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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO.: 0-11478
TCA CABLE TV, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1798185
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3015 S. E. LOOP 323, TYLER, TEXAS 75701
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 903/595-3701
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the registrant's classes of
common stock as of March 14, 1997 was:
24,822,790 shares of common stock
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TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE NO.
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PART I -- FINANCIAL INFORMATION
Consolidated Balance Sheets -- January 31, 1997 and
October 31, 1996....................................... 3
Consolidated Statements of Operations -- Three months
ended January 31, 1997 and 1996........................ 4
Consolidated Statement of Shareholders' Equity -- Three
months ended January 31, 1997.......................... 5
Consolidated Statements of Cash Flows --Three months ended
January 31, 1997 and 1996.............................. 6
Notes to Consolidated Financial Statements................ 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
PART II -- OTHER INFORMATION................................ 8
SIGNATURES................................................ 9
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
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JANUARY 31, OCTOBER 31,
1997 1996
------------- -------------
(UNAUDITED)
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Cash........................................................ $ 3,203,238 $ 3,473,443
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Accounts receivable, subscribers............................ 13,862,411 12,408,291
------------- -------------
Accounts receivable, other.................................. 866,476 666,957
------------- -------------
Income tax receivable....................................... 125,952 1,001,709
------------- -------------
Notes receivable, affiliates................................ 80,000 80,000
------------- -------------
Investments................................................. 799,174 4,714,629
------------- -------------
Property, plant and equipment, at cost:
Land...................................................... 3,313,883 3,313,883
Distribution systems...................................... 350,413,812 340,766,176
Transportation equipment.................................. 9,877,633 9,686,330
Other..................................................... 34,446,696 32,386,113
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398,052,024 386,152,502
Less accumulated depreciation............................. (194,880,631) (186,892,042)
------------- -------------
203,171,393 199,260,460
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Other assets:
Intangibles, net of accumulated amortization of
$88,044,763 and $84,660,150, respectively.............. 439,602,507 441,189,861
Prepaid expenses.......................................... 1,947,025 1,201,281
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441,549,532 442,391,142
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$ 663,658,176 $ 663,996,631
============= =============
LIABILITIES
Accounts payable............................................ $ 12,567,909 $ 12,137,215
Accrued expenses............................................ 15,282,323 14,671,323
Subscriber advance payments................................. 3,902,936 4,909,936
Deferred income taxes....................................... 62,780,000 59,580,000
Term debt................................................... 304,847,462 314,492,583
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399,380,630 405,791,057
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Redeemable minority interest................................ 111,967,164 111,873,245
Contingencies and commitments
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value, 5,000,000 shares
authorized; none issued
Common stock, $.10 par value, 60,000,000 shares authorized;
24,939,512 and 24,931,931 shares issued, respectively..... 2,493,951 2,493,193
Additional paid-in capital.................................. 50,241,046 49,984,093
Retained earnings........................................... 102,581,760 96,861,418
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155,316,757 149,338,704
Less treasury stock at cost, 123,000 shares................. (3,006,375) (3,006,375)
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152,310,382 146,332,329
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$ 663,658,176 $ 663,996,631
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED
JANUARY 31,
--------------------------
1997 1996
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CATV revenues............................................... $73,489,288 $55,000,233
----------- -----------
Operating expenses:
Salaries, wages and benefits.............................. 13,148,530 9,194,144
Programming costs......................................... 18,353,803 12,774,532
Other operating expenses.................................. 2,111,081 1,812,912
Selling, general and administrative....................... 6,389,862 3,591,005
Depreciation and amortization............................. 10,672,638 8,263,757
----------- -----------
50,675,914 35,636,350
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Operating income.......................................... 22,813,374 19,363,883
Other income................................................ 261,811 92,532
Interest expense............................................ (5,443,493) (5,368,040)
Minority interest........................................... (1,743,919)
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Income before income taxes................................ 15,887,773 14,088,375
----------- -----------
Provision for income taxes:
Current................................................... 3,001,005 3,200,000
Deferred.................................................. 3,200,000 2,400,000
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6,201,005 5,600,000
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Net income................................................ 9,686,768 8,488,375
=========== ===========
Earnings per common share................................... $ 0.39 $ 0.34
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
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COMMON STOCK ISSUED ADDITIONAL
----------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
---------- ---------- ----------- ------------ -----------
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Balance, October 31, 1996........ 24,931,931 $2,493,193 $49,984,093 $ 96,861,418 $(3,006,375)
Net income for the three months
ended January 31, 1997...... 9,686,768
Issuance of common stock....... 7,070 707 202,797
Stock options exercised........ 511 51 7,206
Cash dividends at $.16 a
share....................... (3,966,426)
Amortization of warrants....... 46,950
---------- ---------- ----------- ------------ -----------
Balance, January 31, 1997........ 24,939,512 $2,493,951 $50,241,046 $102,581,760 $(3,006,375)
========== ========== =========== ============ ===========
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The accompanying notes are an integral part of the consolidated financial
statements.
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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THREE MONTHS ENDED
JANUARY 31,
----------------------------
1997 1996
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Cash flows from operating activities:
Net income................................................ $ 9,686,768 $ 8,488,375
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................... 7,288,025 6,047,465
Amortization expense................................... 3,384,613 2,216,292
Share of (earnings) losses of affiliates............... (189,358)
Minority interest in earnings.......................... 1,743,919
Stock warrant amortization............................. 46,950 41,862
Deferred income taxes.................................. 3,200,000 2,400,000
Contribution of common stock to retirement plan........ 203,504 97,171
Change in accounts receivable, subscribers............. (1,454,120) 796,666
Change in accounts receivable, other................... (199,519) (261,192)
Change in income tax receivable........................ 875,757 932,306
Change in prepaid expenses............................. (745,744) (662,779)
Change in accounts payable............................. 430,693 3,349,384
Change in accrued expenses............................. 611,000 (2,179,858)
Change in subscriber advance payments.................. (1,007,000) (346,685)
Change in income taxes payable......................... 2,121,361
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Net cash provided by operating activities......... 23,875,488 23,040,368
------------ ------------
Cash flows from investing activities:
Cash paid for acquisitions................................ (60,759,941)
Capital expenditures...................................... (9,830,225) (10,967,272)
Loan to affiliate......................................... (500,000)
Distribution from affiliate............................... 938,823
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Net cash used in investing activities............. (8,891,402) (72,227,213)
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Cash flows from financing activities:
Borrowings of term debt................................... 10,499,990 73,500,000
Repayments of term debt................................... (20,145,111) (19,762,099)
Proceeds from stock options exercised..................... 7,257 39,425
Partnership distributions................................. (1,650,000)
Dividends paid............................................ (3,966,427) (3,447,711)
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Net cash provided by (used in) financing
activities...................................... (15,254,291) 50,329,615
------------ ------------
Net increase (decrease) in cash............................. (270,205) 1,142,770
Cash at beginning of period................................. 3,473,443 1,260,274
------------ ------------
Cash at end of period....................................... $ 3,203,238 $ 2,403,044
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
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TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain financial information has been condensed and certain
footnote disclosures have been omitted. Such information and disclosures are
normally included in financial statements prepared in accordance with
generally accepted accounting principles.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto in the Company's latest report on
Form 10-K.
The financial statements as of January 31, 1997 and for the three month
period then ended are unaudited; however, in the opinion of management, such
statements include all adjustments (consisting solely of normal and
recurring adjustments) necessary to present fairly the financial information
included therein.
B. The consolidated statements of operations for the three months ended January
31, 1997, are not necessarily indicative of the operating results to be
expected for the full year.
C. Earnings per common share are computed based upon the weighted average
common shares outstanding during the period, including common stock
equivalents, of 24,842,267 shares and 24,613,254 shares for 1997 and 1996,
respectively.
D. On January 1, 1997, TCA Communications, Inc. ("TCAC"), a 50% owned affiliate
of the Company distributed certain assets of TCAC primarily related to its
long distance operations and Internet operations in East Texas to
Lufkin-Conroe Telecommunications Corporation ("LCT") in exchange for LCT's
50% ownership interest in TCAC. Effective January 1, 1997, TCAC is a
wholly-owned subsidiary of TCA and continues to provide long distance and
Internet services in West Texas, New Mexico and Arkansas.
7
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TCA CABLE TV, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- Comparison of the three-month period ended January
31, 1997, with the same three-month period of the prior year reveals increases
in revenues, operating income and net income. Revenues, operating income, and
net income increased by approximately 34%, 18% and 14%, respectively.
Approximately 30% of the revenue increase was attributable to internal
growth and 70% from acquisitions. The Company's basic subscribers increased from
602,773 at January 31, 1996 to 671,099 at January 31, 1997, or approximately
11%. All of the increase was the result of acquisitions. Average advertising
revenue per customer increased from $3.53 to $6.98 or approximately 98%. Average
cable revenue per customer increased from $27.63 to $31.32 or approximately 13%.
Operating expenses increased approximately 42% during the first quarter of
fiscal 1997 as compared to the first quarter of fiscal 1996. Salaries, wages and
benefits increased 43%. Programming costs and other operating expenses increased
44% and 16%, respectively. Selling, general and administrative expenses
increased 78%. Depreciation and amortization increased 29%. Approximately 70% of
the increase in operating expenses was from acquisitions.
Interest expense increased approximately 1% as a result of borrowings made
to finance the Company's acquisition of cable television properties. The
Company's weighted average interest rate was 6.90% and 7.09% at January 31, 1997
and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES -- The Company's capital expenditures have
been primarily for cable system construction, upgrading and rebuilding,
acquisition of other cable systems and purchases of converters to be furnished
to subscribers.
Expenditures for rebuilding, upgrading and maintaining the Company's cable
systems and for converter purchases have been financed principally with cash
flow from operations. Acquisitions of cable systems have generally been financed
with cash flow from operations and through bank borrowings.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit A
2.1. ASSET PURCHASE AND SALE AGREEMENT dated December 20, 1996 between
TCA Cable Partners and East Arkansas Cablevision, Inc. and Lawrence
County Cable Partners
(b) No report on Form 8-K has been filed during the quarter for which this
report is filed.
(c) Exhibit 27 -- Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
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TCA CABLE TV, INC.
Date: March 14, 1997 /s/ ROBERT M. ROGERS
--------------------------------------------
Robert M. Rogers,
Chairman and Chief Executive Officer
Date: March 14, 1997 /s/ JIMMIE F. TAYLOR
--------------------------------------------
Jimmie F. Taylor,
Vice President, CFO and Treasurer
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EXHIBIT INDEX
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EXHIBIT
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2.1 -- ASSET PURCHASE AND SALE AGREEMENT dated December 20, 1996
between TCA Cable Partners and East Arkansas Cablevision,
Inc. and Lawrence County Cable Partners
27 -- Financial Data Schedule
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EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
dated December 20, 1996
between
TCA CABLE PARTNERS
and
EAST ARKANSAS CABLEVISION, INC. and
LAWRENCE COUNTY CABLE PARTNERS
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TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3. CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS . . . . . . . . . . . . . 12
SECTION 5. BUYER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 14
SECTION 6. SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 15
SECTION 7. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10. TERMINATION AND DEFAULT . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11. SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . 39
SECTION 12. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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LIST OF SCHEDULES AND EXHIBITS
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Schedules
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Schedule 1.24 Leased Property
Schedule 1.32 Other Real Property Interests
Schedule 1.29 Owned Property
Schedule 1.35 System Contracts
Schedule 1.36 System Franchises
Schedule 1.37 System Licenses
Schedule 1.38 Tangible Personal Property
Schedule 4.2 Excluded Assets
Schedule 6.3 Required Consents
Schedule 6.4 Liens and Permitted Liens
Schedule 6.10 Financial Statements; Changes or Events
Schedule 6.12 Litigation
Schedule 6.14 Plans; Employee Matters
Schedule 6.15 Systems Information
Exhibits
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Exhibit 7.8 Noncompetition Covenant
Exhibit 9.2.1 Bill of Sale and Assignment and Assumption Agreement
Exhibit 9.2.9 Seller Counsel Opinion
Exhibit 9.3.5 Buyer Counsel Opinion
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is made and entered
into as of the 18th day of December, 1996, by and between TCA CABLE PARTNERS, a
Delaware general partnership ("Buyer"), whose U.S. Taxpayer Identification
Number is 75-2628484, Lawrence County Cable Partners, a Colorado general
partnership ("Lawrence Partners"), and East Arkansas Cablevision, Inc., an
Arkansas Corporation ("East Arkansas"), whose U.S. Taxpayer Identification
Number is 75-1221525.
