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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JULY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NO.: 0-11478
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TCA CABLE TV, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-1798185
(State of other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
3015 SSE LOOP 323, TYLER, TEXAS 75701
(Address of principal executive offices) (Zip Code)
</TABLE>
(903) 595-3701
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10
PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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The number of shares outstanding of the registrant's common stock as of
September 9, 1998 was:
49,901,801 SHARES OF COMMON STOCK.
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TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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PART I -- FINANCIAL INFORMATION
Consolidated Balance Sheets -- July 31, 1998 and October
31, 1997............................................... 3
Consolidated Statements of Operations -- Three and nine
months ended July 31, 1998 and 1997.................... 4
Consolidated Statement of Shareholders' Equity -- Nine
months ended July 31, 1998............................. 5
Consolidated Statements of Cash Flows -- Nine months ended
July 31, 1998 and 1997................................. 6
Notes to Consolidated Financial Statements................ 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9-13
PART II -- OTHER INFORMATION................................ 14
SIGNATURES................................................ 15
</TABLE>
2
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
-------------- -------------
(UNAUDITED)
<S> <C> <C>
Cash........................................................ $ 3,067,201 $ 3,270,190
-------------- -------------
Accounts receivable, subscribers............................ 17,127,462 15,852,757
-------------- -------------
Accounts receivable, other.................................. 3,742,191 1,017,070
-------------- -------------
Income tax receivable....................................... 2,833,197 529,830
-------------- -------------
Property, plant and equipment, at cost:
Land...................................................... 4,670,626 4,110,347
Distribution systems...................................... 441,799,663 380,864,913
Transportation equipment.................................. 17,406,462 11,277,388
Other..................................................... 50,351,774 40,994,072
-------------- -------------
514,228,525 437,246,720
Less accumulated depreciation............................. (233,530,980) (208,416,640)
-------------- -------------
280,697,545 228,830,080
-------------- -------------
Other assets:
Intangibles, net of accumulated amortization of
$113,483,376 and $98,669,961, respectively............. 789,823,502 464,602,414
Prepaid expenses.......................................... 12,762,503 7,029,979
-------------- -------------
802,586,005 471,632,393
-------------- -------------
$1,110,053,601 $ 721,132,320
============== =============
LIABILITIES
Accounts payable............................................ $ 15,531,746 $ 12,047,781
Accrued expenses............................................ 31,527,912 23,653,545
Subscriber advance payments................................. 2,024,842 3,522,240
Deferred income taxes....................................... 134,080,000 71,580,000
Term debt................................................... 543,018,524 317,025,181
-------------- -------------
726,183,024 427,828,747
-------------- -------------
Reedemable minority interest................................ 191,826,077 122,636,878
-------------- -------------
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;
49,991,909 and 24,991,048 shares issued, respectively..... 4,999,191 2,499,105
Additional paid-in capital.................................. 54,442,412 51,845,522
Retained earnings........................................... 134,965,948 119,108,443
-------------- -------------
194,407,551 173,453,070
Less treasury stock, at cost, 187,516 and 113,000 shares,
respectively.............................................. (2,363,051) (2,786,375)
-------------- -------------
192,044,500 170,666,695
-------------- -------------
$1,110,053,601 $ 721,132,320
============== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues.............................. $101,541,500 $79,181,508 $278,995,743 $227,654,730
------------ ----------- ------------ ------------
Operating expenses:
Salaries, wages and benefits........ 18,329,407 14,674,592 50,017,314 42,085,859
Programming costs................... 27,488,710 21,458,545 75,198,487 59,788,909
Other operating expenses............ 3,569,614 2,295,064 9,903,183 7,005,054
Selling, general and
administrative................... 8,770,694 5,831,614 22,469,360 17,482,545
Depreciation and amortization....... 15,338,592 11,442,015 40,968,428 33,084,318
------------ ----------- ------------ ------------
73,497,017 55,701,830 198,556,772 159,446,685
------------ ----------- ------------ ------------
Operating income.................... 28,044,483 23,479,678 80,438,971 68,208,045
Other income.......................... 8,242 38,036 1,136,606 484,772
Interest expense...................... (9,523,479) (5,746,538) (24,420,135) (16,522,686)
Minority interest..................... (2,498,964) (1,962,359) (7,039,200) (5,397,977)
------------ ----------- ------------ ------------
Income before income taxes.......... 16,030,282 15,808,817 50,116,242 46,772,154
------------ ----------- ------------ ------------
Provision for income taxes:
Current............................. 3,300,000 3,223,995 10,300,000 9,100,000
Deferred............................ 3,000,000 3,100,000 9,500,000 9,300,000
------------ ----------- ------------ ------------
6,300,000 6,323,995 19,800,000 18,400,000
------------ ----------- ------------ ------------
Net income.......................... $ 9,730,282 $ 9,484,822 $ 30,316,242 $ 28,372,154
============ =========== ============ ============
Basic earnings per common share....... $ 0.20 $ 0.19 $ 0.61 $ 0.58
============ =========== ============ ============
Diluted earnings per common share..... $ 0.19 $ 0.19 $ 0.60 $ 0.58
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ISSUED ADDITIONAL
----------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1997.... 24,991,048 $2,499,105 $51,845,521 $119,108,443 $(2,786,375)
Net income for the nine
months ended July 31,
1998.................... 30,316,242
Issuance of common stock... 21,617 2,162 1,135,887
Issuance of treasury stock
in connection with an
acquisition............. 538,776 423,324
Stock options exercised.... 31,255 3,125 781,378
Amortization of warrants... 140,850
Cash dividends at $.48 per
share................... (11,963,938)
Common stock split effected
in the form of a
dividend................ 24,947,989 2,494,799 (2,494,799)
---------- ---------- ----------- ------------ -----------
Balance, July 31, 1998....... 49,991,909 $4,999,191 $54,442,412 $134,965,948 $(2,363,051)
========== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
---------------------------
1998 1997
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 30,316,242 $28,372,154
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................... 26,120,468 22,605,807
Amortization expense................................... 14,847,960 10,478,511
Deferred income taxes.................................. 9,500,000 9,300,000
Contribution of common stock to retirement plan........ 867,735 642,005
Employee stock bonus................................... 270,313 163,125
Stock warrant amortization............................. 140,850 140,850
Gain on sale of assets................................. (1,062,268)
Share of (earnings) losses of affiliates............... (46,235)
Minority interest in earnings.......................... 7,039,200 5,397,977
Change in prepaid expenses and other assets............ (681,785) (1,195,495)
Change in accounts receivable, subscribers............. (1,274,706) (4,672,316)
Change in accounts receivable, other................... (2,725,121) (325,762)
Change in income taxes receivable...................... (2,303,367) (571,824)
Change in subscriber advance payments.................. (1,497,398) (848,141)
Change in accrued expenses............................. 12,996,441 4,303,697
Change in accounts payable............................. 3,483,965 (966,874)
------------- -----------
Net cash provided by operating activities................... 96,038,529 72,777,479
------------- -----------
Cash flows from investing activities:
Cash paid for acquisitions................................ (248,251,909) (41,850,000)
Capital expenditures...................................... (51,564,808) (36,641,701)
Proceeds from sale of assets.............................. 3,884,104
Investments in affiliates................................. (895,578)
Distribution from affiliate............................... 1,100,025
------------- -----------
Net cash used in investing activities............. (295,932,613) (78,287,254)
------------- -----------
Cash flows from financing activities:
Borrowings of term debt................................... 625,599,999 84,299,990
Repayments of term debt................................... (399,606,656) (73,265,283)
Debt issuance costs....................................... (10,172,813)
Proceeds from stock options exercised..................... 784,503 169,903
Partnership capital contributions......................... 10,275,000
Partnership distributions................................. (4,950,000) (4,950,000)
Dividends paid............................................ (11,963,938) (11,914,154)
------------- -----------
Net cash provided by financing activities......... 199,691,095 4,615,456
------------- -----------
Net decrease in cash........................................ (202,989) (894,319)
Cash at beginning of period................................. 3,270,190 3,473,443
------------- -----------
Cash at end of period....................................... $ 3,067,201 $ 2,579,124
============= ===========
Supplemental cash flow information:
Interest paid.......................................... $ 16,642,197 $16,957,607
============= ===========
Income taxes paid...................................... $ 12,603,367 $ 9,671,824
============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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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 July 31, 1998 and for the three and nine
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 and nine months
ended July 31, 1998, are not necessarily indicative of the operating results to
be expected for the full year.
C. The Company adopted SFAS No. 128, "Earnings per Share" in November 1997.
This statement which replaces APB Opinion No. 15, "Earnings per Share'
establishes simplified accounting standards for computing earnings per share
("EPS").
Basic EPS is computed by dividing net earnings by the weighted-average
number of common shares outstanding during each three month period of 49,892,452
shares and 49,688,898 shares for 1998 and 1997, respectively. Diluted EPS is
computed by dividing net earnings by the weighted-average number of common
shares and common stock equivalents outstanding during the three month period of
50,425,040 and 49,942,138 for 1998 and 1997, respectively. All prior-period EPS
amounts presented conform to the provisions of SFAS No. 128.
D. On January 14, 1998, the Company signed a definitive agreement (the
"Cable One exchange") to exchange the assets of selected TCA Cable Partners
systems in Oklahoma, serving approximately 15,000 subscribers, for the assets of
selected Cable One systems in Texas, serving approximately 13,000 subscribers
and having an equivalent amount of cash flow. Cable One is a Washington Post
subsidiary. The exchange closed on June 15, 1998.
E. On February 2, 1998, the Company formed a partnership, TCA Cable
Partners II (the "TCI Transaction") with TCI American Holdings IV, L.P. (the
"TCI Affiliate"), an affiliate of TCI Communications, Inc. The Company
contributed certain cable systems in Texas and New Mexico serving approximately
155,000 subscribers and $46.6 million in unsecured debt and the TCI affiliate
contributed its cable systems in north Texas and western Louisiana, serving
approximately 150,000 subscribers and $247.9 million in unsecured debt, in
exchange for an 80% and 20% partnership interest, respectively, in TCA Cable
Partners II. The cable systems contributed by the Company and the TCI Affiliate
are each valued at approximately $315 million. The Company financed the TCI
Transaction with a portion of the proceeds from a $150 million increase in the
Company's primary credit facility and the issuance of $200 million in public
debt. TCA Cable Partners II has been consolidated in the financial statements of
the Company and 20% of the estimated fair value of TCA Cable Partners II net
assets have been recorded by the Company as a redeemable minority interest at
the acquisition date. The TCI Affiliate has the right to require the Company to
purchase the TCI Affiliate's 20% partnership interest at fair market value
beginning February 2003 through February 2023 (the "Put and Call Period"), the
termination date of the partnership agreement. The Company has a corresponding
right to require the TCI Affiliate to sell its 20% partnership interest in TCA
Cable Partners II to the Company at fair market value during the Put and Call
Period. TCA Cable Partners II is managed by the Company. At the closing of the
TCI Transaction, the Company served approximately 860,000 subscribers. In
connection with the TCI transaction, the Company recorded a deferred tax
liability and a corresponding intangible asset of $53 million.
7
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TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
F. On February 2, 1998, the Company issued $200 million in bonds with a
coupon of 6.53% to finance the TCI transaction. The bondholders have the option
to require the Company to repurchase the bonds on the tenth anniversary date at
face value.
G. On April 1, 1998, the Company acquired Web International, Inc., doing
business as Internet Tyler, an internet service provider serving the Tyler,
Texas area. The Company issued 19,242 shares of common stock valued at $962,100
and paid approximately $260,000 in cash.
H. On June 25, 1998, the Company approved a two-for-one stock split of the
Company's common stock effected in the form of a stock dividend. Shares were
distributed August 5, 1998 to shareholders of record July 15, 1998. All share
and per share amounts have been restated to reflect the stock split.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months Ended July 31, 1998 Compared to Three Months Ended July 31, 1997.
Revenues. Revenues increased $22.4 million, or 28.2%, during the three
months ended July 31, 1998 compared to the three months ended July 31, 1997.
Management attributes approximately $3.6 million, or 16.1%, of the revenue
increase to internal growth in cable systems, $15.2 million, or 68.0% to cable
system acquisitions, $3.7 million, or 16.5%, to internal growth in the Company's
advertising insertion business, $0.8 million, or 3.7% to the acquisition of two
internet service providers and $0.2 million, or 0.7% to internal growth in the
Company's internet access business. These increases in revenue were offset by a
decrease of $1.1 million, or 5.0% resulting from the Company's sale of its long
distance business.
Revenues from basic and expanded basic cable television subscriptions
increased $15.9 million, or 32.1%, during the three months ended July 31, 1998
compared to the three months ended July 31, 1997. As a percentage of revenues,
revenues from basic and expanded basic subscriptions increased to 64.4% of
revenues for 1998 compared to 62.5% for 1997. Revenues from premium
subscriptions increased $1.8 million, or 19.6%, during 1998 compared to 1997. As
a percentage of revenues, revenues from premium subscriptions decreased to 11.0%
during 1998 compared to 11.7% during 1997. Cable advertising insertion revenues,
including revenues from both the Company's cable advertising business and net
cable advertising revenues from third parties, increased by approximately $3.5
million, or 24.4%, to $18.0 million for the three months ended July 31, 1998
compared to $14.5 million for the three months ended July 31, 1997. As a
percentage of revenues, cable advertising revenues decreased to 17.7% during
1998 compared to 18.3% during 1997. The decreased percentage of advertising
revenue was a result of the increase in cable television revenue from the TCI
Transaction. Pay-per-view revenues decreased $0.3 million, or 26.6%, during 1998
compared to 1997. As a percentage of revenues, revenues from pay-per-view
decreased to 0.9% for 1998 compared to 1.7% for 1997. Other revenues increased
$1.5 million, or 31.7%, during 1998 compared to 1997 primarily due an increase
of $0.9 million in internet revenues. As a percentage of revenues, revenues from
other sources increased to 6.0% in 1998 compared to 5.8% in 1997.
Expenses. Operating expenses increased $17.8 million, or 32.0%, during the
three months ended July 31, 1998 compared to the three months ended July 31,
1997. As a percentage of revenues, operating expenses increased to 72.4% for
1998 compared to 70.3% for 1997. The increase in operating expenses during the
three months ended July 31, 1998 is primarily due to the acquisition of cable
systems in the TCI Transaction.
Salaries, wages and benefits increased $3.7 million, or 24.9%, during 1998
compared to 1997. As a percentage of revenues, salaries, wages and benefits were
18.1% for 1998 compared to 18.5% for 1997. Programming costs increased $6.0
million, or 28.1%, during 1998 compared to 1997. The increase in programming
costs is the result of increases of $1.8 million in cable programming costs in
same system operations, $4.0 million in cable programming costs in acquired
systems and $0.9 million in the Company's payments to other cable operators of a
percentage of advertising sales offset by a decrease of $0.7 million in network
access fees in the long distance and internet access business. As a percentage
of revenues, programming costs were 27.1% for 1998 and 1997. Other operating
expenses increased $1.3 million, or 55.5%, during 1998 compared to 1997. As a
percentage of revenues, other operating expenses were 3.5% for 1998 and 2.9% for
1997. Selling, general and administrative expense increased $2.9 million, or
50.4% during 1998 when compared to 1997. As a percentage of revenues, selling,
general and administrative expenses were 8.6% for 1998 and 7.4% for 1997.
Depreciation and amortization increased $3.9 million, or 34.1%, during 1998 when
compared to 1997. As a percentage of revenues, depreciation and amortization was
15.1% for 1998 and 14.5% for 1997.
Interest expense increased $3.8 million, or 65.7%, in 1998 compared to 1997
as a result of a $247.9 million increase in debt from the TCI Transaction,
offset by a net repayment of debt of $6.0 million. The Company's weighted
average interest rate was 7.0% for the three months ended July 31, 1998 compared
to 7.1% for the three months ended July 31, 1997.
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Other Income. The Company's other income decreased $0.03 million during the
three month ended July 31, 1998 compared to the three months ended July 31,
1997.
Income Taxes. The Company's provision for income taxes was $6.3 million in
1998 and 1997, respectively. The decrease in taxes during the three months ended
July 31, 1998 compared to the three months ended July 31, 1997 was a result of a
1.4% increase in income before income taxes and an decrease in the effective tax
rate to 39.3% in 1998 compared to 40.0% for fiscal 1997.
Minority Interest. Minority interest in earnings was $2.5 million for 1998
and 2.0 million for 1997. Minority interest represents the portion of income
before income taxes due to the minority partners in the Company's two
partnerships. TCA Cable Partners is a partnership that is owned 75% by the
Company and 25% by DR Partners, a division of Stephens Group, Inc. TCA Cable
Partners II is a partnership owned 80% by the Company and 20% by TCI American
Holdings IV, L.P., an affiliate of TCI Communications, Inc.
Net Income. The Company's net income increased $0.2 million, or $2.6%,
during the three months ended July 31, 1998 compared to the three months ended
July 31, 1997. Basic earnings per share were $0.20 during the three months ended
July 31, 1998 compared to $0.19 for the three months ended July 31, 1997.
Diluted earnings per share were $0.19 during the three months ended July 31,
1998 compared to $0.19 for the three months ended July 31, 1997.
Subscribers. The Company's basic subscribers were 853,505 at July 31, 1998
compared to 867,555 at April 30, 1998. The decrease in subscribers resulted from
a seasonal decline in subscribers in systems with colleges and a reduction in
subscribers in the Cable One exchange.
Nine Months Ended July 31, 1998 Compared to Nine Months Ended July 31, 1997.
Revenues. Revenues increased by $51.3 million, or 22.6%, during the nine
months ended July 31, 1998 compared to the nine months ended July 31, 1997.
Management attributes approximately $8.5 million, or 16.6%, of the revenue
increase to internal growth in cable systems, $33.4 million, or 65.1% to cable
system acquisitions, $9.4 million, or 18.3%, to internal growth in the Company's
advertising insertion business, $1.8 million, or 3.4% to the acquisition of two
internet service providers and $0.3 million, or 0.7% to internal growth in the
Company's internet access business. These increases in revenue were offset by a
decrease of $2.1 million, or 4.1% resulting from the Company's sale of its long
distance business.
Revenues from basic and expanded basic cable television subscriptions
increased $34.4 million, or 23.9%, during the nine months ended July 31, 1998
compared to the nine months ended July 31, 1997. As a percentage of revenues,
revenues from basic and expanded basic subscriptions increased to 63.9% of
revenues for 1998 compared to 63.2% for 1997. Revenues from premium
subscriptions increased $4.8 million, or 18.0%, during 1998 compared to 1997. As
a percentage of revenues, revenues from premium subscriptions decreased to 11.4%
during 1998 compared to 11.8% during 1997. Cable advertising insertion revenues,
including revenues from both the Company's cable advertising business and net
cable advertising revenues from third parties, increased by approximately $9.1
million, or 22.7%, to $49.4 million for the nine months ended July 31, 1998
compared to $40.3 million for the nine months ended July 31, 1997. As a
percentage of revenues, cable advertising revenues were to 17.7% during 1998 and
1997. Pay-per-view revenues decreased $0.1 million, or 4.1%, during 1998
compared to 1997. As a percentage of revenues, revenues from pay-per-view
decreased to 1.2% for 1998 compared to 1.5% for 1997. Other revenues increased
$3.1 million, or 23.4%, during 1998 compared to 1997 primarily due to the
addition of $1.8 million of internet revenues. As a percentage of revenues,
revenues from other sources was 5.8% in 1998 and 1997.
Expenses. Operating expenses increased $39.1 million, or 24.5%, during the
nine months ended July 31, 1998 compared to the nine months ended July 31, 1997.
As a percentage of revenues, operating expenses increased to 71.2% for 1998
compared to 70.0% for 1997. The increase in operating expenses during the nine
months ended July 31, 1998 is primarily due to the acquisition of cable systems
in the TCI Transaction.
Salaries, wages and benefits increased $7.9 million, or 18.9%, during 1998
compared to 1997. As a percentage of revenues, salaries, wages and benefits were
17.9% for 1998 compared to 18.5% for 1997. Programming costs increased $15.4
million, or 25.8%, during 1998 compared to 1997. As a percentage of
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revenues, programming costs were 26.9% for 1998 and 26.3% for 1997. The increase
in programming costs is the result of increases of $4.7 million in cable
programming costs in same system operations, $8.7 million in cable programming
costs in acquired systems, $2.5 million in the Company's payments to other cable
operators of a percentage of advertising sales offset by a decrease of $0.5
million in network access fees in the long distance and internet access
business. Other operating expenses increased $2.9 million, or 41.4%, during 1998
compared to 1997. As a percentage of revenues, other operating expenses were
3.6% for 1998 and 3.1% for 1997. Selling, general and administrative expense
increased $5.0 million, or 28.5% during 1998 when compared to 1997. As a
percentage of revenues, selling, general and administrative expenses were 8.1%
for 1998 and 7.7% for 1997. Depreciation and amortization increased $7.9
million, or 23.8%, during 1998 when compared to 1997. As a percentage of
revenues, depreciation and amortization was 14.7% for 1998 and 14.5% for 1997.
Interest expense increased $7.9 million, or 47.8%, in 1998 compared to 1997
as a result of a $247.9 million increase in debt from the TCI Transaction,
offset by a net repayment of debt of $21.9 million. The Company's weighted
average interest rate was 7.0% for the nine months ended July 31, 1998 compared
to 7.0% for the nine months ended July 31, 1997.
Other Income. The Company's other income increased $0.7 million during the
nine months ended July 31, 1998 compared to the nine months ended July 31, 1997.
The increase was due to the sale of the assets of the Company's long distance
business in December 1997. The sale resulted in a gain of approximately $1.1
million.
