contribution of each Partner as set forth
on Exhibit B hereto. Subsequent to the date of this Agreement, each Capital
Account shall be:
(i) increased by (1) the amount of the cash
contribution to the capital of the Partnership by such Partner, (2)
the Fair Market Value of property contributed to the Partnership by
such Partner on the date of such contribution (net of any liabilities
secured by such contributed property that the Partnership is
considered to assume or take subject to under Section 752 of the
Code), (3) the distributive share of the Partnership's Profits, as
allocated to such Partner pursuant to Sections 6.1(a) and (b) hereof
and (4) any positive adjustment to such Capital Account by reason of
an adjustment to the Book Value of Partnership assets;
(ii) decreased by (1) the amount of all cash
distributions to such Partner pursuant to this Agreement, (2) the Fair
Market Value of property distributed to such Partner (net of any
liabilities secured by such property that the Partner is considered to
assume or take subject to under Section 752 of the Code), (3) the
distributive share of the Partnership's Losses, as allocated to such
Partner pursuant to Sections 6.1(a) and (b) hereof and (4) any
negative adjustment to such Capital Account by reason of an adjustment
to the Book Value of Partnership Assets; and
(iii) otherwise adjusted to comply with the
requirements of Treasury Regulations, Section 1.704-1(b)(2)(iv).
Section 4.2 Initial Capital Contributions.
(a) (i) At the Effective Time, Donrey shall contribute
to the capital of the Partnership and shall sell, convey, transfer and
assign to the Partnership, all of the right, title and interest of
Donrey in and to the Donrey Assets and the Partnership shall assume
the Donrey Liabilities.
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(ii) At the Effective Time, Donrey shall transfer
and assign to TCA Management Co. all of the rights and interests of
Donrey under the Donrey Retransmission Consent Agreements.
(iii) Notwithstanding anything in this Agreement to
the contrary, Donrey shall retain title to, and possession of, and
Donrey shall not sell, assign, convey, transfer or deliver any right,
title or interest of Donrey in or to the Donrey Excluded Assets.
(b) (i) At the Effective Time, TAL shall contribute, or
cause to be contributed, to the capital of the Partnership and shall
sell, convey, transfer and assign, or cause to be sold, conveyed,
transferred or assigned, to the Partnership, (x) all of the right,
title and interest of TCA, TAL and the TAL Entities in and to the TAL
Assets and (y) a non-exclusive, royalty free license to use for the
duration of the Partnership all rights of TCA, TAL and the TAL
Entities in and to the name "TCA" and the Partnership shall assume
the TAL Liabilities.
(ii) Notwithstanding anything in this Agreement to
the contrary, TCA, TAL and the TAL Entities shall retain title to, and
possession of, and TCA, TAL and the TAL Entities shall not sell,
assign, convey, transfer or deliver any right, title or interest of
TCA, TAL or the TAL Entities in or to the TAL Excluded Assets;
provided, however, that the TAL Retransmission Agreements shall
continue to be held by TCA Management Co. for the benefit of the
Partnership.
(c) Exhibit A hereto sets forth the adjusted tax basis and
the Fair Market Value of the assets to be contributed by each Partner
to the Partnership.
Section 4.3 The Closing; Termination Prior to the Effective
Time.
(a) Upon the terms and subject to the conditions contained in
this Agreement, the closing of the transactions contemplated by Section 4.2
hereof shall take place at the offices of Jackson & Walker, L.L.P., 901 Main
Street, Dallas, Texas at 9:30 a.m., local time on May 1, 1996 or at such other
date, time and place as the parties hereto may otherwise agree.
(b) This Agreement may be terminated at any time prior to the
Effective Time:
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(i) by mutual consent of Donrey and TAL; or
(ii) by either Donrey or TAL if the Initial Capital
Contributions shall have not been made pursuant to Section 4.2 of this
Agreement on or before June 30, 1996 (unless the failure to so
consummate the Initial Capital Contributions on or before such date
shall be due to the wilful action or failure to act of the party
seeking to terminate this Agreement).
(c) Upon termination of this Agreement pursuant to Section
4.3(b) hereof, this Agreement will forthwith become null and void; except that
Sections 13.3 and 13.13 hereof shall survive such termination and that
termination of this Agreement will not relieve either party of any liability
for wilful breach of any covenants or agreements hereunder.
(d) Donrey and TAL will each use commercially reasonable
efforts to cause its Initial Capital Contribution to be made in accordance with
Section 4.2 of the Agreement.
Section 4.4 Deliveries at the Effective Time. In order to
effect the Initial Capital Contributions (a) Donrey shall execute and deliver
to the Partnership (i) such general and specific bills of sale, endorsements,
assignments, deeds and such other good and sufficient instruments of conveyance
and transfer as shall be necessary to vest in the Partnership good and
marketable title to the Donrey Assets, and (ii) all other documents,
instruments and writings required to be delivered by Donrey to the Partnership
pursuant to this Agreement or otherwise required in connection herewith, (b)
Donrey shall execute and deliver to TCA Management Co. such assignments as
shall be necessary to transfer to TCA Management Co. all rights and interests
of Donrey under the Donrey Retransmission Consent Agreements, (c) TAL shall
execute and deliver, or cause to be executed and delivered, to the Partnership
(i) such general and specific bills of sale, endorsements, assignments, deeds
and such other good and sufficient instruments of conveyance and transfer as
shall be necessary to vest in the Partnership good and marketable title to the
TAL Assets and (ii) all other documents, instruments and writings required to
be delivered by or on behalf of TAL to the Partnership pursuant to this
Agreement or otherwise required in connection herewith, (d) the Partnership
shall execute and deliver to Donrey an assumption agreement pursuant to which
the Partnership shall assume the Donrey Liabilities (other than liabilities
associated with the Donrey Retransmission Consent Agreements), (e) TCA
Management Co. shall execute and deliver to Donrey an assumption agreement
pursuant to which TCA Management Co. shall assume the Donrey Liabilities
associated with the Donrey Retransmission Consent Agreements,
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and (f) the Partnership shall execute and deliver to TAL an assumption
agreement pursuant to which the Partnership shall assume the TAL Liabilities.
Section 4.5 Donrey Programming Agreements. At or prior to the
Effective Time, Donrey shall send notification of its intent to cancel,
effective the Effective Time the Donrey Programming Agreements.
Section 4.6 Conditions to Contributions.
(a) The respective obligations of each of Donrey and TAL
to make its Initial Capital Contribution shall be subject to the following
conditions:
(i) The absence of any effective injunction,
writ, preliminary restraining order of a court of competent
jurisdiction directing that the transactions provided for herein may
not be consummated.
(ii) All approvals of the FCC, any state or local
communications authority necessary to the consummation of the
transactions contemplated hereby and all Material Contractual Consents
as set forth on Schedule 4.5(a)(ii) shall have been obtained on terms
and conditions reasonably satisfactory to Donrey and TAL.
(iii) No action, suit, proceeding or investigation
by or before any court, administrative agency or other governmental
authority shall have been instituted (a) to restrain, prohibit or
invalidate the transactions contemplated by this Agreement, (b) which
seeks material or substantial damages by reason of completion of such
transaction or (c) which may materially affect the right of the
Partnership to own, operate or control after the Effective Time all or
any material portion of the Donrey Assets or the TAL Assets.
(iv) The Partnership shall have entered into a
Management Agreement with TCA Management Co., pursuant to which TCA
Management Co. will manage the business of the Partnership, the terms
and conditions of such Management Agreement to be satisfactory to each
of Donrey and TAL.
(v) The Partnership shall have entered into lease
agreements with Donrey covering the premises occupied by the Vallejo
and Bartlesville Donrey Systems substantially in the forms attached
hereto as Exhibits G-1 and G-2, respectively.
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(vi) Donrey and TAL shall have agreed upon the
Budget for the Partnership for the period commencing with the
Effective Time and ending on October 31, 1996.
(vii) Donrey and TAL shall have agreed upon the
insurance coverage amounts referred to in Section 3.5 hereof.
(viii) Each of Donrey and TAL shall have provided to
the other a copy of Exhibit B to the Partnership Agreement that
updates the adjusted tax basis information to the Effective Time.
(b) The obligations of Donrey to effect the transactions
contemplated hereby shall be further subject to the fulfillment of the
following additional conditions, any one or more of which may be waived by
Donrey:
(i) TAL shall have performed and complied in all
material respects with the agreements contained in this Agreement
required to be performed and complied with by it at or prior to the
Effective Time.
(ii) The representations and warranties of TAL set
forth in this Agreement shall be true and correct in all material
respects as of the Effective Time as if made at and as of the
Effective Time and Donrey shall have received a certificate to that
effect signed by an executive officer of TAL.
(iii) Donrey shall have received the necessary
consents under (a) the loan agreement, dated August 20, 1993 between
Donrey and NationsBank, N.A., as Agent (the "Loan Agreement"), and (b)
the Note Purchase Agreement dated as of December 15, 1993 between
Donrey, American General Life and Accident Insurance Company, the
Variable Annuity Life Insurance Company, Gulf Life Insurance Company,
Connecticut General Life Insurance Company, Life Insurance Company of
North American, The Minnesota Mutual Life Insurance Company, the
Northwestern Mutual Life Insurance Company, Northern Life Insurance
Company, and Northwestern National Life Insurance Company, in each
case on terms and conditions satisfactory to Donrey in its sole
discretion.
(c) The obligations of TAL to effect the transactions
contemplated hereby shall be further subject to the fulfillment of the
following additional conditions, any one or more of which may be waived by TAL:
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(i) Donrey shall have performed and complied in
all material respects with the agreements contained in this Agreement
required to be performed and complied with by it at or prior to the
Effective Time.
(ii) The representations and warranties of Donrey
set forth in this Agreement shall be true and correct in all material
respects as of the Effective Time as if made at and as of the
Effective Time and TAL shall have received a certificate to that
effect signed by an executive officer of Donrey.
(iii) TCA shall have received the necessary
consents under (a) the Credit Agreement dated July 21, 1995 among TCA,
the lenders party thereto, NationsBank of Texas, N.A., as
Administrative Agent and Managing Agent and Texas Commerce Bank,
National Association, as Managing Agent, (b) the Restated Credit
Agreement between TCA and NationsBank of Texas, N.A. dated September
26, 1995, (c) the Note Agreement dated September 27, 1989 between TCA
and The Prudential Insurance Company of America, and (d) the Note
Agreement dated June 23, 1995 among TCA, The Prudential Insurance
Company of America, Pruco Life Insurance Company, The Variable Annuity
Life Insurance Company, American General Life Insurance Company and
The Franklin Life Insurance Company, in each case on terms and
conditions satisfactory to TAL in its sole discretion.
Section 4.7 Additional Capital Contributions by Partners.
(a) (i) Any call for additional Capital Contributions must be
approved by the unanimous consent of the Partnership Committee. In
the event of such approval, the Partnership Committee shall notify the
Partners of the amount of additional Capital Contribution required
from each, determined in accordance with the relative amounts of their
Partnership Interest, and the date by which such additional Capital
Contribution shall be made to the Partnership. Such additional
Capital Contributions when made shall increase the Partner's Capital
Account.
