<PAGE> 1
As filed with the Securities and Exchange Commission on July 9, 1999.
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
---------------
TCA CABLE TV, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1798185
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
3015 SSE Loop 323
Tyler, Texas 75701
(Address of principal executive offices)
---------------
COPY TO:
FRED R. NICHOLS JAMES S. RYAN, III
3015 SSE Loop 323 Jackson Walker L.L.P.
Tyler, Texas 75713-0489 901 Main Street
(Name and address of agent for Suite 6000
service of agent for service) Dallas, Texas 75202
(903) 595-3701
(Telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
Proposed Proposed
Title of Amount Maximum Maximum Amount of
Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share (1) Offering Price (1) Fee (1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value............ 1,628,340 $56.03125 $91,237,925.62 $25,364.14
shares --------- -------------- ----------
==============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c), the offering price and registration fee are
based on a price of $56.03125 per share, which price is an average of
the high and low prices of the Common Stock on the National Association
of Securities Dealers Automated Quotation National Market System on
July 6, 1999.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE> 2
PROSPECTUS
TCA CABLE TV, INC.
1,628,340 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale of up to 1,628,340
shares (the "Shares") of common stock, par value $0.10 per share (the "Common
Stock") of TCA Cable TV, Inc. (the "Company"), issued pursuant to the
provisions of various Agreements and Plans of Reorganization (the "Agreements")
by and among the Company and the individuals and entities listed therein (the
"Selling Shareholders").
The Shares may be sold from time to time by the Selling Shareholders
or by permitted transferees. The Common Stock is quoted through the National
Association of Securities Dealers Automated Quotation National Market System
(the "Nasdaq/NMS") under the symbol "TCAT" and may be sold from time to time by
the Selling Shareholders either directly in private transactions, or through
one or more brokers or dealers on the Nasdaq/NMS, or any other over-the-counter
market or exchange on which the Common Stock is quoted or listed for trading,
at such prices and upon such terms as may be obtainable. On July 6, 1999, the
last reported sale price of the Common Stock, as reported on the Nasdaq/NMS,
was $56.50.
Upon any sale of the Common Stock offered hereby, the Selling
Shareholders and participating agents, brokers, dealers or marketmakers may be
deemed to be underwriters as that term is defined in the Securities Act of
1933, as amended (the "Securities Act"), and commissions or discounts or any
profit realized on the resale of such securities purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
See "Plan of Distribution." The Company will not receive any of the proceeds
from the sales by the Selling Shareholders.
No underwriter is being utilized in connection with this offering. The
Company will pay all expenses incurred in connection with this Offering.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 9, 1999.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; at the Commission's Chicago Regional office located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and at the Commission's New York Regional office located
at 7 World Trade Center, Room 1300, New York, New York 10048. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Additionally, the Commission maintains a website
(http://www.sec.gov) that contains reports, proxy statements and information
statements and other information regarding registrants that file electronically
with the Commission. The Common Stock is listed on the Nasdaq/NMS.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-3 (the "Registration Statement") in connection
with the offer and sale of the Common Stock offered hereby under the Securities
Act. This Prospectus does not contain all of the information set forth or
incorporated by reference in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and the exhibits
thereto. Copies of the Registration Statement are available from the
Commission. Statements contained in this Prospectus concerning the provisions
of documents filed with the Registration Statement are necessarily summaries of
such documents, and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
The Company's principal executive offices are located at 3015 SSE Loop
323, Tyler, Texas 75701 and its telephone number is (903) 595-3701.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission by
the Company, are incorporated herein by reference and made a part hereof:
(i) Annual Report of the Company on Form 10-K for the year ended
October 31, 1998 (the "Annual Report");
(ii) All other reports filed with the Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since the end of the fiscal year covered by the
documents referred to in the Annual Report;
(iii) Definitive 14A Proxy Statement of the Company filed with the
Commission on July 8, 1999; and
2
<PAGE> 4
(iv) Description of the Common Stock contained in the Company's
Registration Statement on Form S-1 (No. 2-75516) and Registration
Statement on Form 8-A (No. 2-88892), effective as of March 17, 1984.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock to be made
hereunder shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or telephone requests for such documents should be
directed to Jimmie F. Taylor, 3015 S.S.E. Loop 323, Tyler, Texas 75701,
telephone number (903) 595-3701.
SELLING SHAREHOLDERS
This Prospectus covers the offer and resale of Shares issued to
certain Shareholders pursuant to the Agreements.
The table below sets forth information concerning the Common Stock
owned by the following Selling Shareholders, none of whom has, or within the
past three years has had, any position, office or other material relationship
with the Company or any of its predecessors or affiliates:
<TABLE>
<CAPTION>
OWNERSHIP OF COMMON STOCK AMOUNT AND PERCENTAGE
COMMON STOCK PRIOR OFFERED FOR SELLING OF CLASS AFTER
NAME TO OFFERING SHAREHOLDERS OFFERING(1)
- ---- ----------- ------------ -----------
<S> <C> <C>
WEHCO Video, Inc. 168,000 168,000 *
John Muraglia 372,374 372,374 *
Dale Hoffman 73,017 73,017 *
Conover Hartin, III 29,673 29,673 *
Lola H. McDaniel 492,638 492,638 *
The Estate of Moran K. McDaniel 492,638 492,638 *
</TABLE>
- ------------------------------
* Indicates shares held are less than 1% of class.
(1) Based on 49,867,436 shares of Common Stock outstanding on July 2, 1999.
3
<PAGE> 5
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock hereby.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by any of the Selling
Shareholders, or permitted transferees. The Shares may be disposed of from time
to time in one or more transactions through any one or more of the following:
(i) to purchasers directly, (ii) in ordinary brokerage transactions and
transactions in which the broker solicits purchasers, (iii) through
underwriters or dealers who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders or such permitted transferees/or from the purchasers of the Shares
for whom they may act as agent, (iv) the writing of options on the Shares, (v)
the pledge of the Shares as security for any loan or obligation, including
pledges to brokers or dealers who may, from time to time, themselves effect
distributions of the Shares or interests therein, (vi) purchases by a broker or
dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus, (vii) a block trade in which the broker or dealer
so engaged will attempt to sell the Shares as agent but may position and resell
a portion of the block as principal to facilitate the transaction and (viii) an
exchange distribution in accordance with the rules of such exchange, including
the Nasdaq/NMS, or in transactions in the over the counter market. Such sales
may be made at prices and at terms then prevailing or at prices related to the
then current market price or at negotiated prices and terms. In effecting
sales, brokers or dealers may arrange for other brokers or dealers to
participate. The Selling Shareholders or such successors in interest, and any
underwriters, brokers, dealers or agents that participate in the distribution
of the Shares, may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of the Shares by them and any
discounts, commissions or concessions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting commissions or
discounts under the Securities Act.
No underwriter is being utilized in connection with this offering. The
Company will pay all expenses incurred in connection with this Offering.
4
<PAGE> 6
In the event of a material change in the plan of distribution
disclosed in this Prospectus, the Selling Shareholders will not be able to
effect transactions in the Shares pursuant to this Prospectus until such time
as a post-effective amendment to the Registration Statement is filed with, and
declared effective by, the Commission.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered
hereby have been passed upon for the Company by Jackson Walker L.L.P., 901 Main
Street, Suite 6000, Dallas, Texas 75202.
EXPERTS
The consolidated financial statements of TCA as of and for the year
ended October 31, 1998, have been incorporated by reference in this Registration
Statement in reliance on the report of KPMG LLP, independent certified public
accountants, incorporated by referenced herein, and upon the authority of said
firm as experts in accounting and auditing. The consolidated financial
statements as of October 31, 1997 and for each of the two years in the period
ended October 31, 1997 incorporated in this Registration Statement by reference
to the Annual Report on Form 10-K for the year ended October 31, 1998, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEMNIFICATION
The Company is a Texas corporation and The Texas Business Corporation
Act ("TBCA") empowers a corporation organized thereunder to indemnify its
directors and officers or former directors and officers and to purchase
insurance with respect to liability arising out of their capacity or status as
directors and officers.
Reference is made to Article IX of the Company's Articles of
Incorporation and Article VII, Section 8 of the Company's Bylaws, which provide
for indemnification of officers and directors except as to certain
circumstances and except as provided by applicable law.
Additionally, Article XIII of the Company's Articles of Incorporation
limits the liability of directors of the Company to the Company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by the TBCA. In general, the effect
of such Article XIII (based on the TBCA as of the date of this Prospectus) is
that the directors of the Company will not be personally liable to the Company
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good
5
<PAGE> 7
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for a transaction from which a director received an improper benefit
whether or not the benefit resulted from an action taken within the scope of
the director's office, or (iv) for an act related to an unlawful stock
repurchase or payment of a dividend.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
6
<PAGE> 8
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and if given or
made, such information or representations must not be relied upon. This
Prospectus does not constitute an offer to sell or a solicitation to buy any
securities other than registered securities to which it relates, or an offer to
or a solicitation of any person in any jurisdiction where such offer or
solicitation would be unlawful. The delivery of this Prospectus at any time
does not imply that the information herein is correct as of any time subsequent
to its date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.............................2
Incorporation by Reference........................2
Selling Shareholders..............................3
Use of Proceeds...................................4
Plan of Distribution..............................4
Legal Matters.....................................5
Experts...........................................5
Indemnification...................................5
</TABLE>
- -----------------------------------------------------
1,628,340 Shares
Common Stock
TCA CABLE TV, INC.