Income Taxes. The Company's provision for income taxes was $19.8 million
and $18.4 million in 1998 and 1997, respectively. The increase in taxes during
the nine months ended July 31, 1998 compared to the nine months ended July 31,
1997 was a result of a 7.2% increase in income before income taxes and an
increase in the effective tax rate to 39.5% in 1998 compared to 39.3% for fiscal
1997.
Minority Interest. Minority interest in earnings was $7.0 million for 1998
and 5.4 million for 1997. Minority interest represents the portion of income
before income taxes due to the minority partners in the Company's two
partnerships. TCA Cable Partners is a partnership that is owned 75% by the
Company and 25% by DR Partners, a division of Stephens Group, Inc. TCA Cable
Partners II is a partnership owned 80% by the Company and 20% by TCI American
Holdings IV, L.P., an affiliate of TCI Communications, Inc.
Net Income. The Company's net income increased $1.9 million, or 6.9%,
during the nine months ended July 31, 1998 compared to the nine months ended
July 31, 1997. Basic earnings per share were $.61 during the nine months ended
July 31, 1998 compared to $.58 for the nine months ended July 31, 1997. Diluted
earnings per share were $.60 during the nine months ended July 31, 1998 compared
to $.58 for the nine months ended July 31, 1997.
Subscribers. The Company's basic subscribers were 853,505 at July 31, 1998
compared to 692,323 at July 31, 1997. The increase in subscribers resulted from
148,436 additional subscribers acquired in the TCI Transaction and 15,371
subscribers, or a 2.2% increase, from internal growth, offset by a reduction of
2625 subscribers in the Cable One exchange.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically been able to meet its current and long-term
liquidity and capital requirements, including dividends and fixed charges,
through cash flow generated from operating activities, existing cash, bank lines
of credit, and other external financing.
Net cash flow from operating activities increased 31.9% to $96.0 million in
1998 from $72.8 million in 1997. The increase was principally due to cable
system acquisitions and internal growth in cable operations and advertising.
At July 31, 1998, the Company had $225.0 million in borrowings under its
bank credit facilities. The Company had $181.0 million borrowed under its
primary credit facility which provides for up to $350 million in borrowings by
the Company and expires on January 31, 2003. The primary credit facility
provides for
11
<PAGE> 12
interest to be paid quarterly at prime or LIBOR plus an applicable margin. At
July 31, 1998 the Company also had $44.0 million borrowed under additional
credit facilities with two banks. The additional bank credit facilities provide
for up to $40.0 million and $4.0 million in borrowings by the Company and expire
June 1999 and April 1999, respectively. In the nine months ended July 31,1998,
the Company's bank debt carried a weighted average interest rate of 6.7%.
On September 27, 1989 the Company completed a $100 million private
placement of debt securities due August 1999 bearing an interest rate of 9.0%.
The terms of the securities call for the repayment of principal in semiannual
installments beginning February 1993. In addition on June 23, 1995, the Company
completed a $100 million private placement of debt securities due June 2005
bearing an interest rate of 7.26%. The terms of these securities call for the
repayment of principal in annual installments beginning in June 1999.
The Company believes that EBITDA, defined as earnings before interest,
taxes, depreciation and amortization, and related measures of cash flow serve as
important financial analysis tools for measuring and comparing cable television
companies in several areas, such as liquidity, operating performance and
leverage. The Company's ratio of indebtedness to EBITDA was 3.3x and 2.5x for
the three months ended July 31, 1998 and 1997, respectively. The Company's
interest coverage ratio, defined as the ratio of EBITDA to total interest
expense, was 5.4x and 6.0x for the three months ended July 31, 1998 and 1997
respectively.
The Company's capital expenditures totaled $51.6 million and $36.6 million
in the nine months ended July 31, 1998 and 1997, respectively. Funds were
applied primarily toward the upgrade of the Company's cable systems and the
purchase of subscriber equipment, including converter boxes. The Company has
principally financed its capital expenditures through funds generated by its
operating activities, and to a lesser extent, bank borrowings and private
placements of debt securities. The Company expects to continue the upgrade of
its cable systems in 1998 and anticipates total capital expenditure requirements
in fiscal 1998 to be approximately 30% more than in 1997.
As a part of the Company's growth strategy the Company has been actively
acquiring cable systems which meet the Company's acquisition criteria. The
Company has funded its acquisitions through internally generated funds, private
placements of debt securities, bank financing and capital contributions from DR
Partners and TCI. The Company anticipates the acquisitions of additional systems
in selected markets in the future.
The Company paid dividends on its common stock totaling approximately $4.0
million, or $0.16 per share in the three months ended July 31, 1998 and 1997,
respectively.
The Company believes that net cash provided by operating activities,
borrowings under its bank credit facilities and the Company's ability to obtain
financing will provide adequate sources of short-term and long-term liquidity in
the future.
On February 2, 1998, the Company formed a partnership, TCA Cable Partners
II (the "TCI Transaction"), with TCI American Holdings IV, L.P.(the "TCI
Affiliate"), an affiliate of TCI Communications Inc. The Company contributed
certain cable systems in Texas and New Mexico serving approximately 155,000
subscribers and $46.6 million in unsecured debt and the TCI Affiliate
contributed its cable systems in north Texas and western Louisiana, serving
approximately 150,000 subscribers and $247.9 million in unsecured debt, in
exchange for an 80% and 20% partnership interest, respectively, in TCA Cable
Partners II. The cable systems contributed by the Company and the TCI Affiliate
are each valued at approximately $315 million. The Company financed the TCI
Transaction with a portion of the proceeds from a $150 million increase in the
Company's primary credit facility and the issuance of $200 million in public
debt. TCA Cable Partners II will be consolidated in the financial statements of
the Company and 20% of the estimated fair value of TCA Cable Partners II net
assets will be recorded by the Company as a redeemable minority interest at the
acquisition date. The TCI Affiliate has the right to require the Company to
purchase the TCI Affiliate's 20% partnership interest at fair market value
beginning February 2003 through February 2023 (the "Put and Call Period"), the
termination date of the partnership agreement. The Company has a corresponding
right to require the TCI Affiliate to sell its 20% partnership interest in TCA
Cable Partners II to the Company at fair market value during the Put and Call
Period. TCA Cable Partners II will be managed by the Company. At the
12
<PAGE> 13
closing of the TCI Transaction, the Company served approximately 860,000
subscribers. In connection with the TCI transaction, the Company recorded a
deferred tax liability and a corresponding intangible asset of $53 million.
On February 2, 1998, the Company issued $200 million in bonds with a coupon
of 6.53% and a 10 year put to finance the TCI Transaction. The Company has
received a rating of BBB+ from Standard & Poor's and Baa2 from Moody's. In
August 1997, the Company entered into treasury lock transactions (the "Treasury
Locks") with a notional amount of $100 million as a hedge against interest rate
changes prior to the closing of the debt offering. In January 1998, the Treasury
Locks were terminated at a cost of $7.9 million. The cost will be amortized over
the term of the public debt as an interest rate yield adjustment.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications and other control devices
use only two digits to identify a year in the date field without considering the
impact of the upcoming change in the century. As a result, as year 2000
approaches, computer systems and applications used by many companies may need to
be upgraded to comply with Year 2000 requirements ("Year 2000"). The Company
relies on its systems in operating and monitoring many significant aspects of
its business, including financial systems (such as general ledger, accounts
payable, accounts receivable, inventory and order management), customer
services, infrastructure and network and telecommunications equipment. The
Company also relies directly and indirectly on the systems of external business
enterprises such as customers, suppliers, creditors, financial organizations and
domestic and international governments. The Company currently estimates that its
costs associated with Year 2000 compliance, including any costs associated with
the consequences of incomplete or untimely resolution of Year 2000 compliance
issues, will not have a material adverse effect on the Company's business,
financial condition or results of operations. However, the Company has not
exhaustively investigated and does not believe it has fully identified the
impact of Year 2000 compliance and has not concluded that it can resolve any
issues that may arise in complying with Year 2000 without disruption of its
business or without incurring significant expense. In addition, even if the
Company's internal systems are not materially affected by Year 2000 compliance
issues, the Company could be affected through disruption in the operation of the
enterprises with which the Company interacts.
FORWARD LOOKING INFORMATION
The statements contained in this Quarterly Report on Form 10-Q ("Quarterly
Report") which are not historical facts, including, but not limited to,
statements found under the captions "Financial Condition and Results of
Operations", and "Liquidity and Capital Resources" above, are forward-looking
statements that involve a number of risks and uncertainties. The actual results
of the future events described in such forward-looking statements in the
Quarterly Report could differ materially from those contemplated by such
forward-looking statements. Among the factors that could cause actual results to
differ materially are the risks and uncertainties discussed in the Quarterly
Report, including without limitation the portions of such statements under the
captions referenced above, and the uncertainties set forth from time to time in
the Company's other public reports and filings and public statements.
13
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1 -- Articles of Incorporation.(1)
3.2 -- Articles of Amendment to Articles of Incorporation.(2)
3.3 -- Articles of Amendment to Articles of Incorporation.(2)
3.4 -- Articles of Amendment to Articles of Incorporation.(3)
3.5 -- Amended and Restated Bylaws.(4)
4.1 -- Form of Stock Certificate.(1)
10.1(a) -- Asset Exchange Agreement dated January 14, 1998 between
TCA Partners and Cable One, Inc.*
10.1(b) -- First Amendment to Asset Agreement dated June 15, 1998
between TCA Cable Partners and Cable One, Inc.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1, File No. 2-75516, and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-8, File No. 33-21901, and incorporated herein by reference.
(3) Previously filed as an exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1993, filed January 27, 1994 and incorporated by reference
herein.
(4) Previously filed as an exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1997, filed January 27, 1998 and incorporated herein by
reference.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TCA CABLE TV, INC.
/s/ FRED R. NICHOLS
------------------------------------
Fred R. Nichols
Chairman and Chief Executive Officer
Date: September 10, 1998
/s/ JIMMIE F. TAYLOR
------------------------------------
Jimmie F. Taylor
Vice President, CFO, and Treasurer
Date: September 10, 1998
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1 -- Articles of Incorporation.(1)
3.2 -- Articles of Amendment to Articles of Incorporation.(2)
3.3 -- Articles of Amendment to Articles of Incorporation.(2)
3.4 -- Articles of Amendment to Articles of Incorporation.(3)
3.5 -- Amended and Restated Bylaws.(4)
4.1 -- Form of Stock Certificate.(1)
10.1(a) -- Asset Exchange Agreement dated January 14, 1998 between
TCA Partners and Cable One, Inc.*
10.1(b) -- First Amendment to Asset Agreement dated June 15, 1998
between TCA Cable Partners and Cable One, Inc.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1, File No. 2-75516, and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-8, File No. 33-21901, and incorporated herein by reference.
(3) Previously filed as an exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1993, filed January 27, 1994 and incorporated by reference
herein.
(4) Previously filed as an exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1997, filed January 27, 1998 and incorporated herein by
reference.
<PAGE> 1
ASSET EXCHANGE AGREEMENT
DATED JANUARY 14, 1998
BETWEEN
TCA CABLE PARTNERS
AND
CABLE ONE, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 1992 Cable Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Basic Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Cable Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Cable Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Cable One Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Cable One Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Cable One Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Cable One Other Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Cable One Other Real Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Cable One Owned Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Cable One Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Cable One Systems Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Cable One Systems Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Cable One Systems Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Cable One Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Cable One's Cable Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Closing Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 Equivalent Basic Subscribers (or 'EBSs') . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Expanded Basic Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.31 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.33 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 Legal Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.39 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.40 Other Real Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.41 Owned Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
1.42 Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.43 Pay TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.44 Permitted Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.45 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.46 Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.48 System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.49 System Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.50 System Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.51 System Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.52 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.53 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.54 TCA Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.55 TCA Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.56 TCA Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.57 TCA Other Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.58 TCA Other Real Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.59 TCA Owned Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.60 TCA Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.61 TCA Systems Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.62 TCA Systems Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.63 TCA Systems Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.64 TCA Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.65 TCA's Cable Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.66 Third party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.67 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.68 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.69 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. EXCHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Exchange of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. CASH CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Calculation of Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Adjusted Current Items Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Determination of Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Allocation of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 TCA Assumed Obligations and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 TCA Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Cable One Assumed Obligations and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Cable One Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
5. CABLE ONE'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Organization and Qualification of Cable One . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authority and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Cable One Systems Franchises, Cable One Systems Licenses,
Cable One Systems Contracts and Cable One Other Real Property
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.9 Patents, Trademarks and Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Financial Statements; Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.11 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.13 Tax Returns; Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.14 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.15 Cable One Systems Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.16 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.17 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.19 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6. TCA'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Organization and Qualification of TCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Authority and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 No Conflict; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 TCA Systems Franchises, TCA Systems Licenses,
TCA Systems Contracts and TCA Other Real Property Interests . . . . . . . . . . . . . . . . . . 27
6.6 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.9 Patents, Trademarks and Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Financial Statements; Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.11 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.13 Tax Returns; Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.14 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.15 TCA Systems Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.16 Taxpayer Identification Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.17 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.18 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.19 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
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7. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Access to Premises and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Continuity and Maintenance of Operations; Certain Deliveries and Notices . . . . . . . . . . . . . . 34
7.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Leased Vehicles; Other Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.5 Required Consents, Franchise Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Title Commitments and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 HSR Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.8 Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.9 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.10 Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 Updated Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.12 Use of Names and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.13 Transitional Billing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.14 Confidentiality and Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.15 Bulk Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.16 Lien Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.17 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.18 Post-Closing Cooperation upon Inquiries as to Rates . . . . . . . . . . . . . . . . . . . . . . . . 43
7.19 Power of Attorney Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.20 Blackwell Overbuild Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Conditions to Cable One's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Conditions to TCA's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.1 The Closing; Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.2 TCA's Delivery Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.3 Cable One's Delivery Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10. TERMINATION AND DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.2 Indemnification by TCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.3 Indemnification by Cable One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.4 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.5 Other Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.6 Payments for Indemnification Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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12. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.1 Parties Obligated and Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.3 Right to Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.6 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.7 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.8 Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.9 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.13 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.14 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.15 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.16 Takings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.17 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.18 Commercially Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.19 Action by any Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<PAGE> 7
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
<TABLE>
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Schedule 1.34 Knowledge
Schedule 1.10 Cable One Leased Property
Schedule 1.12 Cable One Other Real Property
Schedule 1.13 Cable One Owned Property
Schedule 1.15 Cable One Systems Contracts
Schedule 1.16 Cable One Systems Franchises
Schedule 1.17 Cable One Systems Licenses
Schedule 1.18 Cable One Tangible Personal Property
Schedule 1.56 TCA Leased Property
Schedule 1.58 TCA Other Real Property Interests
Schedule 1.59 TCA Owned Property
Schedule 1.61 TCA Systems Contracts
Schedule 1.62 TCA Systems Franchises
Schedule 1.63 TCA Systems Licenses
Schedule 1.64 TCA Tangible Personal Property
Schedule 4.2 TCA Excluded Assets
Schedule 4.4 Cable One Excluded Assets
Schedule 5.3 Cable One Required Consents
Schedule 5.4 Cable One Liens
Schedule 5.4.3 Cable One Competition
Schedule 5.7.2 Cable One Environmental Exceptions
Schedule 5.8.4 Cable One Customer Service Standards Exceptions
Schedule 5.11 Cable One Undisclosed Liabilities; Certain Changes or Events
Schedule 5.12 Cable One Litigation
Schedule 5.14 Cable One Plans; Employee Matters
Schedule 5.14.1 Cable One Employees
Schedule 5.15 Cable One Systems Information
Schedule 5.18 Cable One Bonds
Schedule 6.3 TCA Required Consents
Schedule 6.4 TCA Liens and Permitted Liens
Schedule 6.4.3 TCA Competition
Schedule 6.7.2 TCA Environmental Exceptions
Schedule 6.8.4 TCA Customer Service Standards Exceptions
Schedule 6.11 TCA Undisclosed Liabilities; Certain Changes or Events
Schedule 6.12 TCA Litigation
Schedule 6.14 TCA Plans; Employee Matters
Schedule 6.14.1 TCA Employees
Schedule 6.15 TCA Systems Information
Schedule 6.18 TCA Bonds
Schedule 7.2.3 Exceptions to Section 7.2.3(j)
</TABLE>
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EXHIBITS
<TABLE>
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Exhibit 7.5.1 Form of Consent
Exhibit 7.9(a) TCA Noncompetition Covenant
Exhibit 7.9(b) Cable One Noncompetition Covenant
Exhibit 9.2.2 TCA Bill of Sale and Assignment and Assumption Agreement
Exhibit 9.2.11(a) TCA's General Counsel Opinion
Exhibit 9.2.11(b) TCA's FCC Counsel Opinion
Exhibit 9.3.2 Cable One Bill of Sale and Assignment and Assumption Agreement
Exhibit 9.3.11(a) Cable One's General Counsel Opinion
Exhibit 9.3.11(b) Fleischman and Walsh, L.L.P. Opinion
</TABLE>
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<PAGE> 9
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT ("Agreement") is made as of the 14th day
of January, 1998, by and between TCA Cable Partners, a Delaware general
partnership ("TCA"), and Cable One, Inc., a Delaware corporation ("Cable One").
RECITALS
A. Cable One owns and operates cable television systems
which are franchised or hold other operating authority and operate in and
around the Texas municipalities listed on SCHEDULE 5.15 (collectively, the
"Cable One Systems").
B. TCA owns and operates cable television systems which
are franchised or hold other operating authority and operate in and around the
Oklahoma municipalities listed on SCHEDULE 6.15 (collectively, the "TCA
Systems").
C. This Agreement sets forth the terms and conditions
upon which (i) Cable One will convey, or cause to be conveyed, to TCA
substantially all of the assets comprising or used or useful in connection with
Cable One's Cable Business and (ii) TCA will convey, or cause to be conveyed,
to Cable One substantially all of the assets comprising or used or useful in
connection with TCA's Cable Business, all in such a manner as to effect, to the
extent reasonably possible, a like-kind exchange of such assets under Section
1031 of the United States Internal Revenue Code, as amended (the "Code").
AGREEMENTS
In consideration of the mutual covenants and promises set forth
herein, the parties agree as follows:
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 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. The Cable One Assets or the TCA Assets, as the
context requires.
<PAGE> 10
1.4 Basic Services. The lowest tier of service offered to
subscribers of a System.
1.5 Business Day. Any day other than a Saturday, Sunday or a day
on which the banking institutions in Tyler, Texas or New York, New York are
required or authorized to be closed.
1.6 Cable Act. The Cable Communications Policy Act of 1984, as
amended, and the rules and regulations promulgated thereunder.
1.7 Cable Business. Cable One's Cable Business or TCA's Cable
Business, as the context requires.
1.8. Cable One Assets. All 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 Cable One's
Cable Business in which Cable One or any Affiliate of Cable One has any right,
title or interest or in which Cable One or any Affiliate of Cable One acquires
any right, title or interest on or before the Closing Time that are not Cable
One Excluded Assets, including the Cable One Tangible Personal Property, Cable
One Owned Property, Cable One Leased Property, Cable One Other Real Property
Interests, Cable One Systems Franchises, Cable One Systems Licenses, Cable One
Systems Contracts, Cable One Books and Records and Cable One Other Intangibles,
but excluding the Cable One Excluded Assets.
1.9. Cable One Books and Records. All engineering records, files,
data, drawings, blueprints, schematics, reports, lists, plans and processes and
all other files of correspondence, lists, records and reports concerning Cable
One's Cable Business including subscribers and prospective subscribers of the
Cable One Systems, signal and program carriage and dealings with Governmental
Authorities, including all reports filed by or on behalf of Cable One with the
FCC and statements of account filed by or on behalf of Cable One with the U.S.
Copyright Office.
1.10. Cable One Leased Property. The leaseholds of real property
used or held for use in Cable One's Cable Business and described as Cable One
Leased Property on SCHEDULE 1.10.
1.11. Cable One Other Intangibles. All intangible assets, other
than the Cable One Systems Franchises, the Cable One Systems Licenses and the
Cable One Systems Contracts, including subscriber lists, claims (excluding any
claims comprising or relating to Excluded Assets), patents and copyrights, if
any, owned, used or held for use in Cable One's Cable Business.
1.12. Cable One Other Real Property Interests. The easements and
rights of access (other than those relating to multiple dwelling units) and
other interests in real property held by Cable One in connection with Cable
One's Cable Business, including those interests described as Cable One Other
Real Property Interests on SCHEDULE 1.12.
2
<PAGE> 11
1.13. Cable One Owned Property. The fee interests in the real
property owned by Cable One used or held for use in Cable One's Cable Business
and described as Cable One Owned Property on SCHEDULE 1.13 and all improvements
and towers thereon.
1.14. Cable One Required Consents. Any and all consents,
authorizations and approvals required under the Cable One Systems Franchises,
Cable One Systems Licenses, Cable One Systems Contracts, and the leases and
other documents evidencing Cable One Leased Property and Cable One Other Real
Property Interests and for (a) Cable One to transfer the Cable One Assets to
TCA, (b) TCA to operate the Cable One Systems and to own, lease, use and
operate the Cable One Assets and the Cable One Systems at the places and in the
manner in which the Cable One Assets are used and the Cable One Systems are
operated as of the date of this Agreement and as of the Closing, and (c) TCA to
assume and perform the Cable One Systems Franchises, the Cable One Systems
Licenses, the Cable One Systems Contracts, and the leases and other documents
evidencing Cable One Leased Property and Cable One Other Real Property
Interests.
1.15. Cable One Systems Contracts. The pole line agreements,
underground conduit agreements, crossing agreements, retransmission consent
agreements, multiple dwelling, bulk billing or commercial service agreements
and other Contracts (other than Cable One Systems Franchises and Cable One
Systems Licenses) used or held for use in Cable One's Cable Business and
described on SCHEDULE 1.15.
1.16. Cable One Systems Franchises. The franchises and other
authorizations or permits used or held for use in Cable One's Cable Business
and described on SCHEDULE 1.16.