(ii) In the event that either Partner fails to make the
required additional Capital Contribution under this Section 4.6, the
other Partner may at its sole option make such payment which shall be
treated as an additional Capital Contribution and shall increase its
own Capital Account in the manner set forth below. The non-defaulting
Partner shall have the right, in exchange for contributing the
defaulted capital to the Partnership, to adjust
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its Partnership Interest to reflect the contribution of the defaulted
amount in accordance with the provisions of Section 4.7 hereof. Any
such payment by the non-defaulting Partner shall render the rights of
the Partnership against the defaulting Partner set forth in Section
4.6(b) ineffective as to such nonpayment.
(b) The Partners agree that the prompt payment of Capital
Contributions hereunder is of the essence and that the failure to make such
payments as provided herein will cause substantial injury to the Partnership
and the other Partner and that the amount of damages caused by such injury will
be difficult to calculate. Accordingly, the Partners agree that in the event
that either Partner fails to pay any required Capital Contribution to the
Partnership promptly when due, the Partnership Committee shall give such
defaulting Partner written notice thereof, and if such defaulting Partner shall
fail to make such required payment in full within seven (7) days following the
mailing of such notice or such longer period as the Partnership Committee may
elect, the Partnership may commence legal proceedings against such defaulting
Partner to collect the due and unpaid payment of all amounts due as a Capital
Contribution and the payment of all costs and expenses of collection incurred
by the Partnership (including Legal Expenses).
Section 4.8 Adjustment of Partnership Interests Upon
Additional Capital Contributions. In the event that a Partner makes an
additional Capital Contribution pursuant to Section 4.6(a)(ii) or that TAL
makes an additional Capital Contribution pursuant to 4.8 hereof, the
Partnership Interests of TAL and Donrey shall be adjusted to reflect such
contribution. Such adjustment shall be achieved by (i) first, restating the
Capital Accounts of the Partners to reflect the Fair Market Value of the assets
of the Partnership, (ii) second, crediting to the Capital Accounts the amounts
contributed pursuant to the additional Capital Contributions, and (iii) third,
recomputing the Partnership Interests on the basis of the ratio of the Capital
Account balances to one another.
Section 4.9 Jonesboro System. In the event that TAL or any
affiliate thereof purchases the Jonesboro System prior to or after the
Effective Time, TAL shall contribute the assets related to the Jonesboro System
(the "Jonesboro Assets") to the capital of the Partnership on terms and
conditions to be agreed upon among TAL, Donrey and the Partnership. In the
event such parties are unable to agree on such terms and conditions, TAL or
such affiliate thereof shall have no obligation to make such contribution and
the Partnership shall have no obligation to accept such contribution.
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Section 4.10 Contribution of Tonkawa System.
(a) In the event that Donrey receives the consent of the local
franchising authority in Tonkawa, Oklahoma to transfer the Tonkawa System to
the Partnership (the "Tonkawa Consent") on or prior to the Effective Time,
Donrey shall contribute the assets related to the Tonkawa System (the "Tonkawa
Assets" to the capital of the Partnership as part of its initial capital
contribution in accordance with Section 4.2(a) hereof.
(b) In the event that Donrey receives the Tonkawa Consent subsequent
to the Effective Time, Donrey shall contribute the Tonkawa Assets to the
capital of the Partnership pursuant to Section 4.7 hereof; provided, however
that there shall be no adjustment to the Capital Account or Partnership
Interest of Donrey upon such contribution. In order to effect the contribution
to the Partnership of the Tonkawa System, Donrey and the Partnership shall
enter into a written agreement containing similar representations, warranties,
conditions, terms and indemnities to those set forth in this Agreement pursuant
to which Donrey shall contribute the Tonkawa System to the Partnership, free
and clear of all Liens.
Section 4.11 Withdrawals of Capital Accounts. Except for
Distributions contemplated by the provisions of Article VI hereof, no Partner
shall be entitled to withdraw any amount from its Capital Account prior to the
dissolution of the Partnership.
Section 4.12 Interest on Capital Accounts. No interest or
compensation shall be paid on or with respect to the Capital Account or Capital
Contributions of any of the Partners.
Section 4.13 Transferees. A permitted transferee of all or a
part of an interest in the Partnership will succeed to the Capital Account of
the transferor that is attributable to the transferred interest, as such
Capital Account existed at the effective date of such transfer.
ARTICLE V
PARTNERSHIP INTERESTS
Section 5.1 Partnership Interest. The Partnership Interests
of TAL and Donrey shall be 75% and 25%, respectively. The Partnership Interests
shall be
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subject to adjustment after the Effective Time in accordance with the terms of
this Agreement.
Section 5.2 Transfer of Partnership Interest.
(a) Except as expressly provided by this Agreement, no
Partner shall, directly or indirectly, sell, assign, transfer, exchange,
mortgage, pledge, grant a security interest in, or otherwise dispose of or
encumber its interest in the Partnership or any part thereof without the prior
written consent of the other Partner, the consent of which may be granted or
denied in its sole and absolute discretion. Any purported transfer of any
interest of a Partner in the Partnership or any part thereof not in compliance
with this Section 5.2 shall be void and of no force or effect, and the
transferring Partner shall be liable to the other Partner and the Partnership
for all liabilities, obligations, damages, losses, costs and expenses
(including reasonable attorneys' fees and court costs) arising as a result of
such noncomplying transfer. Notwithstanding the foregoing, (i) either Partner
may make a bona fide pledge of its Partnership Interest to any financial
institution or institutions as security for the extension of financing to such
Partner by such financial institution or institutions, (ii) Donrey shall be
entitled to transfer its Partnership Interest to Stephens Group, Inc.
("Stephens Group") or any of its affiliates and (iii) TAL shall be entitled to
transfer its Partnership Interest to TCA or any of its affiliates; provided,
however, that no such transfer by a Partner of its Partnership Interest shall
relieve such Partner of its obligations under Article VIII hereunder.
(b) From January 5, 2004 to the termination of the
Partnership in accordance with the terms of this Agreement (the "Call Period"),
TAL shall have the right to purchase (the "Call") from Donrey and Donrey shall
be required to sell to TAL all but not less than all of Donrey's Partnership
Interest. If TAL elects to exercise the Call it shall send written notice
thereof in the manner set forth in Section 11.1 hereof (the date of such notice
being hereafter referred to as the "Call Notice Date") to Donrey during the
period commencing January 5, 2004 and expiring upon the termination of the
Partnership in accordance with the terms of this Agreement. Subject to the next
succeeding sentence, the purchase price for Donrey's Partnership Interest
pursuant to this Section 5.2(b) shall be equal to the amount derived from
multiplying (i) Donrey's Partnership Interest on the Call Notice Date by (ii)
the Fair Market Value of the Partnership on the Call Notice Date. The closing
of the purchase shall take place at the principal offices of the Partnership
not later than the 30th day following the determination of the purchase price
for Donrey's Partnership Interest pursuant to Section 5.3 hereof, subject to
applicable law.
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(c) From January 5, 2004 to the termination of the
Partnership in accordance with the terms of this Agreement (the "Put Period"),
Donrey shall have the right to sell to TAL and TAL shall be required to
purchase (the "Put) from Donrey all but not less than all of Donrey's
Partnership Interest. If Donrey elects to exercise the Put it shall send
written notice thereof in the manner set forth in Section 11.1 hereof (the date
of such notice being hereafter referred to as the "Put Notice Date") to TAL
during the period commencing January 5, 2004 and expiring upon the termination
of the Partnership in accordance with the terms of this Agreement. The
purchase price for Donrey's Partnership Interest pursuant to this Section
5.2(c) shall be equal to the amount derived from multiplying (i) Donrey's
Partnership Interest on the Put Notice Date by (ii) the Fair Market Value of
the Partnership on the Put Notice Date. The closing of the purchase shall take
place at the principal offices of the Partnership not later than the 30th day
following the determination of the purchase price for Donrey's Partnership
Interest pursuant to Section 5.3 hereof, subject to applicable law.
Section 5.3 Fair Market Value Determination. The Partners
shall, within ten business days of a notice under Section 5.2 of this Agreement
requiring a determination of the Fair Market Value, try by mutual agreement
among themselves to determine the Fair Market Value of the Partnership. If the
Partners fail to agree upon the Fair Market Value within such ten business
days, then the Partners shall, within three business days, by mutual agreement
select a nationally recognized investment banking firm (the "Investment
Advisor") to evaluate the Partnership assets and to determine in good faith
within 60 days of the engagement of the Investment Advisor the Fair Market
Value of the Partnership. If the Partners fail to agree upon an Investment
Advisor, within 10 business days each Partner shall select a nationally
recognized investment banking firm and such appointees shall be instructed to
agree within five business days of their selection on a nationally recognized
investment banking firm who shall be the Investment Advisor for purposes of
this Agreement. The Partners shall bear equally the fees of the Investment
Advisor. The Investment Advisor shall be instructed to deliver written notice
to the Partners immediately upon its determination of such Fair Market Value,
and such determination shall be final and binding on the Partners. In
determining Fair Market Value, the Investment Advisor shall include in its
assessment of such Fair Market Value the value of any programming agreements,
retransmission consents, must-carry agreements, or other agreements held by TCA
Management Co. for the benefit of the Systems, as if such agreements were held
directly by the Partnership.
Section 5.4 Assignment of Interest in Distributions.
Notwithstanding the provisions of Section 5.2 hereof, and except as required by
law, a Partner may
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assign all or a portion of its interest in its right to receive Distributions
to any entity or person without the consent of the other Partner. An assignee
of an interest in distributions does not become an additional or a substituted
Partner and shall have no right to require any information or account of the
Partnership's transactions, to inspect the Partnership books, or to vote on any
of the matters as to which a Partner would be entitled to vote under this
Agreement.
ARTICLE VI
PROFITS AND LOSSES AND DISTRIBUTIONS
Section 6.1 Allocation of Profits, Gains and Losses.
Commencing at the Effective Time and continuing until the termination of the
Partnership, all Profits and Losses for each Fiscal Year, shall be allocated to
the Capital Accounts of the Partners as provided in Sections 6.1(a) and (b):
(a) Profits and Losses. After any special allocations
required to be made by Section 6.1(b) have been made for each Fiscal Year, all
remaining Profits or Losses from the operations of the Partnership for each
Fiscal Year shall be allocated between the Partners in proportion to their
respective Partnership Interests.
(b) Special Rules. Notwithstanding the general allocation
rules set forth in Section 6.1(a), the following special allocation rules shall
apply under the circumstances described.
(i) Minimum Gain Chargeback. If there is a net
decrease in Minimum Gain during a Fiscal Year, each Partner will be
allocated items of Partnership income and gain for such year (and, if
necessary, for subsequent years) equal to that Partner's share of the
net decrease in Partnership Minimum Gain (within the meaning of
Treasury Regulations, Section 1.704 -2(g)(2)). This provision is
intended to comply with the Minimum Gain Chargeback requirements of
Treasury Regulations, Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions shall be allocated to the Partners who bear the
economic risk of loss for a Partner Nonrecourse Debt that gave rise to
those deductions in accordance with Treasury Regulations, Section
1.704-(2)(i)(1).