July 9, 1999
7
<PAGE> 9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance
and distribution of the Common Stock covered by this Registration Statement are
as follows:
<TABLE>
<S> <C>
Registration Fee .................................... $25,364.14
----------
Printer Expenses .................................... $ 1,000.00
Accounting Fees and Expenses ........................ -0-
Legal Fees and Expenses ............................. $ 3,000.00
Miscellaneous ....................................... -0-
Total................................................ $29,364.14
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Texas corporation and the Texas Business Corporation
Act ("TBCA") empowers a corporation organized thereunder to indemnify its
directors and officers or former directors and officers and to purchase
insurance with respect to liability arising out of their capacity or status as
directors and officers.
Reference is made to Article IX and Article VII, Section 8 of the
Company's Articles of Incorporation and Bylaws, respectively, which provide for
indemnification of officers and directors except as to certain circumstances
and except as provided by applicable law.
Additionally, Article XIII of the Company's Articles of Incorporation
limits the liability of directors of the Company to the Company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by the TBCA. In general, the effect
of such Article XIII (based on the TBCA as of the date of this Prospectus) is
that the directors of the Company will not be personally liable to the Company
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for a transaction from which a director
received an improper benefit whether or not the benefit resulted from an action
taken within the scope of the director's office, or (iv) for an act related to
an unlawful stock repurchase or payment of a dividend.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the
1
<PAGE> 10
Company has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
1 None.
2 Agreement and Plan of Merger dated May 11, 1999 by and among
Cox Communications, Inc., Cox Classic Cable, Inc. and the
Registrant.(5)
4(a) Articles of Incorporation of the Registrant.(1)
4(b) Articles of Amendment to Articles of Incorporation of the Registrant.(2)
4(c) Articles of Amendment to Articles of Incorporation of the Registrant.(2)
4(d) Articles of Amendment to Articles of Incorporation of the Registrant.(3)
4(e) Articles of Amendment to Articles of Incorporation of the Registrant.*
4(f) Amended and Restated Bylaws of the Registrant.(4)
4(g) Form of Stock Certificate.(1)
4(h) Voting Agreement dated as of May 11, 1999, by and among the Registrant, Cox
Communications, Inc. and certain Shareholders of the Registrant.(5)
4(i) Form of First Amendment to the Rights Agreement dated as of
January 15, 1998, by and between the Registrant and
ChaseMellon Securities Services, L.L.C.(5)
5 Opinion of Jackson Walker L.L.P.*
8 None.
12 None.
15 None.
</TABLE>
2
<PAGE> 11
<TABLE>
<S> <C>
23(a) Consent of KPMG LLP*
23(b) Consent of PricewaterhouseCoopers LLP*
23(c) Consent of Jackson Walker L.L.P. (included in its opinion filed as Exhibit 5 to this
Registration Statement).*
24 Power of Attorney (appearing on page II-5 of this Registration Statement).*
25 None.
26 None.
27 None.
99(a) Agreement and Plan of Reorganization among Morrilton Video, Inc., WEHCO
Video, Inc. Morrilton Acquisition, Inc. and the Registrant.*
99(b) Agreement and Plan of Reorganization among Cablevision of Pflugerville, Inc., John
Muraglia, Dale Hoffman, Conover Hartin, III, Lola H. McDaniel, the Estate of Moran
K. McDaniel and the Registrant.*
99(c) Agreement and Plan of Reorganization among Williamson County
Cablevision Company, John Muraglia, Dale Hoffman, Lola H.
McDaniel, the Estate of Moran K.
McDaniel and the Registrant.*
99(d) Agreement and Plan of Reorganization among Cablevision of Leander, Inc., John
Muraglia, Dale Hoffman, Lola H. McDaniel, the Estate of Moran K. McDaniel and
the Registrant.*
</TABLE>
- ---------
* Filed herewith.
(1) Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-1, File No. 2-75516 dated as of March 16, 1982 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 dated as of March 16, 1988,
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 by reference herein.
3
<PAGE> 12
(5) Previously filed as an exhibit to Registrant's Form 10-K filed May 11,
1999 and incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the
Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) (ss. 230.424(b)) if, in
the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.;
(iii) To include any material information
with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material
change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
4
<PAGE> 13
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
5
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tyler, State of Texas on
the 8th day of July, 1999.
TCA CABLE TV, INC.
By: /s/ Fred R. Nichols
-------------------------------------------
Fred R. Nichols, Chief Executive Officer,
Chairman of the Board and President
(Principal Executive Officer)
POWER OF ATTORNEY
Each person whose signature appears below authorizes Fred R. Nichols
and Jimmie F. Taylor, and each of them, each of whom may act without joinder of
the other, to execute in the name of each such person who is then an officer or
director of the Registrant, and to file any amendments to this Registration
Statement necessary or advisable to enable the Registrant to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Commission, in respect thereof, in connection with the registration of
the securities which are the subject of this Registration Statement, which
amendments may make such changes in such Registration Statement as such
attorney may deem appropriate.
6
<PAGE> 15
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Fred R. Nichols Chairman of the Board, Chief July 8, 1999
- ------------------------------ Executive Officer and President
Fred R. Nichols (Principal Executive Officer)
/s/ Jimmie F. Taylor Vice President, Chief Financial July 8, 1999
- ------------------------------ Officer and Treasurer
Jimmie F. Taylor (Principal Accounting and Financial Officer)
/s/ Fred W. Smith Director July 8, 1999
- ------------------------------
Fred W. Smith
/s/Wayne J. McKinney Director July 8, 1999
- ------------------------------
Wayne J. McKinney
/s/ Ben R. Fisch, M.D. Director July 8, 1999
- ------------------------------
Ben R. Fisch, M.D.
/s/ Randall K. Rogers Director July 8, 1999
- ------------------------------
Randall K. Rogers
/s/ A. W. Riter, Jr. Director July 8, 1999
- ------------------------------
A. W. Riter, Jr.
/s/ James F. Ackerman Director July 8, 1999
- ------------------------------
James F. Ackerman
/s/ Darrel Campbell Director July 8, 1999
- ------------------------------
Darrel Campbell
/s/ Robert B. Holland, III Director July 8, 1999
- ------------------------------
Robert B. Holland, III
/s/ Michael Shannon Director July 8, 1999
- ------------------------------
Michael Shannon
</TABLE>
7
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
1 None.
2 Agreement and Plan of Merger dated May 11, 1999 by and among
Cox Communications, Inc., Cox Classic Cable, Inc. and the
Registrant.(5)
4(a) Articles of Incorporation of the Registrant.(1)
4(b) Articles of Amendment to Articles of Incorporation of the Registrant.(2)
4(c) Articles of Amendment to Articles of Incorporation of the Registrant.(2)
4(d) Articles of Amendment to Articles of Incorporation of the Registrant.(3)
4(e) Articles of Amendment to Articles of Incorporation of the Registrant.*
4(f) Amended and Restated Bylaws of the Registrant.(4)
4(g) Form of Stock Certificate.(1)
4(h) Voting Agreement dated as of May 11, 1999, by and among the Registrant, Cox
Communications, Inc. and certain Shareholders of the Registrant.(5)
4(i) Form of First Amendment to the Rights Agreement dated as of
January 15, 1998, by and between the Registrant and
ChaseMellon Securities Services, L.L.C.(5)
5 Opinion of Jackson Walker L.L.P.*
8 None.
12 None.
15 None.
23(a) Consent of KPMG LLP*
23(b) Consent of PricewaterhouseCoopers LLP*
23(c) Consent of Jackson Walker L.L.P. (included in its opinion filed as Exhibit 5 to this
Registration Statement).*
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
24 Power of Attorney (appearing on page II-5 of this Registration Statement).*
25 None.
26 None.
27 None.
99(a) Agreement and Plan of Reorganization among Morrilton Video, Inc., WEHCO
Video, Inc. Morrilton Acquisition, Inc. and the Registrant.*
99(b) Agreement and Plan of Reorganization among Cablevision of Pflugerville, Inc., John
Muraglia, Dale Hoffman, Conover Hartin, III, Lola H. McDaniel, the Estate of
Moran K. McDaniel and the Registrant.*
99(c) Agreement and Plan of Reorganization among Williamson County
Cablevision Company, John Muraglia, Dale Hoffman, Lola H.
McDaniel, the Estate of Moran K.
McDaniel and the Registrant.*
99(d) Agreement and Plan of Reorganization among Cablevision of Leander, Inc., John
Muraglia, Dale Hoffman, Lola H. McDaniel, the Estate of Moran K. McDaniel and
the Registrant.*
</TABLE>
- ---------
* Filed herewith.
(1) Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-1, File No. 2-75516 dated as of March 16, 1982
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 dated as of March 16, 1988,
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 by reference herein.
(5) Previously filed as an exhibit to Registrant's Form 10-K filed May
11, 1999 and incorporated by reference herein.
<PAGE> 1
EXHIBIT 4(e)
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
TCA CABLE TV, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
ARTICLE ONE
The name of the corporation is TCA Cable TV, Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the corporation on March 30, 1999.
ARTICLE IV
The aggregate number of shares which the corporation shall have the
authority to issue is 125,000,000, to consist of 120,000,000 shares of common
stock having a par value of $.10 per share each and 5,000,000 shares of
preferred stock having a par value of $1 per share.