1.17. Cable One Systems 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 used
or held for use in Cable One's Cable Business and described on SCHEDULE 1.17.
1.18. Cable One Tangible Personal Property. All tangible personal
property, including towers (other than towers on Cable One Owned Property),
tower equipment, aboveground and underground cable, distribution systems,
headend amplifiers, line amplifiers, microwave equipment, converters, testing
equipment, motor vehicles, office equipment, computers and billing equipment,
furniture, fixtures, supplies, inventory and other physical assets, the
principal items of which are used or held for use in Cable One's Cable Business
and described on SCHEDULE 1.18
1.19. Cable One's Cable Business. The cable television business and
other income-generating business relating to the Cable One Systems conducted by
Cable One through the Cable One Systems.
1.20. Closing Time. 11:59 P.M., Central Time, on the Closing Date.
1.21. Communications Act. The Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
3
<PAGE> 12
1.22. 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.
1.23. Equivalent Basic Subscribers (or "EBSs"). An active customer
for Basic Services either in a single household, a commercial establishment or
in a multi-unit dwelling (including a hotel unit); provided, however, that the
number of customers in a multi-unit dwelling or commercial establishment that
obtain service on a "bulk-rate" basis shall be determined on a System-by-System
basis by dividing the gross bulk-rate billings for Basic Services and Expanded
Basic Services (but not billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or from any
outlet or connection other than the first or from any pass-through charge for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the
like) attributable to such multi-unit dwelling or commercial establishment
during the most recent billing period ended prior to the date of calculation
(but excluding billings in excess of a single month's charge) by the rate
charged at the time of determination to individual households for the highest
level of Basic Services and Expanded Basic Services offered by such System,
such rate not to be less than the rate for such System set forth on SCHEDULE
6.15 (in the case of TCA) or SCHEDULE 5.15 (in the case of Cable One)
(excluding a la carte tiers or premium services, installation or other
non-recurring charges, converter rental, pass-through charges for sales taxes,
line-itemized franchise fees charged by the FCC and the like). For purposes of
this definition, an "active customer" shall mean any person, commercial
establishment or multi-unit dwelling at any given time that is paying for and
receiving Basic Services from the System who has an account that is not more
that 60 days past due (except for past due amounts of $5 or less, provided such
account is otherwise current). For purposes of this definition, an "active
customer" does not include any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full the charges
for at least one month of the services ordered. For purposes of this
definition, the number of days past due of a customer account shall be
determined from the first day of the period for which the applicable billing
relates.
1.24. Environmental Law. Any Legal Requirement relating to
pollution or the protection of public health, safety, welfare or the pollution,
protection or restoration of the environment, including Legal Requirements
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.
1.25. ERISA. The Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.26. 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.
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1.27. 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 Pay TV.
1.28. FCC. The Federal Communications Commission.
1.29. Financial Statements. Cable One's Financial Statements or
TCA's Financial Statements, as the context requires.
1.30. 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.
1.31. Hazardous Substances. (a) Any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. Sections
6901 et seq.), as amended, and the rules and regulations promulgated
thereunder; (b) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Sections 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. Section 2601 et seq.) or the Insecticide,
Fungicide and Rodenticide Act (IFRA) (7 U.S.C. Section 136 et seq.), each, 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, handling, treatment, storage or disposal of which on Owned Property or
Leased Property is regulated or prohibited by any Environmental Law; and (h)
any other substance which by any Environmental Law requires special handling,
reporting or notification of any Governmental Authority in its collection,
storage, use, treatment or disposal.
1.32. HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
1.33. 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.
1.34. Knowledge. For each Party, the actual knowledge of a
particular matter of one or more of the persons identified under such Party's
name on the attached SCHEDULE 1.34.
1.35. Leased Property. Cable One Leased Property or TCA Leased
Property, as the context requires.
1.36. 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.
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1.37. 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, exception to, defect in, or other condition adversely affecting
title or other ownership interest (including but not limited to reservations,
rights of entry, possibilities of reverter, encroachments, protrusions,
easements, rights-of-way, rights of first refusal, 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.
1.38. 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.
1.39. Losses. Any claims, losses, liabilities, damages, 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 or the existence or assertion
of any Liens (other than Permitted Liens) with respect to which indemnification
is sought.
1.40. Other Real Property Interests. The Cable One Other Real
Property Interests or the TCA Other Real Property Interests, as the context
requires.
1.41. Owned Property. Cable One Owned Property or TCA Owned
Property, as the context requires.
1.42. Party. Either Cable One, on the one hand, or TCA, on the
other hand, as the context requires.
1.43. Pay TV. Premium programming services selected by and sold to
subscribers on a per channel or per program basis.
1.44. 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 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, (i) the rights of any lessor and (ii) any Lien
granted by any lessor of Leased Property to secure indebtedness;
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provided that "Permitted Lien" will not include any Lien securing a debt or
claim (other than inchoate materialmen's, mechanics', workman's, repairmen'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 impair in any
way the conduct of the business of the affected System as it is currently being
conducted, and provided further that the classification of any Lien as a
"Permitted Lien" will not affect any liability which TCA may have under this
Agreement for any such Lien with respect to the exchange of the TCA Systems or
which Cable One may have under this Agreement for any such Lien with respect to
the exchange of the Cable One Systems, including pursuant to any indemnity
obligation under this Agreement.
1.45. Person. Any natural person, Governmental Authority,
corporation, general or limited partnership, limited liability company, joint
venture, trust, association or unincorporated entity of any kind.
1.46. Prime Rate. The annual rate of interest published from time
to time by The Wall Street Journal as the "Prime Rate."
1.47. Required Consents. The Cable One Required Consents or the TCA
Required Consents, as the context requires.
1.48. System. Any of the Cable One Systems or the TCA Systems, as
the context requires.
1.49. System Contracts. The Cable One Systems Contracts or the TCA
Systems Contracts, as the context requires.
1.50. System Franchises. The Cable One Systems Franchises or the
TCA Systems Franchises, as the context requires.
1.51. System Licenses. The Cable One Systems Licenses or the TCA
Systems Licenses, as the context requires.
1.52. Tangible Personal Property. The Cable One Tangible Personal
Property or the TCA Tangible Personal Property, as the context requires.
1.53. 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, severance, net or gross receipts, 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.
1.54. TCA 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
TCA's Cable Business in which TCA or any Affiliate of TCA has any right, title
or interest or in which TCA or any Affiliate of TCA acquires any right, title
or interest on or before the Closing Time that are not TCA Excluded Assets,
including the TCA Tangible
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Personal Property, the TCA Owned Property, the TCA Leased Property, the TCA
Other Real Property Interests, the TCA Systems Franchises, the TCA Systems
Licenses, the TCA Systems Contracts, the TCA Books and Records and TCA Other
Intangibles, but excluding the TCA Excluded Assets.
1.55. TCA Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and processes and all
other files of correspondence, lists, records and reports concerning TCA's
Cable Business, including subscribers and prospective subscribers of the TCA
Systems, signal and program carriage and dealings with Governmental
Authorities, including all reports filed by or on behalf of TCA with the FCC
and statements of account filed by or on behalf of TCA with the U.S. Copyright
Office.
1.56. TCA Leased Property. The leaseholds of real property used or
held for use in TCA's Cable Business and described as TCA Leased Property on
SCHEDULE 1.56.
1.57. TCA Other Intangibles. All intangible assets, other than TCA
Systems Franchises, TCA Systems Licenses and TCA Systems Contracts, including
subscriber lists, claims (excluding any claims comprising or relating to TCA
Excluded Assets), patents and copyrights, if any, owned, used or held for use
in TCA's Cable Business.
1.58. TCA Other Real Property Interests. The easements and rights
of access (other than those relating to multiple dwelling units) and other
interests in real property held by TCA in connection with TCA's Cable Business,
including those interests described as TCA Other Real Property Interests on
SCHEDULE 1.58.
1.59. TCA Owned Property. The fee interests in the real property
owned by TCA used or held for use in TCA's Cable Business and described as TCA
Owned Property on SCHEDULE 1.59 and all improvements and towers thereon.
1.60. TCA Required Consents. Any and all consents, authorizations
and approvals required under the TCA Systems Franchises, TCA Systems Licenses,
TCA Systems Contracts, and the leases and other documents evidencing the TCA
Leased Property or the TCA Other Real Property Interests for (a) TCA to
transfer the TCA Assets to Cable One, (b) Cable One to operate the TCA Systems
and to own, lease, use and operate the TCA Assets and the TCA Systems at the
places and in the manner in which the TCA Assets are used and the TCA Systems
are operated as of the date of this Agreement and as of the Closing, and (c)
Cable One to assume and perform the TCA Systems Franchises, the TCA Systems
Licenses, the TCA Systems Contracts, and the leases and other documents
evidencing TCA Leased Property or TCA Other Real Property Interests.
1.61. TCA Systems Contracts. The pole line agreements, underground
conduit agreements, crossing agreements, retransmission consent agreements,
multiple dwelling, bulk billing or commercial service agreements and other
Contracts (other than TCA Systems Franchises and TCA Systems Licenses) used or
held for use in TCA's Cable Business and described on SCHEDULE 1.61.
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1.62. TCA Systems Franchises. The franchises and similar
authorizations or permits used or held for use in TCA's Cable Business and
described on SCHEDULE 1.62.
1.63. TCA Systems 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 used or held
for use in TCA's Cable Business and described on SCHEDULE 1.63.
1.64. TCA Tangible Personal Property. All tangible personal
property, including towers (other than towers on TCA Owned Property), tower
equipment, aboveground and underground cable, distribution systems, headend
amplifiers, line amplifiers, microwave equipment, converters, testing
equipment, motor vehicles, office equipment, computers and billing equipment,
furniture, fixtures, supplies, inventory and other physical assets, the
principal items of which are used or held for use in TCA's Cable Business and
described on SCHEDULE 1.64.
1.65. TCA's Cable Business. The cable television business and other
income-generating business relating to the TCA Systems conducted by TCA through
the TCA Systems.
1.66. Third party. Any Person other than TCA and its Affiliates or
Cable One and its Affiliates.
1.67. 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 Cable One or TCA in connection with this Agreement or the
transactions contemplated hereby.
1.68. 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 7.7
Appraisal 3.4
Appraiser 3.4
Cable One First Paragraph
Cable One Adjusted Current Items Amount 3.2.2
Cable One Assumed Obligations and Liabilities 4.3
Cable One Balance Sheets 5.10
Cable One Excluded Assets 4.4
Cable One Plans 5.14.2
Cable One Systems Recital A
Cable One Title Policies 9.3.4
Cable One's Financial Statements 5.10
Cash Consideration 3.1.1
Closing 9.1
</TABLE>
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<TABLE>
<S> <C>
Closing Date 9.1
Code Recital C
Copyright Act 5.8.1
Cost of Service Election 5.8.5
Exchange 2.1.1
Final Report 3.3.2
FTC 7.7
Indemnified Party 11.4
Indemnifying Party 11.4
Material Taking 12.17
Preliminary Report 3.3.1
Retained Employees 7.3.1
Surveys 7.6
Survival Period 11.1
Taking 12.17
TCA First Paragraph
TCA Adjusted Current Items Amount 3.2.1
TCA Assumed Obligations and Liabilities 4.1
TCA Balance Sheets 6.10
TCA Excluded Assets 4.2
TCA Plans 6.14.2
TCA Systems Recital B
TCA Title Policies 9.2.4
TCA's Financial Statements 6.10
Title Commitments 7.6
Title Company 7.6
Title Defect 7.6
Transitional Billing Services 7.13
WARN 6.14.1
</TABLE>
1.69. Accounting Terms. All accounting terms not otherwise defined
in this Agreement will have the meanings ascribed to them under generally
acceptable accounting principles as in effect from time to time in the United
States.
2. EXCHANGE.
2.1. Exchange of Assets.
2.1.1. Subject to the terms and conditions set forth in this
Agreement, at the Closing, TCA and Cable One agree to exchange simultaneously
the TCA Assets for the Cable One Assets, free and clear of all Liens (except
Permitted Liens) (the "Exchange"). TCA and Cable One agree to use all
reasonable efforts to structure the Exchange in such a way that to the extent
reasonably possible it will be a tax free exchange of like-kind assets under
Section 1031 of the Code.
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2.1.2. The Exchange is to occur as follows: (A) the TCA
Tangible Personal Property and the Cable One Tangible Personal Property are
being exchanged each for the other; (B) the TCA Owned Property, TCA Leased
Property and TCA Other Property Interests and the Cable One Owned Property,
Cable One Leased Property and Cable One Other Real Property Interests are being
exchanged each for the other; and (c) the TCA Systems Contracts, TCA Systems
Franchises, TCA Systems Licenses and TCA Other Intangibles and the Cable One
Systems Contracts, Cable One Systems Franchises, Cable One Systems Licenses and
Cable One Other Intangibles are being exchanged each for the other, in each
case to the maximum extent permitted by Section 1031 of the Code and the
regulations promulgated thereunder.
3. CASH CONSIDERATION. Each Party agrees that cash consideration will
be paid at Closing by either TCA or Cable One to the other, such amount to be
determined as follows:
3.1. Calculation of Cash Consideration.
3.1.1. If the TCA Adjusted Current Items Amount is less than
the Cable One Adjusted Current Items Amount, then TCA shall pay to Cable One an
amount equal to the Cable One Adjusted Current Items Amount less the TCA
Adjusted Current Items Amount, or, in the alternative, if the Cable One
Adjusted Current Items Amount is less than the TCA Adjusted Current Items
Amount, then Cable One shall pay to TCA an amount equal to the TCA Adjusted
Current Items Amount, less the Cable One Adjusted Current Items Amount (the
"Cash Consideration").
3.1.2. At the Closing, the appropriate Party will pay to the
other Party, by federal wire transfer of immediately available funds pursuant
to wiring instructions which shall be delivered by the other Party at least
five (5) Business Days prior to Closing, an amount in cash equal to the Cash
Consideration as preliminary determined in connection with the preparation of
the Preliminary Reports.
3.2. Adjusted Current Items Amounts.
3.2.1. The TCA Adjusted Current Items Amount shall be
determined and adjusted as follows, which adjustments will be made without
duplication of any amount (the "TCA Adjusted Current Items Amount"):
(a) The TCA Adjusted Current Items Amount shall be
increased or decreased, as applicable, on a pro rata basis as of the Closing
Date for all prepaid expenses other than inventory (but only to the extent the
full benefit of such prepaid expenses will be realizable within 12 months after
the Closing Date), accrued expenses (including real and personal property
taxes, copyright fees, and franchise or license fees or charges), prepaid
income, subscriber prepayments and accounts receivable related to the TCA
Business, all as determined in accordance with generally accepted accounting
principles consistently applied, to reflect the principle that all expenses and
income attributable to the TCA Business for the period through and including
the Closing Date are for the account of TCA, and all expenses and income
attributable to the TCA Business for the period after the Closing Date are for
the account of Cable One. TCA will receive
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no credit for (a) any accounts receivable resulting from cable service sales
any portion of which is 60 days or more past due from the billing date as of
the Closing Date, (b) all accounts receivable resulting from advertising sales
any portion of which is 90 days or more past due as of the Closing Date, or (c)
accounts receivable from customers 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 TCA Excluded Assets.
(b) The TCA Adjusted Current Items Amount shall be
decreased by the amount of all unearned income, advance payments to, or funds
of third parties on deposit with, TCA as of the Closing Date, relating to TCA's
Cable Business, including advance payments and deposits by subscribers served
by TCA's Cable Business for converters, encoders, decoders, cable television
service and related sales, and all interest, if any, required to be paid
thereon through the Closing Date.
3.2.2. The Cable One Adjusted Current Items Amount shall be
determined and adjusted as follows, which adjustments will be made without
duplication of any amount (the "Cable One Adjusted Current Items Amount"):
(a) The Cable One Adjusted Current Items Amount
shall be increased or decreased, as applicable, on a pro rata basis as of the
Closing Date for all prepaid expenses other than inventory (but only to the
extent the full benefit of such prepaid expenses will be realizable within 12
months after the Closing Date), accrued expenses (including real and personal
property taxes, copyright fees, and franchise or license fees or charges),
prepaid income, subscriber prepayments and accounts receivable related to the
Cable One Business, all as determined in accordance with generally accepted
accounting principles consistently applied, to reflect the principle that all
expenses and income attributable to the Cable One Business for the period
through and including the Closing Date are for the account of Cable One, and
all expenses and income attributable to the Cable One Business for the period
after the Closing Date are for the account of TCA. Cable One will receive no
credit for (a) any accounts receivable resulting from cable service sales any
portion of which is 60 days or more past due from the billing date as of the
Closing Date or (b) all accounts receivable resulting from advertising sales
any portion of which is 90 days or more past due as of the Closing Date, or (c)
accounts receivable from customers 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 Cable One Excluded Assets.
(b) The Cable One Adjusted Current Items Amount will
be decreased by the amount of all unearned income, advance payments to, or
funds of third parties on deposit with, Cable One as of the Closing Date,
relating to Cable One's Cable Business, including advance payments and deposits
by subscribers served by Cable One's Cable Business for converters, encoders,
decoders, cable television service and related sales, and all interest, if any,
required to paid thereon through the Closing Date.
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3.3. Determination of Cash Consideration.
3.3.1. At least ten Business Days prior to the Closing, each
Party shall deliver to the other Party a report (the "Preliminary Report"),
certified as to completeness and accuracy by such Party, showing in reasonable
detail the estimated Adjusted Current Items Amount for its Systems and the
preliminary determination of the adjustments referred to in SECTION 3.2 for
such Party, each of which shall be calculated as of the Closing Date (or as of
any other date agreed by the Parties), together with appropriate documents
substantiating the estimates proposed in its Preliminary Report. Each Party
will include in its Preliminary Report a reasonably detailed calculation of the
number of its Equivalent Basic Subscribers as of the date nearest to the date
of its Preliminary Report as is reasonably practicable, a schedule setting
forth advance payments made to or by and deposits made to such Party, accounts
receivable information relating to its respective Cable Business (showing sums
due and their respective aging as of the date nearest to the date of its
Preliminary Report as is reasonably practicable), and its billing report for
the most current period ended prior to the date of its Preliminary Report.
Following receipt of such Preliminary Report, each Party shall have five
Business Days to review such Preliminary Report and supporting information and
to notify the other Party of any disagreements with such Party's estimates. If
either Party provides a notice of disagreement with the other Party's estimates
within such five Business Day period, each Party shall negotiate in good faith
to resolve any such dispute and to reach an agreement on such estimates prior
to the Closing Date. The estimates so agreed upon by each Party or (if the
parties do not reach such an agreement on the estimates set forth in the
Preliminary Report prior to the Closing Date or if both Parties fail to provide
a notice of disagreement with the estimates within the time provided) the
estimates of such Party's Adjusted Current Items Amount and the adjustments
thereto set forth in the Preliminary Report shall be the basis for determining
the Cash Consideration payable at Closing. Any disagreements that may exist
with respect to a Preliminary Report, if any, shall be resolved in connection
with the preparation and finalization of the Final Report pursuant to SECTIONS
3.3.2. AND 3.3.3.
3.3.2. Within 60 days after the Closing, each Party will
deliver to the other Party a report (the "Final Report"), similarly certified
by such Party, showing in reasonable detail the final determination of Adjusted
Current Items Amount for its Systems as of the Closing Date, all adjustments
which were not calculated as of the Closing Date and any corrections to any of
its estimated adjustments contained in its Preliminary Report, together with
appropriate documents substantiating the calculations, determinations and
adjustments proposed in its Final Report. Each Party will provide the other
Party with reasonable access to all records which such Party has in its
possession and which are necessary for the other Party to prepare its Final
Report.
3.3.3. Within 30 days after receipt of the Final Report from
the other Party, each Party will give the other Party written notice of such
Party's objections, if any, to the other Party's Final Report. If either Party
makes any such objection, the parties will agree on the amount, if any, which
is not in dispute within 30 days after either Party's receipt of a notice of
objections to the Final Report. The undisputed portion of any adjustments to
the Cash Consideration paid by either Party on the Closing Date will be paid by
the responsible Party within three Business Days after agreement on such net
amount. Any disputed amounts will be determined within 120 days after the
Closing Date by an accounting firm mutually agreed upon by the parties, whose
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determination will be conclusive. TCA and Cable One 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 Value. As of the date of this Agreement, TCA
and Cable One agree that the value of the Assets of each of TCA and Cable One
shall be as set forth in an appraisal ("Appraisal") prepared by Bond & Pecaro,
Inc. (the "Appraiser"). Within 150 days after the Closing Date, the Appraiser
shall perform the Appraisal. The fees and expenses of the Appraiser shall be
shared equally by TCA and Cable One. TCA and Cable One agree that the
Appraisal shall be conducted for the purpose of reporting the transactions
contemplated hereunder as a like-kind exchange pursuant to Section 1031 of the
Code and shall not be used to adjust the Purchase Price. Accordingly, each of
TCA and Cable One, for purposes of Sections 1031 and 1060 of the Code and the
regulations thereunder, will report the Exchange contemplated by this Agreement
in accordance with the values set forth in the updated Appraisal. Neither
Party shall take any position inconsistent with the valuation contained in the
updated Appraisal and will file all returns and reports with respect to the
transaction contemplated by this Agreement, including all federal, state and
local returns, on a basis consistent with the valuation contained in the
updated Appraisal. Each of Cable One and TCA promptly will give the other
notice of any disallowance or challenge of asset values by the Internal Revenue
Service or any taxing Governmental Authority.