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(iii) Partner Nonrecourse Debt Minimum Gain
Chargeback. If there is a net decrease during a Fiscal Year in the
Partner Nonrecourse Debt Minimum Gain during any Fiscal Year any
Partner who has a share of the Partner Nonrecourse Debt as provided in
Treasury Regulations, Section 1.704-2(i)(5) shall be allocated items
of Partnership income and gain for such Fiscal Year in such amounts
and in such manner as required under Treasury Regulations, Section
1.704-2(i)(4). This provision is intended to comply with the minimum
gain chargeback requirement of Treasury Regulations, Section
1.702(i)(4) and shall be interpreted consistently therewith.
(iv) Limited Effect and Interpretation. The
special rules set forth in Sections 6.1(b)(i), (ii) and (iii) (the
"Regulatory Allocations") shall be applied only to the extent required
by applicable Treasury Regulations for the resulting allocations
provided for in this Section 6.1, taking into account such Regulatory
Allocations, to be respected for federal income tax purposes. The
Regulatory Allocations are intended to comply with the requirements of
Treasury Regulations, Sections 1.704-1(b), 1.704-2 and 1-752-1 through
1.752-5 and shall be interpreted and applied consistently therewith.
(v) Curative Allocations. The Regulatory
Allocations may not be consistent with the manner in which the
Partners intend to divide the Partnership Profits, Losses and similar
items. Accordingly, Profits, Losses and other items will be
reallocated among the Partners in a manner consistent with Treasury
Regulations, Sections 1.704-1(b) and 1.704-2 so as to negate as
rapidly as possible any deviation (after taking into account any
expected future Regulatory Allocations pursuant to Sections 6.1(b)(i)
and 6.1(b)(iii)), from the manner in which Partnership Profits,
Losses and other items are intended to be allocated among the Partners
pursuant to Section 6.1(a) that is caused by the Regulatory
Allocations.
(vi) Change in Regulations. If the Treasury
Regulations incorporating the Regulatory Allocations are hereafter
changed or if new Treasury Regulations are hereafter adopted, and such
changed or new Treasury Regulations, in the opinion of independent tax
counsel for the Partnership, make it necessary to revise the
Regulatory Allocations or provide further special allocation rules in
order to avoid a significant risk that a material portion of any
allocation set forth in this Article VI would not be respected for
federal income tax purposes, the Partners shall make such reasonable
amendments to this Agreement as, in the opinion of such counsel, are
necessary or desirable, taking into account the interests of the
Partners
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as a whole and all other relevant factors, to avoid or reduce
significantly such risk to the extent possible without materially
changing the amounts allocable and distributable to any Partner
pursuant to this Agreement.
(vii) Change in Partners' Partnership Interests.
If there is a change in any Partner's share of the Profits, Losses or
other items of the Partnership during any Fiscal Year, allocations
among the Partners shall be made in accordance with their interests in
the Partnership from time to time during such Fiscal Year in
accordance with Code section 706, using the closing-of-the-books
method, except that Depreciation shall be deemed to accrue ratably on
a daily basis over the entire Fiscal Year during which the
corresponding asset is owned by the Partnership if such asset is
placed in service prior to or during the Fiscal Year.
(c) Tax Allocations.
(i) In General. Except as set forth in Section
6.1(c)(ii), allocations for tax purposes of items of income,
gain, loss, deduction, and credits, and basis therefor, shall
be made in the same manner as allocations for Capital Accounts
purposes set forth in Sections 6.1(a) and (b). Allocations
pursuant to this Section 6.1(c) are solely for purposes of
federal, state and local income taxes and shall not affect or
in any way be taken into account in computing, any Partner's
Capital Account or share of Profits, Losses, other items or
distributions pursuant to any provision of this Agreement.
(ii) Special Rules.
(I) Elimination of Book/Tax Disparities.
Items of depreciation, amortization, and gain or loss with
respect to any contributed property, or with respect to
revalued property where Partnership property is revalued
pursuant to Treasury Regulations, Section
1.704-1(b)(2)(iv)(f), computed for tax purposes, shall be
allocated to the Partners under the "traditional method with
curative allocations" as provided in Treasury Regulations,
Section 1.704-3(c); provided, that to the extent permitted by
Treasury Regulations, Section 1.704-3(c), such curative
allocations shall (i) only be made from (A) items of
Partnership depreciation, amortization and other cost recovery
deductions, computed for tax purposes, and (B) items of
income, gain or loss, computed for tax purposes, recognized by
the
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Partnership upon disposition of the contributed or revalued property,
and (ii) in addition to being made (from the items specified in clause
(i) above) to the extent necessary to offset the effect of the
"ceiling rule" for a current taxable year shall also be made to the
extent necessary to offset the effect of the ceiling rule for prior
taxable years in accordance with the second sentence of Treasury
Regulations, Section 1.704-3(c)(3)(ii) and Treasury Regulations,
Section 1.704-3(c)(3)(iii)(B). This provision is intended to comply
with the requirements of Code section 704(c) and Treasury Regulations,
Sections 1.704-1(b)(iv)(2)(d)(3) and 1.704-3, and shall be interpreted
consistently therewith.
(II) Allocation of Items Among Partners.
Except as otherwise provided in Section 6.1(c)(ii)(I), each
item of income, gain, loss and deduction and all other items
governed by Code section 702(a) shall be allocated among the
Partners in proportion to the allocation of Profits, Losses
and other items to the Partners hereunder, provided that any
gain recognized from any disposition of a Partnership asset
that is treated as ordinary income because it is attributable
to the recapture of any depreciation or amortization shall be
allocated among the Partners in the same ratio as the prior
allocations of Profits, Losses or other items that included
such depreciation or amortization, but not in excess of the
gain otherwise allocable to each Partner.
(III) Tax Credits. Any tax credits shall
be allocated among the Partners in accordance with Treasury
Regulations, Section 1.704-1(b)(4)(ii), unless the applicable
Code provision shall otherwise require.
(d) Conformity of Reporting. The Partners are aware of the
income tax consequences of the allocations made by Section 6.1(c) and hereby
agree to be bound by the provisions of Section 6.1(c) in reporting their shares
of Partnership profits, gains, income, losses, deductions, credits and other
items for income tax purposes.
(e) Restoration of Negative Capital Accounts. Except as
required in Section 9.3 hereof or as may be required by law, or in respect of
any negative balance resulting from a distribution which is in contravention of
this Agreement,
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no Partner with a negative balance in its Capital Account shall have any
obligation to the Partnership or to the other Partner to restore such negative
balance.
Section 6.2 Allocation to Transferred Partnership Interests.
Subject to Section 5.2, income, gains, losses, deductions and credits allocated
to an interest in the Partnership assigned or issued during a Fiscal Year shall
be allocated to each entity or person who was the holder of the Interest in the
Partnership during an interim period in respect of which the books of the
Partnership shall be closed, or in any other manner permitted by the Code and
selected by the Partnership Committee. The effective date of the assignment
shall be (a) in the case of a voluntary assignment, the actual date the
assignment is recorded on the books of the Partnership, or (b) in the case of
involuntary assignment, the date of the operative event.
Section 6.3 Distributions.
(a) (i) In respect of each month the Partnership shall
distribute to the Partners, an amount equal to 100% of the estimated
Free Cash Flow for such month as set forth in the Budget, such
Distribution to be made within ten business days of the end of such
month.
(ii) In respect of each fiscal quarter the
Partnership will distribute to the Partners 100% of the quarterly Free
Cash Flow, if any, in excess of the monthly Distributions made during
such fiscal quarter pursuant to clause (i) above or if such monthly
Distribution(s) were in excess of the actual Free Cash Flow for such
quarter subsequent monthly Distribution(s) will be appropriately
reduced in an amount to be agreed upon by the Partners.
(iii) Except as provided in Section 9.2,
Distributions made pursuant to this Section 6.3 shall be made to the
Partners ratably in proportion to their respective Partnership
Interests.
(b) Notwithstanding Section 6.3(a)(iii), in the event the
Partnership sells, exchanges, transfers, or in any way disposes of, any of the
Donrey Assets in a manner which shall have a Donrey Adverse Tax Consequence,
the Partnership shall distribute Free Cash Flow to Donrey in an amount equal to
the amount of such adverse tax consequence caused by such disposition of
Partnership assets as soon as possible before any distributions are made to any
other Partner as provided in Section 6.3(a)(iii).
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(c) Any other provision of this Agreement to the contrary
notwithstanding, no Distribution shall be made which would render the
Partnership insolvent or which is prohibited by the terms of any Partnership
indebtedness.
ARTICLE VII
TAX MATTERS AND REPORTS
Section 7.1 Filing of Tax Returns. The Partnership
Committee, at the expense of the Partnership, shall prepare and file, or cause
the accountants of the Partnership to prepare and file, a federal information
tax return in compliance with Section 6031 of the Code and any required state
and local income and other tax and information returns for each tax year of the
Partnership. TAL shall act as the Tax Matters Partner of the Partnership as
that term is defined in Section 6231(a)(7) of the Code. The Tax Matters
Partner shall promptly advise the other Partner of audits or other actions by
the Internal Revenue Service. The Tax Matters Partner shall consult with and
carry out the decisions of the Partnership Committee regarding all tax matters.
The Tax Matters Partner may not contest, settle or otherwise compromise
assertions made by the auditing agent or other representative of the Internal
Revenue Service without the unanimous approval of the Partnership Committee.
Section 7.2 Tax and Financial Reports to Current and Former
Partners. Within the due date (including extensions thereof) of the
Partnership information tax returns, the Partnership shall prepare and mail, or
cause its accountants to prepare and mail, to each Partner a report setting
forth in sufficient detail such information as is required to be furnished to
Partners by law (e.g., Section 6031(b) of the Code and regulations thereunder)
and as shall enable such Partner to prepare its federal, state and local income
tax or informational returns in accordance with the laws, rules and regulations
then prevailing. Annual audited financial statements will be distributed to
the Partners within 75 days after the end of each Fiscal Year. The Partners
will receive unaudited quarterly financial statements within forty-five (45)
days after the end of the first three quarters and monthly operating reports
within ten (10) days after the end of each month.
Section 7.3 Books and Records; Independent Audit. Complete
books and records accurately reflecting the accounts, business, transactions,
Capital Accounts and Partners of the Partnership shall be maintained and kept
by the Partnership Committee at the Partnership's principal place of business.
The books and records of the Partnership shall be open at reasonable business
hours on prior
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appointment for inspection and copying by the Partners. The books and records
of the Partnership shall be audited by certified public accountants selected in
accordance with Section 3.4.
Section 7.4 Method of Accounting. The books and accounts of
the Partnership shall be maintained both for financial reporting purposes and
for income tax purposes. The financial books of the Partnership shall be kept
on the accrual basis of accounting in accordance with generally accepted
accounting principles, consistently applied. Notwithstanding the foregoing,
the Capital Accounts of the Partners shall be determined and maintained in
accordance with the provisions of Section 4.1. The books and records of the
Partnership shall be open to inspection, examination and audit by each Partner.
Section 7.5 Withholding. Notwithstanding any other provision
of this Agreement, the Partnership Committee is authorized to take any action
that it determines to be necessary or appropriate to cause the Partnership to
comply with any federal, state and local withholding requirement with respect
to any allocation, payment or Distribution by the Partnership to any Partner or
other entity or person. All amounts so withheld shall be treated as
Distributions to the Partners. If any such withholding requirement with
respect to any Partner exceeds the amount distributable to such Partner under
this Agreement, or if any such withholding requirement was not satisfied with
respect to any amount previously allocated or distributed to such Partner, such
Partner and any successor or assignee with respect to such Partner's interest
in the Partnership hereby indemnifies and agrees to hold harmless the Partners
and the Partnership for such excess amount or such withholding requirement, as
the case may be.