The Directors shall have authority to divide the preferred shares into
series and to set the relative rights and preferences as to and between series,
including voting rights (specifically including the power to grant more or less
than one vote per preferred share on each matter submitted to a vote of
shareholders), dividends, issuance of preferred shares, redemption of such
shares and the conversion of any preferred shares to other preferred or common
shares. Prior to the issuance of any preferred shares of a series established by
resolution adopted by the Directors, the corporation shall file with the
Secretary of State the notice required by Article 2.13 of the Texas Business
Corporation Act.
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 49,660,113 shares of Common Stock, $.10 par value share; and the
number of shares entitled to vote thereon was 44,417,434.
<PAGE> 2
ARTICLE FOUR
The number of shares voted for such amendment was 42,361,573 and the
number of shares voted against such amendment was 2,005,974.
Dated March 30, 1999
TCA CABLE TV, INC.
By: /s/ Fred R. Nichols
---------------------------------
Fred R. Nichols
Chairman, CEO and President
/s/ Karen L. Garrett
-------------------------------------
Karen L. Garrett
Corporate Secretary
<PAGE> 1
EXHIBIT 5
OPINION OF JACKSON & WALKER, L.L.P.
July 8, 1999
TCA Cable TV, Inc.
3015 SSE Loop 323
Tyler, Texas 75713-0489
Re: Registration Statement on Form S-3 of TCA Cable TV, Inc.
Gentlemen:
We are acting as counsel for TCA Cable TV, Inc., a Texas corporation
(the "Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of the offering and sale of up to 1,628,340 shares
of the Company's Common Stock, par value $0.10 per share (the "Shares") by
certain Selling Shareholders. The Selling Shareholders acquired the Shares
pursuant to (i) the Agreement and Plan of Reorganization among Morrilton Video,
Inc., WEHCO Video, Inc., Morrilton Acquisition, Inc. and the Company, (ii) the
Agreement and Plan of Reorganization among Cablevision of Pflugerville, Inc.,
John Muraglia, Dale Hoffman, Conover Hartin, III, Lola H. McDaniel, the Estate
of Moran K. McDaniel and the Company, (iii) the Agreement and Plan of
Reorganization among Williamson County Cablevision Company, John Muraglia, Dale
Hoffman, Lola H. McDaniel, the Estate of Moran K. McDaniel and the Company, and
(iv) the Agreement and Plan of Reorganization among Cablevision of Leander,
Inc., John Muraglia, Dale Hoffman, Lola H. McDaniel, the Estate of Moran K.
McDaniel and the Company (the "Agreements"). A Registration Statement on Form
S-3 covering the offering and sale of the Shares (the "Registration Statement")
is expected to be filed with the Securities and Exchange Commission on or about
the date hereof.
In reaching the conclusions expressed in this opinion, we have examined
and relied upon the originals or certified copies of all documents, certificates
and instruments as we have deemed necessary to the opinions expressed herein,
including the Articles of Incorporation, as amended, and the Bylaws of the
Company and a copy of the Agreement. In making the foregoing examinations, we
have assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all copies submitted to us. S-3.wpd Based solely upon the
foregoing, subject to the comments hereinafter stated, and limited in all
respects to the laws of the State of Texas and the federal laws of the United
States of America, it is our opinion that the Shares, when sold by Selling
Shareholders will be validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement. In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Jackson & Walker, L.L.P.
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
TCA Cable TV, Inc.
We consent to the incorporation herein by reference of our report
related to the consolidated balance sheet of TCA Cable TV, Inc. and subsidiaries
as of October 31, 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended, which report
appears in the October 31, 1998 annual Report on Form 10-K of TCA Cable TV, Inc.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG LLP
Dallas, Texas
July 8, 1999
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated January 15, 1998 relating
to the consolidated financial statements as of October 31, 1997 and for each of
the two years in the period ended October 31, 1997 which appears in TCA Cable
TV, Inc.'s Annual Report on Form 10-K for the year ended October 31, 1998. We
also consent to the references to us under the headings "Experts" in such
Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
July 8, 1999
<PAGE> 1
EXHIBIT 99(a)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of January 28, 1999, is entered into by and among Morrilton Video,
Inc., an Arkansas corporation ("Target"), WEHCO Video, Inc., an Arkansas C
corporation (the "Shareholder"), Morrilton Acquisition, Inc., a Texas
corporation ("Sub"), and TCA Cable TV, Inc., a Texas corporation ("Parent").
WITNESSETH
WHEREAS, the Shareholder owns all of the issued and outstanding capital
stock of Target (the "Stock"), and desires to sell the Stock to Parent;
WHEREAS, Parent desires to purchase the Stock in exchange for shares
of Parent's common stock, $.10 par value ("TCA Stock"), and has established Sub
to facilitate such purchase;
WHEREAS, the respective Boards of Directors of Parent, Sub, Target and
the Shareholder have approved the acquisition of Target by Parent;
WHEREAS, the respective Boards of Directors of Parent, Sub, Target and
the Shareholder have approved a merger of Sub into Target (the "Merger") to
facilitate such sale and purchase; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization with the meaning of Section 368(a) of
the Internal Revenue Code of 1986, amended (the "Code") pursuant to the
provisions governing reverse triangular mergers.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
Purchase and Sale as a Merger
Section 1.01. The Merger.
(i) Subject to the terms and conditions of this Agreement and the
Agreement of Merger executed by Parent, Sub and Target on the same date herewith
(the "Agreement of Merger"), Sub shall be merged into Target and the separate
existence of Sub shall thereupon cease, in accordance with the applicable
provisions of the laws of the State of Texas and the State of Arkansas.
Target will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation") and will continue to be
governed by the laws of the State of Arkansas, and
Page 1
<PAGE> 2
the separate corporate existence of Target and all of its rights, privileges,
immunities and franchises, public or private, and all its duties and liabilities
as a corporation organized under the laws of the State of Arkansas and other
applicable laws, will continue unaffected by the Merger.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any holder of any
capital stock of Sub, all outstanding capital stock of Sub of any kind or nature
shall be canceled and shall cease to exist.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any shareholder of
Target, the Stock shall continue unchanged and remain outstanding as the capital
stock of the Surviving Corporation. The Shareholder shall at the Closing
transfer, assign, convey and deliver to Parent, free and clear of all adverse
claims, security interests, liens, claims and encumbrances, and Parent shall
accept and acquire from the Shareholder, the Stock.
For the purposes of this Agreement, (i) the term "Closing" shall mean
the closing of the Merger and the other transactions contemplated by this
Agreement at such time and place as shall be mutually agreed upon in writing by
all of the parties hereto, and (ii) the term "Closing Date" shall mean March 31,
1999, or such other date as may be mutually agreed upon in writing by all of the
parties hereto.
Section 1.02. Purchase Price.
(i) Total Purchase Price. The total purchase price to be paid by Parent
for the Stock shall be One Hundred and Sixty-Eight Thousand (168,000) shares of
TCA Stock of Parent (the "Closing Shares").
(ii) Delivery of the Closing Shares. The Closing Shares shall be
delivered by Parent to the Shareholder pursuant to the provisions of this
Agreement.
Section 1.03. Other Transfers as Part of Plan of Reorganization. As
part of the Plan of Reorganization contemplated by this Agreement, the following
additional transfers shall occur:
Parent shall transfer all of the Stock to its wholly-owned subsidiary
TAL Financial Corporation, a Nevada corporation ("TAL"), as a contribution to
capital.
Target shall transfer a substantial part or all of its assets to TCA
Holdings, L.P., a Texas limited partnership ("TCA Holdings"), in exchange for a
limited partnership interest in TCA Holdings.
TCA Holdings shall transfer the assets of Target received pursuant to
the provisions of the previous paragraph to TCA Cable Partners, a Delaware
general partnership, as a capital contribution.
Page 2
<PAGE> 3
Section 1.04. Tax Status of Purchase and Sale. The Merger, the transfer
of the Stock to Parent, and the transfer of the Closing Shares to the
Shareholder contemplated by this Agreement are intended by the parties to
qualify as a reverse triangular tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code, and each of the parties hereto agrees
to act with respect to the Stock and the Closing Shares, as applicable, and
take such other steps, including the proper filing of plans of reorganization
and articles of merger, as shall be necessary to insure the tax-free status of
the transaction under such Code sections and the underlying regulations.
Section 1.05. Status of TCA Stock. The Shareholder hereby acknowledges
that the TCA Stock transferred to it by Parent hereunder will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state. The Shareholder hereby acknowledges that it will
be required to hold the TCA Stock received hereunder indefinitely unless such
shares are subsequently registered under the Securities Act and applicable state
laws or unless exemptions from such registrations are available. The Shareholder
agrees to and shall execute a Letter of Investment Intent relating to its
ownership of the Closing Shares in the form of the letter attached hereto as
Exhibit 1.05, and agrees to remain subject to the representations, warranties
and covenants made therein after the Closing Date.
Parent agrees that upon the written request of the Shareholder, after
the Closing, Parent shall use its best efforts to register that portion of the
Closing Shares for which registration is requested, such registration to be at
the sole cost and expense of the Shareholder. In order to eliminate the costs
and expenses of any such registration for the Shareholder, Parent will use its
best efforts to register the Closing Shares pursuant to registration statements
already being filed by Parent. However, Parent is not required to change its
normal registration schedule for other TCA Stock simply to accommodate a dual
registration of the Closing Shares for the Shareholder.