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1. TCA Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, TCA will assume and after the Closing Date,
TCA will pay, discharge and perform the following (the "TCA Assumed Obligations
and Liabilities"): (a) those obligations and liabilities accruing and relating
to periods after the Closing Time under or with respect to the Cable One Assets
assigned and transferred to TCA at the Closing; (b) those obligations and
liabilities of Cable One for subscriber prepayments and deposits related to the
Cable One Systems existing at the Closing Time; (c) the obligations and
liabilities of Cable One only to the extent that an adjustment in favor of TCA
is made with respect thereto pursuant to SECTION 3.2; and (d) all other
obligations and liabilities accruing and relating to periods after the Closing
Time and arising out of TCA's ownership of the Cable One Assets or operation of
the Cable One Systems after the Closing, except to the extent that such
obligations or liabilities relate to any Cable One Excluded Asset. All
obligations and liabilities arising out of or relating to the Cable One Assets
or the Cable One Systems other than the TCA Assumed Obligations and Liabilities
will remain and be the obligations and liabilities solely of Cable One,
including any obligation, liability or claims relating to or arising pursuant
to (x) rate refunds with respect to periods through and including the Closing
Date, (y) litigation commenced, or related to an event occurring, on or prior
to the Closing Date, or (z) credit, loan or other agreements pursuant to which
Cable One 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 Cable One Asset.
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4.2. TCA Excluded Assets. "TCA Excluded Assets" means all: (a)
programming Contracts (including cable guide agreements) and all Contracts to
which TCA and one or more Affiliates of TCA or other cable systems of TCA are
parties (including master retransmission consent agreements, master pole
attachment agreements, and master billing, collection and related agreement),
but only to the extent listed on SCHEDULE 4.2 and other than those listed on
Schedule 1.61; (b) TCA Plans; (c) insurance policies and rights and claims; (d)
bonds, letters of credit, surety instruments and other similar items; (e) cash
and cash equivalents, including cash relating to subscriber prepayments and
deposits, and notes receivable; (f) any of the TCA trademarks, trade names,
service marks, service names, logos and similar proprietary rights; (g)
subscriber billing Contracts and related equipment; (h) any agreement, right,
asset or property owned or leased by TCA or any Affiliate of TCA that is not
used or held for use in connection with the operation of the TCA Systems; (i)
all claims, rights, and interest in and to any refunds of taxes or fees of any
nature, or other claims against third parties, relating to the operation of the
TCA Systems prior to the Closing Time; (j) the account books of original entry,
general ledgers and financial records used in connection with the TCA Systems
provided, however, that TCA shall provide to Cable One access, in connection
with litigation, administrative proceedings, payment of taxes or any other
valid business reason, to any of such books and records as may be in TCA's
possession for a reasonable period, not to exceed seven years from the Closing
Date, from time to time upon reasonable notice from Cable One to TCA; (k) all
capital and vehicle leases; and (l) rights, assets and properties described on
SCHEDULE 4.2.
4.3. Cable One Assumed Obligations and Liabilities. At the Closing
and effective as of the Closing Time, Cable One will assume and after the
Closing Date, Cable One will pay, discharge and perform the following (the
"Cable One Assumed Obligations and Liabilities"): (a) those obligations and
liabilities accruing and relating to periods after the Closing Time under or
with respect to the TCA Assets assigned and transferred to Cable One at the
Closing; (b) those obligations and liabilities of TCA for subscriber
prepayments and deposits related to the TCA Systems existing at the Closing
Time; (c) other obligations and liabilities of TCA only to the extent that an
adjustment in favor of Cable One is made with respect thereto pursuant to
SECTION 3.2; and (d) all other obligations and liabilities accruing and
relating to periods after the Closing Time and arising out of Cable One's
ownership of the TCA Assets or operation of the TCA Systems after the Closing,
except to the extent that such obligations or liabilities relate to any TCA
Excluded Asset. All obligations and liabilities arising out of or relating to
the TCA Assets or the TCA Systems other than the Cable One Assumed Obligations
and Liabilities will remain and be the obligations and liabilities solely of
TCA, including any obligation, liability or claims relating to or arising
pursuant to (x) rate refunds with respect to periods through and including the
Closing Date, (y) litigation commenced, or related to an event occurring, on or
prior to the Closing Date, or (z) credit, loan or other agreements pursuant to
which TCA 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 TCA Asset.
4.4. Cable One Excluded Assets. "Cable One Excluded Assets" means
all: (a) programming (including cable guide agreements) Contracts and all
Contracts to which Cable One and one or more Affiliates of Cable One or other
cable systems of Cable One are parties
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(including master retransmission consent agreements, master pole attachment
agreements, and master billing, collection and related agreements) but only to
the extent listed on Schedule 4.4 and other than those listed on Schedule 1.15;
(b) Cable One Plans; (c) insurance policies and rights and claims thereunder;
(d) bonds, letters of credit, surety instruments and other similar items; (e)
cash and cash equivalents, including cash relating to subscriber prepayments
and deposits, and notes receivable; (f) Cable One's trademarks, trade names,
service marks, service names, logos and similar proprietary rights; (g)
subscriber billing Contracts and related equipment; (h) any agreement, right,
asset or property owned or leased by Cable One or any Affiliate of Cable One
that is not used or held for use in connection with the operation of the Cable
One Systems; (i) all claims, rights, and interest in and to any refunds of
taxes or fees of any nature, or other claims against third parties, relating to
the operation of the Cable One Systems prior to the Closing Time; (j) the
account books of original entry, general ledgers and financial records used in
connection with the Cable One Systems provided however, that Cable One shall
provide to TCA access in connection with litigation, administrative
proceedings, payment of taxes or any other valid business reason, to any of
such books and records as may be in Cable One's possession for a reasonable
period, not to exceed seven (7) years from the Closing Date, from time to time
upon reasonable notice from TCA to Cable One; (k) all capital and vehicle
leases; and (l) rights, assets and properties described on SCHEDULE 4.4.
5. CABLE ONE'S REPRESENTATIONS AND WARRANTIES. Cable One represents and
warrants to TCA as of the date of this Agreement and as of the Closing, as
follows:
5.1. Organization and Qualification of Cable One. Cable One is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and use the Cable One Assets owned, leased or used by
it and to conduct the Cable One Cable Business as it is currently being
conducted by it. Cable One 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 Cable One Assets owned, leased or used by it or the nature of its
activities in connection with the Cable One Systems 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 Cable One's Cable Business, the Cable One Assets or Cable One
Systems or on the ability of Cable One to perform its obligations under this
Agreement.
5.2. Authority and Validity. Cable One has all requisite corporate
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
Cable One of, the performance of Cable One under, and the consummation by Cable
One of the transactions contemplated by, this Agreement and the Transaction
Documents to which it is a party have been duly and validly authorized by all
action by or on behalf of Cable One. This Agreement has been, and when
executed and delivered by Cable One the Transaction Documents will be, duly and
validly executed and delivered by Cable One and the valid and binding
obligations of Cable One, enforceable against Cable One 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.
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5.3. No Conflict; Required Consents. Except for the Cable One
Required Consents, all of which are listed on SCHEDULE 5.3, the TCA Required
Consents and the HSR notification and the expiration or earlier termination of
the waiting period under the HSR Act, the execution and delivery by Cable One
of, the performance of Cable One under, and the consummation by Cable One of
the transactions contemplated by, this Agreement and the Transaction Documents
to which it is a party do not and will not: (a) conflict with or violate any
provision of the charter or bylaws of Cable One; (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 Cable One under, (iv) result in the
creation or imposition of any Lien under, any Cable One Systems Contract or
other instrument evidencing any of the Cable One Assets or by which Cable One
or any of its assets is bound or affected, except for purposes of clauses (c)
and (d) such consents, approvals, authorizations and filings that, if not
obtained or made, would not, and 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
Cable One System, Cable One's Cable Business or Cable One or on the ability of
Cable One to perform its obligations under this Agreement or the Transaction
Documents to which it is a party.
5.4. Assets.
5.4.1. Cable One has exclusive, good and marketable title to
(or, in the case of Assets that are leased, valid leasehold interests in) the
Cable One Assets (other than Cable One Owned Property, Cable One Leased
Property and Cable One Other Real Property Interests, as to which
representations and warranties in SECTION 5.6 apply). The Cable One Assets are
free and clear of all Liens, except (a) Permitted Liens, and (b) Liens
described on SCHEDULE 5.4, all of which will be terminated, released or, in the
case of the rights of first refusal listed on SCHEDULE 5.4, waived, as
appropriate, at or prior to the Closing. Except as described on SCHEDULE 1.18,
the Cable One Tangible Personal Property is in good operating condition and
repair (ordinary wear and tear excepted).
5.4.2. Except for items included in the Cable One Excluded
Assets, the Cable One Assets constitute all the assets necessary to conduct
Cable One's Cable Business and to operate the Cable One Systems substantially
as they are being conducted and operated on the date of this Agreement and in
compliance in all material respects with all applicable Legal Requirements and
Cable One Systems Contracts, Cable One Systems Licenses and Cable One Systems
Franchises.
5.4.3. Except as described on SCHEDULE 5.4.3, to the
Knowledge of Cable One, no third party has been granted or applied for a cable
television franchise or is providing or intending
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to provide wireline or wireless television programming or related services
(except for nationally recognized direct broadcast satellite services) in any
of the communities or unincorporated areas currently served by Cable One's
Cable Business. Except as described on SCHEDULE 5.4.3, Cable One has not been
denied initial or continuing access to any multiple dwelling unit or paid for
access to any multiple dwelling unit, subdivision or private development in the
areas served by Cable One's Cable Business.
5.5. Cable One Systems Franchises, Cable One Systems Licenses,
Cable One Systems Contracts and Cable One Other Real Property Interests.
5.5.1. Except as described on SCHEDULES 1.10, 1.12, 1.15,
1.16 and 1.17, or 4.4, Cable One is not bound or affected by any of the
following that relate primarily or in whole to Cable One's 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) pole line agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements or bulk or commercial service agreements; or
(f) System Contracts other than those described in any other clause of this
SECTION 5.5.1 which contemplate payments by or to Cable One in any 12-month
period exceeding $10,000 individually or $50,000 in the aggregate or which are
not terminable by Cable One without cost or penalty on not more than 90 days
prior written notice. Other than where expressly noted in SCHEDULE 1.15, no
Affiliate of Cable One is a party to any of the Cable One Systems Contracts
disclosed on SCHEDULE 1.15.
5.5.2. Complete and correct copies of the Cable One Systems
Franchises and Cable One Systems Licenses have been provided to TCA. Except as
set forth on SCHEDULE 1.16, the Cable One Systems Franchises contain all of the
commitments and obligations of Cable One to the applicable Governmental
Authority granting such Franchises with respect to the construction, ownership
and operation of the Cable One Systems. The Cable One Systems Franchises and
Cable One Systems 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 Cable One's Knowledge threatened, to terminate,
suspend or modify any Cable One System Franchise or Cable One System License
and Cable One is, or will be as of the Closing Date, in material compliance
with the terms and conditions of all the Cable One Systems Franchises and Cable
One Systems Licenses and other applicable requirements of all Governmental
Authorities (including the FCC and the U.S. Copyright Office) relating to the
Cable One Systems Franchises and Cable One Systems Licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
5.5.3. Complete and correct copies of all material Cable One
Systems Contracts (including Contracts relating to Leased Property and Other
Real Property Interests described on SCHEDULES 1.10 AND 1.12) have been
provided to TCA. Such documents constitute the entire agreement with the other
party. Each such Cable One Systems Contracts is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of Cable One
and Cable One
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is not and, to Cable One's Knowledge, each other party thereto is not in breach
or default of any material terms or conditions thereunder.
5.6 Real Property. All the Assets consisting of Cable One Owned
Property, Cable One Leased Property and material Cable One Other Real Property
Interests are described on SCHEDULES 1.10, 1.12 and 1.13. Except as otherwise
disclosed on SCHEDULE 1.13, Cable One holds good, marketable and indefeasible
fee simple title to the Cable One Owned Property and has the valid and
enforceable right to use and possess such Cable One Owned Property, subject
only to Permitted Liens. Except as otherwise disclosed on SCHEDULE 1.10, Cable
One has valid and enforceable leasehold interests in all Cable One Leased
Property. Except as otherwise disclosed on SCHEDULE 1.12, Cable One has valid
and enforceable rights to use all Cable One 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 Cable One
Owned Property and the premises demised under the leases and other documents
evidencing the Cable One Leased Property are in good condition and repair and
are suitable for the purposes used. Each parcel of Cable One Owned Property
and each parcel of Cable One Leased Property and any improvements thereon (a)
has access to and over public streets or private streets for which Cable One
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, (c) conforms in its current use to all
restrictive covenants, if any, or other Liens affecting all or part of such
parcel and (d) is available for immediate use in the conduct of the business or
operations of the Cable One Systems.
5.7 Environmental.
5.7.1. To the Knowledge of Cable One, the Cable One Owned
Property and Cable One Leased Property comply in all material respects with
and, to Cable One's Knowledge, has previously been operated in compliance in
all material respects with, all Environmental Laws. Cable One has not
generated, stored, used, treated, handled, discharged, released, or disposed of
any Hazardous Substances at, on, under, in or about, or in any other manner
affecting, any Cable One Owned Property or Cable One Leased Property,
transported any Hazardous Substances to or from any Cable One Owned Property or
Cable One Leased Property or discharged any Hazardous Substances from any Cable
One Owned Property or Cable One Leased Property into any body of water,
directly or indirectly, or undertaken or caused to be undertaken any other
activities relating to the Cable One Owned Property or Cable One Leased
Property, which could reasonably give rise to any liability under any
Environmental Law and, to Cable One's Knowledge, no other present or previous
owner, tenant, occupant or user of any Cable One Owned Property or Cable One
Leased Property or any other Person has committed or suffered any of the
foregoing. To Cable One's Knowledge (i) no release of Hazardous Substances
outside the Cable One Owned Property or Cable One Leased Property has entered
or threatens to enter any Cable One Owned Property or Cable One Leased
Property, and (ii) there is no pending or threatened Litigation based on
Environmental Laws which arises from any condition of the land adjacent to or
immediately surrounding any Cable One Owned Property or Cable One Leased
Property. No Litigation or investigation based on Environmental Laws which
relates to any Cable One Owned Property or Cable One Leased Property or any
operations or conditions on it (a) has been asserted or
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conducted in the past or is currently pending against or with respect to any
Cable One Company or, to Cable One's Knowledge, any other Person or (b) to
Cable One's Knowledge, is threatened or contemplated.
5.7.2. Except as described on SCHEDULE 5.7.2, to Cable One's
Knowledge, (a) no aboveground or underground storage tanks are currently or
have been located on any Cable One Owned Property or Cable One Leased Property,
(b) no Cable One Owned Property or Cable One 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, (c) no building or other structure on any Cable One Owned Property or
Cable One Leased Property contains asbestos, asbestos-containing material, or
material presumed to be asbestos-containing material pursuant to any
Environmental Law and (d) there are no incinerators or cesspools on the Cable
One Owned Property or Cable One Leased Property and all domestic waste
discharged from the Cable One Owned Property or the Cable One Leased Property
is discharged into a public sanitary sewer system.
5.7.3 Complete and correct copies of (a) all studies,
reports, surveys or other similar written materials in Cable One's possession
or to which Cable One, to its Knowledge, has access relating to the presence or
alleged presence of Hazardous Substances at, on, under or affecting the Cable
One Owned Property or Cable One Leased Property, (b) all notices (other than
general notices made by general publication) in Cable One's possession or to
which Cable One, to its Knowledge, has access that were 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 Cable One Owned Property or Cable One Leased Property or activities at the
Cable One Owned Property or Cable One Leased Property and (c) notices and
related materials in Cable One's possession or to which Cable One, to its
Knowledge, has access relating to any Litigation or allegation by any private
third party concerning any Environmental Law, have been provided to TCA.
5.8. Compliance with Legal Requirements.
5.8.1. The ownership, leasing and use of the Cable One
Assets as they are currently owned, leased and used, and the conduct of Cable
One's Cable Business and the operation of the Cable One 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 5.8.5, as to which the representations and
warranties set forth in that subsection shall apply) including (a) the
Copyright Act of 1976, as amended, including all rules, regulations, orders and
policies of the U.S. Copyright Office thereunder (the "Copyright Act") and the
applicable rules and regulations of the U.S. Copyright Office; (b) the
Communications Act, including provisions thereof pertaining to signal leakage;
(c) the must-carry and retransmission consent provisions of the 1992 Cable Act
as they relate to the Cable One Systems; and (d) all other applicable Legal
Requirements relating to the construction, maintenance, ownership and operation
of the Cable One Assets, the Cable One Systems and Cable One's Cable Business,
including Legal Requirements pertaining to utility pole make ready and to
grounding and bonding of cable television systems (in each case as the same is
currently in effect). Cable
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One has received no notice of any violation by Cable One or the Cable One
Business of any Legal Requirement applicable to the operation of Cable One's
Cable Business as currently conducted, or the Cable One Systems as currently
operated and to its Knowledge, no person has alleged any such violation.
5.8.2. 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 Cable One Systems Franchises that have expired or
will expire within 36 months after the date of this Agreement.
5.8.3. Cable One has deposited with the U.S. Copyright
Office all statements of account and other documents and instruments, and has
paid all royalties, supplemental royalties, fees and other sums to the U.S.
Copyright Office under the Copyright Act with respect to the business and
operations of the Cable One Systems as are required to obtain, hold and
maintain the compulsory license for cable television systems prescribed in
Section 111 of the Copyright Act. To the knowledge of Cable One, there is no
inquiry, claim, action or demand pending before the U.S. Copyright Office or
from any other party which questions the copyright filings or payments made by
Cable One with respect to the Cable One Systems. Complete and correct copies
of all current reports and filings for the past three years, made or filed
pursuant to the Copyright Act and the rules and regulations of the U.S.
Copyright Office with respect to Cable One's Cable Business have been provided
to TCA.
5.8.4. Except as set forth in SCHEDULE 5.8.4, (a) no written
notices or demands have been received from the FCC, from any television
station, or from any other Person or Governmental Authority (i) challenging the
right of the Cable One Systems to carry any television broadcast station or
deliver the same or (ii) claiming that any Cable One System has failed to carry
a television broadcast station required to be carried pursuant to the
Communications Act or has failed to carry a television broadcast station on a
channel designated by such station consistent with the requirements of the
Communications Act; (b) all necessary FAA or FCC approvals have been obtained
with respect to the height and location of towers used in connection with the
operation of the Cable One Systems and are listed in SCHEDULE 5.8.4., and such
towers are being operated in compliance in all material respects with
applicable FCC and FAA rules; and (c) Cable One 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 Cable One has not agreed with any
Governmental Authority to establish customer service standards that exceed the
FCC standards promulgated pursuant to the 1992 Cable Act.
5.8.5. Notwithstanding the foregoing, to the Knowledge of
Cable One, each Cable One System is in compliance in all material respects with
the provisions of the 1992 Cable Act as such Legal Requirements relate to the
rates and other charges of Cable One's Cable Business. Cable One has used
reasonable good faith efforts to establish 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
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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.
Notwithstanding the foregoing, Cable One makes no representation or warranty
that the rates charged to subscribers would be allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, promulgated
after the date of the Closing. Cable One has delivered to TCA complete and
correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, 1220, 1225, 1235
and 1240 filed with respect to the Cable One Systems, copies of all other FCC
Forms filed by Cable One and of all correspondence with any Governmental
Authority relating to rate regulation generally or specific rates charged to
subscribers with respect to Cable One Systems, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the Cable One Systems, and any other documentation supporting an exemption
from the rate regulation provisions of the 1992 Cable Act claimed by Cable One
with respect to any of the Cable One Systems. Cable One has not made any
election with respect to any cost of service proceeding conducted in accordance
with Part 76.922 of Title 47 of the Code of Federal Regulations or any similar
proceeding (a "Cost of Service Election") with respect to any of the Cable One
Systems. Cable One has not entered into or is not subject to any so-called
social contract or proposed resolution with the FCC with respect to rates
charged for cable television services in the Cable One Systems and is not
currently negotiating or anticipating entering into or being subject to the
same.
5.9. Patents, Trademarks and Copyrights. Cable One does not
possess any patent, patent right, trademark or copyright related to or material
to the operation of the Cable One Systems and Cable One is not a party to any
license or royalty agreement with respect to any such patent, trademark or
copyright, except for licenses respecting program material and obligations
under the Copyright Act applicable to cable television systems generally. To
the Knowledge of Cable One, the Cable One Systems and Cable One's 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.
5.10. Financial Statements; Undisclosed Liabilities. Cable One has
delivered to TCA complete and correct copies of the (i) internally generated
unaudited balance sheets of the Cable One Systems and related statements of
income for the year ending as of December 31, 1996 and (ii) internally
generated unaudited interim balance sheets and related statements of income for
and as of each quarter ending on and up to September 30, 1997 (all of such
financial statements being hereinafter referred to as "Cable One's Financial
Statements"). Cable One's Financial Statements are in accordance with the
books and records of each of the Cable One Systems, were prepared in accordance
with generally accepted accounting principles, applied on a consistent basis
throughout the periods covered thereby, and, except as may be described
therein, present fairly the financial condition of the Cable One Systems at the
dates and for the periods indicated, subject in the case of unaudited Cable
One's Balance Sheets, only to standard year-end adjustments and the omission of
footnotes. The balance sheets as of December 31, 1996 of each of the Cable One
Systems are herein collectively called the "Cable One Balance Sheets." At the
date of the Cable One Balance Sheets, the Cable One Systems 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 Cable One Balance Sheets.