RECITALS
A. Lawrence Partners is engaged in the business of providing cable
television service to subscribers in and around the municipalities of Caraway,
College City, Harrisburg, Hoxie, Imboden, Lawrence County, Leachville,
Poinsette, Ravenden, and Walnut Ridge, Arkansas; and the municipality of
Cardwell, Missouri (the "Lawrence Partners' Systems") and East Arkansas is
engaged in the business of providing cable television service to subscribers in
and around the municipalities of Bay, Caraway, Cherry Valley, College City,
Craighead County, Cross County, Harrisburg, Hoxie, Imboden, Jonesburo, Keiser,
Lake City, Lawrence County, Leachville, Luxora, Manilla, Marked Tree,
Mississippi County, Osceola, Poinsett, Ravenden, Walnut Ridge and Weiner,
Arkansas and Cardwell, Missouri (the "East Arkansas Systems"). The Lawrence
Partners' Systems and the East Arkansas Systems are referred to herein as the
"Systems").
B. Immediately prior to the Closing, Lawrence Partners and East
Arkansas may cause all of the assets and liabilities relating to the Lawrence
Partners' Systems to be owned by East Arkansas (the "Contribution"). As
hereinafter used, "Seller" shall refer to (1) if the Contribution takes place
prior to the Closing, Lawrence Partners and East Arkansas for the period from
the date of this Agreement to the date of the Contribution, and East Arkansas
for the period on and after the Contribution, or (2) if the Contribution does
not take place, Lawrence Partners and East Arkansas.
C. Buyer desires to purchase and Seller desires to sell
substantially all the assets used or useful in connection with the Systems.
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AGREEMENTS
In consideration of the mutual covenants and promises set forth herein,
the parties agree as follows:
SECTION 1. DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms or terms otherwise defined in this Section 1 shall have the
meanings set forth below:
1.1 1992 Cable Act. The Cable Television Consumer Protection
and Competition Act of 1992 and the FCC rules and regulations promulgated
thereunder.
1.2 Affiliate. With respect as to any Person, any Person
controlling, controlled by or under common control with such Person; "control"
means the ownership, directly or indirectly, of voting securities representing
the right generally to elect a majority of the directors (or similar officials)
of a Person or the possession, by contract or otherwise, of the authority to
direct the management and policies of a Person.
1.3 Assets. All of the assets, properties, privileges,
rights, interests and claims, real and personal, tangible and intangible, of
every type and description that are owned, leased, held, used or useful in the
Cable Business in which Seller has any right, title or interest or in which
Seller acquires any right, title or interest on or before the Closing Time that
are not Excluded Assets, including the Tangible Personal Property, the Owned
Property, the Leased Property, the Other Real Property Interests, the System
Franchises, the System Licenses and the System Contracts, but excluding any
Excluded Assets. The Assets shall further and additionally include all assets
related to the cable advertising business of Seller located in Jonesboro d/b/a
TCI Media Services.
1.4 Basic Services. The lowest tier of service offered to
subscribers of a System.
1.5 Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and processes and all
files of correspondence, lists, records and reports concerning subscribers and
prospective subscribers of the Systems, signal and program carriage and
dealings with Governmental Authorities, including all reports filed
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by or on behalf of Seller with the FCC and statements of account filed by or on
behalf of Seller with the U.S. Copyright Office.
1.6 Business Day. Any day other than a Saturday, Sunday or a
day on which the banking institutions in Denver, Colorado or New York, New York
are required or authorized to be closed.
1.7 Cable Act. The Cable Communications Policy Act of 1984,
as amended, and the rules and regulations promulgated thereunder.
1.8 Cable Business. The cable television business and other
income-generating business conducted by Seller through the Systems.
1.9 Closing Time. 11:59 P.M., Mountain Time, on the Closing
Date.
1.10 Communications Act. The Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.11 Contract. Any contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right
or other instrument, document, obligation or agreement, whether written or
oral.
1.12 Environmental Law. Any Legal Requirement relating to
pollution or protection of public health, safety or welfare or the environment,
including those relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including ambient air,
surface water, ground water or land) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
1.13 Equivalent Basic Subscribers (or "EBSs"). As of any date
of determination and for each franchise area served by a System, the number
equal to the quotient of (a) the total monthly billings for sales of Basic
Services and Expanded Basic Services by such System during the most recent
month ended prior to the date of calculation (including billings to
single-family households and commercial and bulk subscribers, whether on a
discounted or undiscounted basis, but excluding billings in excess of a single
month's charges for any account), divided by (b) the standard monthly combined
rate (without discount of any kind) charged to single-family households for
Basic Services and Expanded Basic Services in effect during such month. For
purposes of calculating the number of EBSs, there will be excluded (i) all
billings to any subscriber who is more than 60 days' past due in the payment
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of any amount in excess of $10.00, (ii) all billings to any subscriber who, as
of the date of calculation, has not paid in full the charges for at least one
full month of service, (iii) that portion of the billings to each subscriber
representing an installation or other non-recurring charge, a charge for
equipment or for any outlet or connection other than the first outlet or first
connection in any single-family household or, with respect to a bulk account,
in any residential unit (e.g., an individual apartment or rental unit), a
charge for any tiered service other than Expanded Basic Service (whether or not
included within Pay TV), any charge for Pay TV or a pass-through charge for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the
like, (iv) all billings to any subscriber whose service is pending
disconnection for any reason and (v) all billings to any subscriber who was
solicited during the sixty day period preceding the Closing to purchase such
services by promotions or offers of discounts other than those then generally
being offered by the party for which the determination of EBSs is being made or
any of such party's Affiliates. For purposes of this definition, payments on
account of monthly billings will be deemed due on the first day of the period
for which the service to which such billings relate is provided.
1.14 ERISA. The Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder and
published interpretations with respect thereto.
1.15 ERISA Affiliate. As to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
single employer within the meaning of Section 4001 of ERISA.
1.16 Expanded Basic Services. Any video programming provided
over a cable television system, regardless of service tier, other than Basic
Services, any new product tier and video programming services offered on a per
channel or per program basis.
1.17 FCC. The Federal Communications Commission.
1.18 Governmental Authority. The United States of America, any
state, commonwealth, territory or possession of the United States of America
and any political subdivision or quasi-governmental authority of any of the
same, including any court, tribunal, department, commission, board, bureau,
agency, county, municipality, province, parish or other instrumentality of any
of the foregoing.
1.19 Hazardous Substances. (a) Any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (RCRA) (42
U.S.C.A. 6901 et seq.), as amended, and the rules and regulations promulgated
thereunder; (b) any "hazardous substance"
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as defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.A. 9601 et seq.) (CERCLA), as amended, and the
rules and regulations promulgated thereunder; (c) any substance regulated by
the Toxic Substances Control Act (TSCA) (42 U.S.C. 2601 et seq.), as amended,
and the rules and regulations promulgated thereunder; (d) asbestos or
asbestos-containing material of any kind or character; (e) polychlorinated
biphenyls; (f) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; (g) any substance the presence,
use, treatment, storage or disposal of which on Owned Property or Leased
Property is prohibited by any Environmental Law; and (h) any other substance
which by any Environment Law requires special handling, reporting or
notification of any Governmental Authority in its collection, storage, use,
treatment or disposal.
1.20 HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
1.21 Intangibles. All intangible assets, including subscriber
lists, accounts receivable, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
in the Cable Business.
1.22 Judgment. Any judgment, writ, order, injunction, award or
decree of any court, judge, justice or magistrate, including any bankruptcy
court or judge or the arbitrator in any binding arbitration, and any order of
or by any Governmental Authority.
1.23 Knowledge. The actual knowledge of a particular matter of
one or more of the executive officers of such party or the general manager or
one or more of the managers of such party's Systems.
1.24 Leased Property. The leaseholds of real property
described as Leased Property on SCHEDULE 1.24.
1.25 Legal Requirement. Applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
written standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority, including any Judgment.
1.26 Lien. Any security interest, security agreement,
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment,
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exception to or defect in title or other ownership interest (including but not
limited to reservations, rights of entry, possibilities of reverter,
encroachments, easements, rights-of-way, restrictive covenants, leases and
licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, System License,
System Franchise, System Contract or otherwise.
1.27 Litigation. Any claim, action, suit, proceeding,
arbitration, investigation, hearing or other activity or procedure that could
result in a Judgment and any notice of any of the foregoing.
1.28 Losses. Any claims, losses, liabilities, damages, Liens,
penalties, costs and expenses, including interest that may be imposed in
connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts, and the cost to any Person making a
claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect
to which indemnification is sought.
1.29 Owned Property. The fee interests in the real property
described as Owned Property on SCHEDULE 1.29 and all improvements thereon.
1.30 Pay TV. Premium programming services selected by and sold
to subscribers on a per channel or per program basis.
1.31 Permitted Lien. Any (a) Lien securing Taxes, assessments
and governmental charges not yet due and payable, (b) zoning law or ordinance
or any similar Legal Requirement, (c) right reserved to any Governmental
Authority to regulate the affected property, (d) as to Owned Property and Other
Real Property Interests, any Lien which is reflected in the public records and
that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Owned Property or Other Real Property
Interests as they are being used or operated or to convey good, marketable and
indefeasible fee simple title to the same, and (e) in the case of Leased
Property, the rights of the fee owner and any lien encumbering the fee interest
in such property; provided that "Permitted Lien" will not include any Lien
securing a debt or claim (other than inchoate materialmen's, mechanics,
workman's repairman's or other like liens arising in the ordinary course of
business or any lien described in clause (e) above) or any Lien which could
prevent or inhibit in any way the conduct of the business of the affected
System as it is currently being conducted, and provided further that
classification of any Lien as a "Permitted Lien" will not affect any liability
which Seller may have for any such Lien.
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1.32 Other Real Property Interests. The easements and rights
of access (other than those relating to multiple dwelling units) and other
interests in real property described as Seller Other Real Property Interests on
SCHEDULE 1.32.
1.33 Person. Any natural person, Governmental Authority,
corporation, general or limited partnership, limited liability company, joint
venture, trust, association or unincorporated entity of any kind.
1.34 Required Consents. Any and all consents, authorizations
and approvals required under the System Franchises, the System Licenses, the
leases and other documents evidencing the Leased Property or the Other Real
Property Interests and the System Contracts for (a) Seller to transfer the
Assets to Buyer, (b) Buyer to operate the Systems and to own, lease, use and
operate the Assets and the Systems at the places and in the manner in which the
Assets are used and the Systems are operated as of the date of this Agreement
and as of the Closing, and (c) Buyer to assume and perform the System
Franchises, the System Licenses, the leases and other documents evidencing
Leased Property or Other Real Property Interests and the System Contracts.
1.35 System Contracts. The pole line agreements, underground
conduit agreements, crossing agreements, multiple dwelling or commercial
service agreements and other Contracts (other than System Franchises) described
on SCHEDULE 1.35.
1.36 System Franchises. The franchises and similar
authorizations or permits described on SCHEDULE 1.36.
1.37 System Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, copyright notices and other licenses, authorizations, consents
or permits issued by the FCC or any other Governmental Authority (other than
those described on SCHEDULE 1.35) described on SCHEDULE 1.37.
1.38 Tangible Personal Property. All tangible personal
property, including towers, tower equipment, aboveground and underground cable,
distribution systems, headend amplifiers, line amplifiers, microwave equipment,
converters, testing equipment, motor vehicles, office equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are described on SCHEDULE 1.38.