ARTICLE II
Closing Deliveries
Section 2.01. Deliveries of Target and the Shareholder. At the Closing,
Target and the Shareholder shall deliver to Parent the following, all of which
shall be in form and content satisfactory to Parent and its counsel:
(i) certificates representing all of the Stock, duly endorsed and in
proper form for transfer to Parent by delivery under applicable law, or
accompanied by duly executed instruments of transfer in blank;
(ii) executed Agreement Not to Compete (the "Agreement Not to Compete")
among Target, Parent and the Shareholder, in the form of the agreement attached
as Exhibit 2.01(b);
Page 3
<PAGE> 4
(iii) a separate Letter of Investment Intent, in the form attached
hereto as Exhibit 1.05, executed by the Shareholder;
(iv) a copy of resolutions of the Board of Directors of Target
authorizing the execution, delivery and performance of this Agreement, the
Agreement of Merger and all related documents and agreements, each certified by
the Secretary of that corporation as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(v) a separate certificate of each of the President of Target and the
Shareholder, dated the Closing, Date, (i) as to the truth and correctness of the
representations and warranties of Target and the Shareholder contained herein on
and as of the Closing Date, (ii) as to the performance of and compliance by
Target and the Shareholder with all covenants contained herein on and as of the
Closing Date, and (iii) certifying that all conditions precedent of Target and
the Shareholder to the Closing have been satisfied;
(vi) a certificate of the Secretary of Target certifying as to the
incumbency of the directors and officers of Target and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Target;
(vii) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Arkansas establishing that Target is
in existence, has paid all franchise taxes and otherwise is in good standing to
transact business in that state;
(viii) certificates, dated within thirty (30) days of the Closing Date,
of the Secretaries of State of the states in which it is necessary for Target to
be qualified to do business, to the effect that Target is qualified to do
business and is in good standing as a foreign corporation in each of such
states, if applicable;
(ix) an opinion of legal counsel to Target and the Shareholder, dated
as of the Closing Date, in the form attached hereto as Exhibit 2.01(j), and an
opinion of FCC counsel to Target and the Shareholder, dated as of the Closing
Date, in the form attached hereto as Exhibit 2.01(j-a);
(x) all necessary authorizations, consents, approvals, permits and
licenses referenced in Schedule 3.07;
(xi) releases from Shareholder to Morrilton Video, Inc. for any
security interests or liens held by the Shareholder in the form attached hereto
as Exhibit 2.01(1); and
(xii) such other instrument or instruments as shall be necessary or
appropriate, as Parent or its counsel shall reasonably request, to vest in
Parent good and marketable title to the Stock.
Page 4
<PAGE> 5
Section 2.02. Deliveries of Parent. At the Closing, Parent shall
deliver the following to Target or the Shareholder, as applicable:
(i) the Closing Shares to the Shareholder;
(ii) the Agreement Not to Compete;
(iii) a separate certificate of each of the President or any Vice
President of Parent and Sub, dated the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Parent and Sub contained
herein on and as of the Closing Date, (ii) as to the performance of and
compliance by Parent and Sub with all covenants contained herein on and as of
the Closing Date, and (iii) certifying that all conditions precedent of Parent
and Sub to the Closing have been satisfied;
a certificate of the Secretary of Parent certifying as to the
incumbency of such officers of Parent, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Parent;
a certificate of the Secretary of Sub certifying as to the incumbency
of such officers of Sub, and as to their signatures, who have executed documents
delivered at the Closing on behalf of Sub;
a certificate, dated within thirty (30) days of the Closing Date, of
the Secretary of State of the State of Texas, establishing, that Parent is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
a certificate, dated within thirty (30) days of the Closing Date, of
the Secretary of State of the State of Texas, establishing, that Sub is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so.
an opinion of legal counsel to Parent and Sub, dated as of the Closing
Date, in form attached hereto as Exhibit 2,02(h).
entity resolutions for Parent and Sub approving the transactions.
ARTICLE III
Representations and Warranties of Target and the Shareholder
Target and the Shareholder jointly and severally represent and warrant
that the following are true and correct as of the date hereof and will be true
and correct through the Closing, Date as if made on that date.
Page 5
<PAGE> 6
Section 3.01. Ownership of the Stock. The Shareholder owns,
beneficially and of record, good and marketable title to the Stock, which
constitutes all of the issued and outstanding capital stock of Target free and
clear of all security interests, liens, adverse claims, encumbrances, equities,
proxies, options or shareholder agreements. At the Closing, the Shareholder will
convey to Parent good and marketable title to all of the Stock, free and clear
of any security interests, liens, adverse claims, encumbrances, equities,
proxies, options, shareholder agreements or other restrictions.
Section 3.02. Organization and Good Standing: Qualification. Target is
a corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Target is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Schedule 3.02, except where the failure to be qualified or licensed would not
have a material adverse effect on the business of Target. Target does not have
any assets, employees or offices located in any state other than the states
listed in Schedule 3.02.
Section 3.03. Capitalization of Target. The authorized capital stock of
Target consists of 1500 shares of common stock, $0 par value per share, of which
3 shares are issued and outstanding. No shares of such capital stock are held in
the treasury of Target. All of issued and outstanding shares of capital stock of
Target are duly authorized, validly issued, fully paid and nonassessable. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, the capital stock of Target.
Neither the Shareholder nor Target are parties to or bound by, nor do they have
any knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of Target. No shares of capital stock of Target
have been issued or disposed of in violation of the preemptive rights of any of
Target's Shareholder. All accrued dividends on the capital stock of Target,
whether or not declared, have been paid in full.
Section 3.04. Corporate Records. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Target which have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. The minute book of Target, a copy of which has been
delivered to Parent, contains accurate minutes of all meetings of, and accurate
consents to all actions taken without meetings by, the Board of Directors (and
any committees thereof) and the shareholders of Target since its formation.
Section 3.05. Authorization and Validity. The execution, delivery and
performance by Target of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Target and the Shareholder. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Target and the Shareholder, as
applicable, and
Page 6
<PAGE> 7
constitute or will constitute legal, valid and binding obligations of Target
and the Shareholder, as applicable, enforceable against Target and the
Shareholder in accordance with their respective terms. To the knowledge of
Target and the Shareholder, the sale of the Stock by Shareholder to Parent will
not impair the ability or authority of Target to carry on Target's business as
now conducted in any respect.
Section 3.06. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Target or any agreement, indenture or other instrument under which
Target is bound or to which the appropriate portion of the Stock or any of the
assets of Target are subject, or result in the creation or imposition of any
security interest, lien, charge or encumbrance upon the Stock or any of the
assets of Target, or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Target, the Stock or the
assets of Target.
Section 3.07. Consents. Except as set forth in Schedule 3.07, no
consent, authorization, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Target or the Shareholder.
Section 3.08. Financial Statements. Target has furnished to Parent the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 1992 through December 31, 1998,
including the notes thereto, (collectively, the "Financial Statements"). The
Financial Statements are true, correct and complete, are in accordance with the
books and records of Target fairly present the financial condition and results
of operations of Target as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis. Target represents that at Closing Target's
current assets shall have no less than a zero ("0") net balance after deducting
current liabilities at Closing.
Section 3.09. [RESERVED].
Section 3.10. Liabilities and Obligations. Except asset forth in
Schedule 3.10, the Financial Statements reflect all liabilities of Target
accrued, contingent or otherwise (known or unknown and asserted or unasserted),
arising out of transactions effected or events occurring on or prior to the date
hereof. All reserves shown in the Financial Statements are appropriate,
reasonable and sufficient to provide for losses thereby contemplated. Except as
set forth in the Financial Statements, Target is not liable upon or with respect
to, or obligated in any other way to provide funds in respect of or to guarantee
or assume in any manner, any debt, obligation or dividend of any person,
corporation,
Page 7
<PAGE> 8
association, partnership, joint venture, trust or other entity, and neither
Target nor the Shareholder know of any basis for the assertion of any other
claims or liabilities of any nature or in any amount.
Section 3.11. Absence of Certain Changes. Except as set forth in
Schedule 3.11, since December 31, 1998, Target has not, except in the ordinary
course of business:
(i) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Target or the Shareholder, in its condition
(financial or otherwise), operations, assets, liabilities, business or
prospects;
(ii) contracted for the purchase of any capital assets other than those
identified in Target's financial statements dated September 30, 1998, previously
provided to Parent;
(iii) incurred any indebtedness for borrowed money or issued or sold
any debt securities;
(iv) incurred or discharged any liabilities or obligations;
(v) paid any amount on any indebtedness prior to the due date, forgiven
or canceled any debts or claims or released or waived any rights or claims;
(vi) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(vii) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could reasonably be expected to materially and adversely affect,
its business;
(viii) acquired or disposed of any assets;
(ix) written up or written down the carrying value of any of its
assets;
(x) changed the costing system or depreciation methods of accounting
for its assets;
(xi) waived any material rights or forgiven any material claims;
(xii) lost or terminated any employee, customer or supplier, the loss
or termination of which has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or
assets;
(xiii) increased the compensation of or paid any bonus to any director
or officer;
(xiv) increased the compensation of or paid any bonus to any employee;
Page 8
<PAGE> 9
(xv) made any payments to or loaned any money to any person or entity
referred to in Section 3.30;
(xvi) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(xvii) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to such capital stock or securities, or agreed to
change the terms and conditions of any such rights;
(xviii) entered into any agreement with any person or group, or
modified or amended in any material respect the terms of any such existing
agreement, except in the ordinary course of business;
(xix) entered into, adopted or amended any Employee Benefit Plan (as
hereinafter defined); or
(xx) entered into any other commitment or transaction or experienced
any other event that is material to this Agreement or to any of the other
agreements and documents executed or to be executed pursuant to this Agreement
or to the transactions contemplated hereby or thereby, or that has materially
and adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or
prospects of Target taken as a whole.