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5.11. Absence of Certain Changes or Events. Except as set forth on
SCHEDULE 5.11, since the date of the Cable One Balance Sheets: (a) Cable One
has not incurred any obligation or liability (contingent or otherwise) with
respect to Cable One's Cable Business or any Cable One System, except normal
trade or business obligations incurred in the ordinary course of business, the
performance of which will not, to Cable One's Knowledge, individually or in the
aggregate, have a material adverse effect on the financial condition of or
results of operations of Cable One's Cable Business or any Cable One System;
(b) there has been no material adverse change in the Cable One Assets
comprising any Cable One System or in the business, condition (financial or
otherwise) or liabilities of Cable One's Cable Business or any Cable One System
and, to Cable One's Knowledge, no fact or condition exists or is contemplated
or threatened which would result in such a change in the future; (c) Cable One
has not committed to make any material capital expenditures or capital
additions or betterments to the Cable One Systems or the Cable One Assets; and
(d) Cable One's Cable Business has been conducted only in the ordinary course
of business consistent with past practices. For the purpose of this Agreement,
the impact on Cable One of events which affect the cable industry as a whole in
the State of Texas or the United States, shall not be considered in determining
whether there has been a material adverse change in the business, condition
(financial or otherwise) or liabilities of Cable One's Cable Business or any
Cable One System.
5.12. Litigation. Except as set forth in SCHEDULE 5.12: (a) there
is no Litigation pending or, to Cable One's Knowledge, threatened, by or before
any Governmental Authority or private arbitration tribunal against Cable One or
any Affiliate thereof which, if adversely determined, would adversely affect
the financial condition or operations of Cable One's Cable Business, any of the
Cable One Systems, the Cable One Assets or the ability of Cable One to perform
its obligations under this Agreement, or which, if adversely determined, would
result in the modification, revocation, termination, suspension or other
limitation of any of the Cable One Systems Franchises, Cable One Systems
Licenses, Cable One Systems Contracts or leases or other documents evidencing
the Cable One Leased Property or the Cable One Other Real Property Interests;
and (b) there is not in existence any Judgment requiring any Cable One Company,
or any Affiliate thereof, to take any action of any kind with respect to the
Cable One Assets or the operation of any of the Cable One Systems, or to which
Cable One (with respect to the Cable One Systems), any of the Cable One Systems
or the Cable One Assets are subject or by which they are bound or affected.
5.13. Tax Returns; Other Reports. Cable One 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 Cable One, 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 Cable One Assets, except such
amounts as are being contested diligently and in good faith and are not in the
aggregate material. Cable One has not received notice of, nor does Cable One
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, any of the Cable One
Assets.
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5.14. Employment Matters.
5.14.1. SCHEDULE 5.14.1 contains a complete and correct
list of the names and positions of all employees engaged in Cable One's
Business as of the date of this Agreement. Cable One 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. Section 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.
5.14.2. 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 Cable One or any of its ERISA Affiliates has any
liability or in which any employees or agents, or any former employees or
agents, of Cable One or any of its ERISA Affiliates participate is set forth
in SCHEDULE 5.14 (the "Cable One Plans"). Neither Cable One, any of its ERISA
Affiliates nor any Cable One Plan is in material violation of any provision of
ERISA. No material "reportable event" (as defined in Section 4043 of ERISA),
"prohibited transaction" (as defined in Section 406 of ERISA), "accumulated
funding deficiency" or "withdrawal liability" (as defined in Section 302 of
ERISA) has occurred or exists and is continuing with respect to any Cable One
Plan. After the Closing, TCA will not be required, under ERISA, the Code or
any collective bargaining agreement, to establish, maintain or continue any
Cable One Plan currently maintained by Cable One or any of its ERISA
Affiliates.
5.14.3. Except as set forth on SCHEDULE 5.14, there are no
collective bargaining agreements applicable to any Person employed by Cable One
that renders services in connection with the Cable One Systems and Cable One
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 Cable
One, any demand for recognition or any other request or demand from a labor
organization for representative status with respect to any Person employed by
Cable One that renders services in connection with the Cable One Systems.
Except as described on SCHEDULE 5.14, Cable One has no employment agreements,
either written or oral, with any employee of the Cable One Systems and none of
the employment agreements listed on SCHEDULE 5.14 requires Cable One, or will
require TCA, to employ any Person after the Closing.
5.15. Cable One Systems Information. SCHEDULE 5.15 sets forth a
materially true and accurate description, on a System-by-System basis, of the
following information relating to Cable One's Cable Business as of the date of
the most recent monthly report generated by Cable One in the ordinary course of
business containing the information required to prepare such SCHEDULE 5.15
provided that such date is no earlier than two months prior to the date of this
Agreement:
5.15.1. the approximate number of miles of plant included in
the Cable One Assets;
5.15.2. the number of subscribers and subscriber equivalents
served by the Cable One Systems;
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5.15.3. the approximate number of single family homes and
residential dwelling units passed by the Cable One Systems;
5.15.4. a description of basic and optional or tier services
available from the Cable One Systems, the rates charged by Cable One for each
and the number of subscribers and subscriber equivalents receiving each
optional or tier service;
5.15.5. the stations and signals carried by the Cable One
Systems, the channel position of each such signal and station, and each request
or demand, if any, to lease channel capacity on any of the Cable One Systems
pursuant to Section 612 of the Communications Act;
5.15.6. the cities, towns, villages, boroughs and counties
served by the Cable One Systems; and
5.15.7. the MHZ capacity and channel capacity of each of the
Cable One Systems.
5.16. Taxpayer Identification Number. Cable One's U.S. Taxpayer
Identification Number is 13-3060083.
5.17. Accounts Receivable. The accounts receivable relating to
Cable One's Cable Business are actual and bona fide receivables representing
obligations for the total dollar amount of such receivables, as shown on the
books of Cable One, that resulted from the regular course of Cable One's Cable
Business. Such receivables are fully collectible in accordance with their
terms and are subject to no offset or reduction of any nature, except for a
reserve for uncollectible amounts consistent with the reserve established by
Cable One in Cable One's Financial Statements and those credits or reductions
made to such accounts in the ordinary course of business.
5.18. Bonds. Except as set forth on SCHEDULE 5.18, there are no
franchise, construction, fidelity, performance, or other bonds or letters of
credit posted by Cable One in connection with its operation or ownership of any
of the Cable One Systems or Cable One Assets.
5.19. Finders and Brokers. Except for Daniels & Associates, neither
Cable One nor any Affiliate thereof has 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 TCA could be liable.
6. TCA'S REPRESENTATIONS AND WARRANTIES.
TCA represents and warrants to Cable One as of the date of this
Agreement and as of the Closing, as follows:
6.1. Organization and Qualification of TCA.
6.1.1. TCA is a general partnership duly organized and
validly existing under the laws of the State of Delaware, and TCA has all
requisite power and authority to own, lease
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and use the TCA Assets owned, leased or used by it and to conduct TCA's Cable
Business as it is currently conducted. TCA is duly qualified to do business
under the laws of each jurisdiction in which the ownership, leasing or use of
the TCA Assets owned, leased or used by it or the nature of its activities in
connection with the TCA Systems makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified would not have a
material adverse effect on the ownership or operation of TCA's Cable Business,
the TCA Assets or TCA Systems or on the ability of TCA to perform its
obligations under this Agreement.
6.1.2. TCA Holdings, L.P., a Texas limited partnership, is
the general partner of TCA, is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Texas, and has
all requisite authority to own all of its assets and to conduct its business as
currently conducted. TCA Holdings, L.P. is duly qualified, licensed to do
business and in good standing in the State of Oklahoma and in each other
jurisdiction in which the nature of its activities or its ownership, lease or
use of its assets makes such qualification necessary. TCA Cable TV, Inc., the
ultimate parent corporation of TCA Holdings, L.P., is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Texas, and has all requisite corporate power and authority to own all of its
assets and to conduct its business as currently conducted.
6.2. Authority and Validity. TCA 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 TCA of, the
performance of TCA under, and the consummation by TCA of the transactions
contemplated by, this Agreement and the Transaction Documents to which TCA is a
party have been duly and validly authorized by all action by or on behalf of
TCA. This Agreement has been, and when executed and delivered by TCA the
Transaction Documents to which it is a party will be, duly and validly executed
and delivered by TCA and the valid and binding obligations of TCA, enforceable
against TCA, 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 TCA Required
Consents, all of which are listed on SCHEDULE 6.3, the Cable One Required
Consents and the HSR notification and the expiration or earlier termination of
the waiting period under the HSR Act, the execution and delivery by TCA, the
performance of TCA under, and the consummation by TCA of the transactions
contemplated by, this Agreement and the Transaction Documents to which TCA is a
party do not and will not: (a) conflict with or violate any provision of the
partnership documents of the TCA; (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
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performance of TCA under, (iv) result in the creation or imposition of any Lien
under, any TCA Systems Contract or other instrument evidencing any of the TCA
Assets or by which TCA or any of its assets is bound or affected, except for
purposes of clauses (c) and (d) such consents, approvals, authorizations and
filings that, if not obtained or made, would not, and 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 TCA System, TCA's Cable Business or TCA or on the ability
of TCA, to perform its obligations under this Agreement or the Transaction
Documents to which it is a party.
6.4. Assets.
6.4.1. TCA has exclusive, good and marketable title to
(or, in the case of TCA Assets that are leased, valid leasehold interests in)
the TCA Assets (other than TCA Owned Property, TCA Leased Property and TCA
Other Real Property Interests, as to which representations and warranties in
SECTION 6.6 apply). The TCA Assets are free and clear of all Liens, except (a)
Permitted Liens and, (b) Liens described on SCHEDULE 6.4, all of which will be
terminated, released or, in the case of the rights of first refusal listed on
SCHEDULE 6.4, waived, as appropriate, at or prior to the Closing. Except as
described on SCHEDULE 1.64, the TCA Tangible Personal Property is in good
operating condition and repair (ordinary wear and tear excepted).
6.4.2. Except for items in the TCA Excluded Assets, the TCA
Assets constitute all the assets necessary to conduct TCA's Cable Business and
to operate the TCA Systems substantially as they are being conducted and
operated on the date of this Agreement and in compliance in all material
respects with all applicable Legal Requirements and TCA Systems Contracts, TCA
Systems Licenses and TCA Systems Franchises.
6.4.3. Except as described on SCHEDULE 6.4.3, to the
Knowledge of TCA, no third party has been granted or applied for a cable
television franchise or is providing or intending to provide wireline or
wireless television programming or related services (except for nationally
recognized direct broadcast satellite services) in any of the communities or
unincorporated areas currently served by TCA's Cable Business. Except as
described in SCHEDULE 6.4.3, TCA has not been denied initial or continuing
access to any multiple dwelling unit or paid for any access to any multiple
dwelling unit, subdivision or private development in the areas served by TCA's
Cable Business.
6.5. TCA Systems Franchises, TCA Systems Licenses, TCA Systems
Contracts and TCA Other Real Property Interests.
6.5.1. Except as described on SCHEDULES 1.56, 1.58, 1.61,
1.62 AND 1.63 or 4.2, TCA is not bound or affected by any of the following that
relate primarily or in whole to TCA's Cable Business: (i) leases of real or
personal property; (ii) franchises for the construction or operation of cable
television systems or Contracts of substantially equivalent effect; (iii) other
licenses, authorizations, consents or permits of the FCC or any other
Governmental Authority; (iv) material easements or rights of access; (v) pole
line agreements, underground conduit
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agreements, crossing agreements, retransmission consent agreements or bulk or
commercial service agreements; or (vi) System Contracts other than those
described in any other clause of this SECTION 6.5.1 which contemplate payments
by or to TCA in any 12-month period exceeding $10,000 individually or $50,000
in the aggregate or which are not terminable by TCA without cost or penalty on
not more than 90 days prior written notice. Other than where expressly noted
in SCHEDULE 1.61, no Affiliate of TCA is a party to any of the TCA Systems
Contracts disclosed on SCHEDULE 1.61.
6.5.2. Complete and correct copies of the TCA Systems
Franchises and TCA Systems Licenses have been provided to Cable One. Except as
set forth on SCHEDULE 1.62, the TCA Systems Franchises contain all of the
commitments and obligations of TCA to the applicable Governmental Authority
granting such Franchises with respect to the construction, ownership and
operation of the TCA Systems. The TCA Systems Franchises and TCA Systems
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
TCA's Knowledge threatened, to terminate, suspend or modify any TCA Systems
Franchise or TCA System License and TCA is, or will be as of the Closing Date,
in material compliance with the terms and conditions of all the TCA Systems
Franchises and TCA Systems Licenses and other applicable requirements of all
Governmental Authorities (including the FCC and the U.S. Copyright Office)
relating to the TCA Systems Franchises and TCA Systems Licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
6.5.3. Complete and correct copies of all material TCA
Systems Contracts (including Contracts relating to Leased Property and Other
Real Property Interests described in SCHEDULES 1.56 AND 1.58) have been
provided to Cable One. Such documents constitute the entire agreement with the
other party. Each such TCA Systems Contract is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of TCA and TCA
is not and, to TCA's Knowledge, each other party thereto is not in breach or
default of any material terms or conditions thereunder.
6.6. Real Property. All the Assets consisting of TCA Owned
Property, TCA Leased Property and material TCA Other Real Property Interests
are described on SCHEDULES 1.56, 1.58 AND 1.59. Except as otherwise disclosed
on SCHEDULE 1.59, TCA holds good, marketable and indefeasible fee simple title
to the TCA Owned Property and has the valid and enforceable right to use and
possess such TCA Owned Property, subject only to Permitted Liens. Except as
otherwise disclosed on SCHEDULE 1.56, TCA has valid and enforceable leasehold
interests in all TCA Leased Property, subject only to Permitted Liens. Except
as otherwise disclosed on SCHEDULE 1.58, TCA has valid and enforceable rights
to use all TCA 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 TCA Owned Property and the premises
demised under the leases and other documents evidencing the TCA Leased Property
are in good condition and repair and are suitable for the purposes used. Each
parcel of TCA Owned Property and each parcel of TCA Leased Property and any
improvements thereon (a) has access to and over public streets or private
streets for which TCA has a valid right of ingress and egress, (b) conforms in
its current use and occupancy to all material zoning requirements without
reliance
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upon a variance issued by a Governmental Authority or a classification of the
parcel in question as a nonconforming use, (c) conforms in its current use to
all restrictive covenants, if any, or other Liens affecting all or part of such
parcel and (d) is available for immediate use in the conduct of the business or
operations of the TCA Systems.
6.7. Environmental.
6.7.1. To the Knowledge of TCA, the TCA Owned Property and
TCA Leased Property comply in all material respects with and, to TCA's
Knowledge, has previously been operated in compliance in all material respects
with, all Environmental Laws. TCA has not generated, stored, used, treated,
handled, discharged, released, or disposed of any Hazardous Substances at, on,
under, in or about, or in any other manner affecting, any TCA Owned Property or
TCA Leased Property, transported any Hazardous Substances to or from any TCA
Owned Property or TCA Leased Property or discharged any Hazardous Substances
from any TCA Owned Property or TCA Leased Property into any body of water,
directly or indirectly, or undertaken or caused to be undertaken any other
activities relating to the TCA Owned Property or TCA Leased Property, which
could reasonably give rise to any liability under any Environmental Law and, to
TCA's Knowledge, no other present or previous owner, tenant, occupant or user
of any TCA Owned Property or TCA Leased Property or any other Person has
committed or suffered any of the foregoing. To TCA's Knowledge, (i) no release
of Hazardous Substances outside the TCA Owned Property or TCA Leased Property
has entered or threatens to enter any TCA Owned Property or TCA Leased
Property, and (ii) there is no pending or threatened Litigation based on
Environmental Laws which arises from any condition of the land adjacent to or
immediately surrounding any TCA Owned Property or TCA Leased Property. No
Litigation or investigation based on Environmental Laws which relates to any
TCA Owned Property or TCA 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 TCA or, to TCA's Knowledge, any other Person, or (b) to
TCA's Knowledge, is threatened or contemplated.
6.7.2. Except as described on SCHEDULE 6.7.2, to TCA's
Knowledge, (a) no aboveground or underground storage tanks are currently or
have been located on any TCA Owned Property or TCA Leased Property, (b) no TCA
Owned Property or TCA 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, (c) no building
or other structure on any TCA Owned Property or TCA Leased Property contains
asbestos, asbestos-containing material, or material presumed to be
asbestos-containing material pursuant to any Environmental Law and (d) there
are no incinerators or cesspools on the TCA Owned Property or TCA Leased
Property and all domestic waste discharged from the TCA Owned Property or the
TCA Leased Property is discharged into a public sanitary sewer system.
6.7.3. Complete and correct copies of (a) all studies,
reports, surveys or other similar written materials in TCA's possession or to
which TCA, to its Knowledge, has access relating to the presence or alleged
presence of Hazardous Substances at, on, under or affecting the TCA Owned
Property or TCA Leased Property, (b) all notices (other than general notices
made by general publication) in TCA's possession or to which TCA, to its
Knowledge, has access that
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were 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 TCA Owned Property or TCA Leased Property or activities at the
TCA Owned Property or TCA Leased Property and (c) all notices and related
materials in TCA's possession or to which TCA, to its Knowledge, has access
relating to any Litigation or allegation by any private third party concerning
any Environmental Law, have been provided to Cable One.
6.8. Compliance with Legal Requirements.
6.8.1. The ownership, leasing and use of the TCA Assets as
they are currently owned, leased and used, and the conduct of TCA's Cable
Business and the operation of the TCA 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 6.8.5, as to which the representations and warranties set forth in that
subsection shall apply) including (a) the Copyright Act and the applicable
rules and regulations of the U.S. Copyright Office; (b) the Communications Act,
including provisions thereof pertaining to signal leakage; (c) the must-carry
and retransmission consent provisions of the 1992 Cable Act as they relate to
the TCA Systems; and (d) all other applicable Legal Requirements relating to
the construction, maintenance, ownership and operation of the TCA Assets, the
TCA Systems and TCA's Cable Business, including Legal Requirements pertaining
to utility pole make ready and to grounding and bonding of cable television
systems (in each case as the same is currently in effect). TCA has received no
notice of any violation by TCA or the TCA Cable Business of any Legal
Requirement applicable to the operation of TCA's Cable Business as currently
conducted, or the TCA Systems as currently operated and to its Knowledge, no
Person has alleged 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 TCA Systems Franchises that have
expired or will expire within 36 months after the date of this Agreement.
6.8.3. TCA has deposited with the U.S. Copyright Office
all statements of account and other documents and instruments, and has paid all
royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act with respect to the business and operations of
the TCA Systems as are required to obtain, hold and maintain the compulsory
license for cable television systems prescribed in Section 111 of the Copyright
Act. Complete and correct copies of all current reports and filings for the
past three years, made or filed pursuant to the Copyright Act and the rules and
regulations of the U.S. Copyright Office with respect to TCA's Cable Business
have been provided to Cable One. To the knowledge of TCA, there is no inquiry,
claim, action or demand pending before the U.S. Copyright Office or from any
other party which questions the copyright filings or payments made by TCA with
respect to the TCA Systems.
6.8.4. Except as set forth in SCHEDULE 6.8.4, (a) no written
notices or demands have been received from the FCC, from any television
station, or from any other Person or
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Governmental Authority (i) challenging the right of the TCA Systems to carry
any television broadcast station or deliver the same or (ii) claiming that any
TCA System has failed to carry a television broadcast station required to be
carried pursuant to the Communications Act or has failed to carry a television
broadcast station on a channel designated by such station consistent with the
requirements of the Communications Act; (b) all necessary FAA or FCC approvals
have been obtained with respect to the height and location of towers used in
connection with the operation of the TCA Systems and are listed in Schedule
6.8.4, and such towers are being operated in compliance in all material
respects with applicable FCC and FAA rules; and (c) TCA 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 TCA has not
agreed with any Governmental Authority to establish customer service standards
that exceed the FCC standards promulgated pursuant to the 1992 Cable Act.
6.8.5. Notwithstanding the foregoing, to the Knowledge of
TCA, each TCA System is in compliance in all material respects with the
provisions of the 1992 Cable Act as such Legal Requirements relate to the rates
and other charges of TCA's Cable Business. TCA has used reasonable good faith
efforts to establish 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.
Notwithstanding the foregoing, TCA makes no representation or warranty that the
rates charged to subscribers would be allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, promulgated
after the date of the Closing. TCA has delivered to Cable One complete and
correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, 1220, 1225, 1235
and 1240 filed with respect to the TCA Systems, copies of all other FCC Forms
filed by TCA and of all correspondence with any Governmental Authority relating
to rate regulation generally or specific rates charged to subscribers with
respect to TCA Systems, including copies of any complaints filed with the FCC
with respect to any rates charged to subscribers of the TCA Systems, and any
other documentation supporting an exemption from the rate regulation provisions
of the 1992 Cable Act claimed by TCA with respect to any of the TCA Systems.
In addition, TCA has also delivered to Cable One documentation for each of the
TCA Systems in which the franchising authority has not certified to regulate
rates as of the date of this Agreement showing a determination of allowable
rates using a benchmark methodology. TCA has not made any Cost of Service
Election with respect to any of the TCA Systems.
6.9. Patents, Trademarks and Copyrights. TCA does not possess
any patent, patent right, trademark or copyright related to or material to the
operation of the TCA Systems and TCA is not a party to any license or royalty
agreement with respect to any such patent, trademark or copyright, except for
licenses respecting program material and obligations under the Copyright Act
applicable to cable television systems generally. To the Knowledge of TCA, the
TCA Systems and TCA's Cable Business have been operated in such a manner so as
not to violate or
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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. TCA has
delivered to Cable One complete and correct copies of (i) the internally
generated unaudited balance sheets of the TCA Systems and related statements of
income for and as of October 31, 1996 and (ii) the internally generated
unaudited interim balance sheets and the related statements of income for each
quarter ending on and after January 31, 1997 (all of such financial statements
and notes being hereinafter referred to as "TCA's Financial Statements").