Section 7.6 Tax Elections. Upon the request of any Partner,
the Partnership will make the election under Section 754 of the Code in
accordance with applicable Treasury Regulations thereunder for the first Fiscal
Year in which such election could apply. In addition to the foregoing, the
Partnership Committee shall, in its sole discretion, determine whether to make
any other available tax elections and select any other appropriate tax
accounting methods and conventions for any purpose under this Agreement.
ARTICLE VIII
INDEMNIFICATION AND EXCULPATION
Section 8.1 Indemnification of the Partners.
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(a) The Partnership shall indemnify and hold harmless the
Partners and any partner, officer, employee, agent or affiliate of a Partner
and any employee or agent of the Partnership and/or the legal representatives
of any of them, and each other person who may incur liability as a partner or
otherwise in connection with the management of the Partnership or any
corporation or other entity in which the Partnership has an investment, against
all liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel fees)
reasonably incurred by him or it in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, in which he
or it may be involved or with which he or it may be threatened, while a Partner
or serving in such other capacity or thereafter, by reason of its being or
having been a Partner, or by serving in such other capacity, except with
respect to any matter which constitutes willful misconduct, bad faith, gross
negligence or reckless disregard of the duties of his office, or criminal
intent. The Partnership shall have the right to approve any counsel selected
by any indemnitee and to approve the terms of any proposed settlement. The
Partnership shall advance to a Partner and any partner, officer, employee,
agent or affiliate of a Partner or the Partnership reasonable attorneys' fees
and other costs and expenses incurred in connection with the defense of any
such action or proceeding upon receipt of an undertaking by or on behalf of the
party receiving such advance to repay such advance if it shall ultimately be
determined that the party receiving such advance is not entitled to
indemnification under this Agreement. Each Partner hereby agrees, and each
partner, officer, employee, agent or affiliate of the Partner or the
Partnership shall agree in writing prior to any such advancement, that in the
event he or it receives any such advance, such indemnified party shall
reimburse the Partnership for such fees, costs and expenses to the extent that
it shall be determined that he or it was not entitled to indemnification under
this Section 8.1(a). The rights accruing to a Partner and each partner,
officer, employee, agent or affiliate of a Partner or the Partnership under
this Section 8.1(a) shall not exclude any other right to which it or they may
be lawfully entitled; provided, that any right of indemnity or reimbursement
granted in this Section 8.1(a) or to which any indemnified party may be
otherwise entitled may only be satisfied out of the assets of the Partnership
and no withdrawn Partner shall be personally liable with respect to any such
claim for indemnity or reimbursement. Notwithstanding any of the foregoing to
the contrary, the provisions of this Section 8.1(a) shall not be construed so
as to provide for the indemnification of a Partner or any partner, officer,
employee, agent or affiliate of a Partner or the Partnership for any liability
to the extent (but only to the extent) that such indemnification would be in
violation of applicable law or such liability may not be waived, modified or
limited under applicable law, but shall be
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construed so as to effectuate the provisions of this Section 8.1(a) to the
fullest extent permitted by law.
(b) The Partnership shall indemnify and hold harmless Donrey
and any partner, officer, employee, agent or affiliate of Donrey from and
against all Losses arising out of or resulting from the Donrey Liabilities.
(c) The Partnership shall indemnify and hold harmless Donrey
and any partner, officer, employee, agent or affiliate of Donrey from and
against all Losses related to or arising out of Donrey's cancellation of the
Donrey Programming Agreements pursuant to Section 4.5 hereof.
(d) The Partnership shall indemnify and hold harmless TAL and
any partner, officer, employee, agent or affiliate of TAL from and against all
Losses arising out of or resulting from the TAL Liabilities.
Section 8.2 Indemnification of the Partnership.
(a) Donrey shall indemnify and hold the Partnership harmless
from and against, and shall reimburse the same for, all Losses which may be
claimed or assessed against it, or to which it may be subject, in connection
with any and all claims, suits or asserted Losses which arise from or are
related to the inaccuracy or incompleteness of any representation or warranty
of Donrey contained in or made pursuant to this Agreement.
(b) Donrey shall indemnify and hold the Partnership harmless
from and against, and shall reimburse the same for all Losses arising out of or
relating to the ownership and operation of the Donrey Systems on or prior to
the Effective Time.
(c) TAL shall indemnify and hold the Partnership harmless
from and against, and shall reimburse the same for, all Losses which may be
claimed or assessed against it, or to which it may be subject, in connection
with any and all claims, suits or asserted Losses which arise from or are
related to the inaccuracy or incompleteness of any representation or warranty
of TAL contained in or made pursuant to this Agreement.
(d) TAL shall indemnify and hold the Partnership harmless
from and against, and shall reimburse the same for all Losses arising out of or
relating to the ownership and operation of the TAL Systems on or prior to the
Effective Time.
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(e) The party seeking indemnification under Sections 8.2 and
8.1 (the "Indemnified Party") agrees to give the party that would be obligated
to provide such indemnification (an "Indemnifying Party") prompt written notice
of any claim, assertion, event or proceeding by or in respect of a third party
of which it has knowledge concerning any liability or damage as to which it may
request indemnification hereunder. With respect to claims for indemnification
brought pursuant to this Section 8.2 and Section 8.1, the Indemnifying Party
shall have the right to direct, through counsel of its own choosing, the
defense or settlement of any such claim or proceeding at its own expense, which
counsel shall be reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party elects to assume the defense of any such claim or proceeding
pursuant to this Section 8.2 or Section 8.1, the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party incurred in connection with such participation shall be paid by the
Indemnified Party; provided, however, that the Indemnifying Party shall be
responsible for such expenses if the Indemnified Party reasonably concludes
that counsel selected by the Indemnifying Party has a conflict of interest.
The Indemnified Party shall cooperate with the Indemnifying Party in the
defense or settlement of any such claim, assertion, event or proceeding. If
the Indemnifying Party elects not to compromise or defend such claim or
proceeding or contests its obligation to indemnify under this Section 8.2,
Section 8.1(b) or Section 8.1(c), the Indemnified Party hereof may pay,
compromise or defend such claim or proceeding at the Indemnifying Party's
expense. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnified Party may settle or compromise any claim over the objection of the
other; provided, however, that consent to settlement or compromise shall not be
unreasonably delayed or withheld.
Section 8.3 Survival of Representations. All representations
and warranties contained in this Agreement or in any Schedule or Exhibit
delivered pursuant hereto shall terminate on the second anniversary of the
Effective Time; provided, however, that the representations and warranties set
forth in Sections 10.1(a), 10.1(b), 10.1(c), and 10.1(d) and 10.2(a), 10.2(b).
10.2(c) and 10.2(d) shall survive in perpetuity. Notwithstanding anything to
the contrary contained herein, all representations and warranties made by the
Partners in this Agreement or in any Schedule or Exhibit delivered pursuant
hereto, and the liability of any party with respect thereto, shall not
terminate with respect to any claim, whether or not fixed as to liability or
liquidated as to amount, with respect to which such party has been given
written notice stating the nature of the claim prior to the date on which any
such representation and warranty expires.
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Section 8.4 Exculpation. Any Partner and any partner,
officer, employee, agent or affiliate of a Partner or the Partnership shall not
be liable to any Partner or the Partnership for mistakes of judgment or for
action or inaction which such Partner or any such partner, officer, employee,
agent or affiliate of such Partner or the Partnership reasonably believed to be
in the best interests of the Partnership unless such action or inaction
constitutes willful misconduct, bad faith, gross negligence or reckless
disregard of his or its duties, or criminal intent. Each Partner may (on its
own behalf or on the behalf of any partner, officer, employee, agent or
affiliate thereof) consult with counsel, accountants and other experts in
respect of the Partnership's affairs and such Partner (or such partner,
officer, employee, agent or affiliate thereof) shall be fully protected and
justified in any action or inaction which is taken in accordance with the
advice or opinion of such counsel, accountants or other experts, provided that
they shall have been selected with reasonable care. Notwithstanding any of the
foregoing to the contrary, the provisions of this Section 8.4 shall not be
construed so as to relieve (or attempt to relieve) a Partner and any partner,
officer, employee, agent or affiliate of a Partner or the Partnership of any
liability, to the extent (but only to the extent) that such liability may not
be waived, modified or limited under applicable law, but shall be construed so
as to effectuate the provisions of this Section 8.4 to the fullest extent
permitted by law.
ARTICLE IX
TERMINATION AND DISSOLUTION
Section 9.1 Events of Dissolution. The Partnership shall
dissolve upon (i) bankruptcy, insolvency or appointment of a trustee or
receiver to manage the affairs of a Partner, (ii) dissolution being required by
operation of law (including the occurrence of an event specified under the laws
of Delaware as one effecting a dissolution) or judicial decree, (iii) the
unanimous consent of the Partners or (iv) the sale, transfer or other
disposition of substantially all of the assets of the Partnership. Without the
unanimous consent of the Partners, each Partner agrees not to voluntarily
withdraw as a Partner and if any of such Partners effects such withdrawal in
violation of this Agreement, the Partnership may recover damages for breach of
this Agreement. Upon dissolution of the Partnership, the Partnership Committee
shall wind up the affairs of the Partnership and, subject to the provisions of
Section 9.2, use its best efforts to reduce to cash or cash equivalents such
assets of the Partnership as it deems advisable, discharge the liabilities of
the Partnership and terminate the Partnership as a partnership.
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Section 9.2 Order of Dissolution. In settling accounts after
dissolution, the assets of the Partnership shall be applied and distributed as
expeditiously as possible in the following order of priority:
(a) to the payment of the costs of winding up the affairs of,
liquidating and dissolving the Partnership, including, without limitation,
expenses of selling assets of the Partnership, discharging the liabilities of
the Partnership, distributing the assets of the Partnership and terminating the
Partnership as a partnership in accordance with Section 9.1 hereof;
(b) to creditors, including a Partner to the extent of any
outstanding loan or advance;
(c) to the establishment of reasonable reserves to provide
for any contingent or unforeseen liabilities or obligations to creditors; and
(d) to those Partners with positive Capital Account balances
(in proportion to such Capital Account balances).
Section 9.3 Capital Account Deficits. If a Partner has a
deficit balance in its Capital Account following the liquidation of the
Partnership or its interest therein, as determined after taking into account
all Capital Account adjustments made for the taxable year of the Partnership
during which such liquidation occurs, such Partner shall be unconditionally
obligated to restore the amount of such deficit balance to the Partnership by
the end of such taxable year (or, if later, within 90 days after the date of
such liquidation). The amount so restored shall be paid to creditors of the
Partnership or distributed to other Partners in accordance with their positive
capital account balances pursuant to Section 9.2.