1.39 Taxes. All levies and assessments of any kind or nature
imposed by any Governmental Authority, including all income, sales, use, ad
valorem, value added, franchise,
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severance, net or gross proceeds, withholding, payroll, employment, excise or
property taxes and levies or assessments related to unclaimed property,
together with any interest thereon and any penalties, additions to tax or
additional amounts applicable thereto
1.40 Third party. Any Person other than Seller and its
Affiliates or Buyer and its Affiliates.
1.41 Transaction Documents. The instruments and documents
described in Sections 9.2 and 9.3 which are being executed and delivered by or
on behalf of Buyer or Seller in connection with this Agreement or the
transactions contemplated hereby.
1.42 Other Definitions. The following terms are defined in
the Sections or Recitals indicated:
<TABLE>
<CAPTION>
Term Section or Recital
---- ------------------
<S> <C>
Action 11.4
Agreement First Paragraph
Antitrust Division 7.6
Assumed Obligations and Liabilities 4.1
Balance Sheet 6.10
Buyer Damages 11.5
Closing 9.1
Closing Date 9.1
Damages 11.6
East Arkansas Systems Recitals
Excluded Assets 4.2
Final Adjustment Report 3.3.2
Financial Statements 6.10
FTC 7.6
Indemnified Party 11.4
Indemnifying Party 11.4
Lawrence Partners' Systems Recitals
Plans 6.14.2
Prime Rate 12.10
Retained Employees 7.3.1
Seller Recitals
Seller Damages 11.6
Survival Period 11.1
Systems Recitals
Taking 12.16
Transitional Billing Services 7.12
WARN 6.14.1
</TABLE>
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<PAGE> 12
1.43 Accounting Terms. All accounting terms not otherwise
defined in this Agreement will have the meanings ascribed to them under
generally accepted accounting principles as in effect from time to time in the
United States.
SECTION 2. SALE OF ASSETS
Subject to the terms and conditions set forth in this Agreement, at the
Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all of
Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION
3.1 Base Purchase Price. Buyer will pay to Seller total cash
consideration of $52,000,000 (the "Base Purchase Price"), which will be paid by
wire transfer of immediately available funds on the Closing Date in
consideration of the sale of the Assets to Buyer.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will
be adjusted as follows:
3.2.1 Adjustments on a pro rata basis as of the Closing Date
will be made for all prepaid expenses (but only to the extent the full benefit
thereof will be realizable by Buyer within 12 months after the Closing Date),
accrued expenses (including real and personal property taxes), prepaid income,
subscriber prepayments and accounts receivable related to the Business, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all
expenses and income attributable to the Business for the period on and after
the Closing Date are for the account of Buyer. Seller will receive no credit
for any (a) accounts receivable any portion of which is 60 days or more past
due as of the Closing Date, (b) all accounts receivable resulting from
advertising sales any
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<PAGE> 13
portion of which is 120 days or more past due as of the Closing Date, or (c)
from subscribers whose accounts are inactive or whose service is pending
disconnection for any reason as of the Closing Date. Notwithstanding the
foregoing, no adjustment will be made for any items of income or expense which
relate to any Excluded Assets.
Buyer's account shall be credited for the amount of all advance
payments to, or funds of third parties on deposit with, Seller as of the
Closing Date, relating to the Business, including advance payments and deposits
by subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, will be assumed by Buyer and credited to
the account of Buyer.
Seller shall pay to Buyer the economic value of all accrued
vacation time permitted to be taken by any of Seller's former employees hired
by Buyer on and after the Closing Date pursuant to Section 7.3.6(a).
3.3 Determination of Adjustments. Preliminary and final adjustments
to the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at
least 10 Business Days prior to the Closing, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
adjustments referred to in Section 3.2, which are calculated as of the Closing
Date (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments made to or by Seller and deposits made
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer shall have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in Section
3.2 within such five Business Day period, Buyer and Seller shall negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The
estimate so agreed upon by Buyer and Seller or (if the parties do not reach
such an agreement on the estimated amount of the adjustments set forth in the
Preliminary Adjustments Report prior to the Closing Date or if Buyer fails to
provide a notice of disagreement with Seller's estimates of such adjustments
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<PAGE> 14
within the time provided) the estimates of such adjustments set forth in the
Preliminary Adjustments Report shall be the basis for determining the Base
Purchase Price.
3.3.2 Within 30 days after the Closing, Seller will deliver to
Buyer a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide
Seller with reasonable access to all records which Buyer has in its possession
and which are necessary for Seller to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments
Report, Buyer will give Seller written notice of Buyer's objections, if any, to
the Final Adjustments Report. If Buyer makes any such objection, the parties
will agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Such undisputed amounted will be paid to the applicable party within 10
days after such agreement. Any disputed amounts will be determined within 120
days after the Closing Date by the accounting firm of KPMG Peat Marwick, whose
determination will be conclusive. The amount determined by KPMG Peat Marwick
will be paid to the applicable party within 10 days after such determination.
Seller and Buyer will bear equally the fees and expenses payable to such firm
in connection with such determination. The payment required after
determination of all disputed amounts will be made by the responsible party by
wire transfer of immediately available funds to the other party within three
Business Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer
under this Agreement will be allocated among the Assets as set forth in a
schedule mutually agreed to by Buyer and Seller not later than 180 days after
the Closing Date (or April 1 of the year following the Closing Date if
earlier). Buyer and Seller agree to be bound by the allocation and will not
take any position inconsistent with such allocation and will file all returns
and reports with respect to the transactions contemplated by this Agreement,
including all federal, state and local tax returns, on the basis of such
allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS
4.1 Assumed Obligations and Liabilities. At the Closing,
Buyer will assume and after the Closing, Buyer will pay, discharge and perform
the following (the "Assumed
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<PAGE> 15
Obligations and Liabilities"): (a) those obligations and liabilities accruing
and relating to periods after the Closing Time under or with respect to the
Assets assigned and transferred to Buyer at the Closing; (b) those obligations
and liabilities to customers of the Business for (i) customer deposits held by
Seller as of the Closing Date and which are refundable, in the amount for which
Buyer received credit under Section 3.2, and (ii) customer, advertising and
other advance payments held by Seller as of the Closing Date, in the amount for
which Buyer received credit under Section 3.2; and (c) all other obligations
and liabilities accruing and relating to periods after the Closing Time and
arising out of Buyer's ownership of the Assets or operation of the Systems
after the Closing. Notwithstanding the foregoing, Buyer will not assume any
obligations or liabilities which relate to any Excluded Asset. All obligations
and liabilities, contingent, fixed or otherwise, arising out of or relating to
the Assets or the Systems other than the Assumed Obligations and Liabilities
will remain and be the obligations and liabilities solely of Seller, including
any obligation, liability or claims relating to or arising pursuant to (x) rate
refunds with respect to periods prior to Closing, (y) litigation commenced
prior to, or related to an event occurring prior to, the Closing Date, or (z)
credit, loan or other agreements pursuant to which Seller has created,
incurred, assumed or guaranteed indebtedness for borrowed money or under which
any Lien securing such indebtedness has been or may be imposed on any Assets.
4.2 Excluded Assets. "Excluded Assets" means all: (a)
programming and retransmission consent Contracts (other than those listed on
SCHEDULE 1.35); (b) Plans; (c) insurance policies and rights and claims
thereunder (except as otherwise provided in Section 12.16); (d) bonds, letters
of credit, surety instruments and other similar items; (e) cash and cash
equivalents; (f) Seller's trademarks, trade names, service marks, service
names, logos and similar proprietary rights; (g) subscriber billing Contracts
and related leased equipment; (h) all equipment, contracts or agreements for
or relating to the provision of direct satellite television programming to
subscribers by a System or any of its Affiliates; and (i) rights, assets and
properties described on SCHEDULE 4.2.
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SECTION 5. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as of the date of this
Agreement and as of the Closing, as follows:
5.1 Organization and Qualification of Buyer.
5.1.1 Buyer is a partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and use the assets owned,
leased or used by it. Buyer is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which the ownership, leasing or
use of the assets owned, leased or used by it or the nature of its activities
makes such qualification necessary, except in any such jurisdiction where the
failure to be so qualified and in good standing would not have a material
adverse effect on Buyer or on the ability of Buyer to perform its obligations
under this Agreement.
5.2 Authority and Validity. Buyer has all requisite power
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which it is a party. The execution and delivery by Buyer, the
performance of Buyer under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Buyer is
a party have been duly and validly authorized by all action by or on behalf of
Buyer. This Agreement has been, and when executed and delivered by Buyer the
Transaction Documents will be, duly and validly executed and delivered by Buyer
and the valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required
Consents and the HSR notification, the execution and delivery by Buyer, the
performance of Buyer under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Buyer is
a party do not and will not: (a) conflict with or violate any provision of its
partnership agreement; (b) violate any provision of any Legal Requirement; (c)
require any consent, approval or authorization of, or filing of any
certificate, notice, application, report or other document with, any
Governmental Authority or other Person; or (d) (i) conflict with, violate,
result in a breach of or constitute a default under (without regard to
requirements of notice, lapse of time or elections of other Persons or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Buyer under, (iv) result in the
creation or imposition of any Lien under, any instrument or other agreement to
which Buyer is a party by which Buyer or any of its assets is bound or
affected, except for purposes of this clause (d) such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications and accelerations
as would not, individually or in the aggregate, have a material adverse effect
on Buyer or on the ability of Buyer to perform its obligations under this
Agreement or the Transaction Documents to which Buyer is a party.
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<PAGE> 17
5.4 Finders and Brokers. Except for Daniels & Associates,
Buyer has not employed any financial advisor, broker or finder or incurred any
liability for any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by this Agreement
for which Seller could be liable.
SECTION 6. SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as of the date of this Agreement and as
of the Closing, as follows (provided, however, that, as of the date of this
Agreement, each of the following representations and warranties are subject to,
and further qualified by, any disclosures made by Seller in the schedules to be
prepared and attached hereto after the date hereof pursuant to Section 7.10,
and further provided, that, unless otherwise indicated, each Seller represents
and warrants to Buyer only with respect to the Assets owned by it and the Cable
Business conducted by it as of the date of this Agreement or as of the date of
the Closing, and further provided, that, if the Contribution occurs prior to
the Closing, any representation or warranty made by Lawrence Partners shall be
made as of the date of this Agreement and not as of Closing):
6.1 Organization and Qualification of Seller. East Arkansas
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Arkansas and Lawrence Partnership is a partnership
duly organized and validly existing under the law of the State of Colorado and
each have all requisite corporate or partnership power and authority to own,
lease and use the Assets owned, leased or used by it and to conduct the Cable
Business as it is currently conducted by it. Each of East Arkansas and
Lawrence Partnership is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which the ownership, leasing or use of
the Assets owned, leased or used by it or the nature of its activities in
connection with the Systems owned by it makes such qualification necessary,
except in any such jurisdiction where the failure to be so qualified and in
good standing would not have a material adverse effect on the ownership or
operation of the Cable Business, the Assets or Systems or on the ability of
Seller to perform its obligations under this Agreement.
6.2 Authority and Validity. Seller has all requisite
corporate or partnership (as applicable) power and authority to execute and
deliver, to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller
is a party. The execution and delivery by Seller, the performance of Seller
under, and the consummation by Seller of the transactions contemplated by, this
Agreement and the Transaction Documents to which Seller is a party have been
duly and
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validly authorized by all action by or on behalf of Seller. This Agreement has
been, and when executed and delivered by Seller the Transaction Documents will
be, duly and validly executed and delivered by Seller and the valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors' rights generally or by principles governing
the availability of equitable remedies.
6.3 No Conflict; Required Consents. Except for the Required
Consents, all of which are listed on SCHEDULE 6.3, and the HSR notification,
the execution and delivery by Seller, the performance of Seller under, and the
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Seller is a party do not and will not: (a)
conflict with or violate any provision of its charter, bylaws or partnership
agreement, as applicable, (b) violate any provision of any Legal Requirement;
(c) require any consent, approval or authorization of, or filing of any
certificate, notice, application, report or other document with, any
Governmental Authority or other Person; or (d) (i) conflict with, violate,
result in a breach of or constitute a default under (without regard to
requirements of notice, lapse of time or elections of other Persons or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Lien under any System Contract or other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Cable Business or Seller or on the ability of
Seller to perform its obligations under this Agreement or the Transaction
Documents to which Seller is a party.