TCA's Financial Statements are in accordance with the books and records of each
of the TCA Systems, were prepared in accordance with generally accepted
accounting principles, applied on a consistent basis throughout the periods
covered thereby, and, except as may be described therein, present fairly the
financial condition of the TCA Systems at the dates and for the periods
indicated subject, in the case of unaudited TCA's Financial Statements, only to
standard year-end adjustments and the omission of footnotes. The balance
sheets as of October 31, 1996 of the TCA Systems are herein collectively called
the "TCA Balance Sheets." At the date of the TCA Balance Sheets, the TCA
Systems 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 TCA Balance Sheets.
6.11. Absence of Certain Changes or Events. Except as set forth on
SCHEDULE 6.11, since the date of the TCA Balance Sheets: (a) TCA 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 TCA's Knowledge, individually or in the
aggregate, have a material adverse effect on the financial condition, or
results of operations of TCA's Cable Business or any TCA System; (b) there has
been no material adverse change in the TCA Assets comprising any TCA System or
in the business, condition (financial or otherwise) or liabilities of TCA's
Cable Business or any TCA System and, to TCA's Knowledge, no fact or condition
exists or is contemplated or threatened which would result in such a change in
the future; (c) TCA has not committed to make any material capital expenditures
or capital additions or betterments to the TCA Systems or the TCA Assets; and
(d) TCA's Cable Business has been conducted only in the ordinary course of
business consistent with past practices. For the purpose of this Agreement,
the impact on TCA of events which affect the cable industry as a whole in the
State of Oklahoma or the United States, shall not be considered in determining
whether there has been a material adverse change in the business, condition
(financial or otherwise) or liabilities of TCA's Cable Business or any TCA
System.
6.12. Litigation. Except as set forth in SCHEDULE 6.12: (a) there
is no Litigation pending or, to TCA's Knowledge, threatened, by or before any
Governmental Authority or private arbitration tribunal against TCA or any
Affiliate of TCA which, if adversely determined, would adversely affect the
financial condition or operations of TCA's Cable Business, any of the TCA
Systems, the TCA Assets or the ability of TCA to perform its obligations under
this Agreement, or which, if adversely determined, would result in the
modification, revocation, termination, suspension or other limitation of any of
the TCA Systems Franchises, TCA Systems Licenses, TCA Systems Contracts or
leases or other documents evidencing the TCA Leased Property or the TCA Other
Real Property Interests; and (b) there is not in existence any Judgment
requiring TCA
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or any Affiliate of TCA to take any action of any kind with respect to the TCA
Assets or the operation of any of the TCA Systems, or to which TCA (with
respect to the TCA Systems), any of the TCA Systems or the TCA Assets are
subject or by which they are bound or affected.
6.13. Tax Returns; Other Reports. TCA 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 it, 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 TCA Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
TCA has not received any notice of, nor does TCA 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, any of the TCA Assets.
6.14. Employment Matters.
6.14.1. SCHEDULE 6.14.1 contains a complete and correct
list of the names and positions of all employees engaged in TCA's Business as
of the date of this Agreement. TCA 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.
Section 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 TCA or any of its ERISA Affiliates has any liability or
in which any employees or agents, or any former employees or agents, of TCA or
any of its ERISA Affiliates participate is set forth in SCHEDULE 6.14 (the "TCA
Plans"). Neither TCA, any of its ERISA Affiliates nor any TCA Plan is in
material violation of any provision of ERISA. No material "reportable event"
(as defined in Section 4043 of ERISA), "prohibited transaction" (as defined in
Section 406 of ERISA), "accumulated funding deficiency" or "withdrawal
liability" (as defined in Section 302 of ERISA) has occurred or exists and is
continuing with respect to any TCA Plan. After the Closing, Cable One will not
be required, under ERISA, the Code or any collective bargaining agreement, to
establish, maintain or continue any TCA Plan currently maintained by TCA 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 TCA that
renders services in connection with the TCA Systems and TCA 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 TCA, any demand for
recognition or any other request or demand from a labor organization for
representative status with respect to any Person employed by TCA that renders
services in connection with the TCA Systems. Except as described on SCHEDULE
6.14, TCA has no employment agreements, either
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written or oral, with any employee of the TCA Systems and none of the
employment agreements listed on SCHEDULE 6.14 requires TCA, or will require
Cable One, to employ any Person after the Closing.
6.15. TCA Systems Information. SCHEDULE 6.15 sets forth a
materially true and accurate description, on a System-by-System basis, of the
following information relating to TCA's Cable Business as of the date of the
most recent monthly report generated by TCA in the ordinary course of business
containing the information required to prepare such SCHEDULE 6.15 provided that
such date is no earlier than two months prior to the date of this Agreement:
6.15.1. the approximate number of miles of plant included
in the TCA Assets;
6.15.2. the number of subscribers and subscriber
equivalents served by the TCA Systems;
6.15.3. the approximate number of single family homes and
residential dwelling units passed by the TCA Systems;
6.15.4. a description of basic and optional or tier
services available from the TCA Systems, the rates charged by TCA for each and
the number of subscribers and subscriber equivalents receiving each optional or
tier service;
6.15.5. the stations and signals carried by the TCA
Systems, the channel position of each such signal and station, and each request
or demand, if any, to lease channel capacity on any of the TCA Systems pursuant
to Section 612 of the Communications Act;
6.15.6. the cities, towns, villages, boroughs and counties
served by the TCA Systems; and
6.15.7 the MHZ capacity and channel capacity of each of
the TCA Systems.
6.16. Taxpayer Identification Number. TCA's U.S. Taxpayer
Identification Number is 84-1359094.
6.17. Accounts Receivable. The accounts receivable relating to
TCA's Cable Business are actual and bona fide receivables representing
obligations for the total dollar amount of such receivables, as shown on the
books of TCA, that resulted from the regular course of TCA's Cable Business.
Such receivables are fully collectible in accordance with their terms and are
subject to no offset or reduction of any nature, except for a reserve for
uncollectible amounts consistent with the reserve established by TCA in TCA's
Financial Statements and those credits and reductions made to such accounts in
the ordinary course of business.
6.18. Bonds. Except as set forth on SCHEDULE 6.18, there are no
franchise, construction, fidelity, performance, or other bonds or letters of
credit posted by TCA in connection with its operation or ownership of any of
the TCA Systems or TCA Assets.
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6.19. Finders and Brokers. Except for Daniels & Associates, neither
TCA nor any Affiliate thereof has 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 Cable One could be liable.
7. ADDITIONAL COVENANTS.
7.1. Access to Premises and Records. Between the date of this
Agreement and the Closing Date, each Party (a) will give to the other and its
counsel, accountants and other representatives full access during normal
business hours to all the premises and books and records of its Cable Business
and to all of its Assets and Systems' personnel; and (b) will furnish to the
other and such representatives all such documents, financial information and
other information regarding its Cable Business and its Assets as the other 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 the other 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 other Party may otherwise consent in writing,
between the date of this Agreement and the Closing, each of TCA with respect to
TCA's Cable Business, the TCA Systems and the TCA Assets and Cable One with
respect to Cable One's Cable Business, the Cable One Systems and the Cable One
Assets:
7.2.1. will conduct its Cable Business and operate its
Systems only in the usual, regular and ordinary course and consistent with its
respective past practices and procedures (including making capital
expenditures, fulfilling installation requests, completing disconnection work
orders and disconnecting and discontinuing service to customers whose accounts
are delinquent) and, to the extent consistent with such conduct and operation,
use its commercially reasonable efforts to (a) preserve its current business
intact in all material respects, including preserving existing relationships
with franchising authorities, suppliers, customers and others having business
dealings with its Systems, unless the other Party requests otherwise, (b) keep
available the services of its employees and agents providing services in
connection with its Cable Business and (c) continue making marketing,
advertising and promotional expenditures with respect to its Cable Business
consistent with its respective past practices;
7.2.2. will maintain its Assets in good repair, order and
condition, ordinary wear and tear excepted; will maintain equipment and
inventory for its Systems at normal historical levels consistent with past
practices; will maintain in full force and effect policies of insurance with
respect to its Cable Business, in such amounts and with respect to such risks
as are currently in effect for its Systems; and will maintain its books,
records and accounts with respect to those Assets and the operation of its
Systems in the usual, regular and ordinary manner on a basis consistent with
past practices;
7.2.3. will not (a) modify, terminate, renew, suspend or
abrogate any System Contract (other than retransmission consent Contracts,
leases or documents evidencing Leased
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Real Property or Other Real Property Interests, or programming Contracts, all
of which are addressed in subsection (b) of this SECTION 7.2.3) other than in
the ordinary course of business; (b) modify, terminate, renew, suspend or
abrogate any retransmission consent Contract (except on terms that are not
materially different) or programming Contract, System Franchise, lease or
document evidencing Leased Property or Other Real Property Interests or System
License; (c) take or omit to take any action that would result in the condition
of the other Party in SECTION 8.2.1 (with respect to Cable One) or SECTION
8.1.1 (with respect to TCA) not being satisfied at any time prior to or on the
Closing; (d) engage in any marketing, promotional, subscriber installation,
collection or disconnection practices that are inconsistent with its past
practices; (e) make any Cost of Service Election; (f) enter into any agreement
with or commitment to any competitive access providers with respect to those
Systems; (g) 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
(other than Permitted Liens) on any of those Assets; (h) take any actions that
would cause the transactions contemplated hereby to fail to qualify as a like-
kind exchange under Section 1031 of the Code; (i) engage in any hiring or
employee compensation practices that are inconsistent with past practices
except for changes in such practices implemented by such Party and its
Affiliates on a company-wide basis; (j) increase or decrease 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, in each case except as
described on SCHEDULE 7.2.3 or except to the extent required under the 1992
Cable Act or any other Legal Requirement; provided however that if rates are
decreased in order to so comply, the Party decreasing the rates will provide
the other with copies of any FCC forms (even if not filed with any Governmental
Authority) that such Party used to determine that the new rates were required;
7.2.4. will promptly deliver to the other true and complete
copies of all monthly and quarterly financial statements and operating reports
and any reports with respect to its Systems or the operation of its Cable
Business prepared by or for such Party at any time from the date of this
Agreement until the Closing, and if Closing occurs as of month end, as soon as
practicable after Closing, shall deliver to the other Party a true and complete
copy of the internally generated unaudited balance sheet for its Systems as of
the Closing Date and the internally generated unaudited statements of profit
and loss of its Systems for the period then ended generated in the ordinary
course of business, which in each case shall be presented in the same format in
which its System Financial Statements are presented;
7.2.5. will give or cause to be given to the other and its
counsel, accountants and other representatives, as soon as reasonably possible
but in any event at least 10 Business Days 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
filed with any Governmental Authority under the 1992 Cable Act with respect to
rates and prepared with respect to any of its Systems, such forms to be
reasonably satisfactory in form and substance to the other;
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
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7.2.7. will promptly notify the other of any fact,
circumstance, event or action by it or otherwise (a) which, if known at the
date of this Agreement, would have been required to be disclosed by it in or
pursuant to this Agreement or (b) the existence, occurrence or taking of which
would result in the condition of the other Party in SECTION 8.2.1 (with respect
to Cable One) or SECTION 8.1.1 (with respect to TCA) not being satisfied at any
time prior to or on the Closing, and, with respect to clause (b), use its
commercially reasonable efforts to remedy the same.
7.3. Employees.
7.3.1. Each Party may, but shall have no obligation to
employ or offer employment to any employee of the other Party's Cable Business.
Within 90 days after the date of execution of this Agreement, each Party shall
provide to the other a list of all active employees of its 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 such Party
desires to retain as its employees (the "Retained Employees"). Within 30 days
after receipt of this list, the Party receiving such list will provide to the
other in writing a list of employees such Party or its Affiliates desires to
employ following the Closing, which list shall not include any Retained
Employees. As of the Closing Date, each Party shall terminate the employment
of all its employees who were employed incidental to the conduct of such
Party's Cable Business other than Retained Employees.
7.3.2. Each Party will pay to all employees employed in its
Cable Business all compensation, including salaries, commissions, bonuses,
deferred compensation, severance, insurance, vacation, 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. Each Party agrees to cooperate in all
reasonable respects with the other Party to allow the other Party to evaluate
and interview employees of such Party's Cable Business to make hiring
decisions. Each Party shall, at its cost, be permitted to conduct
pre-employment physical examinations (including drug screen urinalysis) and
other appropriate pre-hire investigations of such of the other Party's employees
that it may desire to hire, and each Party may make any offer of employment to
any such employee conditional upon its receipt of results of the pre-hire
investigations of such employee that are satisfactory to it.
7.3.3. Each Party will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as defined in
ERISA) maintained by such Party pursuant to the provisions of such plan.
Neither Party will assume any obligation or liability for any such accrued
benefits or any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits under any employee benefit plans
maintained by the other Party.
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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 a Party or arising under any Legal Requirement affecting
employees of such Party 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 such Party, whether or not
such employees are hired by the other Party after the Closing. Neither Party
will have and assume any obligation or liability under or in connection with
any such plan.
7.3.5. Each Party will remain solely responsible for, and
will indemnify and hold harmless the other 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 other Party, as a result of their employment by it on or prior to the
Closing Date, the termination of their employment on the Closing Date, 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 Date.
7.3.6. Notwithstanding anything to the contrary herein, each
Party shall (a) permit each employee of the other Party (other than a Retained
Employee) who is offered employment by such Party on or prior the Closing Date
and becomes an employee of such Party after the Closing Date (a "Hired
Employee") to participate in such Party's employee benefit plans to the same
extent as similarly situated employees of such Party and their dependents; (b)
give each Hired Employee credit for such employee's past service with the other
Party as of the Closing Date (including past service with any prior owner or
operator of such Party or its Cable Business) for purposes of eligibility and
vesting under such Party's employee benefit and other plans to the same extent
as other similarly situated employees of such Party; and (c) not subject any
Hired Employee to any waiting periods or limitations on benefits for
pre-existing conditions under such Party's employee benefit plans, including
any group health and disability plans, except to the extent such employees were
subject to such limitations under the other Party's employee benefit plans, and
except for pre-existing orthodontia and certain other dental services, which
are excluded under Cable One's group health plan.
7.3.7. If any Party discharges without cause within 90 days
after Closing any Hired Employee and such Hired Employee would have been
entitled to severance payments pursuant to the other Party's severance benefits
plan if such Hired Employee had been discharged without cause by the other
Party at Closing in accordance with SECTION 7.3.1 and not hired by such Party
as of Closing, then such Party shall pay severance benefits to such Hired
Employee in accordance with the other Party's severance benefit plan to the
extent such plan would have paid severance to such employee.
7.3.8. Nothing in this SECTION 7.3 or elsewhere in this
Agreement shall be deemed to make any employee of either Party a third party
beneficiary of this Agreement.
7.4. Leased Vehicles; Other Capital Leases. Each Party will pay
the remaining balances on any leases for vehicles or capital leases included in
its Tangible Personal Property and will
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deliver title to such vehicles and other Tangible Personal Property free and
clear of all Liens (other than Permitted Liens) to the other Party at the
Closing.
7.5. Required Consents; Franchise Renewal.
7.5.1. Each Party will use its commercially reasonable
efforts to obtain in writing as promptly as possible and at its expense, all of
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, substantially in the form attached hereto as EXHIBIT 7.5.1
and deliver to the other Party copies of such Required Consents and such other
consents, authorizations or approvals promptly after they are obtained by such
Party; provided, however, that each Party will afford the other Party the
opportunity to review, approve and revise the form of Required Consent prior to
delivery to the third party whose consent is sought. Each Party will cooperate
with the other Party to obtain all Required Consents. Neither Party will 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 its Cable Business that are not acceptable to
the other. 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, each Party 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. Without the prior consent of
the other Party, neither Party shall agree with any Governmental Authority to
extend or to toll the time limits applicable to such Governmental Authority's
consideration of the FCC Form 394 filed with such Governmental Authority.
7.5.2. Each Party will use commercially reasonable efforts
to obtain and cooperate with the other Party to obtain renewals or extensions
of 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 for a period
expiring no earlier than three years after the Closing Date.
7.5.3. Notwithstanding the foregoing, no Party will have
further obligation to obtain Required Consents: (a) with respect to license
agreements relating to pole attachments where the licensing authority will not
consent to an assignment of such license agreement but requires that the other
Party enter into a new agreement with such licensing authority, in which case
the other Party shall use its commercially reasonable efforts to enter into
such agreement prior to Closing or as soon as practicable thereafter and such
Party will cooperate with and assist the other Party in obtaining such
agreements; (b) for any business radio license which such Party reasonably
expects can be obtained within 120 days after the Closing and so long as a
temporary authorization is available to the other Party under FCC rules with
respect thereto; (c) with respect to Contracts evidencing Leased Property, if,
with the consent of the other Party, such Party obtains and makes operational
prior to Closing substitute Leased Property that is reasonably satisfactory to
the other Party; and (d) with respect to Contracts which are identified with an
(*) on SCHEDULE 5.3 or 6.3, if TCA, with respect to Contracts pertaining to a
TCA System, or Cable
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One, with respect to Contracts pertaining to a Cable One System, uses its
commercially reasonable efforts to obtain the Required Consent of the third
party to such Contract but fails to obtain such consent on or prior to Closing;
provided, however, in each case applicable above, commercially reasonable
efforts shall not require any Party to take any action of the type that it is
not required to take pursuant to SECTION 7.5.1.
7.5.4. If and to the extent that Cable One or TCA shall have
waived satisfaction of the condition to Closing set forth in SECTION 8.1.5 OR
SECTION 8.2.5, respectively, subsequent to the Closing, each of TCA with
respect to its Systems and Assets and Cable One with respect to its Systems and
Assets will continue to use commercially reasonable efforts to obtain in
writing as promptly as possible such Required Consent 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 the other. The obligations
set forth in this Section will survive the Closing and will not be merged in
the consummation of the transactions contemplated hereby.
7.6. Title Commitments and Surveys. Cable One and TCA each will
provide to the other, within 60 days after the date of this Agreement, (a)
current commitments to issue ALTA (1992 Rev.) owner's policy of title insurance
or its local equivalent in any state in which ALTA policies are unavailable
("Title Commitments") by an agent writing for Chicago Title Insurance Company
(the "Title Company") and containing policy limits and other terms reasonably
acceptable to the other, and legible photocopies of all recorded items
described as exceptions therein, committing to insure (i) good, marketable and
indefeasible fee simple title in the other to each parcel of Owned Property
included in its Assets, subject only to exceptions stated therein which are
Permitted Liens and (ii) easements which provide access to such Owned Property,
and (b) surveys of each such parcel of Owned Property in such form as is
necessary to obtain the title insurance to be issued pursuant to the Title
Commitments with the standard printed exceptions relating to survey matters
deleted (the "Surveys"), certified to the other and to the Title Company
issuing a Title Commitment. Except as provided in SECTIONS 9.2.4 AND 9.3.4,
the cost to obtain such title insurance policies and the cost of all Surveys
and other documents required by the Title Company to issue such policies,
together with all costs and fees of the Title Company to record the deeds
transferring title to such Owned Property and any other instruments or
documentation related thereto, shall be shared equally by TCA and Cable One.
If Cable One or TCA notifies the other within 20 days of its receipt of both
the Title Commitments and the Surveys of any Lien (other than a Permitted Lien
or a Lien set forth in SCHEDULES 5.4 or 6.4, as applicable) or other matter
which renders or could render title to any parcel of Owned Property
unmarketable or prevents or could prevent or impair access to or interferes
with or impairs or could interfere with or impair the use or operation of any
parcel of Owned Property for the purposes for which it is currently used or
operated by the other (each a "Title Defect"), the other will exercise
commercially reasonable efforts to remove or, with the consent of the objecting
Party, cause the Title Company to commit to insure over, each such Title Defect
prior to the Closing.
7.7. HSR Notification. As soon as practicable after the execution
of this Agreement, but in any event no later than 60 days after such execution,
Cable One and TCA will each complete and file, or cause to be completed and
filed at its own cost and expense, any notification
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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 commercially reasonable 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 commercially reasonable
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 Party 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 information in connection with the HSR Act is unduly burdensome,
either Party may terminate this Agreement by notifying the other Party.
7.8. Sales and Transfer Taxes. All sales, use or excise Taxes
arising from or payable by reason of the transfer of any of the TCA Assets or
any of the Cable One Assets will be shared equally by TCA and Cable One. 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 TCA
Assets or the Cable One Assets also will be shared equally by TCA and Cable
One.
7.9. Noncompetition. At the Closing, TCA and Cable One will
execute and deliver to the other a Noncompetition Covenant, in the respective
forms attached as EXHIBITS 7.9(A) or (B), as appropriate.
7.10. Programming. Each Party will execute and deliver such
documents and take such action as may be reasonably requested by the other
Party to enable such other Party to comply with the requirements of its
programming agreements with respect to divestitures and acquisitions of cable
television systems; provided, however, that neither Party will be required to
provide specific programming or channels or to assume any liability with
respect to or in connection with the other's programming agreements.
7.11. Updated Schedules. Not less than ten Business Days prior to
Closing, each Party will deliver to the other revised copies of each of its
Schedules, except for SCHEDULES 5.14.1 and 6.14.1 (regardless of whether the
original Schedule is as of a certain date) which shall have been updated and
marked to show any changes occurring between the date of this Agreement and the
date of delivery; provided, however, that for purposes of such Party's
representations and
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warranties and covenants in this Agreement, all references to the Schedules
will mean the version of the Schedules attached to this Agreement on the date
of signing, and provided further that if the effect of any such updates to
Schedules is to disclose any one or more additional properties, privileges,
rights, interests or claims as Assets, the Party which is to receive such
Assets, at or before Closing, will have the right (to be exercised by written
notice to the other Party) to cause any one or more of such items to be
designated as and deemed to constitute Excluded Assets of the other Party for
all purposes under this Agreement. Without changing the result set forth in
the preceding sentence that a Party's updated Schedules do not serve to update
such Party's representations and warranties, the updated Schedules delivered
pursuant to this SECTION 7.11 shall be accompanied by an officer's certificate
of the Party delivering such Schedules, certifying that the information set
forth in such Schedules is true and accurate in all material respects as of the
date of delivery thereof and that all information required to be given in the
Schedules "as of the date of this Agreement" has been updated to the date of
delivery of the updated Schedules or other date permitted to be specified in
such Schedules.