Section 3.12. Title; Leased Assets.
(i) Real Property. A description of all interests in real property
owned by Target (collectively, the "Real Property") is set forth in Schedule
3.12(a). Except as set forth in Schedule 3.12(a), Target has good, valid and
marketable title to all the Real Property. The Real Property and the leased
real property referred to in Section 3.12(c) constitute the only real property
used in the conduct of the business of Target.
(ii) Personal Property. Except as set forth in Schedule 3.12(b),
Target has good, valid and marketable title to all tangible and intangible
personal property owned by them (collectively, the "Personal Property"). The
Personal Property and the leased personal property referred to in Section
3.12(c) constitute the only personal property used in the conduct of the
business of Target.
(iii) Leases. A list and brief description of all leases of real and
personal property to which Target is a party, either as lessor or lessee, are
set forth in Schedule 3.12(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
Page 9
<PAGE> 10
(iv) Right to Use Assets. Except for those assets acquired since
December 31, 1998, which are listed in Schedule 3.12(d), all tangible and
intangible assets used in the conduct of the business of Target are reflected in
the Financial Statements in a manner that is in conformity with generally
accepted accounting principles, consistently applied. Target owns, leases or
otherwise possesses a right to use all assets used in the conduct of the
business of Target, which will not be impaired by the consummation of the
transactions contemplated hereby.
Section 3.13. Commitments.
(i) Commitments; Defaults. Except as set forth in Schedule 3.13(a),
Target has not entered into, and the Stock, the assets, and the business of
Target are not bound by, whether or not in writing any
1) partnership or joint venture agreement;
2) deed of trust or other security agreement;
3) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
4) employment, consulting or compensation agreement or
arrangement, including the election or retention in office
of any director or officer;
5) labor or collective bargaining agreement;
6) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent
or to be lent to another;
7) deed or other document evidencing an interest in or
contract to purchase or sell real property;
8) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or
attorneys;
9) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
10) agreement between Target and any affiliate of Target;
Page 10
<PAGE> 11
11) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an
affiliate of Target;
12) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving, more
than $1,000 in the aggregate;
13) powers of attorney;
14) contracts containing noncompetition covenants;
15) any other contract or agreement that involves either an
unperformed commitment in excess of $1,000 or that
terminates more than 30 days after the date hereof,
16) agreement relating to any material matter or transaction in
which an interest is held by any person or entity referred
to in Section 3.29;
17) agreement providing for the purchase from a supplier of all
or substantially all of the requirements of Target of a
particular product or service; or
18) any other agreement or commitment not made in the ordinary
course of business or that is material to the business or
financial condition of Target.
All of the foregoing items which are listed on Schedule 3.13(a) are
hereinafter collectively referred to as the "Commitments." True, correct and
complete copies of the written Commitments, and true, correct and complete
written descriptions of any oral Commitments, have heretofore been delivered or
made available to Parent. There are no material existing defaults, events of
default or events, occurrences, acts or omissions which, with the giving of
notice or lapse of time or both, would constitute material defaults by Target
and no penalties have been incurred nor are amendments pending, with respect to
the Commitments, except as described in Schedule 3.13(a) The Commitments are in
full force and effect and are valid and enforceable obligations of the parties
thereto in accordance with their respective terms, and no defenses, offsets or
counterclaims have been asserted, or to the knowledge of Target or the
Shareholder, may be made, by any party thereto, nor has Target waived any
rights thereunder, except as described in Schedule 3.13(a). Neither Target nor
any Shareholder has received notice of any default with respect to any
Commitment.
Page 11
<PAGE> 12
(ii) No Cancellation or Termination of Commitment. Except as
contemplated hereby, neither Target nor any Shareholder has received notice of
any plan or intention of any other party to any Commitment to exercise any right
to cancel or terminate any Commitment or agreement, and neither Target nor any
Shareholder knows of any fact that would justify the exercise of such a right.
Neither Target nor any Shareholder currently contemplates, or has reason to
believe any other person or entity currently contemplates, any amendment or
change to any Commitment. Except as listed in Schedule 3.13(b), to the knowledge
of Target and the Shareholder, none of the customers or suppliers of Target have
refused, or communicated that they will or may refuse, to purchase or supply
goods or services, as the case may be, or have communicated that they will or
may substantially reduce the amounts of goods or services that they are willing
to purchase from, or sell to, Target.
Section 3.14. Adverse Agreements. Target is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects, or so far as Target or the Shareholder can now
reasonably foresee, may in the future materially and adversely affect, the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Target.
Section 3.15. Insurance. Target carries adequate and necessary
property, liability, workers' compensation and other types of insurance. A list
and brief description of all insurance policies of Target are set forth in
Schedule 3.15. All of such policies are valid and enforceable policies, issued
by insurers of recognized responsibility and in amounts and against such risks
and losses as are customary in its industry. Such insurance shall be outstanding
and duly in force without interruption up to and including the Closing Date.
True, complete and correct copies of all such policies have been provided to
Parent on or prior to the date hereof.
Section 3.16. Subscribers. Target and Shareholder represent that the
Morrilton Cable System shall have at least 2100 cable television subscribers as
of the Closing Date.
Section 3.17. Patents, Trademarks, Service Marks and Copyrights.
(i) Ownership. Target owns all patents, trademarks, service marks and
copyrights, if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the rights of
others. Set forth in Schedule 3.17 is a true and correct description of the
following (the "Proprietary Rights"):
1) all trademarks, tradenames, service marks and other trade
designations, registrations and applications therefor, and all
patents, copyrights and applications currently owned, in whole or
in part, by Target with respect to the business of Target and all
licenses, royalties, assignments and other similar agreements
relating to the foregoing to which Target is a party (including
expiration date if applicable); and
Page 12
<PAGE> 13
2) all agreements relating to technology, know how or processes
that Target is licensed or authorized to use by others, or which
either licenses or authorizes others to use.
(ii) Conflicting Rights of Third Parties. Target has the right to use
the Proprietary Rights without infringing or violating the rights of any third
parties. Use of the Proprietary Rights does not require the consent of any other
person and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or right to use any Proprietary Right
or challenging or questioning, the validity or effectiveness of any license or
agreement constituting a part of any Proprietary Right, and neither Target nor
any Shareholder knows of any valid basis for any such claim. Each of the
Proprietary Rights is valid and subsisting, has not been canceled, abandoned or
otherwise terminated and, if applicable, has been duly issued or filed.
(iii) Claims of Other Persons. Target and the Shareholder have no
knowledge of any claim that, or inquiry as to whether, any product, activity or
operation of Target infringes upon or involves, or has resulted in the
infringement of, any proprietary right of any other person, corporation or other
entity; and no proceedings have been instituted, are pending, or to the
knowledge of Target and the Shareholder are threatened, that challenge the
rights of Target with respect thereto.
Section 3.18. Trade Secrets and Customer Lists. Target has the right to
use, free and clear of any claims or rights of others, except claims or rights
specifically set forth in Schedule 3.18, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Target. Target is not using
or in any way making use of any confidential information or trade secrets of any
third party.
Section 3.19. Taxes.
(i) Filing of Tax Return. Target has duly and timely filed with the
appropriate governmental agencies all tax returns (including information
returns) and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such tax
returns or reports are complete and accurate and properly reflect the taxes of
Target for the periods covered thereby.
(ii) Payment of Taxes. Target has paid or accrued all taxes, penalties
and interest which have become due with respect to any returns that it has
filed and any assessments of which it is aware. Target is not delinquent in the
payment of any tax, assessment or governmental charge.
(iii) No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as listed in Schedule 3.19(c), no tax deficiency or delinquency has been
asserted against Target. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of Target
that could be asserted by any taxing authority. There is no taxing authority
audit of Target pending, or threatened, and the results of any completed audits
are properly reflected
Page 13
<PAGE> 14
in the Financial Statements of Target. Target has not violated any federal
state, local or foreign tax law.
(iv) No Extension of Limitation Period. Target has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
(v) All Withholding Requirements Satisfied. All monies required to be
withheld by Target and paid to Governmental agencies for all taxes have been
(i) collected or withheld and either paid to the respective Governmental
agencies or set aside in accounts for such purpose, or (ii) properly reflected
in the Financial Statements of Target.
(vi) State Unemployment Taxes. In respect of its most recently
completed reporting period and all previous reporting periods, Target has paid
state unemployment taxes to all applicable states at the appropriate rates for
the wages paid by Target during such period which were subject to such tax.
(vii)ab Reasonable Expenditures. All amounts paid by Target (i) to officers,
employees, consultants and agents as salaries, compensation, and expenses
reimbursed by Target, or (ii) as rental payments, have been in amounts which
are reasonable and deductible for income tax purposes.
(viii) Tax Liability in Financial Statements. The liabilities
(including deferred taxes) shown in Target's December 31, 1998 Financial
Statements and to be accrued on the books and records of Target through the
Closing Date for taxes, interest and penalties are and will be adequate
accruals and have been and will be accrued in a manner consistent with the
practices utilized for accruing tax liabilities in the tax year ended December
31, 1998 and take into account net operating losses, investment credits and
other carryovers for periods ended prior to the Closing Date.