6.4 Assets.
6.4.1 Seller has exclusive, good and marketable title to
(or, in the case of Assets that are leased, valid leasehold interests in) the
Assets (other than Owned Property, Leased Property and Other Real Property
Interests, as to which representations and warranties in Section 6.6 apply).
The Assets are free and clear of all Liens, except (a) Permitted Liens (b)
Liens described on SCHEDULE 6.4, all of which will be terminated, released or,
in the case of rights of first refusal listed on SCHEDULE 6.4, waived, as
appropriate, at or prior to the Closing. Except as described on SCHEDULE 1.38,
the Tangible Personal Property is in good operating condition and repair
(ordinary wear and tear excepted).
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6.4.2 Except for items included in the Excluded Assets,
the Assets constitute all the assets necessary to permit Buyer to conduct the
Cable Business and to operate the Systems substantially as they are being
conducted and operated on the date of this Agreement and in compliance with all
applicable Legal Requirements and Contracts and to perform all of the Assumed
Obligations and Liabilities.
6.4.3 To the Knowledge of Seller, no third party has been
granted or applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Cable Business.
6.5 System Franchises, System Licenses, System Contracts and
Other Real Property Interests.
6.5.1 Except as described on SCHEDULES 1.24, 1.32, 1.35,
1.36 and 1.37 OR 4.2, Seller is not bound or affected by any of the following
that relate primarily or in whole to the Cable Business: (a) leases of real or
personal property; (b) franchises for the construction or operation of cable
television systems or Contracts of substantially equivalent effect; (c) other
licenses, authorizations, consents or permits of the FCC or any other
Governmental Authority; (d) material easements or rights of access; (e)
material pole line and joint line agreements, underground conduit agreements,
crossing agreements or bulk or commercial service agreements; or (f) Contracts
relating to the operation of the Cable Business other than those described in
any other clause of this Section 6.5.1 which contemplate payments by or to
Seller in any 12-month period exceeding $10,000 individually or $100,000 in the
aggregate.
6.5.2 Complete and correct copies of the System
Franchises and System Licenses have been delivered by Seller to Buyer. The
System Franchises and System Licenses are currently in full force and effect,
are not in default and are valid under all applicable Legal Requirements
according to their terms. There is no legal action, governmental proceeding or
investigation, pending or to Seller's Knowledge threatened, to terminate,
suspend or modify any System Franchises and System Licenses and Seller is in
compliance with the terms and conditions of all the System Franchises and
System Licenses and with other applicable requirements of all Governmental
Authorities (including the FCC and the Register of Copyrights) relating to the
System Franchises and System Licenses, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
6.5.3 Complete and correct copies of all System Contracts
(including Contracts relating to Leased Property and Other Real Property
Interests) have been provided
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to Buyer. Such documents constitute the entire agreement with the other party.
Each such System Contract is in full force and effect and constitutes the
valid, legal, binding and enforceable obligation of Seller and Seller is not
and to Seller's Knowledge, each other party thereto is not in breach or default
of any terms or conditions thereunder.
6.6 Real Property. All the Assets consisting of Owned
Property, Leased Property and Other Real Property Interests are described on
SCHEDULES 1.24, 1.32 and 1.29. Except as otherwise disclosed on SCHEDULES
1.24, 1.32 and 1.29, Seller holds good, marketable and indefeasible fee simple
title to the Owned Property and the valid and enforceable right to use and
possess such Owned Property, subject only to Permitted Liens. Seller has valid
and enforceable leasehold interests in all Leased Property and, with respect to
Other Real Property Interests the valid and enforceable right to use all Other
Real Property Interests subject only to Permitted Liens. Except for routine
repairs, all of the material improvements, leasehold improvements and the
premises of the Owned Property and the premises demised under the leases and
other documents evidencing the Leased Property are in good condition and repair
and are suitable for the purposes used. Each parcel of Owned Property and each
parcel of Leased Property and any improvements thereon and their current use
(a) has access to and over public streets or private streets for which Seller
has a valid right of ingress and egress, (b) conforms in its current use and
occupancy to all material zoning requirements without reliance upon a variance
issued by a Governmental Authority or a classification of the parcel in
question as a nonconforming use and (c) conforms in its use to all restrictive
covenants, if any, or other Liens affecting all or part of such parcel.
6.7 Environmental.
6.7.1 The Owned Property and Leased Property comply with
all Environmental Laws. Seller has not generated, released, stored, used,
treated, handled, discharged or disposed of any Hazardous Substances at, on,
under, in or about, or in any other manner affecting, any Owned Property or
Leased Property, transported any Hazardous Substances to or from any Owned
Property or Leased Property or discharged any Hazardous Substances from any
Owned Property or Leased Property into any body of water, directly or
indirectly or undertaken or caused to be undertaken any other activities
relating to the Owned Property or Leased Property, which would support a claim
or cause of action under any Environmental Law and, to Seller's Knowledge, no
other present or previous owner, tenant, occupant or user of any Owned Property
or Leased Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, no release of Hazardous Substances outside
the Owned Property or Leased Property has entered or threatens to enter any
Owned Property or Leased Property, nor is there any pending or threatened
claim based on Environmental Laws which arises from any condition of the land
surrounding any Owned
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<PAGE> 21
Property or Seller Leased Property. No claim or investigation based on
Environmental Laws which relates to any Owned Property or Leased Property or
any operations or conditions on it (a) has been asserted or conducted in the
past or is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (b) to Seller's Knowledge, is threatened or
contemplated.
6.7.2 To Seller's Knowledge, (a) no underground storage
tanks are currently or have been located on any Owned Property or Leased
Property, (b) no Owned Property or Leased Property has been used at any time
as a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Owned Property or Leased Property
contains asbestos or asbestos-containing material.
6.7.3 Seller has provided Buyer with complete and correct
copies of (a) all studies, reports, surveys or other materials in Seller's
possession or to which Seller has access relating to the presence or alleged
presence of Hazardous Substances at, on or affecting the Owned Property or
Leased Property, (b) all notices or other materials in Seller's possession or
to which Seller has access that was received from any Governmental Authority
having the power to administer or enforce any Environmental Laws relating to
current or past ownership, use or operation of the Owned Property or Leased
Property or activities at the Owned Property or Leased Property and (c) all
materials in Seller's possession or to which Seller has access relating to any
claim, allegation or action by any private third party under any Environmental
Law.
6.8 Compliance with Legal Requirements.
6.8.1 The ownership, leasing and use of the Assets as
they are currently owned, leased and used and the conduct of the Cable Business
and the operation of the Systems as they are currently conducted and operated
do not violate or infringe in any material respect any Legal Requirements
currently in effect (other than Legal Requirements described in Section 6.8.4,
as to which the representations and warranties set forth in that subsection
shall apply). Seller has received no notice of any violation by Seller or the
Business of any Legal Requirement applicable to the operation of the Cable
Business as currently conducted, or the Systems as currently operated and to
its Knowledge, there is no basis for the allegation of any such violation.
6.8.2 A valid request for renewal has been duly and
timely filed under Section 626 of the Communications Act with the proper
Governmental Authority with respect to all System Franchises that have expired
prior to or will expire within 36 months after the date of this Agreement.
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6.8.3 Seller has complied and the Cable Business is in
compliance, in all material respects, with the specifications set forth in Part
76, Subpart K of the rules and regulations of the FCC, Section 111 of the U.S.
Copyright Act of 1976 and the applicable rules and regulations thereunder and
the applicable rules and regulations of the U.S. Copyright Office, the Register
of Copyrights, the Copyright Royalty Tribunal and the Communications Act,
including provisions of any thereof pertaining to signal leakage, to utility
pole make ready and to grounding and bonding of cable television systems (in
each case as the same is currently in effect), and all other applicable Legal
Requirements relating to the construction, maintenance, ownership and operation
of the Assets, the Systems and the Cable Business.
6.8.4 Notwithstanding the foregoing, Seller has used
reasonable good faith efforts to comply in all material respects with the
provisions of the 1992 Cable Act as such Legal Requirements relate to the
operation of the Cable Business. Seller has complied in all material respects
with the must carry and retransmission consent provisions of the 1992 Cable
Act. Seller has established rates charged to subscribers, effective since
September 1, 1993, that are or were allowable under the 1992 Cable Act and any
authoritative interpretation thereof now or then in effect, whether or not such
rates are or were subject to regulation at that date by any Governmental
Authority, including any local franchising authority and/or the FCC, unless
such rates were not subject to regulation pursuant to a specific exemption from
rate regulation contained in the 1992 Cable Act other than the failure of any
franchising authority to have been certified to regulate rates. Seller has
delivered to Buyer complete and correct copies of all FCC Forms 393, 1200,
1205, 1210, 1215, 1220, 1225, 1235 and 1240 filed with respect to the Systems,
copies of all other FCC Forms filed by Seller and of all correspondence with
any Governmental Authority relating to rate regulation generally or specific
rates charged to subscribers with respect to Systems, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the Systems, and any other documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by Seller with respect
to any of the Systems. Seller has received no notice from any Governmental
Authority with respect to an intention to enforce customer service standards
pursuant to the 1992 Cable Act and Seller has not agreed with any Governmental
Authority to establish customer service standards that exceed the standards in
the 1992 Cable Act. Seller has not made any Cost of Service Election with
respect to any of the Systems.
6.9 Patents, Trademarks and Copyrights. Seller has timely
and accurately made all requisite filings and payments with the Register of
Copyrights. Seller has delivered to Buyer complete and correct copies of all
current reports and filings for the past three years, made or filed pursuant to
copyright rules and regulations with respect to the Business. Seller does not
possess any patent, patent right, trademark or copyright related to or material
to the operation of the Systems and Seller is not a party to any license or
royalty agreement with
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respect to any such patent, trademark or copyright, except for licenses
respecting program material and obligations under the Copyright Act of 1976
applicable to cable television systems generally. The Systems and Cable
Business have been operated in such a manner so as not to violate or infringe
upon the rights, or give rise to any rightful claim of any Person for
copyright, trademark, service mark, patent or license infringement or the like.
6.10 Financial Statements; Undisclosed Liabilities. Seller has
delivered to Buyer complete and correct copies of (i) the internally generated
unaudited balance sheets of Seller and related statements of income for and as
of the year ended December 31, 1995 and (ii) the internally generated unaudited
balance sheets and the related unaudited statements of income for each quarter
ending on and after March 31, 1996 (all of such financial statements and notes
being hereinafter referred to as the "Financial Statements"). The Financial
Statements are in accordance with the books and records of Seller, and, except
as may be described therein, present fairly the financial condition of Seller
at the dates and for the periods indicated. The unaudited Balance Sheet as of
September 30, 1996 of Seller is herein called the "Balance Sheet." At the
date of the Balance Sheet, Seller had no material liabilities required by
generally accepted accounting principles to be reflected or reserved against
therein that were not fully reflected or reserved against on the Balance Sheet,
other than liabilities set forth on SCHEDULE 6.10.
6.11 Absence of Certain Changes or Events. Except as set forth
on SCHEDULE 6.10, since the date of the Balance Sheet: (a) Seller has not
incurred any obligation or liability (contingent or otherwise), except normal
trade or business obligations incurred in the ordinary course of business, the
performance of which will not, to Seller's Knowledge, individually or in the
aggregate, have a material adverse effect on the financial condition Seller or
results of operations of Seller or the Cable Business; (b) there has been no
material adverse change in the business, condition, financial or otherwise, or
liabilities of the Cable Business and, to Seller's Knowledge, no fact or
condition exists or is contemplated or threatened which would result in such a
change in the future; and the Cable Business has been conducted only in the
ordinary course of business. For the purpose of this Agreement, the impact on
the Seller of events which affect the cable industry as a whole in the States
of Arkansas or Missouri or the United States, shall not be considered in
determining whether there has been a material adverse change in the business,
financial or other condition or liabilities of the Cable Business.