7.12. Use of Names and Logos. For a period of 60 Business Days
after the Closing, Cable One and TCA will be entitled to use the trademarks,
trade names, service marks, service names, logos and similar proprietary rights
of the other to the extent incorporated in or on the Assets transferred to it
at the Closing, provided that each will exercise commercially reasonable
efforts to remove all such names, marks, logos and similar proprietary rights
of the other from the Assets as soon as reasonably practicable, and in any
event within 60 Business Days, following the Closing.
7.13. Transitional Billing Services. Cable One and TCA will each
provide to the other, upon request, access to and the right to use its billing
system computers, software and related fixed assets in connection with the
System acquired by the other for a period of up to 90 days following the
Closing to allow for conversion of existing billing arrangements ("Transitional
Billing Services"). Each Party will notify the other at least 10 days prior to
the Closing as to whether it desires Transitional Billing Services from the
other. All Transitional Billing Services, if any, that are requested by a
Party will be provided on terms and conditions reasonably satisfactory to each
Party; provided, however, that the amount to be paid by the Party receiving
Transitional Billing Services will not exceed the out of pocket cost to the
other Party of providing such Transitional Billing Services. Each Party will
notify the other, at least 45 days prior to the Closing, of the cost to such
Party of providing such Transitional Billing Services.
7.14. Confidentiality and Publicity.
7.14.1. Each Party will use commercially reasonable efforts
to assure that any non-public information that such Party may obtain from the
other in connection with this Agreement with respect to the other's Cable
Business and Systems will be kept 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
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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 other materials
obtained by such Party or on its behalf from the other, whether so obtained
before or after the execution hereof.
7.14.2. Neither Party will issue any press releases or
make any other public announcement 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.
7.15. Bulk Transfers. Cable One and TCA each waives compliance by
the other with Legal Requirements relating to bulk transfers applicable to the
transactions contemplated hereby.
7.16. Lien Searches. Each Party will obtain at its expense, the
results of a lien search conducted by a professional search company of records
in the offices of the secretaries of state in each state and county clerks in
each county where there exist any of its Owned Property or Tangible Personal
Property, and in the state and county where such Party's principal offices are
located, including copies of all financing statements or similar notices or
filings (and any continuation statements) discovered by such search company.
7.17. Further Assurances. At or after the Closing, each of Cable
One and TCA 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 Cable One
Assets or the TCA Assets. Without limiting the generality of the foregoing,
Cable One and TCA will take, or cause to be taken, all actions consistent with
the terms of this Agreement, including execution and delivery of any documents
or instruments, as the other may reasonably request to effect the qualification
of the transactions contemplated hereby as a like-kind exchange under Section
1031 of the Code.
7.18. Post-Closing Cooperation upon Inquiries as to Rates. For a
period of 12 months after Closing, each Party will cooperate with and assist
the other by providing, upon reasonable request, all information in that
Party's possession (and not previously made available to the requesting Party)
relating directly to the rates set forth in SCHEDULE 5.15 OR 6.15, as
applicable,
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or on any of FCC Forms 1200, 1205, 1210, 1220, 1225, 1235 or 1240 or any other
FCC Form, that the requesting Party may reasonably require to justify such
rates in response to any inquiry, order or requirements of any Governmental
Authority.
7.19. Power of Attorney Accounts Receivable. At Closing, each Party
shall grant to the other the limited, irrevocable right, in such Party's name,
place and stead, as such Party's attorney-in-fact, to cash, deposit, endorse or
negotiate checks received on or after the Closing Date made out to such Party
in payment for cable television and related services provided by such Party's
Systems. In addition, on or prior to the Closing Date, each Party shall
provide written instructions to its lock-box service provider or similar agents
to promptly forward to the other all such cash, deposits and checks that it may
receive. From and after the Closing, each Party shall promptly remit to the
other any payment received by such Party after the Closing Date in respect of
any account receivable in respect of such Party's Systems.
7.20 Blackwell Overbuild Elections. If, prior to Closing, the City
of Blackwell or any other franchising authority grants a cable television
franchise or other authorization or otherwise allows any third party to provide
wireline video programming or related services in its community, then Cable
One, in its sole discretion, may delay Closing so as to permit (x) the parties
to identify and agree upon other assets of TCA or a mutually agreeable third
party that Cable One reasonably deems to be adequate replacement assets for the
TCA Assets relating to the provision of cable service to customers located in
such community (the "Overbuilt Assets"), (y) the parties to make such
amendments to this Agreement as they mutually deem necessary to reflect the
exclusion of the Overbuilt Assets and the inclusion of the replacement assets,
which amendments shall include extending the time limit set forth in Section
10.1.3 by at least 90 days, and (z) the purchase, if necessary, and conveyance
of the replacement assets by TCA to Cable One at Closing. If the parties
cannot agree within 90 days on which other assets of TCA or a mutually
agreeable third party should replace the Overbuilt Assets, then Cable One, in
its sole discretion, shall have the right to terminate this Agreement and
abandon the transactions contemplated hereby.
8. CONDITIONS PRECEDENT.
8.1. Conditions to Cable One's Obligations. The obligations of
Cable One 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 Cable One:
8.1.1. Accuracy of Representations and Warranties. The
representations and warranties of TCA in this Agreement and in any Transaction
Document, if specifically qualified by materiality, shall be true in all
respects and, if not so qualified, shall be 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. TCA shall have 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.
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8.1.3. Deliveries. TCA shall have 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
pending or threatened by or before any Governmental Authority and no Legal
Requirement shall have 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 (a) prohibit Cable One's ownership or
operation of all or a material portion of any TCA System, TCA's Cable Business
or the TCA Assets, (b) compel Cable One to dispose of or hold separate all or a
material portion of any TCA System, TCA's Cable Business or the TCA Assets as a
result of any of the transactions contemplated by this Agreement, (c) if
determined adversely to Cable One's interest, materially impair the ability of
Cable One to realize the benefits of the transactions contemplated by this
Agreement or have a material adverse effect on the right of Cable One to
exercise full rights of ownership of the TCA Systems or (d) prevent or make
illegal the consummation of any transactions contemplated by this Agreement.
8.1.5. Consents. Except as otherwise provided in SECTION
7.5.3, Cable One shall have received evidence, in form and substance reasonably
satisfactory to it, that the TCA Required Consents have been obtained.
8.1.6. No Material Adverse Change. There shall not have
been any material adverse change since April 30, 1997 in the TCA Assets or the
financial condition or operations of TCA's Cable Business or the TCA Systems.
8.1.7. Title Defects. With respect to each Title Defect
affecting the TCA Systems, either (i) the Title Company shall have agreed to
delete such Title Defect as an exception in the relevant Title Commitment or,
with the consent of Cable One, shall have committed to insure over it by
endorsement, or (ii) if acceptable to Cable One in its reasonable discretion,
the parties shall have entered into a written agreement containing TCA's
commitment to remedy such Title Defect on terms satisfactory to Cable One.
8.1.8. Environmental Assessments. No environmental audits
or assessments conducted by Cable One with respect to the TCA Owned Property or
the TCA Leased Property shall have indicated 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, other than environmental matters with respect to which, with Cable
One's consent, TCA shall have committed in writing to remediate as promptly as
practicable after the Closing Date.
8.1.9. Subscribers. The TCA Systems shall be serving at
least 17,051 Equivalent Basic Subscribers.
8.1.10. Books and Records. TCA shall have made arrangements
reasonably satisfactory to Cable One to deliver to Cable One all TCA Books and
Records. Delivery of the
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foregoing will be deemed made to the extent such Books and Records are then
located at any of the offices included in the TCA Owned Property or TCA Leased
Property.
8.1.11. Retransmission Consent. With respect to any
retransmission consent Contract for broadcast signals carried on the TCA
Systems on the date of this Agreement and on the date of the Closing that are
included as part of the TCA Excluded Assets, all required retransmission
consents for continued carriage of such broadcast signals shall have been
obtained on terms and conditions reasonably acceptable to Cable One unless a
broadcast station has elected must carry status. With respect to any
retransmission consent Contracts for broadcast signals carried on the Cable One
Systems on the date of this Agreement and on the date of the Closing that are
included as part of the Cable One Excluded Assets, Cable One shall have been
relieved of any obligations under such retransmission consent Contracts with
respect to the Cable One Systems for any period after the Closing.
8.1.12. HSR Act. All filings required under the HSR Act
shall have been made and the applicable waiting period shall have expired or
been earlier terminated.
8.1.13. Franchise Renewals. All TCA Systems Franchises 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 shall have been renewed or extended for
a period expiring no earlier than three years after the Closing Date.
8.2. Conditions to TCA's Obligations. The obligations of TCA 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 TCA:
8.2.1. Accuracy of Representations and Warranties. The
representations and warranties of Cable One in this Agreement and in any
Transaction Document, if specifically qualified by materiality, shall be true
in all respects and, if not so qualified, shall be 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. Cable One shall have
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. Cable One shall have 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
shall be pending or threatened by or before any Governmental Authority and no
Legal Requirement shall have 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 (a) prohibit TCA's ownership or
operation of all or a material portion of any Cable One System, Cable One's
Cable
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Business or the Cable One Assets, (b) compel TCA to dispose of or hold separate
all or a material portion of any Cable One System, Cable One's Cable Business
or Cable One Assets as a result of any of the transactions contemplated by this
Agreement, (c) if determined adversely to TCA's interest, materially impair the
ability of TCA to realize the benefits of the transactions contemplated by this
Agreement or have a material adverse effect on the right of TCA to exercise
full rights of ownership of the Cable One Systems or (d) prevent or make
illegal the consummation of any transactions contemplated by this Agreement.
8.2.5. Consents. Except as otherwise provided in SECTION
7.5.3, TCA shall have received evidence, in form and substance reasonably
satisfactory to it, that the Cable One Required Consents have been obtained.
8.2.6. No Material Adverse Change. There shall not have
been any material adverse change since April 30, 1997 in the Cable One Assets
or the financial condition or operations of the Cable One Systems.
8.2.7. Title Defects. With respect to each Title Defect
affecting the Cable One Systems, either (i) the Title Company shall have agreed
to delete such Title Defect as an exception in the relevant Title Commitment
or, with the consent of TCA, shall have committed to insure over it by
endorsement, or (ii) if acceptable to TCA in its reasonable discretion, the
parties shall have entered into a written agreement containing Cable One's
commitment to remedy such Title Defect on terms satisfactory to TCA.
8.2.8. Environmental Assessments. No environmental audits
or assessments conducted by TCA with respect to the Cable One Owned Property or
the Cable One Leased Property shall have indicated 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, other than environmental matters with respect to which, with TCA's
consent, Cable One has committed in writing to remediate as promptly as
practicable after the Closing Date.
8.2.9. Subscribers. The Cable One Systems shall be serving
at least 14,237 Equivalent Basic Subscribers.
8.2.10. Books and Records. Cable One shall have made
arrangements reasonably satisfactory to TCA to deliver to TCA all Cable One
Books and Records. Delivery of the foregoing will be deemed made to the extent
such Books and Records are then located at any of the offices included in the
Cable One Owned Property or Cable One Leased Property.
8.2.11. Retransmission Consent. With respect to any
retransmission consent Contract for broadcast signals carried on the Cable One
Systems on the date of this Agreement and on the date of the Closing that are
included as part of the Cable One Excluded Assets, all required retransmission
consents for continued carriage of such broadcast signals shall have been
obtained on terms and conditions reasonably acceptable to TCA unless a
broadcast station has elected must carry status. With respect to any
retransmission consent Contracts for broadcast signals carried
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on the TCA Systems on the date of this Agreement and on the date of the Closing
that are included as part of the TCA Excluded Assets, TCA shall have been
relieved of any obligations under such retransmission consent Contracts with
respect to the TCA Systems for any period after the Closing.
8.2.12. HSR Act. All filings required under the HSR Act
shall have been made and the applicable waiting period shall have expired or
been earlier terminated.
8.2.13. Franchise Renewals. All Cable One Systems
Franchises 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 shall have been renewed or
extended for a period expiring no earlier than three years after the Closing
Date.
9. THE CLOSING.
9.1. The Closing; Time and Place. Subject to the terms and
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall be held at a place mutually agreed upon by
the Parties at 10:00 a.m., local time, on the last calendar day of the calendar
month in which the conditions set forth in Article 8 shall have been satisfied
or waived (provided that each Party shall have at least 10 days prior notice of
the scheduled Closing Date in order to prepare for the Closing) or at such
other place, date and time as may be agreed upon by the Parties (the "Closing
Date"). The transactions to be consummated at Closing shall be deemed to have
been consummated as of the Closing Time. If the Closing Date is not a Business
Day, then the Cash Consideration shall be paid by the appropriate Party by
12:00 p.m. Central Time on the next immediately following Business Day.
9.2. TCA's Delivery Obligations. At the Closing, TCA will deliver
or cause to be delivered to Cable One the following:
9.2.1. Cash Consideration. If applicable, the Cash
Consideration will be paid by TCA to Cable One by wire transfer in immediately
available funds.
9.2.2. Bill of Sale and Assignment and Assumption
Agreement. The executed Bill of Sale and Assignment and Assumption Agreement
in the form of EXHIBIT 9.2.2 and such other instruments of transfer, assignment
or assumption, in form and substance mutually satisfactory to TCA and Cable
One, as Cable One may reasonably require to further document the transfer and
assignment of the TCA Assets to Cable One and Cable One's assumption of the
Cable One Assumed Obligations and Liabilities.
9.2.3. Deeds. A special warranty deed in a form reasonably
acceptable to Cable One (and complying with applicable state laws) with respect
to each parcel of TCA Owned Property, duly executed and acknowledged and in
recordable form, warranting title to such TCA Owned Property against all
Persons claiming by, through or under TCA, subject, however, to Permitted
Liens.
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9.2.4. Title Policies. Policies of title insurance pursuant
to the Title Commitments described in SECTION 7.6, dated as of the Closing
Date, and endorsed to delete or modify to the satisfaction of Cable One the
standard printed exceptions and any Title Defects (the "TCA Title Policies") or
the irrevocable written commitment of the Title Company to deliver the TCA
Title Policies, and TCA's written commitment contemplated in SECTION 8.1.7, to
the extent applicable; Cable One will pay the premiums and charges for any
additional endorsements Cable One requests with respect to any TCA Title Policy
other than the endorsements (i) to delete the standard survey exceptions from
such TCA Title Policy (the cost of which shall be split equally between TCA and
Cable One) and (ii) to delete or insure over any Title Defects (the cost of
which shall be paid solely by TCA).
9.2.5. Lien Releases. Evidence satisfactory to Cable One
that all Liens (other than Permitted Liens) affecting or encumbering the TCA
Assets have been terminated, released or waived, as appropriate, or original,
executed instruments in form satisfactory to Cable One effecting such
terminations, releases or waivers.
9.2.6. TCA Noncompetition Covenant. TCA will have
delivered to Cable One a Noncompetition Covenant in the form of EXHIBIT 7.9(A)
executed by TCA.
9.2.7. Vehicle Titles. Title certificates to all vehicles
included among the TCA Assets, endorsed for transfer of title to Cable One, and
separate bills of sale therefor or other transfer documentation, if required by
the laws of the States in which such vehicles are titled.
9.2.8. Evidence of Authorization. Certified corporate
resolutions or other evidence reasonably satisfactory to Cable One that TCA has
taken all action necessary to authorize the execution of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby.
9.2.9. FIRPTA Certificate. FIRPTA Non-Foreign Seller
Certificate certifying that TCA is not a foreign person within the meaning of
Section 1445 of the Code reasonably satisfactory in form and substance to Cable
One.
9.2.10. Officer's Certificate. Cable One will have
received a certificate executed by an executive officer of TCA dated the date
of the Closing, reasonably satisfactory in form and substance to Cable One,
certifying that the conditions specified in SECTIONS 8.1.1 and 8.1.2 have been
satisfied.
9.2.11. TCA Counsel Opinions. Cable One will have received
(a) an opinion of TCA's General Counsel, dated the date of the Closing, in the
form of EXHIBIT 9.2.11(A) and (b) an opinion of TCA's FCC Counsel, dated the
date of the Closing, in the form of EXHIBIT 9.2.11(B).
9.2.12. Other. Such other documents and instruments as may
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
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9.3. Cable One's Delivery Obligations. At the Closing, Cable One
will deliver or cause to be delivered to TCA the following:
9.3.1. Cash Consideration. If applicable, the Cash
Consideration will be paid by Cable One to TCA by wire transfer in immediately
available funds.
9.3.2. Bill of Sale and Assignment and Assumption
Agreement. The executed Bill of Sale and Assignment and Assumption Agreement
in the form of EXHIBIT 9.3.2 and such other instruments of transfer, assignment
or assumption, in form and substance mutually satisfactory to Cable One and
TCA, as TCA may reasonably require to further document the transfer and
assignment of the Cable One Assets to TCA and TCA's assumption of the TCA
Assumed Obligations and Liabilities.
9.3.3. Deeds. A special warranty deed in a form reasonably
acceptable to TCA (and complying with applicable state laws) with respect to
each parcel of Cable One Owned Property, duly executed and acknowledged and in
recordable form, warranting title to such Cable One Owned Property against all
Persons claiming by, through or under Cable One, subject, however, to Permitted
Liens.
9.3.4. Title Policies. Policies of title insurance pursuant
to the Title Commitments described in SECTION 7.6, dated as of the Closing Date
and endorsed to delete or modify to the satisfaction of TCA the standard
printed exceptions and any Title Defects (the "Cable One Title Policies") or
the irrevocable written commitment of the Title Company to deliver the Cable
One Title Policies, and Cable One's written commitment contemplated in SECTION
8.2.7, to the extent applicable; TCA will pay the premiums and charges for any
non-standard endorsements TCA requests with respect to any Cable One Title
Policy other than the endorsements (i) to delete the standard survey exceptions
from such Cable One Title Policy (the cost of which shall be split equally
between TCA and Cable One) and (ii) to delete or insure over any Title Defects
(the cost of which shall be paid solely by Cable One).
9.3.5. Lien Releases. Evidence satisfactory to TCA that
all Liens (other than Permitted Liens) affecting or encumbering the Cable One
Assets have been terminated, released or waived, as appropriate, or original,
executed instruments in form satisfactory to TCA effecting such terminations,
releases or waivers.
9.3.6. Cable One Noncompetition Covenant. Cable One will
have delivered to TCA a Noncompetition Covenant in the form of EXHIBIT 7.9(B)
executed by Cable One.
9.3.7. Vehicle Titles. Title certificates to all vehicles
included among the Cable One Assets, endorsed for transfer of title to TCA, and
separate bills of sale therefor or other transfer documentation, if required
by the laws of the States in which such vehicles are titled.
9.3.8. Evidence of Authorization Actions. Certified
resolutions of the Board of Directors of Cable One or other evidence reasonably
satisfactory to TCA that Cable One has taken
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all action necessary to authorize the execution of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby.
9.3.9. FIRPTA Certificate. FIRPTA Non-Foreign Seller
Certificate certifying that Cable One is not a foreign person within the
meaning of Section 1445 of the Code reasonably satisfactory in form and
substance to TCA.
9.3.10. Officer's Certificate. TCA will have received a
certificate executed by an executive officer of Cable One dated the date of the
Closing, reasonably satisfactory in form and substance to TCA, certifying that
the conditions specified in SECTIONS 8.2.1 AND 8.2.2 have been satisfied.
9.3.11. Cable One Counsel Opinions. TCA will have received
(a) an opinion of Cable One's General Counsel, dated the date of the Closing,
in the form of EXHIBIT 9.3.11(A) and (b) an opinion of Fleischman and Walsh,
L.L.P., dated the date of Closing, in the form of EXHIBIT 9.3.11(B).
9.3.12. Other. Such other documents and instruments as may
be necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
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 Cable One
and TCA;
10.1.2. By either Cable One or TCA 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, provided that (i) the non-breaching Party
provides the breaching Party with prompt written notice that provides a
reasonably detailed explanation of the facts and circumstances surrounding such
breach or default, and (ii) the breaching Party is given thirty (30) days after
its receipt of such written notice within which to cure such breach or default
and such Party fails to cure such breach or default within such thirty day
period, unless such breach or default cannot be cured; provided further that
the existence or occurrence of any event or circumstance arising after the date
hereof, or prior to the date hereof if the appropriate Party had no Knowledge
thereof, that constitutes or causes a breach of a representation or warranty of
such Party under this Agreement (including, without limitation, the Schedules
hereto of such Party and the Transaction Documents) on the date such
representation or warranty is made shall not constitute a breach of such
representation or warranty if such event or circumstance is corrected so as to
cure any such breach on or prior to the Closing Date.
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10.1.3. By either Cable One or TCA 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 three hundred
sixty-five days after 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 7.14 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 TCA or Cable One may have
with respect to a breach or default by the other of its covenants, agreements
or obligations under this Agreement.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1. Survival of Representations and Warranties. The
representations and warranties of TCA and Cable One in this Agreement and in
the Transaction Documents will survive Closing for a period of 36 months after
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 SECTIONS 5.4.1 AND 6.4.1, respectively, and as to ownership of Owned
Property set forth in SECTIONS 5.6 AND 6.6, respectively, and in the special
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, with the understanding that, notwithstanding any
language contained in any such deed, the representations and warranties as to
ownership of Owned Property set forth in SECTIONS 5.6 AND 6.6, respectively,
will not be merged into any such deed or other Transaction Document. 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 each
Party under its 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 each Party in this Agreement and in
the Transaction Documents will survive the Closing and will continue in full
force and effect without limitation.