(ix) Foreign Investment in U.S. Real Property. The Shareholder is not
a foreign person, as such term is used in Section 1445(b)(2) of the Code.
(x) Tax Exempt Entity. None of the assets of Target are or will be
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Code.
(xi) Collapsible Corporation. Target has not at any time consented,
and the Shareholder will not permit Target to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(xii) Change in Accounting Method. Target has not voluntarily or
involuntarily changed a method of accounting resulting in Target's inclusion of
amounts in income pursuant to the adjustment provisions of Section 481 of the
Code.
(xiii) C corporation. Target is currently and since August 15, 1979,
has been an C corporation as such term is defined in the internal Revenue Code.
Page 14
<PAGE> 15
(xiv) All representations in this Section 3.19 with respect to Target
shall be treated as representations by Target and the Shareholder.
Section 3.20. Compliance with Laws. Target has complied with all laws,
regulations and licensing requirements and has filed with the proper authorities
all necessary statements and reports. There are no existing violations by Target
or the Shareholder of any federal, state or local law or regulation that could
materially and adversely affect the property or business of Target. Target
possesses all necessary licenses, franchises, permits and governmental
authorizations material to the conduct of its business as now conducted, all of
which are listed in Schedule 3.20.
Section 3.21. Finder's Fee. Neither Target nor Shareholder has incurred
any obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
Section 3.22. Litigation. Except as described in Schedule 3.22, there
are no legal actions or administrative proceedings or investigations instituted,
or to the knowledge of Target or the Shareholder threatened, against or
affecting, or that could affect, Target, the Stock, or the business of Target.
Neither Target nor the Shareholder are (i) subject to any continuing court or
administrative order, writ, injunction or decree applicable specifically to
Target or its businesses, assets, operations or employees, or (ii) in default
with respect to any such order, writ, injunction or decree. Neither Target nor
the Shareholder know of any basis for any such action, proceeding or
investigation.
Section 3.23. Condition of Fixed Assets. All of the plants, structures
and equipment (the "Fixed Assets") owned by Target are in good condition and
repair for their intended use in the ordinary course of business and conform in
all material respects with all applicable ordinances, regulations and other
laws and there are no known latent defects therein.
Section 3.24. Inventory. All of the tangible inventory owned by Target
is in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Target has, and at the Closing Date will have, the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
Section 3.25. Books of Account. The books of account of Target have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Target have been properly recorded in such books.
Section 3.26. Corporate Name - Morrilton Video, Inc. There are no
actions, suits or proceedings pending, or to the knowledge of Target or the
Shareholder threatened, against or affecting Target that could result in any
impairment of the right of Target to use the name "Morrilton Video, Inc." The
use of the name "Morrilton Video, Inc." does not infringe the rights of any
third party nor is it confusingly similar with the corporate name of any third
party. After the Closing Date,
Page 15
<PAGE> 16
no person or business entity other than Target will be authorized, directly or
indirectly, to use the name "Morrilton Video, Inc." or any name confusingly
similar thereto.
Section 3.27. Accounts Receivable. Schedule 3.27 sets forth the
accounts receivable of Target from sales made as of December 31, 1998 and the
payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the ordinary course of
business and are valid and enforceable claims subject to no right of set-off or
counterclaim.
Section 3.28. Product Warranties. There is no claim against or
liability of Target on account of product warranties or with respect to the
manufacture, sale or rental of defective products or services and there is no
basis for any such claim on account of defective products or services heretofore
manufactured, sold or rented that is not fully covered by insurance.
Section 3.29. Banking Relations. Set forth in Schedule 3.29 is a
complete and accurate list of all arrangements that Target has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
Section 3.30. Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.30, no officer, supervisory employee, director or
shareholder of Target, or their respective spouses or children, owns directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer or director of, any customer or supplier of Target, or any
organization that has a material contract or arrangement with Target.
Section 3.31. Investments in Competitors. Shareholder does not own,
directly or indirectly, any interests or has any investment in any corporation,
business or other person that is a competitor of Target within the service area
of Target.
Section 3.32. Employee Matters.
(i) Cash Compensation. Schedule 3.32(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Target who are
currently compensated at a rate in excess of $15,000 per year and who earned in
excess of such amount during the preceding fiscal year. In addition, Schedule
3.32(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of Target during the current and immediately
preceding fiscal year of Target, and (ii) any promised increases in Cash
Compensation of employees of Target that have not yet been effected.
(ii) Compensation Plans. Schedule 3.32(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Target or
Page 16
<PAGE> 17
to which Target contributes on behalf of its employees, other than Employee
Benefit Plans listed in Schedule 3.34(a). The Compensation Plans include without
limitation plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options. Target has provided Parent a copy of each written
Compensation Plan and a written description of each unwritten Compensation Plan.
Each of the Compensation Plans can be terminated or amended at will by Target.
(iii) Employment Agreements. All written or oral employment agreements
(the "Employment Agreements") which exist between Target and its employees,
including agreements containing covenants not to compete, are listed on Schedule
3.32(c), Target has provided Parent a copy of each written Employment Agreement
and a written description of each written Employment Agreement, if any.
(iv) Employee Policies and Procedures. Schedule 3.32(d) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Target. Target has provided Parent a copy of all written Employee
Policies and Procedures. Each of the Employee Policies and Procedures Can be
amended or terminated at will by Target, except as prohibited by law.
(v) Unwritten Amendments. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(vi) Labor Compliance. Except as set forth in Schedule 3.32(f),
Target:
1) has been and is in compliance with all laws, rules,
regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and
2) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing.
Target has not engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices.
There are no:
1) unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age or handicap discrimination
charges or complaints, pending or to the knowledge of Target and
the Shareholder threatened, against Target before any federal,
state or local court, board, department, commission or agency nor
does any basis therefor exist, or
Page 17
<PAGE> 18
2) existing, or to the knowledge of Target and the Shareholder
threatened, labor strikes, disputes, grievances, controversies or
other labor troubles affecting Target and no basis therefor
exists.
(vii) Unions. Target has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of Target
are represented by any union, labor organization or collective bargaining unit.
To the knowledge of Target and the Shareholder, the employees of Target have no
intention to and have not threatened to organize or join a union, labor
organization or collective bargaining unit.
(viii) Aliens. All employees of Target are citizens of, or are
authorized to be employed in, the United States.
Section 3.34. Employee Benefit Plans.
(i) Identification. Schedule 3.34(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Target or to which Target contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Target has provided Parent with copies of all plan documents,
determination letters, pending, determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans.
(ii) Administration. Each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations.
(iii) Examinations. No Employee Benefit Plan is currently the subject
of an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
(iv) Prohibited Transactions. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(v) Claims and Litigation. No claims, suits or other proceeding are
pending, or to the knowledge of Target and the Shareholder are threatened, with
respect to any Employee Benefit Plan other than normal benefit claims filed by
participants or beneficiaries.
(vi) Qualification. Target has received a favorable determination
letter or ruling from the
Page 18
<PAGE> 19
Internal Revenue Service for each Employee Benefit Plan intended to be qualified
within the meaning of Section 401(a) of the Code and/or tax-exempt within the
meaning of Section 501 (a) of the Code. No proceedings are pending, or to the
knowledge of Target and the Shareholder are threatened, that could result in the
revocation of any such favorable determination letter or ruling.
(vii) Funding Status. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning, of Section 412(n)(6)(B) of the Code) in
which Target is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing, basis as of the date hereof. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such plan are at
least equal in value to the present value of accrued benefits as of the date
hereof. Schedule 3.34(g) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued benefits
under all Employee Benefit Plans subject to actuarial assumptions.
(viii) Excise Taxes. Neither Target nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee Benefit
Plan under applicable provisions of the Code or ERISA.
(ix) Multiemployer Plans. Neither Target nor any member of a Controlled
Group is or ever has been obligated to contribute to a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(x) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Target or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(xi) Medical and Dental Care Claims. Schedule 3.34(k) contains a
complete and accurate list of all claims made (without identifying specific
individuals) under any medical or dental care plan or commitment offered by
Target to its employees involving hospitalization, medical or dental care claims
that have exceeded $500 per year for an individual during the period January 1,
1998 to September 30, 1998.
(xii) Retirees. Target does not have any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with Target.
Section 3.35. Environmental Matters.
Page 19
<PAGE> 20
(i) Environmental Laws. Neither Target nor any of its assets, are
currently in violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
including without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq. as
amended from time to time ("CERCLA")) (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time ("RCRA"), and regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, relating to asbestos or
polychlorinated biphenyls, and (iv) the provisions contained in any applicable
state statutes, rules or orders pertaining to environmental matters, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the assets and operations of
Target.
(ii) Use of Assets. To the knowledge of Target and the Shareholder, the
assets of Target have never been used in a manner that would be in violation of
any of the Environmental Laws, including without limitation, CERCLA or RCRA.
(iii) Permits. Target has not obtained, and is not required to obtain,
and neither Target nor any Shareholder has knowledge of any reason Parent will
be required to obtain, any permits, licenses or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures and
equipment owned or leased by Target or by reason of any Environmental Laws.
(iv) Superfund List. To the knowledge of Target and the Shareholder,
none of the assets owned or leased by Target are on any federal or state
"Superfund" list or subject to any environmentally related liens.