Section 9.4 Timing Requirements. In the event the
Partnership is "liquidated" within the meaning of Treasury Regulations, Section
1.704-1(b)(2)(ii) (g) distributions shall be made pursuant to Section 9.2 to
the Partners who have positive Capital Account balances in compliance with
Treasury Regulations, Section 1.704-1(b)(2)(ii)(b)(2). If all Partners agree
in their sole discretion, a portion of the distribution that would otherwise be
made pursuant to the preceding sentence may be:
(a) distributed 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
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Partnership arising out of or in connection with the Partnership. The assets
of any such trust shall be distributed to the Partners from time to time, in
the reasonable discretion of the trustee, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to this Agreement; or
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the Partners as soon as practicable
and the other requirements of Treasury Regulations, Section
1.704-1(b)(2)(ii)(b) shall be met.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
Section 10.1 Representations and Warranties of Donrey.
Except as set forth on the Donrey Disclosure Schedules, Donrey hereby
represents and warrants to TAL as follows, and acknowledges that TAL is relying
on such representations and warranties in entering into this Agreement:
(a) Organization. Donrey is a partnership duly formed and
validly existing under the laws of Nevada, and has the partnership power and
authority to own and operate the Donrey Systems and to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
(b) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on Donrey's behalf.
(c) Execution and Delivery. This Agreement and any other
agreements or instruments executed and delivered pursuant hereto to which
Donrey is a party have been (or, when executed and delivered, will be) duly
executed and delivered by, and constitute (or, when executed and delivered,
will constitute) legal, valid and binding obligations of it enforceable against
Donrey in accordance with their terms, subject as to enforcement to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application, both at law and in equity, affecting the rights of creditors
generally.
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(d) No Violations. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) violate, conflict with or result in any breach of any provision of
Donrey's partnership agreement, (ii) violate, conflict with, result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, lease, contract, agreement or other instrument or
commitment or obligation to which Donrey or any of its properties may be bound
or affected or to which it is a party or is bound or result in the creation of
any Lien upon any of the properties included in the Donrey Assets or (iii)
violate any order, writ, injunction, decree, judgment, ruling, law, notice of
violation, rule or regulation of any court, public body or authority or any
other restriction of any kind or character, applicable to Donrey or any of the
Donrey Assets.
(e) Consents and Approvals. Except as set forth on Schedule
10.1(e) hereto, there is no requirement applicable to Donrey to make any filing
with, or to obtain any permit, authorization or consent or approval of, any
governmental or regulatory authority as a condition to the lawful consummation
of the transactions contemplated hereby.
(f) Title to Properties; Encumbrances.
(i) Schedule 10.1(f)(i) contains descriptions of all
material items of tangible personal property and real property
included in the Donrey Assets, which comprise all material items of
tangible personal property and real property used by Donrey to operate
the Donrey Systems. Except as described in the following sentence,
Donrey has good, valid, and marketable title to (or in the case of
leased assets, a valid leasehold interest in) all of the property
included in the Donrey Assets and validly holds all necessary state,
local and federal authorizations, including FCC licenses or permits,
and local franchises required to operate the Donrey Systems in the
manner in which they are currently being operated and the issuance of
such authorizations are no longer subject to administrative or
judicial review. None of such properties or assets is subject to any
Lien of any kind (whether absolute, accrued, contingent or otherwise),
except (a) as set forth in Schedule 10.1(f)(i) hereto, and (b) minor
imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of the
property or assets subject thereto and do not impair the operation of
the Donrey Systems. When considered as a whole, the Donrey Assets are
in
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good working condition. All items of cable plant and headend
equipment included in the Donrey Assets (a) have been maintained in a
manner consistent with generally accepted standards of good
engineering practice and (b) will permit the Donrey Systems to operate
in all material respects in accordance with the terms of the Donrey
Franchises and Licenses.
(ii) Schedule 10.1(f)(ii) sets forth a true and
complete list of all of the Donrey Franchises and Licenses. Each of
the Donrey Franchises and Licenses listed on Schedule 10.1(f)(ii) is
valid and in full force and effect. No event has occurred with
respect to any of the authorizations which permits, or after notice or
lapse of time would permit, revocation or termination thereof or would
result in any other material impairment of the rights of the holder of
such authorizations that would have a material adverse effect on the
business of the holder of such authorization. Donrey has filed as
required by the appropriate franchising authorities all appropriate
requests for renewal under the Communications Act within 30 to 36
months prior to the expiration of each of the Donrey Franchises and
Licenses, with respect to the Donrey Franchises and Licenses. Except
as disclosed in Schedule 10.1(f)(ii) hereto, each of the Donrey
Systems is currently in compliance in all material respects with all
of the Donrey Franchises and Licenses. No party holding any such
authorization has any knowledge that any of its authorizations listed
on Schedule 10.1(f)(ii) will not be renewed in the ordinary course or,
where applicable, the facilities regulated by such authorization will
not be constructed and put into commercial service within the
applicable time period.
(g) Financial Information. Donrey has delivered to TAL an
unaudited balance sheet of the Donrey Systems as of December 31, 1994 and
December 31, 1995 and unaudited statements of operations of the Donrey Systems
for the years ended December 31, 1994 and December 31, 1995. The statements of
operations and the balance sheet were prepared in accordance with generally
accepted accounting principles, consistent with past practice and present
fairly the results of operations and financial condition of the Donrey Systems
as of and for the periods indicated.
(h) No Adverse Change. Since September 30, 1995, (i) there
has not been any material adverse change in the Donrey Assets or in the
financial condition or operation of the Donrey Systems, and (ii) the Donrey
Assets and the financial condition and operations of the Donrey Systems have
not been materially and
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adversely affected as a result of any fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or otherwise.
(i) Litigation. Except as set forth on Schedule 10.1(i)
hereto, there is no suit, action, charge, claim, inquiry, investigation or
proceeding pending or, to the best knowledge of Donrey, threatened against or
affecting the Donrey Systems or the ability of Donrey to perform its
obligations under this Agreement, nor, to the best knowledge of Donrey, is
there any valid basis for any such suit, action, charge, claim, inquiry,
investigation or proceeding, nor is there any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding affecting the Donrey Systems.
(j) Compliance with Legal Requirements. Donrey owns and
operates, and has owned and operated, its properties and assets, and carries on
and conducts, and has carried on and conducted, its business in material
compliance with all federal, foreign, state or local laws, statutes,
ordinances, rules or regulations (including the Communications Act, the
Copyright Act and the Cable Act and the rules and regulations promulgated
thereunder) or any court or administrative order or process.
(k) Environmental Matters.
(i) Donrey is in compliance in all material respects
with all applicable Environmental Laws applicable to the Donrey
Systems. To the best knowledge of Donrey, there are no circumstances
that may prevent or interfere with compliance with such Environmental
Laws in all material respects in the future. Donrey has not received
any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that
Donrey is not in full compliance with Environmental Laws applicable to
the Donrey Systems. All material permits and other governmental
authorizations applicable to the Donrey Systems currently held by
Donrey pursuant to the Environmental Laws are identified in Schedule
10.1(k)(i).
(ii) Except as set forth on Schedule 10.1(k)(ii)
hereto, there is no Environmental Claim pending or threatened against
Donrey with respect to the Donrey Systems or, to the best knowledge of
Donrey, against any person or entity whose liability for any
Environmental Claims Donrey has or may have retained or assumed either
contractually or by operation of law.
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(iii) Except as set forth on Schedule 10.1(k)(iii)
hereto, to the best knowledge of Donrey, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or
disposal of any Material of Environmental Concern, that could form the
basis of any Environmental Claim against Donrey with respect to the
Donrey Systems or against any person or entity whose liability for any
Environmental Claim Donrey has or may have retained or assumed either
contractually or by operation of law.
(iv) Without in any way limiting the generality of
the foregoing, (a) to the best knowledge of Donrey, all on-site and
off-site locations where Donrey has stored or disposed Materials of
Environmental Concern in connection with the Donrey Systems are
identified in Schedule 10.1(k)(iv), (b) no underground storage tanks
are located on property owned or leased by Donrey with respect to the
Donrey Systems, (c) to the best knowledge of Donrey, except as set
forth on Schedule 10.1(k)(iv), there is no asbestos contained in or
forming part of any building, building component, structure or office
space owned or leased by Donrey with respect to the Donrey Systems in
violation of any applicable Environmental Laws, and (d) to the best
knowledge of Donrey, except as set forth on Schedule 10.1(k)(iv), no
polychlorinated biphenyls (PCBs) are used or stored at any property
owned or leased by Donrey with respect to the Donrey Systems in
violation of any applicable Environmental Laws.
(l) Donrey Assets Necessary to Donrey Systems. The Donrey
Assets include all rights, properties, leases, licenses, permits, contracts and
equipment and other assets necessary to permit the Partnership to operate the
Donrey Systems as presently operated, and other than the Donrey Assets being
transferred to the Partnership at the Effective Time and the Donrey Excluded
Assets, there are no other assets or properties owned by Donrey or any
affiliate, stockholder or third party which are reasonably necessary to operate
the Donrey Systems as presently operated.
(m) Taxes. Donrey has timely filed or caused to be filed, or
will file or cause to be filed, all federal, state, local and foreign tax
returns required to be filed by it with respect to or which include the Donrey
Systems on or prior to the Effective Time (all such returns being true correct
and complete) and has duly paid all Taxes due or claimed to be due from it from
any taxing authority with respect to or imposed upon the Donrey Systems for any
period on or prior to the Effective
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Time, other than Taxes that are being contested in good faith through
appropriate proceedings and for which an adequate accrual has been established.
(n) ERISA.
(i) Schedule 10.1(n) hereto sets forth a true and
complete list of each employee benefit plan, program, arrangement or
agreement that is maintained (or contributed to), or was maintained
(or contributed to) at any time during the six (6) years immediately
preceding the date of this Agreement (the "Donrey Plans"), by Donrey
or by any trade or business, whether or not incorporated, which
together with Donrey would be deemed a "single employer" within the
meaning of section 4001 of ERISA. A copy of each Donrey Plan has been
made available to TCA.
(ii) Each of the Donrey Plans has been written,
operated and administered in substantial compliance with all
applicable laws (including, without limitation, ERISA and the Code);
each of the Donrey Plans intended to be "qualified" within the meaning
of section 401(a) of the Code is so qualified; no Donrey Plan is
subject to section 412 of the Code or to Title IV of ERISA.
(iii) All contributions or other amounts due and
payable from Donrey to (or under) any Donrey Plan prior to the
Effective Time have been, or will be, paid on or before the Effective
Time. There are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of
the Donrey Plans or any trusts related thereto.
(iv) No Donrey Plan provides benefits (including,
without limitation, death or medical benefits, whether or not insured)
to the current or former employees covered thereunder after their
retirement or other termination of service (other than (i) coverage
mandated by applicable law, (ii) death benefits or retirement benefits
under any tax-qualified retirement plan, or (iii) benefits the costs
of which are borne by the employee (or the employee's beneficiary)).
(v) Except as contemplated by Section 11.1(b)(i),
the consummation of the transactions contemplated by this Agreement
will not accelerate the time of payment or vesting under any Donrey
Plan and will not increase the amount of compensation payable to any
employee covered thereunder.
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(o) Employees.
(i) There are no collective bargaining agreements
applicable to any persons employed by Donrey that render services in
connection with the Donrey Systems, and Donrey has no duty to bargain
with any labor organization with respect to any such persons. There
are not pending any unfair labor practice charges against Donrey, nor
any demand for recognition, or any other request or demand from a
labor organization for representative status with respect to any
persons employed by Donrey that render services in connection with the
Donrey Systems.