6.12 Litigation. Except as set forth in SCHEDULE 6.12: (i)
there is no Litigation pending or, to Seller's Knowledge, threatened, by or
before any Governmental Authority or private arbitration tribunal against
Seller which, if adversely determined, would materially adversely affect the
financial condition or operations of the Cable Business, the Systems, the
Assets or the ability of Seller to perform its obligations under this
Agreement, or which, if
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adversely determined, would result in the modification, revocation,
termination, suspension or other limitation of any of the System Franchises,
System Licenses, System Contracts or leases or other documents evidencing the
Leased Property or the Other Real Property Interests; and (ii) there is not in
existence any Judgment requiring Seller to take any action of any kind with
respect to the Assets or the operation of the Systems, or to which Seller, the
Systems or the Assets are subject or by which they are bound or affected.
6.13 Tax Returns; Other Reports. Seller has duly and timely
filed in correct form all federal, state, local and foreign Tax returns and
other Tax reports required to be filed by Seller, and has timely paid all Taxes
which have become due and payable, whether or not so shown on any such return
or report, the failure of which to be filed or paid could affect or result in
the imposition of a Lien upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Seller has received no notice of, nor does Seller have any Knowledge of, any
deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any taxing Governmental Authority which could affect or result in the
imposition of a Lien upon the Assets.
6.14 Employment Matters.
6.14.1 SCHEDULE 6.14 contains a complete and correct list
of the names and positions of all employees engaged in the Business. Seller
has complied in all material respects with all applicable Legal Requirements
relating to the employment of labor, including, the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. 2101, et seq. ("WARN"), ERISA,
continuation coverage requirements with respect to group health plans and those
relating to wages, hours, collective bargaining, unemployment insurance,
worker's compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of Taxes.
6.14.2 Each employee benefit plan (as defined in Section
3(3) of ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA)
with respect to which Seller or any of its ERISA Affiliates has any liability
or in which any employees or agents, or any former employees or agents, of
Seller or any of its ERISA Affiliates participate is set forth in SCHEDULE 6.14
(the " Plans"). Neither Seller, any of its ERISA Affiliates nor any Plan is in
material violation of any provision of ERISA. No "reportable event" (as
defined in Section 4043 of ERISA) has occurred and is continuing with respect
to any Plan and no "prohibited transaction" (as defined in Section 406 of
ERISA) has occurred with respect to any Plan which would result in material
liability to Seller or any of its ERISA Affiliates. No material "accumulated
funding deficiency" or "withdrawal liability" (as defined in Section 302 of
ERISA) exists with respect to any Plan. After the Closing, Seller will not be
required, under
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ERISA, the Code or any collective bargaining agreement, to establish, maintain
or continue any Plan currently maintained by Buyer or any of its ERISA
Affiliates.
6.14.3 Except as set forth on SCHEDULE 6.14, there are no
collective bargaining agreements applicable to any Person employed by Seller
that render services in connection with the Systems and Seller has no duty to
bargain with any labor organization with respect to any such Person. There are
not pending any unfair labor practice charges against Seller, any demand for
recognition or any other request or demand from a labor organization for
representative status with respect to any Person employed by Seller that render
services in connection with the Systems or any effort by any labor organization
to obtain representative status. Except as described on SCHEDULE 6.14, Seller
has no employment agreements, either written or oral, with any employee of the
Systems and none of the employment agreements listed on SCHEDULE 6.14 requires
Buyer to employ any Person after the Closing.
6.15 Systems Information. SCHEDULE 6.15 sets forth a
materially true and accurate description of the following information relating
to the Cable Business as of recent date prior to the date of this Agreement:
(a) the number of single family homes and residential
dwelling units passed by the Systems;
(b) the number of miles of plant included in the Assets
and the channel capacity of such plant;
(c) the number of subscribers served by the Systems;
(d) the cities, towns, townships, villages, boroughs and
counties served by the Systems;
(e) a description of basic and optional or tier services
available from the Systems, the rates charged by Seller for each and the number
of EBSs receiving each optional or tier service; and
(f) the stations and signals carried by the Systems and
the channel position of each such signal and station.
6.16 Finders and Brokers. Except for Daniels & Associates,
Seller has not employed any financial advisor, broker or finder or incurred any
liability for any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by this Agreement
for which Buyer could be liable.
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6.17 Disclaimer of Warranty. Buyer acknowledges and agrees
that Seller shall not be liable for or bound in any manner by, and Buyer has
not relied upon, any express or implied, oral or written, information,
warranty, guaranty, promise, statement, inducement, or representation
pertaining to the Cable Business, the Assets and operations, prospects, income,
expense, or liabilities of the Cable Business or the Systems except as is
expressly set forth in this Section 6, elsewhere in this Agreement or in the
Original Schedules to be attached hereto. Buyer has conducted its own
inspection of the Cable Business and the Systems to its own satisfaction and
has independently investigated, analyzed, and appraised the condition, value,
prospects, and profitability thereof and the risk associated therewith.
SECTION 7. ADDITIONAL COVENANTS
7.1 Access to Premises and Records. Between the date of this
Agreement and the Closing Date, Seller will give to Buyer and its counsel,
accountants and other representatives full access during normal business hours
to all the premises and books and records of the Cable Business and to all of
Seller's Assets and Systems' personnel; and will furnish to Buyer and such
representatives all such documents, financial information and other information
regarding the Cable Business and the Assets as Buyer from time to time
reasonably may request; provided that no investigation will affect or limit the
scope of any of the representations, warranties, covenants and indemnities of
Seller in this Agreement or in any Transaction Document or limit liability for
any breach of any of the foregoing.
7.2 Continuity and Maintenance of Operations; Certain
Deliveries and Notices. Except as the Buyer may otherwise consent in writing,
between the date of this Agreement and the Closing, Seller:
7.2.1 will conduct the Cable Business and operate the
Systems only in the usual, regular and ordinary course and consistent with past
practices (including but not limited to making capital expenditures and
fulfilling installation requests) and, to the extent consistent with such
conduct and operation, use its commercially reasonable efforts to (i) preserve
its current business intact in all material respects, including preserving
existing relationships with franchising authorities, suppliers, customers and
others having business dealings with the Systems, unless Buyer requests
otherwise, (ii) use commercially reasonable efforts to keep available the
services of its employees and agents providing services in connection with the
Cable Business and (iii) continue making normal marketing, advertising and
promotional expenditures with respect to the Cable Business;
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7.2.2 will maintain the Assets in good repair, order and
condition, ordinary wear and tear excepted, will maintain equipment and
inventory for the Systems at normal historical levels consistent with past
practices, but, as of the Closing Date, there shall not be less than that
amount of equipment and inventory necessary to operate the Systems for a period
of thirty days after Closing assuming normal use and operations; will maintain
in full force and effect, policies of insurance with respect to the Cable
Business, in such amounts and with respect to such risks as is customarily
maintained by operators of cable television systems of the size and geographic
location of the Systems and will maintain its books, records and accounts with
respect to the Assets and the operation of the Systems in the usual, regular
and ordinary manner on a basis consistent with past practices;
7.2.3 will not (i) modify, terminate, renew, suspend or
abrogate any System Contract other than retransmission consents or programming
System Contracts other than in the ordinary course of business, (ii) modify,
terminate, renew, suspend or abrogate any retransmission consent or programming
System Contract, System Franchise, lease or document evidencing Leased Property
or Other Real Property Interests or System License, (iii) take or omit to take
any action that would result in any of its representations and warranties in
this Agreement or in any Transaction Document not being true and correct in all
material respects when made or at the Closing, (iv) engage in any marketing,
subscriber installation or collection practices that are inconsistent with its
past practices; (v) except in the ordinary and normal course of business,
change the rate charged for any level of Basic Services, Expanded Basic
Services, or any Pay TV or add, delete, retier or repackage any programming
services except to the extent required under the 1992 Cable Act or any other
Legal Requirement; provided however if rates are changed in order to so comply,
Seller will provide Buyer with copies of any FCC forms (even if not filed with
any Governmental Authority) that Seller used to determine that the new rates
were allowable, (vi) make any Cost of Service Election, (vii) enter into any
agreement with or commitment to any competitive access providers with respect
to the System, or (viii) sell, transfer or assign any portion of the Assets
other than sales in the ordinary course of business or permit the creation of a
Lien on any Asset;
7.2.4 will promptly deliver to Buyer true and complete
copies of all monthly and quarterly financial statements and operating reports
and any reports with respect to the operation of the Cable Business prepared by
or for Seller at any time from the date of this Agreement until the Closing;
7.2.5 will give or cause to be given to Buyer and its
counsel, accountants and other representatives, as soon as reasonably possible
but in any event prior to the date of submission to the appropriate
Governmental Authority, copies of all FCC Forms 1200, 1205, 1210, 1215, 1220,
1225, 1235 and 1240 or any other FCC forms required to be
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filed with any Governmental Authority under the 1992 Cable Act and prepared
with respect to any of the Systems, such forms to be reasonably satisfactory in
form and substance to Buyer;
7.2.6 will duly and timely file a valid notice of renewal
under Section 626 of the Cable Act with the appropriate Governmental Authority
with respect to any System Franchise that will expire within 36 months after
any date between the date of the Agreement and the Closing Date; and
7.2.7 will promptly notify Buyer of any fact,
circumstance, event or action by it or otherwise (i) which, if known at the
date of this Agreement, would have been required to be disclosed in or pursuant
to this Agreement or (ii) the existence, occurrence or taking of which would
result in any of its representations and warranties in this Agreement or in any
Transaction Document not being true, complete and correct in all material
respects when made or at the Closing, and, with respect to clause (ii), use its
commercially reasonable efforts to remedy the same.
7.3 Employees.
7.3.1 Buyer may, but shall have no obligation to, employ
or offer employment to any employee of the Cable Business. Not less than 45
days' prior to the Closing, Seller shall provide to Buyer a list of all active
employees of the Systems excluding all employees subject to a collective
bargaining agreement or represented by a labor organization, if any, as of a
recent date, showing then-current positions and rates of compensation and
indicating which of such employees Seller desires to retain as its employees
(the "Retained Employees). Within 10 days after receipt of this list, Buyer
will provide to Seller in writing a list of employees Buyer or its Affiliates
desires to employ following the Closing, which list shall not include any
Retained Employees. As of the Closing Date, Seller shall terminate the
employment of all its employees who were employed incidental to the conduct of
the Cable Business other than Retained Employees.
7.3.2 Seller will pay or cause to be paid to all
employees employed in the Cable Business all compensation, including salaries,
commissions, bonuses, deferred compensation, severance, insurance, pensions,
profit sharing, vacation (other than vacation which is allowed to be carried
over pursuant to Section 7.3.6(a)), sick pay and other compensation or benefits
to which they are entitled for periods prior to the Closing, including, without
limitation, all amounts, if any, payable on account of the termination of their
employment. Seller agrees to cooperate in all reasonable respects with Buyer
to allow Buyer to evaluate and interview employees of the Cable Business to
make hiring decisions.
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7.3.3 Seller will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as defined in
ERISA) maintained by Seller pursuant to the provisions of such plans. Buyer
will not assume any obligation or liability for any such accrued benefits nor
any fiduciary or administrative responsibility to account for or dispose of any
such accrued benefits under any employee benefit plans maintained by Seller.
7.3.4 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Seller or arising under any Legal Requirement affecting
employees of Seller incurred on or before the Closing Date or resulting from or
arising from events or occurrences occurring or commencing on or before the
Closing Date will remain the responsibility of Seller, whether or not such
employees are hired by Buyer after the Closing. Buyer will not have and assume
any obligation or liability under or in connection with any such plan.
7.3.5 Seller will remain solely responsible for, and
will indemnify and hold harmless Buyer from and against all Losses arising from
or with respect to, all salaries and all severance, vacation, medical, sick,
holiday, continuation coverage and other compensation or benefits to which its
employees may be entitled, whether or not such employees may be hired by the
Buyer, as a result of their employment by it prior to the Closing Time, the
termination of their employment prior to the Closing Time, the obligation, if
any, to notify and/or bargain with any labor organization, the consummation of
the transactions contemplated hereby or pursuant to any applicable Legal
Requirement (including without limitation WARN) or otherwise relating to their
employment prior to the Closing Time.