Section 3.36. Certain Payments. To the knowledge of Target and the
Shareholder, neither Target, the Shareholder nor any director, officer or
employee of Target has paid or caused to be paid, directly or indirectly, in
connection with the business of Target:
(i) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment; or
(ii) any contribution to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by Target
or as otherwise permitted by applicable law).
Section 3.37. Accuracy of Information Furnished. All information
furnished to Parent by Target or any Shareholder hereby or in connection with
the transactions contemplated hereby is true,
Page 20
<PAGE> 21
correct and complete in all material respects. Such information states all facts
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements are made, true, correct
and complete.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub each represent and warrant that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
Section 4.01. Organization and Good Standing. Parent and Sub are Texas
corporations duly organized, validly existing and in good standing under the
laws of the State of Texas, with all requisite power and authority to carry on
the businesses in which they are engaged, to own the properties they own, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
Section 4.02. Authorization and Validity. The execution, delivery and
performance by Parent and Sub of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Parent and Sub. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Parent and Sub and constitute or
will constitute legal, valid and binding obligations of Parent and Sub,
enforceable against Parent and Sub in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Closing Shares, when issued in compliance with the provisions of the
Agreement, will be validly issued, fully paid, non-assessable, not issued in
violation of any preemptive rights, and will be free from all taxes, liens,
charges and other encumbrances, subject to the terms and provisions of the
Letter of Investment Intent.
Section 4.03. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the representative organizational
documents of Parent and Sub or any agreement, indenture or other instrument
under which Parent or Sub is bound, (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Parent or Sub
or the properties or assets of Parent or Sub, or (iii) violate or conflict with
any laws, rules or regulations, including but not limited antitrust laws, or
that of any applicable jurisdiction or any applicable public, governmental or
regulatory agency or body.
Page 21
<PAGE> 22
Section 4.04. Finder's Fee. Neither Parent nor Sub has incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
ARTICLE V
The Covenants of Target and the Shareholder
Target and the Shareholder jointly and severally make the following
covenants relating to the period between the date hereof and the Closing.
Section 5.01. Consummation of Agreement. Target and the Shareholder
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Section 5.02. Business Operations. Target shall operate its business in
the ordinary course and will not introduce any new method of management or
operation. Target and the Shareholder shall use their best efforts to preserve
the business of Target intact, to retain the present customers and suppliers so
that they will be available to Parent after the Closing. Target and the
Shareholder shall not take any action that could adversely affect the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Target without the prior written consent of Parent or take or fail to take
any action that would cause or permit the representations made in Article III to
be inaccurate at the time of Closing or preclude Target and the Shareholder from
making such representations and warranties at the Closing.
Section 5.03. Access. Target and the Shareholder shall permit Parent
and its authorized representatives full access to, and make available for
inspection, all of the assets and business of Target, including their employees,
customers and suppliers, and permit Parent and its authorized representatives to
inspect and make copies of all documents, records and information with respect
to the affairs of Target as Parent and its representatives may request, all for
the sole purpose of permitting Parent to become familiar with the business and
assets and liabilities of Target.
Section 5.04. Material Change. Target and the Shareholder shall
promptly inform Parent in writing, of any material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Target. Notwithstanding the disclosure to Parent of any such
material adverse change, Target and the Shareholder shall not be relieved of any
liability for, nor shall the providing of such information by Target to Parent
be deemed a waiver by Parent of the breach of any representation or warranty of
Target and the Shareholder contained in this Agreement.
Section 5.05. Approvals of Third Parties. Target and the Shareholder
shall use their best efforts to secure, as soon as practicable after the date
hereof, all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
Page 22
<PAGE> 23
Section 5.06. Employee Matters. Target shall not, without the prior
written approval of Parent, except as required by law:
(i) increase the Cash Compensation of any employee of Target;
(ii) adopt, amend or terminate any Compensation Plan, Employment
Agreement, Employee Policies and Procedures or Employee Benefit Plan;
(iii) institute, settle or dismiss any employment litigation;
(iv) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit;
(v) take or fail to take any action with respect to any past or present
employee of Target that could adversely affect the business of Target;
(vi) take any action that would deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(vii) fail to pay any premium or contribution due with respect to any
Employee Benefit Plan;
(viii) fail to file any return or report with respect to any Employee
Benefit Plan; or
(ix) take or fall to take any action that could adversely affect any
Employee Benefit Plan.
Section 5.07. Contracts. Except with Parent's prior written consent,
Target shall not waive any right or cancel any contract, debt or claim or assume
or enter into any contract, lease, license, obligation, indebtedness,
commitment, or purchase or sale, except in the ordinary course of business.
Section 5.08. Changes in Inventory. Target shall not alter the physical
contents or character of its raw materials, work-in-process or finished goods
inventory or the mixture of products in its finished goods inventory so as to
affect the nature of its business or result in a change in the total dollar
valuation thereof.
Section 5.09. Capital Assets; Payments of Liabilities. Target shall
not, without the prior written approval of Parent, (i) acquire or dispose of any
capital asset, or (ii) discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (a) liabilities and obligations
reflected in the Financial Statements, or (b) current liabilities and
obligations incurred in the ordinary course of business and, in the case of
either (a) or (b) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
Page 23
<PAGE> 24
Section 5.10. Mortgages, Liens and Guaranties. Target shall not,
without the prior written approval of Parent, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets,
whether now owned or hereafter acquired, or guarantee or otherwise become
contingently liable for any obligation of another, except obligations arising by
reason of endorsement for collection and other similar transactions in the
ordinary course of business, or make any capital contribution or investment in
any corporation, business or other person.
Section 5.11. No Negotiation with Others. Target and the Shareholder
shall not solicit or participate in negotiations with (and Target and the
Shareholder shall use their best efforts to prevent any affiliate, shareholder,
director, officer, employee or other representative or agent of Target from
negotiating with, soliciting or participating in negotiations with) any third
party with respect to the sale of the business of Target or any transaction
inconsistent with those contemplated hereby.
Section 5.12.
(i) Income Tax Refunds. The Shareholder hereby acknowledges that its
has no claim to or interest in any income tax refunds which Target may receive
after the Closing Date relating to tax periods prior to the Closing Date.
(ii) Cooperation. The Shareholder shall provide such assistance to
Parent as Parent may reasonably request in connection with the preparation of
any tax return required to be filed in respect of Target, any audit or other
examination by any taxing authority, any Judicial or administrative proceeding
relating to liability for taxes, or any claim for refund in respect of such
taxes, and the Shareholder will retain, and upon request provide, any records or
information which may be relevant to such return, audit, examination, proceeding
or claim. Such assistance shall include (i) making employees or counsel
available at and for reasonable times to provide additional information and
explanation of any material to be provided hereunder, and (ii) furnishing access
to, and permitting the copying of any records, returns, schedules, documents,
work papers or other relevant materials which might reasonably be expected to be
of use in connection with such return, audit, examination, proceeding or claim.
ARTICLE VI
Covenants of Parent and Sub
Section 6.01. Consummation of Agreement. Parent and Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions.
Page 24
<PAGE> 25
ARTICLE VII
Parent's Conditions Precedent
Except as may be waived in writing by Parent and Sub, the obligations
of Parent and Sub hereunder are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
Section 7.01. Representations and Warranties. The representations and
warranties of Target and the Shareholder contained herein shall have been true
and correct in all respects when initially made and shall be true and correct in
all material respects as of the Closing Date; and Parent and Sub shall have
received a certificate from each of Target's President and the Shareholder,
dated as of the Closing Date, to the foregoing effect.
Section 7.02. Covenants and Conditions. Target and the Shareholder
shall have performed and complied in all material respects with all covenants
and conditions required by this Agreement to be performed and complied with by
Target and the Shareholder prior to the Closing Date; and Parent and Sub shall
have received a certificate from each of Target's President and the Shareholder,
dated as of the Closing, Date, to the foregoing effect.
Section 7.03. Proceedings. No action, precaution or order by any court
or governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 7.04. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target shall have occurred since the date of the most
recent balance sheet of each included in the Financial Statements, whether or
not such change shall have been caused by the deliberate act or omission of
Target or any Shareholder.
Section 7.05. Resignations of Directors and Officers. Parent and Sub
shall have received the resignations of the directors and officers of Target to
the extent requested.
Section 7.06. Closing Deliveries. Parent shall have received all
documents referred to in Section 2.01 hereof, duly executed in form satisfactory
to Parent and its counsel.
Section 7.07. Tax Affidavit. Parent shall have received a nonforeign
affidavit, as such affidavit is referred to in Section 1445(b)(2) of the Code,
of the Shareholder, signed under penalties of perjury and dated as of the date
of the Closing Date, to the effect that such Shareholder is not a foreign person
(as such term is defined in Section 1445(f)(3) of the Code) and providing such
Shareholder's United States taxpayer identification number.
Page 25
<PAGE> 26
Section 7.08. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Asset Exchange Agreement between TCA Cable Partners and Dardenelle Cable
Television, Inc. to be final and effective.
ARTICLE VIII
The Conditions Precedent of Target and the Shareholder
Except as may be waived in writing by Target and the Shareholder, the
obligations of Target and the Shareholder hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and
warranties of Parent and Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date; and Parent and Sub shall have
delivered to the Shareholder certificates of Parent's and Sub's respective
President or Vice President, dated as of the Closing Date, to the foregoing
effect.