(ii) Donrey is not a party to any employment
agreement, written or oral, relating to employees of the Donrey
Systems which cannot be terminated at will by Donrey and, except as
set forth on Schedule 10.1(n), Donrey has not had and does not
currently have any pension or profit sharing or other employee benefit
plan relating to employees of the Systems.
Section 10.2 Representations and Warranties of TAL. Except
as set forth on the TAL Disclosure Schedules, TAL hereby represents and
warrants to Donrey as follows, and acknowledges that Donrey is relying on such
representations and warranties in entering into this Agreement:
(a) Organization. TAL is a corporation duly organized,
validly existing and in good standing under the laws of Nevada, has the
corporate power and authority to cause the TAL Entities to convey the TAL
Systems to the Partnership pursuant to Section 4.2 of this Agreement and to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(b) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on TAL's behalf.
(c) Execution and Delivery. This Agreement and any other
agreements or instruments executed and delivered pursuant hereto to which TCA,
TAL or the TAL Entities are parties have been (or, when executed and delivered,
will be) duly executed and delivered by, and constitute (or, when executed and
delivered, will constitute) legal, valid and binding obligations of it
enforceable against TCA, TAL or the TAL Entities in accordance with their
terms, subject as to enforcement to applicable bankruptcy, insolvency,
reorganization, moratorium and
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other laws of general application, both at law and in equity, affecting the
rights of creditors generally.
(d) No Violations. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) violate, conflict with or result in any breach of any provision of the
certificate of incorporation, bylaws or partnership agreements of TCA, TAL and
the TAL Entities, (ii) violate, conflict with, result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, lease, contract, agreement or other instrument or
commitment or obligation to which TCA, TAL or the TAL Entities or any of their
respective properties may be bound or affected or to which they are parties or
are bound or result in the creation of any Lien upon any of the properties
included in the TAL Assets or (iii) violate any order, writ, injunction,
decree, judgment, ruling, law, notice of violation, rule or regulation of any
court, public body or authority or any other restriction of any kind or
character, applicable to TCA, TAL or the TAL Entities or any of the TAL Assets.
(e) Consents and Approvals. Except as set forth on Schedule
10.2(e) hereto, there is no requirement applicable to TCA, TAL or the TAL
Entities to make any filing with, or to obtain any permit, authorization or
consent or approval of, any governmental or regulatory authority as a condition
to the lawful consummation of the transactions contemplated hereby.
(f) Title to Properties; Encumbrances.
(i) Schedule 10.2(f)(i) contains descriptions of all
material items of tangible personal property and real property
included in the TAL Assets, which comprise all material items of
tangible personal property and real property used by TCA, TAL or the
TAL Entities to operate the TAL Systems. Except as described in the
following sentence, TCA, TAL or the TAL Entities have good, valid, and
marketable title to (or in the case of leased assets, a valid
leasehold interest in) all of the property included in the TAL Assets
and validly hold all necessary state, local and federal
authorizations, including FCC licenses or permits, and local
franchises required to operate the TAL Systems in the manner in which
they are currently being operated and the issuance of such
authorizations are no longer subject to administrative or judicial
review. None of such properties or assets is subject
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to any Lien of any kind (whether absolute, accrued, contingent or
otherwise), except (a) as set forth in Schedule 10.2(f)(i) hereto, and
(b) minor imperfections of title and encumbrances, if any, which are
not substantial in amount, do not materially detract from the value of
the property or assets subject thereto and do not impair the operation
of the TAL Systems. When considered as a whole the TAL Assets are in
good working condition. All items of cable plant and headend
equipment included in the TAL Assets (a) have been maintained in a
manner consistent with generally accepted standards of good
engineering practice and (b) will permit the TAL Systems to operate in
all material respects in accordance with the terms of the TAL
Franchises and Licenses.
(ii) Schedule 10.2(f)(ii) sets forth a true and
complete list of all of the TAL Franchises and Licenses. Each of the
TAL Franchises and Licenses listed on Schedule 10.2(f)(ii) is valid
and in full force and effect. No event has occurred with respect to
any of the authorizations which permits, or after notice or lapse of
time would permit, revocation or termination thereof or would result
in any other material impairment of the rights of the holder of such
authorizations that would have a material adverse effect on the
business of the holder of such authorization. TCA, TAL or the TAL
Entities have filed as required by the appropriate franchising
authorities all appropriate requests for renewal under the
Communications Act, within 30 to 36 months prior to the expiration of
each of the TAL Franchises and Licenses, with respect to the TAL
Franchises and Licenses. Except as disclosed in Schedule 10.2(f)(ii)
hereto, each of the TAL Systems is currently in compliance in all
material respects with all of the TAL Franchises and Licenses. No
party holding any such FCC authorization has any knowledge that any of
its authorizations listed on Schedule 10.2(f)(ii) will not be renewed
in the ordinary course or, where applicable, the facilities regulated
by such authorization will not be constructed and put into commercial
service within the applicable time period.
(g) No Adverse Change. Since September 30, 1995, (i) there
has not been any material adverse change in the TAL Assets or in the financial
condition or operation of the TAL Systems, and (ii) the TAL Assets and the
financial condition and operations of the TAL Systems have not been materially
and adversely affected as a result of any fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or otherwise.
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(h) Litigation. Except as set forth on Schedule 10.2(h)
hereto, there is no suit, action, charge, claim, inquiry, investigation or
proceeding pending or, to the best knowledge of TAL, threatened against or
affecting the TAL Systems or the ability of TCA, TAL or the TAL Entities to
perform their obligations under this Agreement, nor, to the best knowledge of
TAL, is there any valid basis for any such suit, action, charge, claim,
inquiry, investigation or proceeding, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding affecting the TAL Systems.
(i) Compliance with Legal Requirements. TCA, TAL and the TAL
Entities own and operate, and have owned and operated, their properties and
assets, and carry on and conduct, and have carried on and conducted, their
business in material compliance with all federal, foreign, state or local laws,
statutes, ordinances, rules or regulations (including the Communications Act,
the Copyright Act and the Cable Act and the rules and regulations promulgated
thereunder) or any court or administrative order or process.
(j) Environmental Matters.
(i) TCA, TAL and the TAL Entities are in compliance
in all material respects with all applicable Environmental Laws
applicable to the TAL Systems. To the best knowledge of TAL, there
are no circumstances that may prevent or interfere with compliance
with such Environmental Laws in all material respects in the future.
None of TCA, TAL or the TAL Entities has received any communication
(written or oral), whether from a governmental authority, citizens
group, employee or otherwise, that alleges that TCA, TAL or the TAL
Entities are not in full compliance with Environmental Laws applicable
to the TAL Systems. All material permits and other governmental
authorizations applicable to the TAL Systems currently held by TCA,
TAL and the TAL Entities pursuant to the Environmental Laws are
identified in Schedule 10.2(j)(i).
(ii) Except as set forth on Schedule 10.2(j)(ii)
hereto, there is no Environmental Claim pending or threatened against
TCA, TAL or the TAL Entities with respect to the TAL Systems or, to
the best knowledge of TAL, against any person or entity whose
liability for any Environmental Claims TCA, TAL or the TAL Entities
have or may have retained or assumed either contractually or by
operation of law.
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(iii) Except as set forth on Schedule 10.2(j)(iii)
hereto, to the best knowledge of TAL, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or
disposal of any Material of Environmental Concern, that could form the
basis of any Environmental Claim against TCA, TAL or the TAL Entities
with respect to the TAL Systems or against any person or entity whose
liability for any Environmental Claim TCA, TAL or the TAL Entities
have or may have retained or assumed either contractually or by
operation of law.
(iv) Without in any way limiting the generality of
the foregoing, (a) to the best knowledge of TAL, all on-site and
off-site locations where TCA, TAL or the TAL Entities have stored or
disposed Materials of Environmental Concern in connection with the TAL
Systems are identified in Schedule 10.2(j)(iv), (b) no underground
storage tanks are located on property owned or leased by TCA, TAL or
the TAL Entities with respect to the TAL Systems, (c) to the best
knowledge of TAL, except as set forth on Schedule 10.2(j)(iv), there
is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by TCA, TAL or
the TAL Entities with respect to the TAL Systems in violation of any
applicable Environmental Laws, and (d) to the best knowledge of TAL,
except as set forth on Schedule 10.2(j)(iv), no polychlorinated
biphenyls (PCBs) are used or stored at any property owned or leased by
TCA, TAL or the TAL Entities with respect to the TAL Systems in
violation of any applicable Environmental Laws.
(k) TAL Assets Necessary to TAL Systems. The TAL Assets
include all rights, properties, leases, licenses, permits, contracts and
equipment and other assets necessary to permit the Partnership to operate the
TAL Systems as presently operated, and other than the TAL Assets being
transferred to the Partnership at the Effective Time and the TAL Excluded
Assets, there are no other assets or properties owned by TCA, TAL or the TAL
Entities or any affiliate, stockholder or third party which are reasonably
necessary to operate the TAL Systems as presently operated.
(l) Taxes. TCA, TAL or the TAL Entities have timely filed or
caused to be filed, or will file or cause to be filed, all federal, state,
local and foreign tax returns required to be filed by them with respect to or
which include the TAL Systems on or prior to the Effective Time (all such
returns being true correct and complete) and have duly paid all Taxes due or
claimed to be due from them from any taxing authority with respect to or
imposed upon the TAL Systems for any
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period on or prior to the Effective Time, other than Taxes that are being
contested in good faith through appropriate proceedings and for which an
adequate accrual has been established.
(m) ERISA
(i) Schedule 10.2(m) hereto sets forth a true and
complete list of each employee benefit plan, program, arrangement or
agreement that is maintained (or contributed to), or was maintained
(or contributed to) at any time during the six (6) years immediately
preceding the date of this Agreement (the "TAL Plans"), by TCA, TAL or
the TAL Entities or by any trade or business, whether or not
incorporated, which together with TCA, TAL or the TAL Entities would
be deemed a "single employer" within the meaning of section 4001 of
ERISA. A copy of each TAL Plan has been made available to Donrey.
(ii) Each of the TAL Plans has been written,
operated and administered in substantial compliance with all
applicable laws (including, without limitation, ERISA and the Code);
each of the TAL Plans intended to be "qualified" within the meaning of
section 401(a) of the Code is so qualified; no TAL Plan is subject to
section 412 of the Code or to Title IV of ERISA.
(iii) All contributions or other amounts due and
payable from TCA, TAL or the TAL Entities to (or under) any TAL Plan
prior to the Effective Time have been, or will be, paid on or before
the Effective Time. There are no pending, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or
against any of the TAL Plans or any trusts related thereto.
(iv) No TAL Plan provides benefits (including,
without limitation, death or medical benefits, whether or not insured)
to the current or former employees covered thereunder after their
retirement or other termination of service (other than (i) coverage
mandated by applicable law, (ii) death benefits or retirement benefits
under any tax-qualified retirement plan, or (iii) benefits the costs
of which are borne by the employee (or the employee's beneficiary)).
(v) The consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment
or vesting under any TAL
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Plan and will not increase the amount of compensation payable to any
employee covered thereunder.
(n) Employees.