7.3.6 Notwithstanding anything to the contrary herein,
any employee of Seller (other than a Retained Employee) which is offered
employment by Buyer and accepts such offer of employment prior to the Closing
Date (a) shall be entitled to vacation to which they are entitled at the
Closing Date as employees of Seller; provided, however, that the amount of
vacation permitted to be carried over by such employees shall be limited to the
maximum amount of vacation permitted to be taken by employees of Buyer in
accordance with Buyer's standard practices; (b) shall be entitled to
participate in Buyer's employee benefit plans to the same extent as similarly
situated employees of Buyer and their dependents; (c) shall receive credit for
such employee's past service with the Seller as of the Closing Time for
purposes of eligibility and vesting under Buyer's employee benefit and other
plans to the same extent as other similarly situated employees of Buyer; and
(d) shall not be subject to any waiting periods or limitations on benefits for
pre-existing conditions under Buyer's employee benefit plans, including any
group health plans, except to the extent such employees were subject to such
limitations under Seller's employee benefit plans.
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7.3.7. If Buyer discharges without cause within 90 days
after Closing any former employees of Seller hired by Buyer at Closing, and
such employees would have been entitled to severance payments pursuant to
Seller's severance benefits plan if such employees had been discharged without
cause by Seller in accordance with Section 7.3.1 and not hired by Buyer as of
Closing, then Buyer shall pay severance benefits to such employees in
accordance with Seller's severance benefit plan to the extent such plan would
have paid severance to any such employees.
7.3.8 Nothing in this Section 7.3 or elsewhere in this
Agreement shall be deemed to make any employee of the parties a third party
beneficiary of this Agreement.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay
the remaining balances on any leases for vehicles or capital leases included in
its Tangible Personal Property and will deliver title to such vehicles and
other Tangible Personal Property free and clear of all Liens (other than
Permitted Liens) to Buyer at the Closing.
7.5 Required Consents, Estoppel Certificates, Franchise
Renewal. Seller will use its commercially reasonable efforts to obtain in
writing as promptly as possible and at its expense, all the Required Consents
and any other consent, authorization or approval required to be obtained by
such party in connection with the transactions contemplated by this Agreement,
reasonably satisfactory in form and substance to the other, and deliver to
Buyer copies of such Required Consents and such other consents, authorizations
or approvals promptly after they are obtained by Seller; provided, however,
that Seller will afford Buyer the opportunity to review, approve and revise the
form of Required Consent prior to delivery to the party whose consent is
sought. Seller will cooperate with Buyer to obtain all Required Consents, but
Seller will not be required to accept or agree or accede to any modifications
or amendments to, or the imposition of any condition to the transfer of, any of
the System Franchises, System Licenses, System Contracts or leases or documents
evidencing Leased Property or Other Real Property Interests of the Cable
Business that are not acceptable to Seller. Notwithstanding the foregoing, as
soon as practicable after the date of this Agreement, but in any event no later
than 20 days after the date of this Agreement, the parties will cooperate with
each other to complete, execute and deliver, or cause to be completed, executed
and delivered to the appropriate Governmental Authority, an FCC Form 394 with
respect to each System Franchise as to which such Form 394 is required. Seller
will also use its best efforts to obtain, at its expense, such estoppel
certificates or similar documents from lessors and other Persons who are
parties to System Contracts as Buyer may request.
7.5.1 Seller will use commercially reasonable efforts to
obtain and cooperate with Buyer to obtain renewals or extensions of any System
Franchise for which a valid notice
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of renewal pursuant to the formal renewal procedures established by Section 626
of the Cable Act has not been timely delivered to the appropriate Governmental
Authority for a period expiring no earlier than three years after the Closing
Date.
7.5.2 Notwithstanding the foregoing, Seller will not have
further obligation to obtain Required Consents; (a) with respect to license
agreements relating to pole attachments where the licensing party will not
consent to an assignment of such license agreement but requires that Buyer
enter into a new agreement with such licensing authority, in which case Buyer
shall use its best efforts to enter into such agreement as soon as possible and
Seller will cooperate with and assist Buyer in obtaining such agreements;
provided however that Buyer's commercially reasonable efforts shall not require
the Buyer to take any action of the type that Buyer is not required to take
pursuant to this Section; and (b) for any business radio license which Seller
reasonably expects can be obtained within 120 days after the Closing and so
long as a temporary authorization is available to Buyer under FCC rules with
respect thereto.
7.6 HSR Notification. As soon as practicable after the
execution of this Agreement, but in any event no later than 40 days after such
execution, Buyer and Seller will each complete and file, or cause to be
completed and filed, any notification and report required to be filed under the
HSR Act and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The parties shall use their reasonable best
efforts to respond as promptly as reasonably practicable to any inquiries
received from the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") for additional
information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Authority in connection with antitrust matters. The parties shall use their
respective reasonable best efforts to overcome any objections which may be
raised by the FTC, the Antitrust Division or any other Governmental Authority
having jurisdiction over antitrust matters. Each of the parties will cooperate
to prevent inconsistencies between their respective filings and will furnish to
each other such necessary information and reasonable assistance as the other
may reasonably request in connection with its preparation of necessary filings
or submissions under the HSR Act. Notwithstanding the foregoing, no party
shall be required to make any significant change in the operations or
activities of the business (or any material assets employed therein) of such
party or any of its Affiliates, if a party determines in good faith that such
change would be materially adverse to the operations or activities of the
business (or any material assets employed therein) of such party or any of its
Affiliates having significant assets, net worth or revenue. Notwithstanding
anything to the contrary in this Agreement if either party determines in its
reasonable business judgment that a request for additional data and information
in connection with the HSR Act is unduly burdensome, either party may terminate
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this Agreement by notifying the other party. Buyer and Seller shall each pay
one-half of the HSR filing fee.
7.7 Transfer Taxes. All sales, use or excise Taxes arising
from or payable by reason of the transfer of any of the Assets will be shared
equally by Seller and Buyer. All transfer and similar Taxes or assessments,
including transfer fees and similar assessments for or under System Franchises,
System Licenses and System Contracts, arising from or payable by reason of the
conveyance of the Assets will be paid by Seller.
7.8 Noncompetition. At the Closing, Seller will execute and
deliver to Buyer a Noncompetition Covenant, in the form attached hereto as
EXHIBIT 7.8.
7.9 Programming. Seller will execute and deliver such
documents and take such action as may be reasonably requested by Buyer to
enable Buyer to comply with the requirements of its programming agreements with
respect to divestitures and acquisitions of cable television systems; provided,
however, that Seller will not be required to provide specific programming or
channels or to assume any liability with respect to or in connection with
Buyer's programming agreements.
7.10 Schedules. Not less than 45 days after the date of this
Agreement, Seller will prepare and deliver to Buyer copies of each of the
disclosure Schedules to be attached hereto (the "Original Schedules"). Buyer
may terminate this Agreement no later than ten days after receipt of the
Schedules if in the commercially reasonable judgment of the Buyer, the
Schedules disclose a fact or facts that materially affect the value of the
Systems.
Not less than five Business Days prior to Closing, Seller will
deliver to Buyer revised copies of each of the Original Schedules which shall
have been updated and marked to show any changes occurring between the date of
the delivery of the Original Schedules prepared by Seller and the date of
delivery of the updated Schedules; provided, however, that for purposes of
Seller's representations and warranties and covenants in this Agreement, all
references to the Schedules will mean the Original Schedules, and provided
further that if the effect of any such updates to the Original Schedules is to
disclose any one or more additional properties, privileges, rights, interests
or claims as Assets, Buyer, at or before Closing, will have the right (to be
exercised by written notice to Seller) to cause any one or more of such items
to be designated as and deemed to constitute Excluded Assets for all purposes
under this Agreement.
7.11 Use of Names and Logos. For a period of 60 days after the
Closing, Buyer will be entitled to use the trademarks, trade names, service
marks, service names, logos
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and similar proprietary rights of Seller to the extent incorporated in or on
the Assets transferred to it at the Closing, provided that Buyer will exercise
reasonable efforts to remove all such names, marks, logos and similar
proprietary rights of the other from the Assets as soon as reasonably
practicable following the Closing.
7.12 Transitional Billing Services. Seller will provide to
Buyer, upon request, access to and the right to use its billing system
computers, software and related fixed assets in connection with the Systems
acquired by Buyer for a period of up to 90 days following the Closing to allow
for conversion of existing billing arrangements ("Transitional Billing
Services"). Buyer will notify Seller at least 10 days prior to the Closing as
to whether it desires Transitional Billing Services from Seller. All
Transitional Billing Services, if any, that are requested by Buyer will be
provided on terms and conditions reasonably satisfactory to Seller; provided,
however, that the amount to be paid by Buyer will not exceed the cost to Seller
of providing such Transitional Billing Services. Seller will notify Buyer, at
least 45 days prior to the Closing, of the cost to Seller of providing such
Transitional Billing Services.
7.13 Confidentiality and Publicity.
7.13.1 Each party will use reasonable efforts to assure
that any non-public information that such party may obtain from the other in
connection with this Agreement or with respect to the Cable Business and
Systems will be confidential and, unless and until the Closing occurs, such
party will not disclose, and will cause its employees, consultants, advisors
and agents not to disclose, any such information to any other Person (other
than its directors, officers and employees and representatives of its advisers
and lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use, and will cause
its employees, consultants, advisors and agents not to use, such information to
the detriment of the other; provided that (i) such party may use and disclose
any such information once it has been publicly disclosed (other than by such
party in breach of its obligations under this Section) or which rightfully has
come into the possession of such party (other than from the other party) and
(ii) to the extent that such party may, in the reasonable opinion of its
counsel, be compelled by Legal Requirements to disclose any of such
information, such party may disclose such information if it will have used all
reasonable efforts, and will have afforded the other the opportunity, to obtain
an appropriate protective order or other satisfactory assurance of confidential
treatment, for the information compelled to be disclosed. The obligation by
either party to hold information in confidence pursuant to this Section will be
satisfied if such party exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information. In the event of termination of this Agreement, each party
will use all reasonable efforts to cause to be delivered to the other, and
retain no copies of, any documents, work papers and
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other materials obtained by such party or on its behalf from the other, whether
so obtained before or after the execution hereof.
7.13.2 Neither party will issue any press releases or make
any other public announcement, any oral or written statements to Buyer's and
Seller's employees concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other, which consent and approval may not
be unreasonably withheld.
7.14 Bulk Transfers. Buyer and Seller each waives compliance
by the other with Legal Requirements relating to bulk transfers applicable to
the transactions contemplated hereby.
7.15 Title Commitments; Lien Searches. Seller will cooperate
with Buyer to obtain, at Seller's expense, such commitments for owner's or
lessee's title insurance policies on Owned or Leased Property and lien
searches, as Buyer may request.
7.16 Further Assurances. At or after the Closing, each of
Buyer and Seller at the request of the other, will promptly execute and
deliver, or cause to be executed and delivered, to the other all such documents
and instruments, in addition to those otherwise required by this Agreement, in
form and substance reasonably satisfactory to the other as the other may
reasonably request in order to carry out or evidence the terms of this
Agreement or to collect any accounts receivable or other claims included in the
Assets. Without limiting the generality of the foregoing, Buyer and Seller
will take, or cause to be taken, all actions consistent with the terms of this
Agreement.
7.17 Consents. Subsequent to the Closing, Seller will continue
to use commercially reasonable efforts to obtain in writing as promptly as
possible any consent, authorization or approval required to be obtained by it
in connection with the transactions contemplated under this Agreement which was
not obtained on or before the Closing and will deliver copies of the same,
reasonably satisfactory in form and substance, to Buyer. The obligations set
forth in this Section will survive the Closing and will not be merged in the
consummation of the transactions contemplated hereby.
1. Post-Closing Cooperation upon Inquiries as to Rates. For
a period of 24 months after Closing, Seller will cooperate with and assist
Buyer by providing, upon request, all information in Seller's possession (and
not previously made available to Buyer) relating directly to the rates set
forth in SCHEDULE 6.15, as applicable, or on any of FCC Forms 393, 1200, 1205,
1210, 1220, 1225, 1235 or 1240 or any other FCC Form, that Buyer may reasonably
require to justify such rates in response to any inquiry, order or requirements
of any Governmental Authority.