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11.2. Indemnification by TCA. From and after the Closing, TCA will
indemnify and hold harmless Cable One and its Affiliates, and its and their
respective 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 TCA in this Agreement, (b) any
breach of any covenant, agreement or obligation of TCA contained in this
Agreement, (c) any act or omission of TCA with respect to, or any event or
circumstance related to, the ownership or operation of the TCA Assets or the
conduct of TCA's Cable 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 Cable One Assumed Obligations and Liabilities
related to the TCA Systems prior to the Closing Time, (e) any Title Defect that
TCA fails to eliminate as an exception from a TCA Title Policy, and any Title
Defect affecting any TCA Owned Property that the Title Company has insured over
in accordance with SECTION 8.1.7, (f) any claim that the transactions
contemplated by this Agreement violate WARN or any Legal Requirement or any
fraudulent conveyance laws of any jurisdiction, (g) the presence, generation,
removal or transportation of a Hazardous Substance on or from any of the TCA
Owned Property or TCA 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), (h) any rate refund, or credit, penalty and/or interest payment with
respect thereto, ordered by any Governmental Authority with respect to the TCA
Systems for periods prior to the Closing Time or (i) the failure of TCA to
perform the TCA Assumed Obligations and Liabilities.
In the event that an indemnified item arises under both clause (a) and
under one or more of clauses (b) through (i) of this SECTION 11.2, Cable One's
rights to pursue its claim under clauses (b) through (i), as applicable, will
exist notwithstanding the expiration of the Survival Period applicable to such
claim under clause (a).
11.3. Indemnification by Cable One. From and after the Closing,
Cable One will indemnify and hold harmless TCA and its Affiliates, and its and
their respective shareholders, officers, directors, partners, 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 Cable
One in this Agreement, (b) any breach of any covenant, agreement or obligation
of Cable One contained in this Agreement, (c) any act or omission of Cable One
with respect to, or any event or circumstance related to, the ownership or
operation of the Cable One Assets or the conduct of Cable One's Cable 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 5.12, (d) any liability or obligation not included in the TCA Assumed
Obligations and Liabilities related to the Cable One Systems prior to the
Closing Time, (e) any Title Defect that Cable One fails to eliminate as an
exception from a Cable One Title Policy, and any Title Defect affecting any
Cable One Owned Property that the Title Company has insured over in accordance
with SECTION 8.2.7,
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(f) any claim that the transactions contemplated by this Agreement violate WARN
or any similar Legal Requirement or any bulk transfer or fraudulent conveyance
laws of any jurisdiction, (g) the presence, generation, removal or
transportation of a Hazardous Substance on or from any of the Cable One Owned
Property or Cable One 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), (h) any rate refund, or credit, penalty and/or interest payment with
respect thereto, ordered by any Governmental Authority with respect to the
Cable One Systems for periods prior to the Closing Date or (i) the failure of
Cable One to perform the Cable One Assumed Obligations and Liabilities.
In the event that an indemnified item arises under both clause (a) and
under one or more of clauses (b) through (i) of this SECTION 11.3, TCA's rights
to pursue its claim under clauses (b) through (i), 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 third party
(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 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. Expenses of counsel to the Indemnified Party shall be
reimbursed on a current basis by the Indemnifying Party if such expenses are a
liability of the Indemnifying Party and if there is no dispute as to the
applicability of indemnification. No Indemnified Party will settle or
compromise any such Action for which it is entitled to indemnification under
this Agreement without the prior
54
<PAGE> 63
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. Other Indemnification. The provisions of this SECTION 11 will
be applicable to any claim for indemnification made under any other provision
of this Agreement and all references in this SECTION 11 to SECTIONS 11.2 and
11.3 will be deemed to be references to such other provisions of this
Agreement.
11.6. Payments for Indemnification Amounts. Amounts payable by
either Party in respect of any Losses under SECTIONS 11.2 AND 11.3 will be
payable by the Indemnifying Party as incurred by the other Party within ten
(10) Business Days after the Indemnifying Party's receipt of a statement
therefor.
12. MISCELLANEOUS PROVISIONS.
12.1 Parties Obligated and Benefited. Subject to the limitations
set forth below, this Agreement will be binding upon each of 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
the other parties, 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.
12.2. Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement to either
Party 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:
55
<PAGE> 64
To TCA at:
TCA Cable Partners
c/o TCA Management Company
3015 SSE Loop 323
Tyler, TX 75701
Attn: Fred R. Nichols, President
Telecopy: (903) 596-9008
With a copy (which shall not constitute notice) to:
TCA Management Company
3015 SSE Loop 323
Tyler, TX 75701
Attn: General Counsel
Telecopy: (903) 595-1929
Jackson Walker, L.L.P.
901 Main Street
Suite 6000
Dallas, TX 75202
Attn: Janie E. James, Esq.
Telecopy: (214) 963-6822
To Cable One at:
Cable One, Inc.
4742 North 24th Street, Suite 270
Phoenix, AZ 85016
Attn: Thomas O. Might
Telecopy: (602) 468-9216
With a copy (which shall not constitute notice) to:
Cable One, Inc.
4742 North 24th Street, Suite 270
Phoenix, AZ 85016
Attn: Alan H. Silverman, Esq.
Telecopy: (602) 468-0116
and
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W., Suite 600
Washington, D.C. 20036
Attn: Jeffry L. Hardin, Esq.
Telecopy: (202) 265-5706
56
<PAGE> 65
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.
12.3. Right to Specific Performance. Each Party acknowledges that
the unique nature of the Assets to be exchanged hereunder pursuant to this
Agreement renders money damages an inadequate remedy for the breach by each
Party 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. The validity, performance, and enforcement of
this Agreement and all Transaction Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Delaware, without
giving effect to the principles of conflicts of law of such state. In
accordance with Title 6, Section 2708 of the Delaware Code Annotated, each
Party hereby submits to the jurisdiction of the courts of Delaware and agrees
to be served with legal process from any of such courts. Each Party hereby
irrevocably waives, to the fullest extent permitted by law, any objection that
it may have, whether now or in the future, to the laying of venue in, or to the
jurisdiction of, any and each of such courts, including any claim or objection
that any of such courts constitutes an inconvenient forum.
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 Party
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.
57
<PAGE> 66
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. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original.
12.11. 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 all of
the parties hereto.
12.12. Severability. Any term or provision of this Agreement which
is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefited by such provision or
any other provisions of this Agreement.
12.13. 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.
12.14. 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; provided, however that in the event the
transactions contemplated hereunder are consummated, each Party shall share
equally the fee of $100,000 payable to Daniels & Associates.
12.15. Risk of Loss. The risk of any loss or damage to the Cable One
Assets or TCA Assets resulting from fire, theft or other casualty (except
reasonable wear and tear) will be borne by Cable One or TCA, respectively, 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, Cable One or TCA as appropriate,
will immediately notify the other in writing of that fact and the other, at any
time within 10 days after receipt of such notice, may elect by written notice
to the notifying Party to either (i) waive such defect and proceed toward
consummation of the transaction in accordance with terms of this Agreement or
(ii) terminate this Agreement. If the other elects to so terminate this
Agreement, both parties will stand fully released and discharged of any and all
obligations under this Agreement. If the other elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, the Cash Consideration shall be adjusted, to the extent such loss
or damage cannot be remedied prior to the Closing Date, by
58
<PAGE> 67
an amount mutually acceptable to TCA and Cable One, which amount shall be equal
to the estimated out-of-pocket costs and expenses which the other Party
reasonably can be expected to incur to repair or replace, in accordance with
cable television industry practices, such lost or damaged Assets after Closing.
If the actual out-of-pocket costs and expenses which a Party reasonably
incurred to repair or replace such lost or damaged Assets exceeds such
estimated amount, the Party that owned the lost or damaged Assets prior to
Closing shall reimburse the other Party for such excess costs provided that
such Party shall not be obligated to reimburse the other Party for any amounts
in excess of any insurance proceeds paid to such Party as a result of the
occurrence of the event resulting in such loss or damage. The Party that owned
such lost or damaged Assets prior to Closing shall retain all insurance
proceeds payable as a result of the occurrence of the event resulting in such
loss or damage.
12.16. Takings. If, on or prior to the Closing Date, all or any part
of or interest in the Cable One Assets or the TCA Assets, as appropriate, is
taken or condemned as a result of a Governmental Authority's exercise of its
powers of eminent domain, or if a Governmental Authority having such power
informs a Party that it intends to condemn all or any part of such Party's
Assets (such event being called, in either case, a "Taking") and such Taking is
so substantial as to prevent normal operations of a System or any material part
thereof (a "Material Taking"), then Cable One, in the case of a Material Taking
of TCA Assets, or TCA, in the case of a Material Taking of Cable One Assets,
shall have the right to terminate this Agreement. If TCA or Cable One, as
appropriate, does not elect to terminate this Agreement notwithstanding the
occurrence of a Material Taking, or if there shall have occurred a non-Material
Taking, then (i) TCA, in the case of a Taking of Cable One Assets, or Cable
One, in the case of a Taking of TCA Assets, may elect, in the name of the other
Party, to negotiate for, claim, contest and receive all damages with respect to
the Taking, (ii) the Party whose Assets were the subject of the Taking will be
relieved of its obligation to convey to the other Party those of its Assets
that were the subject of the Taking, (iii) at Closing, the Party whose Assets
were the subject of the Taking will assign to the other Party all of its rights
to damages payable as a result of the Taking, and will pay to the other Party
all damages previously paid to it in connection with the Taking, and (iv)
following the Closing, the Party whose Assets were the subject of the Taking
will give to the other Party any further assurances of such rights and
assignment with respect to the Taking as the other Party reasonably may request
from time to time.
12.17. Tax Consequences. No Party makes any representation or
warranty, express or implied, with respect to the Tax implications of any
aspect of this Agreement on any other Party, and each Party expressly
disclaims 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 or unreasonable 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.
12.19. Action by any Party. Unless otherwise indicated in this
Agreement, whenever consent is required by any Party, notice is required to be
delivered to or by any Party, agreement is required between each Party, or any
other such action is required by a Party, any entity comprising a Party has the
authority to give notice, to consent to, to agree with, and to perform any such
other action on behalf of the Party, with such notice, consent, agreement or
other action to be deemed the action of each of the other entities comprising
the Party.
59
<PAGE> 68
The parties have executed this Agreement as of the day and year first
above written.
TCA CABLE PARTNERS
By: TCA Holdings, L.P., a Texas
limited partnership, its general partner
By:
-------------------------------------
-------------------------------------
CABLE ONE, INC.
By:
-----------------------------------------
Thomas O. Might, President
Signature Page to Asset Exchange Agreement
between TCA Cable Partners and Cable One, Inc.
60
<PAGE> 1
FIRST AMENDMENT TO ASSET EXCHANGE AGREEMENT
FIRST AMENDMENT TO ASSET EXCHANGE AGREEMENT (the "Amendment"), dated as
of June 15, 1998, by and between Cable One, Inc., a Delaware corporation ("Cable
One"), and TCA Cable Partners, a Delaware general partnership ("TCA").
RECITALS
A. Cable One and TCA are parties to the Asset Exchange Agreement, dated
as of January 14, 1998 (the "Exchange Agreement").
B. Cable One and TCA desire to amend the Exchange Agreement in order to
exclude from the transaction contemplated thereby the Livingston/Corrigan System
(as defined herein) and the Blackwell System (as defined herein) and to update
their respective disclosure schedules.
In consideration of the premises and the respective representations,
warranties and agreements contained herein and in the Exchange Agreement, the
parties hereto agree as follows:
SECTION 1. The first three sentences of Section 5.1 of the Exchange
Agreement are hereby deleted and the following sentences are hereby added to
replace such deleted sentences:
Cable One has delivered to TCA complete and correct copies of the (i)
internally generated unaudited balance sheets and related statements of income
for the year ending as of December 31, 1996, both of which reflect the operation
of the Cable One Systems and the cable television system serving the Texas
communities of Livingston and Corrigan (the "Livingston/Corrigan System") as a
consolidated entity, and (ii) internally generated unaudited interim balance
sheets and related statements of income for and as of each quarter ending on and
up to September 30, 1997, both of which reflect the operation of the Cable One
Systems and the Livingston/Corrigan System as a consolidated entity (all of such
financial statements being hereinafter referred to as "Cable One's Financial
Statements"). Cable One's Financial Statements are in accordance with the books
and records of the Cable One Systems and the Livingston/Corrigan System, were
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods covered thereby, and, except as may be
described therein, present fairly the financial condition of the Cable One
Systems and the Livingston/Corrigan System on a consolidated basis at the dates
and for the periods indicated subject, in the case of unaudited Cable One's
Balance Sheets, only to standard year-end adjustments and the omission of
footnotes. The consolidated balance sheets as of December 31, 1996 of the Cable
One Systems and the Livingston/Corrigan System are herein collectively called
the "Cable One Balance Sheets."
SECTION 2. Subsections 7.3.1 and 7.3.2 of the Exchange Agreement are
hereby amended to read in their entirety as follows:
<PAGE> 2
7.3.1. Each Party may, but shall have no obligation to employ or offer
employment to any employee of the other Party's Cable Business. Within 90 days
after the date of execution of this Agreement, each Party shall provide to the
other a list of all active employees of its Systems and, with respect to Cable
One only, its Livingston/Corrigan System (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 such Party desires to retain as its
employees (the "Retained Employees"). Within 30 days after receipt of this list,
the Party receiving such list will provide the other in writing a list of
employees such Party or its Affiliates desires to employ following the Closing,
which list shall not include any Retained Employees. As of the Closing Date,
each Party shall terminate the employment of all its employees who were employed
incidental to the conduct of such Party's Cable Business and, with respect to
Cable One only, the Livingston/Corrigan System, other than Retained Employees.
7.3.2. Each Party will pay to all employees employed in its Cable
Business and, with respect to Cable One only, its Livingston/Corrigan System,
all compensation, including salaries, commissions, bonuses, deferred
compensation, severance, insurance, vacation, 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. Each Party agrees to cooperate in all reasonable respects
with the other Party to allow the other Party to evaluate and interview
employees of such Party's Cable Business and, with respect to Cable One only,
the Livingston/Corrigan System, to make hiring decisions. Each Party shall, at
its cost, be permitted to conduct pre-employment physical examinations
(including drug screen urinalysis) and other appropriate pre-hire investigations
of such of the other Party's employees that it may desire to hire, and each
Party may make any offer of employment to any such employee conditional upon its
receipt of results of the pre-hire investigations of such employee that are
satisfactory to it.
SECTION 3. The form of the Noncompetition Agreement set forth in
Exhibit 7.9(a) and 7.9(b) is hereby deleted and replaced by the form of such
agreement attached hereto as Exhibit A.
SECTION 4. Subsection 7.14.1 of the Exchange Agreement is hereby
amended to add the following new sentence after the first sentence of such
subsection:
Each Party will use commercially reasonable efforts to assure that any
non-public information that such Party may obtain from the other in connection
with this Agreement with respect to the cable television system serving the
Oklahoma community of Blackwell (the "Blackwell System") or the
Livingston/Corrigan System will be kept confidential and, unless and until
consummation of the Subsequent Exchange 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
-2-
<PAGE> 3
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) 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.
SECTION 5. The "Blackwell Overbuild Elections" clause contained in
Section 7.20 of the Exchange Agreement is hereby deleted.
SECTION 6. The Exchange Agreement is hereby amended by adding the
following covenants:
7.21 Subsequent Exchange. Unless one Party provides 60 days advance
written notice of its intention otherwise, TCA and Cable One shall continue
after Closing to use their good faith, commercially reasonable efforts to effect
a subsequent like-kind exchange of the Blackwell System for the
Livingston/Corrigan System pursuant to Section 1031 of the Code (the "Subsequent
Exchange"). The Subsequent Exchange shall be governed by terms mutually
agreeable to the parties. In addition, consummation of the Subsequent Exchange
shall not occur until Cable One, in its reasonable discretion, has ascertained
the impact of the competing cable operator in the City of Blackwell, Oklahoma on
the value of the Blackwell System and whether the Subsequent Exchange continues
to be commercially warranted. During the period from Closing to the earlier of
(i) the consummation of the Subsequent Exchange or (ii) the termination of the
parties' efforts to effect the Subsequent Exchange, TCA shall operate the
Blackwell System in accordance with its past practices and will rebuild the
Blackwell System to 750 MHZ.
7.22 Operation of Livingston/Corrigan System. From and after the
Closing Date until the earlier of (i) the consummation of the Subsequent
Exchange or (ii) the termination of the parties' efforts to effect the
Subsequent Exchange, the parties shall enter into the Management Agreement
attached hereto as Exhibit B concerning the operation of the Livingston/Corrigan
System.
7.23 Signal Delivery. The parties shall provide signals and cable
television programming as set forth below:
7.23.1 Effective as of Closing the parties shall enter into
the signal delivery agreement attached hereto as
Exhibit C, whereby TCA shall, in accordance with the
terms of such agreement, provide Cable One with
certain video signals distributed over TCA's cable
television relay system known as the Oak Grove
microwave system.
7.23.2 Effective as of Closing the parties shall enter into
the signal delivery agreement attached hereto as
Exhibit D, whereby TCA shall, in accordance
-3-
<PAGE> 4
with the terms of such agreement, provide Cable One
with certain cable television programming from the
Blackwell System.
7.23.3 Effective as of Closing, the parties shall enter into
the signal delivery agreement attached hereto as
Exhibit E, whereby Cable One shall, in accordance
with the terms of such agreement, provide TCA with
certain Oklahoma City television signals.
SECTION 7. Section 8.1.9 of the Exchange Agreement is hereby amended to
substitute "14,220" for "17,051."
SECTION 8. Section 8.2.9 of the Exchange Agreement is hereby amended to
substitute "11,959" for "14,237."
SECTION 9. Section 11.2 of the Exchange Agreement is hereby amended to
delete the word "or" prior to subsection (i) of 11.2 and the remainder of
Section 11.2 shall read as follows:
(i) the failure of TCA to perform the TCA Assumed Obligations and
Liabilities, or (j) claims of any Person (including claims arising from acts,
events or circumstances in which Cable One is alleged to be jointly or jointly
and severally liable with TCA) concerning or arising out of Cable One's or TCA's
provision of services to the other party, Cable One's purchase of the Blackwell
System, or the Subsequent Exchange.
In the event that an indemnified item arises under both clause (a) and
under one or more of clauses (b) through (j) of this SECTION 11.2, Cable One's
rights to pursue its claim under clauses (b) through (j), as applicable, will
exist notwithstanding the expiration of the Survival Period applicable to such
claim under clause (a).
SECTION 10. Section 12.2 of the Exchange Agreement is hereby amended to
revise Cable One's address in the two instances in which it appears so as to
read as follows:
Cable One, Inc.
1314 North Third Street
Third Floor
Phoenix, Arizona 85004
SECTION 11. Section 12.14 of the Exchange Agreement is hereby amended
to substitute "$50,000" for "$100,000."
SECTION 12. Cable One's Schedules 1.10, 1.13, 1.15, 1.16, 1.17, 1.18,
4.4, 5.3, 5.8.4, 5.15, 5.18 and 7.2.3 are hereby amended so as to read in their
entirety as set forth on Exhibit F hereto.
-4-
<PAGE> 5
SECTION 13. TCA's Schedules 1.34, 1.56, 1.59, 1.61, 1.62, 1.63, 1.64,
4.2, 6.3, 6.4.3, 6.8.4, 6.14.1, and 6.15 are hereby amended so as to read in
their entirety as set forth on Exhibit G hereto.
SECTION 14. This Amendment is hereby made supplemental to and a part of
the Exchange Agreement and, except as expressly amended by this Amendment, the
Exchange Agreement is in all respects ratified and confirmed and all terms,
conditions and provisions thereof shall remain in full force and effect.
SECTION 15. The validity, performance, and enforcement of this
Amendment shall be governed by the laws of the State of Delaware, without giving
effect to the principles of conflicts of law of such state. In accordance with
Title 6, Section 2708 of the Delaware Code Annotated, each Party hereby submits
to the jurisdiction of the courts of Delaware and agrees to be served with legal
process from any of such courts. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection that it may have, whether now or
in the future, to the laying of venue in, or to the jurisdiction of, any and
each of such courts, including any claim or objection that any of such courts
constitutes an inconvenient forum.
SECTION 16. Capitalized terms contained herein and not otherwise
defined herein shall have the respective meanings assigned to them in the
Exchange Agreement.
SECTION 17. This Amendment may be executed in one or more counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE> 6
The parties have executed this Amendment as of the day and year first
written above.
TCA CABLE PARTNERS
By: TCA Holdings, L.P., a Texas
limited partnership, its general partner
By:
---------------------------------
CABLE ONE, INC.
By:
---------------------------------
80446
Signature page to the Amendment to the Asset Exchange
Agreement between TCA Cable Partners and Cable
One, Inc.
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 3,067,201
<SECURITIES> 0
<RECEIVABLES> 17,127,463
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 514,228,525
<DEPRECIATION> (233,530,980)
<TOTAL-ASSETS> 1,110,053,601
<CURRENT-LIABILITIES> 0
<BONDS> 543,018,524
0
0
<COMMON> 2,504,392
<OTHER-SE> 189,540,108
<TOTAL-LIABILITY-AND-EQUITY> 1,110,053,601
<SALES> 0
<TOTAL-REVENUES> 101,541,500
<CGS> 0
<TOTAL-COSTS> 27,488,710
<OTHER-EXPENSES> 46,008,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,523,479
<INCOME-PRETAX> 16,030,282
<INCOME-TAX> 6,300,000
<INCOME-CONTINUING> 9,730,282
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,730,282
<EPS-PRIMARY> 0.20
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</TABLE>