(i) There are no collective bargaining agreements
applicable to any persons employed by TCA, TAL or the TAL Entities
that render services in connection with the TAL Systems, and none of
TCA, TAL or the TAL Entities has any duty to bargain with any labor
organization with respect to any such persons. There are not pending
any unfair labor practice charges against TCA, TAL or the TAL
Entities, nor any demand for recognition, or any other request or
demand from a labor organization for representative status with
respect to any persons employed by TCA, TAL or the TAL Entities that
render services in connection with the TAL Systems.
(ii) Except as set forth on Schedule 10.2(n), none
of TCA, TAL or the TAL Entities is a party to any employment
agreement, written or oral, relating to employees of the TAL Systems
which cannot be terminated at will by TCA, TAL or the TAL Entities
and, except as set forth on Schedule 10.2(m), none of TCA, TAL or the
TAL Entities has had or currently has any pension or profit sharing or
other employee benefit plan relating to employees of the Systems.
ARTICLE XI
EMPLOYEE MATTERS
Section 11.1 Post-Closing Obligations to Employees.
(a) Employment, Benefits and Compensation, Generally.
(i) As used in this Section 11.1, the term
"Employees" shall mean and include any employee of Donrey who is actively
working for the Donrey Systems as of the Effective Time and any employee of
Donrey who is absent as of the Effective Time on short-term disability,
Workers' Compensation or an authorized leave (such as maternity, military,
family and medical leaves or other leaves where return to work is subject to
statutory requirements), but was actively working for Donrey Systems
immediately prior to such absence. As used in this Section 11.1, the term "TCA
Employees" shall mean and include any Employee who shall have
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accepted an offer of employment made by TCA Management Co. in accordance with
Section 11.1(b)(ii) hereof and the term "Non-TCA Employees" shall mean and
include any Employee who shall have received such an offer of employment but
declined the offer.
(ii) As of the Effective Time, TAL shall cause TCA
Management Co. to offer employment in substantially comparable positions to all
Employees active as of the Effective Time who pass TCA Management Co.'s normal
drug test for applicants. The employment of any active Employee who accepts
the terms of employment so offered will commence at 12:01 A.M. on the day
immediately after the Effective Time. When any Employee who is absent from
Donrey on short-term disability or Workers' Compensation on the Effective Time
is released therefrom in writing by the Employee's physician to return to
active employment, TAL shall cause TCA Management Co. to offer immediate
employment (upon receipt of such release) to such Employee, in a position
substantially comparable to that which the Employee occupied before such
absence but only at such time as the Employee is medically capable to perform
the essential functions of the position occupied immediately before such
absence. Employment in substantially comparable positions will be offered to
those Employees seeking to return from any authorized leave. TAL shall not be
required to cause TCA Management Co. to offer re-employment nor have any other
obligation with respect to individuals who are on long-term disability as of
the Effective Date.
(iii) TAL will cause TCA Management Co. to pay a
base salary to each TCA Employee which is at least equal to the base salary
being paid to such individual by Donrey immediately prior to the Effective
Time. TAL will cause TCA Management Co. to maintain, without interruption,
employee compensation and benefit plans, programs, policies and arrangements
(including fringe benefits) that, in the aggregate, will provide benefits and
compensation to the TCA Employees that are, at any time after the Effective
Time, no less favorable than those provided to comparably situated other
employees of TAL, TCA Management Co. or the Partnership.
(iv) For purposes of determining eligibility and
vesting under all employee benefit plans, programs, policies, arrangements and
fringe benefits of TCA, TAL, TCA Management Co. or the Partnership
(collectively, the "TCA Plans"), TCA Employees shall be given credit for all
service with Donrey and its affiliates and predecessors to the same extent as
such service was credited for such purposes by Donrey. Additionally, in the
case of any TCA Plan which is an "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), if a TCA Em-
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ployee was participating in the analogous Donrey plan as of the Effective Time,
such TCA Employee shall immediately participate in the TCA Plan, to the extent
permitted by applicable law.
(v) Nothing in this Section 11.1 shall be deemed to
require the employment of any TCA Employee to be continued for any particular
period of time after the Effective Time. However, if the employment of any TCA
Employee in a given position shall be terminated by TCA Management Co. without
the prior written consent of the TCA Employee within the one-year period
immediately following the Effective Time and if such termination is) without
"Cause" (as defined in this Section 11.1(a)(v)) and is not the result of the
TCA Employee's (x) retirement on or after age 65, (y) death or (z) development
of a physical or mental condition making the TCA Employee unable to
substantially perform all the TCA Employee's duties, TAL shall use its best
efforts to offer the TCA Employee immediate employment in a substantially
comparable position within TCA Management Co. For purposes of this Section
11.1(a)(v), "Cause" shall mean (x) a TCA Employee's willful and continued
failure to adequately perform substantially all his or her duties as a TCA
Employee, or (y) a TCA Employee's willful engagement in conduct which is
demonstrably and materially injurious to the employer, monetarily or otherwise.
(vi) Donrey shall give TAL reasonable access to any
and all records necessary to administer all TCA Plans for the TCA Employees.
(vii) Donrey shall be responsible for, and shall
cause to be discharged and satisfied in full, all amounts owed by Donrey prior
to the Effective Time to any current or prior employee, including (i) wages,
salaries and severance, (ii) amounts owed pursuant to any employment, incentive
compensation or bonus agreements, or (iii) other benefits or payments on
account of termination. Additionally, Donrey shall be responsible for, and
shall cause to be discharged and satisfied in full, all compensation and
benefit amounts (including any severance or termination pay) owed by Donrey to
Non-TCA Employees at or after the Effective Time. Donrey shall indemnify TAL,
TCA Management and the Partnership, and hold each of them harmless from any
amounts described in this Section 11.1(a)(vii).
(viii) Donrey shall assume full responsibility and
liability for offering and providing "continuation coverage" to any "covered
employee" or "qualified beneficiary" who is covered by a "group health plan"
sponsored, maintained or contributed to by Donrey and who has experienced a
"qualifying event" or is receiving such "continuation coverage" prior to the
Effective Time. Donrey shall also assume full responsibility and liability for
offering and providing "continuation
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coverage" to any "covered employee" or "qualified beneficiary" who is covered
by a "group health plan" sponsored, maintained or contributed to by Donrey who
experiences a "qualifying event" at the Effective Time. TCA Management Co.
shall assume full responsibility and liability at the Effective Time for
offering and providing "continuation coverage" to any TCA Employee and his or
her other "qualified beneficiaries" who are covered by a "group health plan"
sponsored, maintained or contributed to by TCA Management Co. and who
experience a "qualifying event" after the Effective Time. Continuation
coverage, covered employee, 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. Donrey shall hold TAL, TCA Management
and the Partnership, and any entity required to be combined with any or all of
them under Section 414 of the 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 Donrey as a result of any action or omission of Donrey prior
to the Effective Time. TAL shall hold Donrey and any entity required to be
combined with Donrey under Section 414 of the Code ("Donrey Affected Parties")
harmless from and fully indemnify such Donrey Affected Parties against any
losses incurred or suffered by such Donrey Affected Parties which arise under a
group health plan sponsored, maintained or contributed to by TCA Management Co.
as a result of a qualifying event occurring after the Effective Time with
respect to an Employee who becomes a TCA Employee or his or her other qualified
beneficiaries.
(b) Donrey Retirement Plan - Vesting and Asset Transfer.
(i) Donrey shall cause the account balances as of
the Effective Time of all Employees who are participants in the Donrey
Retirement Savings Plan (together with any predecessor plans which are part of
such plan, the "Donrey Retirement Plan") as of the Effective Time to be
completely vested as of the Effective Date.
(ii) Donrey shall cause to be transferred from the
Donrey Retirement Plan to the TCA Deferred Savings and Retirement Plan (the
"TCA Savings Plan") the liability for the account balances of all the TCA
Employees who were participants in the Donrey Retirement Plan as of the
Effective Time ("Retirement Plan Employees"), together with assets which are
reasonably acceptable to the trustee of the TCA Savings Plan and the aggregate
fair market value of which is equal to such liability, and TAL shall cause TCA
to cause the TCA Savings Plan to accept such transfer (the acceptance of the
liability being conditioned upon the asset
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transfer); provided, however, that the amount of the asset transfer shall be
reduced by the aggregate amount of any payments and distributions made in
accordance with Section 11.1(b)(iii) hereof from the Donrey Retirement Plan to
or on behalf of Retirement Plan Employees between the Effective Time and the
date of the asset transfer. Donrey and TAL shall cause TCA to adopt the
resolutions required to make (and shall cause the Donrey Retirement Plan and
the TCA Savings Plan, respectively, to be amended, if necessary, to permit)
such transfer of assets and liabilities, preserving benefits protected by
Section 411(d)(6) of the Code and Section 204(g) of ERISA. The asset transfer
shall take place as soon as practicable after the Effective Time; provided,
however, that in no event shall such transfer take place until the later of the
following occurs: (A) the mutual exchange of favorable determination letters
from the Internal Revenue Service (the "IRS") with respect to the qualification
of the Donrey Retirement Plan and the TCA Savings Plan, respectively, under
Section 401(a) of the Code, as amended to comply with changes to the
qualification requirements of Section 401(a) of the Code made by the Tax Reform
Act of 1986 and other recent legislation and regulations, or if a determination
letter taking into account the provisions of the Tax Reform Act of 1986 and all
subsequent legislation has not yet been received, then a determination letter
taking into account all tax laws up until the enactment of the Tax Reform Act
of 1986 may be furnished in lieu thereof, provided that, in addition, an
acceptable representation from the respective plan administrator is furnished
that an application for a determination letter taking into account all required
tax law changes to date has been applied for (or will be applied for), that the
respective plan administrator will take whatever actions the IRS requires to
issue a favorable determination letter, that the respective plan has, at all
times, been in operational compliance with all tax laws and that any amendments
necessary to comply with such tax legislation have been (or will be) adopted in
a timely manner, and (B) the receipt of any necessary governmental approval or
filing of necessary governmental reports including but not limited to IRS Form
5310-A.
(iii) Pending the completion of the asset transfer
described in this Section 11.1(b), Donrey and TAL shall make arrangements for
any required payments or distributions to the Retirement Plan Employees from
the Donrey Retirement Plan. Donrey and TAL shall provide each other with
access to information reasonably necessary in order to carry out the provisions
of this paragraph. Donrey and TAL shall each use their commercially reasonable
efforts to satisfy promptly the conditions for such transfer and to implement
such transfer as soon as practicable following the Effective Time.
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(iv) Notwithstanding any provision hereof to the
contrary, TCA Management Co. shall have no obligation to permit the TCA Savings
Plan to accept a transfer of assets and liabilities from the Donrey Retirement
Plan if such transfer would jeopardize the tax qualification of the TCA Savings
Plan.
(c) Medical and Welfare Plan Obligations.
(i) TAL agrees to cause TCA Management Co. to waive
any limitations for preexisting conditions under its medical care plan with
respect to the TCA Employees. With respect to long-term disability coverage
for the TCA Employees, TCA agrees to cause TCA Management Co. to waive any
limitations for preexisting conditions except any condition for which a TCA
Employee received treatment (or was diagnosed) within three (3) months before
the TCA Employee's date of hire by TCA Management Co. and which caused the TCA
Employee to become disabled within twelve (12) months after such date of hire.