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2. Broker's Fee. Seller and Buyer shall each pay one-half of
the brokerage fee due to Daniels & Associates.
3. Phase I Environmental Report. Seller will, at its
expense, for each parcel of Owned Property deliver to Buyer at or prior to 15
days prior to the anticipated Closing Date a Phase I Environmental Site
Assessment in accordance with ASTM Standard E 1527-93.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to Buyer's Obligations. The obligations of
Buyer to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction, at or before the Closing, of the following
conditions, which may be waived by Buyer:
8.1.1 Accuracy of Representations and Warranties. The
representations and warranties of Seller in this Agreement and in any
Transaction Document, if specifically qualified by materiality, are true in all
respects and, if not so qualified, are true in all material respects at and as
of the Closing with the same effect as if made at and as of the Closing.
8.1.2 Performance of Agreements. Seller has performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement and in any Transaction
Document to be performed and complied with by it at or before the Closing.
8.1.3 Deliveries. Seller has delivered the items and
documents required to be delivered by it, pursuant to this Agreement, including
those required under Section 9.2.
8.1.4 Legal Proceedings. No action, suit or proceeding
is pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (i) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Cable Business or the Assets,
(ii) compel Buyer to dispose of or hold separate all or a material portion of
any System, the Cable Business or the Assets as a result of any of the
transactions contemplated by this Agreement, (iii) if determined adversely to
Buyer's interest, materially impair the ability of Buyer to realize the
benefits of the transactions contemplated by this Agreement or
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have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (iv) prevent or make illegal the consummation of
any transactions contemplated by this Agreement.
8.1.5 Consents. Buyer has received evidence, in form and
substance reasonably satisfactory to it, that the Required Consents have been
obtained.
8.1.6 No Material Adverse Change. There has not been any
material adverse change in the Assets or the financial condition or operations
of the Cable Business or the Systems since the date of this Agreement.
8.1.7 Environmental Assessments. Any environmental
audits or assessments conducted by Buyer with respect to the Owned Property or
the Leased Property do not indicate the presence thereon, or the likelihood of
presence thereon, of Hazardous Substances of a kind or in a quantity as could
reasonably be expected to give rise to a material risk of liability.
8.1.8 Subscribers. The Systems serving Jonesboro, Walnut
Ridge and Imboden, Arkansas are serving at least 21,236 Equivalent Basic
Subscribers and the remaining Systems are serving at least 8,102 Equivalent
Basic Subscribers..
8.1.9 Documents and Records. Seller has delivered to
Buyer (i) all existing blueprints, schematics, working drawings, plans,
specifications, projections, statistics, engineering records, System
construction and as-built maps and (ii) all customer lists, files and records
used by Seller in connection with the operation of the Systems, including a
list of all pending subscriber hook-ups, disconnect and repair orders, supply
orders and any other lists reasonably necessary to the operation of the
Systems. Delivery of the foregoing will be deemed made to the extent such
lists, files and records are then located at any of the offices included in the
Owned Property or Leased Property.
8.1.10 Retransmission Consent. With respect to any
retransmission consent Contracts for broadcast signals carried on the Systems
on the date of this Agreement and on the date of the Closing that are included
as part of the Excluded Assets, all required retransmission consents for
continued carriage of such broadcast signals have been obtained on terms and
conditions reasonably acceptable to Buyer.
8.1.11 HSR Act. All filings required under the HSR Act
will have been made and the applicable waiting period will have expired or been
earlier terminated.
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8.1.12 Franchise Renewals. Any System Franchise for
which a valid notice of renewal pursuant to the formal renewal procedures
established by Section 626 of the Cable Act has not been timely delivered to
the appropriate Governmental Authority has been renewed or extended for a
period expiring no earlier than three years after the Closing Date.
8.2 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction, at or before the Closing, of the following
conditions, which may be waived by Seller:
8.2.1 Accuracy of Representations and Warranties. The
representations and warranties of Buyer in this Agreement and in any
Transaction Document, if specifically qualified by materiality, are true in all
respects and, if not so qualified, are true in all material respects at and as
of the Closing with the same effect as if made at and as of the Closing.
8.2.2 Performance of Agreements. Buyer has performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement and in any Transaction
Document to be performed and complied with by it at or before the Closing.
8.2.3 Deliveries. Buyer has delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required under Section 9.3.
8.2.4 Legal Proceedings. No action, suit or proceeding
is pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (i) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Cable Business or the Assets,
(ii) compel Buyer to dispose of or hold separate all or a material portion of
any System, Cable Business or Assets as a result of any of the transactions
contemplated by this Agreement, (iii) if determined adversely to Buyer's
interest, materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement or have a material adverse effect
on the right of Buyer to exercise full rights of ownership of the Systems or
(iv) prevent or make illegal the consummation of any transactions contemplated
by this Agreement.
8.2.5 HSR Act. All filings required under the HSR Act
have been made and the applicable waiting period has expired or been earlier
terminated.
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SECTION 9. THE CLOSING
9.1 The Closing; Time and Place. The closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
a date (the "Closing Date") and time mutually determined by Seller and Buyer,
which Closing Date shall be within ten days after the date on which all
conditions set forth in Sections 8.1 and 8.2 have either been satisfied or
waived in writing by the party entitled to the benefit of such condition.
9.2 Seller's Delivery Obligations. At the Closing, Seller
will deliver or cause to be delivered to Buyer the following:
9.2.1 Bill of Sale and Assignment and Assumption
Agreement. An executed counterpart of the Bill of Sale and Assignment and
Assumption Agreement in the form of EXHIBIT 9.2.1.
9.2.2 Deeds. A general warranty deed in a form
reasonably acceptable to Buyer (and complying with applicable state laws) with
respect to each parcel of Owned Property, duly executed and acknowledged and in
recordable form, warranting good and clear record and marketable and
indefeasible fee simple title to such Owned Property against all Persons
claiming by, through or under Seller.
9.2.3 Lien Releases. Evidence satisfactory to Buyer that
all Liens (other than Permitted Liens) affecting or encumbering the Assets have
been terminated, released or waived, as appropriate, or original, executed
instruments in form satisfactory to Buyer effecting such terminations, releases
or waivers.
9.2.4 Seller Noncompetition Covenant. Seller will have
delivered to Buyer a Noncompetition Covenant in the form of EXHIBIT 7.8
executed by Seller.
9.2.5 Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer, and
separate bills of sale therefor, if required by the laws of the States in which
such vehicles are titled.
9.2.6 Evidence of Corporate or Partnership Actions.
Certified corporate resolutions or other evidence reasonably satisfactory to
Buyer that Seller has taken all corporate or partnership action necessary to
authorize the execution of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby.
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9.2.7 FIRPTA Certificate. FIRPTA Non-Foreign Seller
Certificate certifying that Seller is not a foreign person within the meaning
of Section 1445 of the Code reasonably satisfactory in form and substance to
Buyer.
9.2.8 Officer's Certificate. Buyer will have received a
certificate executed by an executive officer of East Arkansas (and a general
partner of Lawrence Partnership, if applicable) dated the date of the Closing,
reasonably satisfactory in form and substance to Buyer, certifying that the
conditions specified in Sections 8.1.1 and 8.1.2 have been satisfied.
9.2.9 Seller Counsel Opinion. Buyer will have received
an opinion of Mary S. Willis, Esq., counsel to Seller, dated the date of the
Closing, in the form of EXHIBIT 9.2.9.
9.2.10 Other. Such other documents and instruments as may
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will
deliver or cause to be delivered to Seller the following:
9.3.1 Closing Payments. The Purchase Price required to
be paid by Buyer pursuant to Section 3.
9.3.2 Assignment and Assumption Agreement. An executed
counterpart of the executed Bill of Sale and Assignment and Assumption
Agreement in the form of EXHIBIT 9.2.1.
9.3.3 Evidence of Authorization Actions. Unanimous
written consent of the TCA Partners Partnership Committee or other evidence
reasonably satisfactory to Seller that Buyer has taken all action necessary to
authorize the execution of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby.
9.3.4 Officer's Certificates. Seller will have received
a certificate executed by an executive officer of Buyer dated the date of the
Closing, reasonably satisfactory in form and substance to Seller certifying
that the conditions specified in Sections 8.2.1 and 8.2.2 have been satisfied.
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9.3.5 Buyer Counsel Opinion. Seller will have received
an opinion of Jackson & Walker, counsel to Buyer, dated the date of the
Closing, in the form of EXHIBIT 9.3.5.
9.3.6 Other. Such other documents and instruments as may
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
SECTION 10. TERMINATION AND DEFAULT
10.1 Termination Events. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
10.1.1 At any time, by the mutual agreement of
Buyer and Seller;
10.1.2 By either Buyer or Seller at any time, if
the other is in material breach or default of any of its covenants, agreements
or other obligations herein or in any Transaction Document, or if any of its
representations herein or in any Transaction Document are not true in all
material respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default is not cured or
waived prior to Closing;
10.1.3 By either Buyer or Seller upon written
notice to the other, if any of the conditions to its obligations set forth in
Sections 8.1 and 8.2, respectively, are not satisfied on or before 365 days
from the date of this Agreement for any reason other than a material breach or
default by such party of its respective covenants, agreements or other
obligations under this Agreement, or any of its representations herein not
being true and accurate in all material respects when made or when otherwise
required by this Agreement to be true and accurate in all material respects; or
10.1.4 As otherwise provided herein.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in Sections 7.13 and
12.15. Termination of this Agreement pursuant to Sections 10.1.2 or 10.1.3
will not limit or impair any remedies that any of Seller or Buyer may
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have with respect to a breach or default by the other of its covenants,
agreements or obligations under this Agreement.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. The
representations and warranties of Seller and Buyer in this Agreement and in the
Transaction Documents will survive until the first anniversary of the Closing
Date, except that (a) all such representations and warranties with respect to
any Taxes, rates, Environmental Law, ERISA, employment matters or copyright
matters will survive until 60 days after the expiration of the applicable
statute of limitations (including any extensions) for such Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters, respectively
and (b) the representations and warranties as to ownership of the Assets in
Section 6.4, and as to ownership of Owned Property set forth in Section 6.6,
and in the general warranty deed or deeds delivered with respect to Owned
Property will survive the Closing and the delivery of such deeds and will
continue in full force and effect without limitation. The periods of survival
of the representations and warranties prescribed by this Section 11.1 are
referred to as the "Survival Period." The liabilities of the parties under
their respective representations and warranties will expire as of the
expiration of the applicable Survival Period; provided, however, that such
expiration will not include, extend or apply to any representation or warranty,
the breach of which has been asserted by a party in a written notice to the
other party before such expiration or about which a party has given the other
party written notice before such expiration indicating that facts or conditions
exist that, with the passage of time or otherwise, can reasonably be expected
to result in a breach (and describing such potential breach in reasonable
detail). The covenants and agreements of the parties in this Agreement and in
the Transaction Documents will survive the Closing and will continue in full
force and effect without limitation.
11.2 Indemnification by Seller. From and after the Closing,
Seller will indemnify and hold harmless Buyer and its shareholders and its and
their respective Affiliates, and the shareholders, officers, directors,
employees, agents, successors and assigns and any Person claiming by or through
any of them, as the case may be, from and against any and all Losses arising
out of or resulting from (a) any breach of any representation or warranty made
by Seller in this Agreement, (b) any breach of any covenant, agreement or
obligation of Seller contained in this Agreement, (c) any act or omission of
Seller with respect to, or any event or circumstance related to, the ownership
or operation of the Assets or the conduct of the Cable
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Business, which act, omission, event or circumstance occurred or existed prior
to or at the Closing Time, without regard to whether a claim with respect to
such matter is asserted before or after the Closing Time, including any matter
described on SCHEDULE 6.12, (d) any liability or obligation not included in the
Assumed Obligations and Liabilities, (e) any claim that the transactions
contemplated by this Agreement violate WARN or any Legal Requirement or any
fraudulent conveyance laws of any jurisdiction, (f) the presence, generation,
removal or transportation of a Hazardous Substance on or from any of the Owned
Property or Leased Property prior to the Closing Time, including the costs of
removal or clean-up of such Hazardous Substance and other compliance with the
provisions of any Environmental Laws (whether before or after Closing), or (g)
any rate refund ordered by any Governmental Authority with respect to the
Systems for periods prior to the Closing Time.