(ii) Donrey shall pay all claims for medical and
dental benefits covered by any of its medical and dental care plans which
relate to care services rendered on or before the Effective Time, regardless of
when such claims may be filed and to the extent such plans would honor such
claims in accordance with their terms under their administrative procedures
established prior to the signing of this Agreement. In the calendar year which
includes the Effective Time, TAL shall cause TCA Management Co. to honor any
deductible and out-of-pocket expenses incurred by TCA Employees and their
beneficiaries under Donrey's medical plans during the portion of the calendar
year preceding the Effective Time, to the extent that information regarding
such amounts is provided by Donrey to TCA Management Co.
(iii) TAL shall cause TCA Management Co. to assume
the obligations of Donrey with respect to vacation time of TCA Employees which
has been accrued, but not taken, as of the Effective Time.
ARTICLE XII
ARBITRATION
Section 12.1 Arbitration. Each of the Partners agrees to
submit to binding arbitration any and all differences and disputes which may
arise out of or are related to this Agreement, except for any dispute arising
out of the failure of a
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Partner to make a required Capital Contribution. Prior to initiating
arbitration, the Partners shall first meet face-to-face to effect a resolution
of the differences. Any differences which the Partners are unable to resolve
in such face-to-face meeting shall be heard and finally settled in
Fayetteville, Arkansas or in any other location mutually agreed upon by the
parties, by binding arbitration in accordance with the Commercial Rules of the
American Arbitration Association. Such arbitration shall be initiated in the
Fayetteville, Arkansas office of the American Arbitration Association. Any
award entered in any such arbitration shall be final, binding, and may be
entered and enforced in any court of competent jurisdiction. The arbitrator
shall make such orders, conduct and schedule all proceedings in connection with
the arbitration so that final arbitration commences no less than thirty (30)
days and concludes no later than seventy-five (75) days after a party files the
initial notice of arbitration, and so that the final arbitration award is made
and delivered to the parties within ninety (90) days after the filing of the
initial notice of arbitration. Nothing herein contained shall be construed as
preventing any party from instituting legal or equitable action in any
jurisdiction against any of the other parties for temporary or similar
provisional relief to the full extent permitted under the laws applicable to
this Agreement, or any such other written agreement between the parties or the
performance hereof or thereof or otherwise pending final settlement of any
dispute, difference or question by arbitration. Any such provisional relief
may be modified or amended in any way by the arbitrator at any time after his
appointment. Each Partner shall pay the expenses of their own representatives,
if any, and shall share all other costs of such arbitration, including the fees
and expenses of the arbitrators.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. Each Partner shall promptly give
written notice to the other Partner upon becoming aware of the occurrence or,
to its knowledge, a pending or threatened occurrence, of any event which would
cause or constitute a breach of any of its representations, warranties or
covenants contained or referenced in this Agreement and will use its best
efforts to prevent or promptly remedy the same. All notices or other
communications to parties under this Agreement shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt) by delivery in
person, by cable, telegram, telex, facsimile transmission or other standard
form of telecommunications, or by registered or
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certified mail or Federal Express delivery, postage prepaid, return receipt
requested, addressed as follows:
If to Donrey:
DR Partners
3600 Wheeler Avenue
Fort Smith, Arkansas 72901
Attention: Lynn Mosier
With copies to:
Stephens Group, Inc.
111 Center Street, Suite 2300
Little Rock, Arkansas 72203
Attention: David Knight, Esq.
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell, Esq.
If to TAL:
TAL Financial Corporation
c/o TCA Cable TV, Inc.
3015 SSE Loop 323
Tyler, Texas 75713
Attention: Randall L. Clark
With a copy to:
Jackson & Walker, L.L.P.
901 Main Street
Suite 6000
Dallas, Texas 75202
Attention: James S. Ryan, III
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or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 13.1.
Section 13.2 Governing Law. This Agreement and the
Partnership created hereby shall be governed by and construed accordance with
the laws of the State of Delaware. The parties further agree that any action
relating to this Agreement shall be instituted and prosecuted in the Courts of
the County of New Castle in the State of Delaware, and each party hereto hereby
consents to the jurisdiction of said Courts and waives any right or defense
relating to such jurisdiction and venue.
Section 13.3 Confidentiality. No Partner shall during the
period such Partner is a Partner and at any time after such Partner has ceased
to be a Partner, disclose any confidential or proprietary information with
respect to the Partnership to any Person, except (i) with the prior written
consent of the other Partners; (ii) to the extent necessary to comply with law
or the valid order of a court of competent jurisdiction, in which event the
party making such disclosure shall so notify the other Partners as promptly as
practicable (and, if possible, prior to making such disclosure) and shall seek
confidential treatment of such information; (iii) as part of its normal
reporting or review procedure to its parent company, if any, or partners, its
auditors and its attorneys and other representatives; provided, that, such
Partner shall be responsible for the compliance of its parent company, if any,
or partners, auditors, attorneys and representatives with the provisions of
this Section 13.3; (iv) in connection with the enforcement of such Partner's
rights hereunder; (v) with respect to disclosures to an affiliate of, or
professional advisor to, such Partner in connection with the performance by
such Partner of its obligations hereunder; provided, that, such Partner shall
be responsible for the compliance of its affiliates or professional advisors
with the provisions of this Section 13.3; and (vi) to a prospective purchaser
of all or a portion of such Partner's Partnership Interest in connection with a
sale thereof in accordance with the terms of this Agreement; provided, that,
such prospective purchaser agrees to be bound by the provisions of this Section
13.3. Except as provided in the immediately preceding sentence, no Partner,
nor any of its affiliates, shall, during the periods referred to therein, use
any confidential or proprietary information with respect to the Partnership.
Section 13.4 Amendments. This Agreement may be modified or
amended only by an instrument in writing signed by all of the Partners.
Section 13.5 Entire Agreement. Except as provided herein,
this instrument and the Management Agreement constitute the entire agreement
between
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the Partners with respect to the Partnership and supersede all prior
agreements, understandings, offers and negotiations, oral or written.
Section 13.6 Waiver of Partition. Each Partner hereby
irrevocably waives any and all rights that it may have to maintain an action
for partition of any of the Partnership property.
Section 13.7 Consents. All consents, agreements and
approvals required or permitted by this Agreement shall be in writing and a
signed copy thereof shall be filed and kept with the books of the Partnership.
Section 13.8 Successors; No Third Party Beneficiaries.
Subject to Section 5.4, all rights and duties of the Partners hereunder shall
inure to the benefit of and be binding upon their respective successors and
assigns other than as contemplated by Article VIII hereof, neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto thereto any rights or remedies hereunder or
thereunder.
Section 13.9 Further Assurances. Each party hereto agrees to
execute and deliver all such other and additional instruments and documents and
to do such other acts and things as may be necessary or expedient to create the
Partnership, carry out the business of the Partnership or effectuate this
Agreement.
Section 13.10 Headings. The Article and Section headings
herein are for convenience of reference only and shall not affect the meaning
or interpretation of any provision hereof.
Section 13.11 Severability. Each provision of this Agreement
shall be considered severable and if for any reason any provision which is not
essential to the effectuation of the basic purposes of the Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable
and contrary to the Act or existing or future applicable law, such invalidity
shall not impair the operation of or affect those provisions of this Agreement
which are valid. In that case, this Agreement shall be construed so as to
limit any term or provision so as to make it enforceable or valid within the
requirements of any applicable law, and in the event such term or provision
cannot be so limited, this Agreement shall be construed to omit such invalid or
unenforceable provisions.
Section 13.12 Survival. Except as expressly provided in this
Agreement, all indemnities and reimbursement obligations made pursuant to this
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Agreement shall survive dissolution and liquidation of the Partnership until
expiration of the longest applicable statute of limitations (including
extensions and waivers) with respect to the matter for which a party would be
entitled to be indemnified or reimbursed, as the case may be.
Section 13.13 Brokers. Donrey represents and warrants to
TAL, and TAL represents and warrants to Donrey, that neither it nor any party
acting on its behalf has incurred any liability, either express or implied, to
any "broker" or "finder" or similar person in respect of any of the
transactions contemplated hereby. TAL agrees to indemnify Donrey against, and
hold it harmless from, and Donrey agrees to indemnify TAL against, and hold it
harmless from, any liability, cost or expense (including, but not limited to,
fees and disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party for brokerage or finders'
fees or other commissions in connection with this Agreement or the transactions
contemplated hereby.
Section 13.14 Access. Between the date hereof and the
Effective Time, each of TAL and Donrey will (i) provide to the other and its
representatives, during normal working hours, full access to the premises,
property, files, books, records, documents, and other information of or
concerning the TAL Systems and the Donrey Systems, (ii) furnish to the other
and its representatives financial, technical and operating data and other
information pertaining to the business and property of the TAL Systems and the
Donrey Systems, and (iii) permit the other and its representatives to conduct
reasonable interviews of the employees, sales representatives and auditors of
the TAL Systems and the Donrey Systems; provided, however, that any such
investigation will be conducted in such a manner as not to interfere
unreasonably with the operation of the business of the TAL Systems and the
Donrey Systems. Between the date hereof and the Effective Time, each of TAL and
Donrey will promptly notify the other in writing of (a) any default under any
material Assumed Donrey Contract or material Assumed TAL Contract or (b) any
material adverse change in the business, financial condition or results of
operations of the Donrey Systems or the TAL Systems, in each case taken as a
whole.
Section 13.15 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Partners have executed this Amended
and Restated Partnership Agreement as of the date first above written.
DR PARTNERS
By: Stephens Group, Inc.,
general partner
By:
--------------------------------------------
Title:
----------------------------------
Name:
-----------------------------------
TAL FINANCIAL CORPORATION
By:
--------------------------------------------
Title:
----------------------------------
Name:
-----------------------------------
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EXHIBIT A
INITIAL CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Adjusted Tax Basis Fair Market Value
------------------ -----------------
<S> <C> <C>
TAL Systems
Donrey Systems
------------------ -----------------
</TABLE>
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<PAGE> 77
EXHIBIT B
MANAGEMENT AGREEMENT
67
<PAGE> 78
EXHIBIT C
BUDGET
68
<PAGE> 79
EXHIBIT D
INSURANCE COVERAGE AMOUNTS
69
<PAGE> 80
EXHIBIT E
DONREY DISCLOSURE SCHEDULES
70
<PAGE> 81
EXHIBIT F
TAL DISCLOSURE SCHEDULES
71
<PAGE> 82
EXHIBITS G-1, G-2
VALLEJO AND BARTLESVILLE LEASES
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<PAGE> 83
EXHIBIT B
INITIAL CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Adjusted Tax Basis* Fair Market Value
-------------------- -----------------
<S> <C> <C>
TAL Systems 116,279,455 326,250,000
Donrey Systems 26,541,365 108,750,000
----------- -----------
142,820,820 435,000,000
</TABLE>
______________
* As of November 30, 1995
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EXHIBIT 23.2
As independent public accountants, we hereby consent to the
incorporation by reference of our report, dated May 28, 1996, covering the
financial statements of Donrey Cablevision as of and for the year ended
December 31, 1995 into the previously filed Registration Statements of TCA Cable
TV, Inc. and subsidiaries, File Nos. 2-82934, 2-88892, 33-21901, 33-49172,
33-33898, 33-55898, 33-55895, 33-61041 and 33-31487 on Form S-8 and Registration
Statements Nos. 33-44289, 33-61616 and 33-40273 on Form S-3.
/s/ ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
July 15, 1996.