In the event that an indemnified item arises under both clause (a) and under
one or more of clauses (b) through (g) of this Section, Buyer's rights to
pursue its claim under clauses (b) through (g), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a).
11.3 Indemnification by Buyer. From and after the Closing,
Buyer will indemnify and hold harmless Seller and its shareholders and its and
their respective Affiliates and the shareholders, officers, directors,
Employees, agents, successors and assigns and any Person claiming by or through
any of them, as the case may be, from and against any and all Losses arising
out of or resulting from (a) any breach of any representation or warranty made
by Buyer in this Agreement, (b) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement, or (c) the failure of Buyer
to perform the Assumed Obligations and Liabilities.
In the event that an indemnified item arises under both clause (a) and under
one or more of clauses (b) or (c) of this Section, Seller's rights to pursue
its claim under clauses (b) or (c), as applicable, will exist notwithstanding
the expiration of the Survival Period applicable to such claim under clause
(a).
11.4 Third Party Claims. Promptly after the receipt by any
party of notice of any claim, action, suit or proceeding by any Person who is
not a party to this Agreement (collectively, an "Action"), which Action is
subject to indemnification under this Agreement, such party (the "Indemnified
Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The Indemnified Party
will be entitled, at the sole expense and liability of the Indemnifying Party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the Indemnifying Party, within a reasonable time after the giving
of such notice by the Indemnified Party, (a) admits
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in writing to the Indemnified Party the Indemnifying Party's liability to the
Indemnified Party for such Action under the terms of this Section 11, (b)
notifies the Indemnified Party in writing of the Indemnifying Party's intention
to assume such defense, (c) provides evidence reasonably satisfactory to the
Indemnified Party of the Indemnifying Party's ability to pay the amount, if
any, for which the Indemnified Party may be liable as a result of such Action
and (d) retains legal counsel reasonably satisfactory to the Indemnified Party
to conduct the defense of such Action. The other party will cooperate with the
party assuming the defense, compromise or settlement of any such Action in
accordance with this Agreement in any manner that such party reasonably may
request. If the Indemnifying Party so assumes the defense of any such Action,
the Indemnified Party will have the right to employ separate counsel and to
participate in (but not control) the defense, compromise or settlement of the
Action, but the fees and expenses of such counsel will be at the expense of the
Indemnified Party unless (i) the Indemnifying Party has agreed to pay such fees
and expenses, (ii) any relief other than the payment of money damages is sought
against the Indemnified Party or (iii) the Indemnified Party has been advised
by its counsel that there may be one or more defenses available to it which are
different from or additional to those available to the Indemnifying Party, and
in any such case that portion of the fees and expenses of such separate counsel
that are reasonably related to matters covered by the indemnity provided in
this Section 11 will be paid by the Indemnifying Party. No Indemnified Party
will settle or compromise any such Action for which it is entitled to
indemnification under this Agreement without the prior written consent of the
Indemnifying Party, unless the Indemnifying Party has failed, after reasonable
notice, to undertake control of such Action in the manner provided in this
Section 11.4. No Indemnifying Party will settle or compromise any such Action
(A) in which any relief other than the payment of money damages is sought
against any Indemnified Party or (B) in the case of any Action relating to the
Indemnified Party's liability for any Tax, if the effect of such settlement
would be an increase in the liability of the Indemnified Party for the payment
of any Tax for any period beginning after the Closing Date, unless the
Indemnified Party consents in writing to such compromise or settlement.
11.5 Limitations on Indemnification - Seller. Seller will not
be liable for indemnification arising solely under Section 11.2(a) for (a) any
Losses of or to Buyer or any other Person entitled to indemnification from
Seller or (b) any Losses incidental to or relating to or resulting from any of
the foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this Section 11 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
Section, be liable exceeds, on an aggregate basis, $50,000, in which case
Seller will be liable for all such Buyer Damages, which will be due and payable
within 15 days after Seller's receipt of a statement therefor. Seller will not
have any liability under Section 11.2 to the extent that the aggregate
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amount of Losses otherwise subject to its indemnification obligation thereunder
exceeds $2,500,000.
11.6 Limitations on Indemnification - Buyer. Buyer will not be
liable for indemnification arising solely under Section 11.3(a) for (a) any
Losses of or to Seller or any other Person entitled to indemnification from
Buyer or (b) any Losses incidental to or relating to or resulting from any of
the foregoing the items described in clauses (a) and (b) collectively being
referred to for purposes of this Section as "Seller Damages") unless the amount
of Seller Damages for which Buyer would, but for the provisions of this
Section, be liable exceeds, on an aggregate basis, $50,000, in which case Buyer
will be liable for all such Seller Damages, which will be due and payable
within 15 days after Buyer's receipt of a statement therefor. Buyer will not
have any liability under Section 11.3 to the extent that the aggregate amount
of Losses otherwise subject to its indemnification obligations thereunder
exceeds $2,500,000, except for any failure of Buyer to pay or perform its
Assumed Obligations and Liabilities.
1. Other Indemnification. The provisions of Sections 11.1,
11.4, 11.5 and 11.6 will be applicable to any claim for indemnification made
under any other provision of this Agreement and all references in Sections
11.1, 11.4, 11.5 and 11.6 to Sections 11.2 and 11.3 will be deemed to be
references to such other provisions of this Agreement.
2. Fair Market Value. Buyer and Seller shall each maintain
assets with a fair market value of at least Two Million Five Hundred
Thousand ($2,500,000) for the period of time that each is liable to
indemnify the other pursuant to this Section 11.
SECTION 12. MISCELLANEOUS PROVISIONS
12.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding upon the parties
and their respective assigns and successors in interest and will inure solely
to the benefit of the parties and their respective assigns and successors in
interest, and no other Person will be entitled to any of the benefits conferred
by this Agreement. Without the prior written consent of the other parties, no
party will assign any of its rights under this Agreement or delegate any of its
duties under this Agreement, provided that a party may, without the consent of
any other party, assign or delegate its rights or obligations under this
Agreement to any of its Affiliates, and such assignee will be substituted for
such party under this Agreement as though it were the original party to this
Agreement. Notwithstanding the foregoing, Seller may assign this Agreement to
any third party qualified intermediary. Furthermore, notwithstanding the
foregoing, Buyer may assign its right pursuant to this Agreement to buy certain
of the Systems (except those Systems
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serving the communities of Jonesboro, Walnut Ridge, and Imboden Arkansas) to
Friendship Cable of Arkansas, Inc. ("Buford") (including the covenants,
representations and warranties and indemnities that pertain to those certain
Systems) provided however, Buyer shall remain liable to perform all covenants
of this Agreement including, but not limited to, the obligation to purchase the
Systems and pay to Seller the consideration pursuant to Section 3 hereof.
Notwithstanding any such assignment to Buford, the microwave site at Hickory
Ridge shall be conveyed to TCA.
12.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier
or, if receipt is confirmed, by telecopier:
To Seller at:
East Arkansas Cablevision, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Dan L. Buchanan
Telecopy: 303/488-3219
With a copy similarly addressed to the attention of Mary Willis
(Legal Department).
To Buyer at:
TCA CABLE PARTNERS
3015 S.S.E. Loop 323
Tyler, Texas 75701
Attention: Fred R. Nichols
Telecopy: 903/595-1929
With a copy similarly addressed to the attention of Legal
Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation.
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<PAGE> 46
12.3 Right to Specific Performance. The parties acknowledge
that the unique nature of the Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by the
parties of its obligations under this Agreement, and the parties agree that in
the event of such breach, the parties will upon proper action instituted by
either of them, be entitled to a decree of specific performance of this
Agreement.
12.4 Waiver. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
12.5 Captions. The section and other captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
12.6 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE
CONFLICTS OF LAWS RULES OF COLORADO.
12.7 Terms. Terms used with initial capital letters or
otherwise defined in this Agreement will have the meanings specified,
applicable to both singular and plural forms, for all purposes of this
Agreement. The word "include" and derivatives of that word are used in this
Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
12.9 Time. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
12.10 Late Payments. If either party fails to pay the other any
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the annual rate publicly announced from
time to time by The Bank of New York
-44-
<PAGE> 47
as its prime rate (the "Prime Rate") plus 3%, adjusted as and when changes in
the Prime Rate are made.
12.11 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original.
12.12 Entire Agreement. This Agreement (including the
Transaction Documents and the Schedules and Exhibits referred to in this
Agreement, which are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the parties and supersedes all prior oral or
written agreements and understandings with respect to the subject matter. This
Agreement may not be amended or modified except by a writing signed by the
parties.
12.13 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefitted by such provision or
any other provisions of this Agreement.
12.14 Construction. This Agreement has been negotiated by the
parties and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.15 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.16 Risk of Loss. The risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear and
tear) will be borne by Seller at all times prior to the Closing Time. If any
such loss or damage is sufficiently substantial so as to preclude and prevent
resumption of normal operations of any material portion of a System or the
replacement or restoration of the lost or damaged property within 20 days from
the occurrence of the event resulting in such loss or damage, Seller will
immediately notify Buyer in writing of that fact and Buyer, at any time within
10 days after receipt of such notice, may elect by written notice to Seller to
either (a) waive such defect and proceed toward consummation of the transaction
in accordance with terms of this Agreement or (b) terminate this Agreement. If
Buyer elects to so terminate this Agreement, both parties will stand fully
released and discharged of any and all obligations under this Agreement. If
Buyer elects to consummate the transactions contemplated by this Agreement
notwithstanding such loss or
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<PAGE> 48
damage and does so, all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage (to the extent not
used to replace or restore such lost or damaged property), except for any
proceeds from business interruption insurance relating to the loss of revenue
for the period prior to the Closing Date, will be delivered by Seller to Buyer
or the rights to such proceeds will be assigned by Seller to Buyer if not yet
paid over to Seller, and Seller will pay to Buyer an amount equal to the
difference between the amount of such insurance costs and the full replacement
cost of the damaged or lost Assets.
If, prior to the Closing, any part of or interest in the Assets is taken
or condemned as a result of the exercise of the power of eminent domain, or if
a Governmental Authority having such power informs Seller that it intends to
condemn all or any part the Assets (such event being called, in either case, a
"Taking"), then Buyer may terminate this Agreement. If Buyer does not elect to
terminate this Agreement, then (a) Buyer will have the sole right, in the name
of Seller, if Buyer so elects, to negotiate for, claim, contest and receive all
damages with respect to the Taking, (b) Seller will be relieved of its
obligation to convey to Buyer the Assets or interests that are the subject of
the Taking, (c) at the Closing Seller will assign to Buyer all of Seller's
rights to all damages payable with respect to the Taking and (d) following the
Closing, Seller will give Buyer such further assurances of such rights and
assignment with respect to the taking as Buyer may from time to time reasonably
request.
12.17 Tax Consequences. No party to this Agreement makes any
representation or warranty, express or implied, with respect to the Tax
implications of any aspect of this Agreement on any other party to this
Agreement, and all parties expressly disclaim any such representation or
warranty with respect to any Tax consequences arising under this Agreement.
Each party has relied solely on its own Tax advisors with respect to the Tax
implications of this Agreement.
12.18 Commercially Reasonable Efforts. For purposes of this
Agreement, "commercially reasonable efforts" will not be deemed to require a
party to undertake extraordinary measures, including the initiation or
prosecution of legal proceedings or the payment of amounts in excess of normal
and usual filing fees and processing fees, if any.
The parties have executed this Agreement as of the day and year first
above written.
EAST ARKANSAS CABLEVISION, INC.
By:
Name: William R. Fitzgerald
Title: Vice President
LAWRENCE COUNTY CABLE PARTNERS
By:
--------------------------------
By:
Name: William R. Fitzgerald
Title: Vice President
TCA CABLE PARTNERS
By:
Name:
Title:
-46-
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