Section 8.02. Covenants and Conditions. Parent and Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date; and Parent shall have delivered to the Shareholder
certificates of Parent's and Sub's President or Vice President, dated as of the
Closing Date, to the foregoing effect.
Section 8.03. Proceedings. No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 8.04. Closing Deliveries. Target or the Shareholder, as the
case may be, shall have received all documents referred to in Section 102.
Section 8.05. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Asset Exchange Agreement between TCA Cable Partners and Dardenelle Cable
Television, Inc. to be final and effective.
ARTICLE IX
Post Closing Matters
Section 9.01. Further Instruments of Transfer. Following the Closing,
at the request of Parent, the Shareholder shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
(i) vest in Parent good and marketable title to the Stock, and (ii) carry
Page 26
<PAGE> 27
out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
ARTICLE X
Remedies
Section 10.01. Indemnification by the Shareholder. Subject to the terms
and conditions of this Article, the Shareholder agrees to indemnify, defend and
hold Parent and Sub and their respective directors, officers, agents, attorneys
and affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, attorneys' fees
and expenses (collectively "Damages"), asserted against or incurred by any of
such indemnitees by reason of or resulting from:
(i) a breach of any representation, warranty or covenant of Target or
the Shareholder contained herein, in any exhibit, schedule, certificate or
financial statement delivered hereunder, or in any agreement executed in
connection with the transactions contemplated hereby; or
(ii) the violation or alleged violation, on or before the Closing Date,
of any Environmental Law, and any and all matters arising out of any act,
omission, event or circumstance existing or occurring on or prior to the Closing
Date (including without limitation the presence on the Real Property or release
from the Real Property, or the generation by Target or any Shareholder of
hazardous substances or solid waste disposed or otherwise released prior to the
Closing Date), regardless of whether the act, omission, event or circumstance
constituted a violation of any Environmental Law at the time of its existence or
occurrence. The terms "hazardous substance" and "firelease" shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposed" shall
have the meanings specified in RCRA; provided that to the extent that any
applicable statute of any state, any subdivision thereof or any other
governmental body or agency of competent jurisdiction over the matter, establish
a meaning for "hazardous substance," "release," "solid waste" or "disposed" that
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply. The provisions of this Section 10.01(b) shall survive the Closing,
and shall continue indefinitely thereafter in full force and effect.
Section 10.02. Indemnification by Parent. Subject to the terms and
conditions of this Article, Parent hereby agrees to indemnify, defend and hold
Target and the Shareholder and their respective directors, officers, agents,
attorneys and affiliates harmless from and against all Damages asserted against
or incurred by any of such indemnitees by reason of or resulting, from a breach
of any representation, warranty or covenant of Parent or Sub contained herein or
in any exhibit, schedule or certificate delivered hereunder, or in any agreement
executed in connection with the transactions contemplated hereby.
Page 27
<PAGE> 28
Section 10.03. Conditions of Indemnification. The respective
obligations and liabilities of the Shareholder and Parent (the "indemnitor") to
the other parties (the "indemnitees") under Sections 10.01 and 10.02 with
respect to claims resulting from the assertion of liability by third parties,
shall be subject to the following terms and conditions:
(i) In the event that a legal proceeding or action is commenced against
an indemnitees with respect to any indemnified matter, that indemnitees promptly
will provide written notice thereof to the indemnitor (but in no event later
than ten (10) days after receipt of notice), together with a copy of any claim,
process or other legal pleading. The indemnitor will undertake the defense
thereof, as its expense, by counsel of its own choosing and reasonably
acceptable to the indemnitees; provided that the indemnitees may participate in
all aspects of the defense with, or without, counsel of its own choice. In the
event that the indemnitees elect to retain additional counsel of their own
choice, the fees and expenses of said counsel shall be the exclusive
responsibility of the indemnitees unless (i) the indemnitor has agreed to pay
such fees and expenses, (ii) the indemnitor has failed to undertake the defense
of such action, or (iii) if the nature of any action presents a conflict between
the interests of the indemnitor and the indemnitees, or the indemnitees have
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the indemnitor
(in which case, if the indemnitees inform the indemnitor in writing that it
elects to employ separate counsel at the expense of the indemnitor, the
indemnitor shall have no further right to participate in or undertake the
defense of such action on behalf of the indemnitees except with respect to
payment of full indemnification for any Damages).
(ii) Except for failure by the indemnitees to provide notice as
provided for above in subsection (a), in the event that the indemnitor, on or
before the thirtieth day after receipt of notice of any such action, or, if
applicable and earlier, on or before the tenth day preceding the day on which an
answer, appearance or other pleading must be served in order to prevent judgment
by default in favor of the person asserting such claim or other prejudice to the
indemnitees, fails to undertake the defense of such action, the indemnitees will
have the right to retain counsel of their own choosing and undertake the
defense, compromise or settlement of such claim for the account and risk of the
indemnitor without waiving the indemnitee's right to full indemnification from
the indemnitor and at the indemnitor's expense, subject to the right of the
indemnitor to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof with counsel reasonably acceptable to
the indemnitees.
(iii) Notwithstanding the foregoing, the indemnitor shall not settle
any claim asserted against the indemnitees without the prior consent of the
indemnitees unless such settlement involves only the payment of money and the
claimant provides the indemnitees with a release from all liability in respect
of such claim. If the settlement of any claims involves more than the payment of
money, the indemnitor shall not settle the claim without the prior written
consent of the indemnitees, which consent shall not be unreasonably withheld. In
the event the indemnitor has not undertaken the defense, as described above,
with respect to any claim resulting from the assertion of liability by third
parties, the indemnitor may settle any claim without prior notice to and consent
of the indemnifying party, and indemnitor agrees to promptly, and in any event
within thirty days after
Page 28
<PAGE> 29
receipt of written demand, reimburse indemnitees for all Damages, including
without limitation all amounts paid or incurred in connection with such
settlement, together with attorneys' fees, costs and expenses and other costs
incurred in connection with defense of the claim.
(iv) The indemnitees and indemnitor will each cooperate with all
reasonable requests of the other.
Section 10.04. Remedies Not Exclusive. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity.
ARTICLE XI
Termination
Section 11.01. Termination. This Agreement may be terminated:
(i) At any time prior to the Closing Date by mutual agreement of all
parties.
(ii) At any time prior to the Closing Date by Parent if any
representation or warranty of Target or the Shareholder contained in this
Agreement or in any certificate or other document executed and delivered by
Target or the Shareholder pursuant to this Agreement is or becomes untrue or
breached in any material respect, or if Target or the Shareholder fail to comply
in any material respect with any covenant contained herein.
(iii) At any time prior to the Closing Date by the Shareholder if any
representation or warranty of Parent or Sub contained in this Agreement or in
any certificate or other document executed and delivered by Parent or Sub
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Parent or Sub fails to comply in any material respect with any
covenant contained herein.
(iv) After the Closing Date by Parent if the conditions stated in
Article VII have not been satisfied by the Closing Date.
(v) After the Closing Date by the Shareholder if the conditions stated
in Article VIII and have not been satisfied by the Closing Date.
In the event this Agreement is terminated pursuant to subparagraph (b),
(c), (d) or (e) above, Parent, Sub, Target and the Shareholder shall each be
entitled to pursue, exercise and enforce any and all remedies, rights, powers
and privileges available at law or in equity. In the event of a termination of
this Agreement under the provisions of this Article, a party not then in
material breach
Page 29
<PAGE> 30
of this Agreement shall stand fully released and discharged of any and all
obligations under this Agreement.
ARTICLE XII
Miscellaneous
Section 12.01. Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party, or (ii) proving that another party breached any of the terms of
this Agreement.
Section 12.02. Waiver. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, or any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
Section 12.03. Offset. Any and all amounts owing, or to be paid by
Parent to the Shareholder hereunder or otherwise, shall be subject to offset and
reduction pro tanto by any amounts that may be owing at any time by the
Shareholder to Parent in respect of any failure or breach of any representation,
warranty or covenant of Target or the Shareholder under or in connection with
this Agreement, the Agreement Not to Compete or any other agreement with Parent
or any transaction contemplated hereby or thereby, as reasonably determined by
Parent. If Parent determines that such offset is appropriate, notice shall be
given to Shareholder of such determination on or prior to the due date of the
payment to be reduced.
Section 12.04. Knowledge. "Knowledge," "have no knowledge of," or "do
not know of" and requires, to any employee of such entity after reasonable
investigation and inquiry by the principal executive officer of such entity.
Section 12.05. Specific Performance. Each of the parties hereto
acknowledges that a refusal by any other party to consummate the transactions
contemplated hereby will cause irreparable harm to each other party for which
there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, each of the parties hereto shall be
entitled,
Page 30
<PAGE> 31
in addition to, and without having to prove the inadequacy of, other remedies at
law, to specific performance of this Agreement, as well as injunctive relief
(without being required to post bond or other security).
Section 12.06. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
Section 12.07. Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Parent to
an affiliate of Parent.
Section 12.08. Parties In Interest: No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.09. Entire Agreement. This Agreement, the Agreement of
Merger and the agreements contemplated hereby and thereby constitute the entire
agreement of the parties regarding the subject matter hereof, and supersede all
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.
Section 12.10. Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
here from. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.11. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Target, the Shareholder, Sub or Parent
pursuant to this Agreement shall be deemed to have been representations and
warranties by Target and the Shareholder or Parent and Sub, as the case may be,
and, notwithstanding any provision in this Agreement to the contrary, shall
survive the Closing for three (3) years from the date of Closing.
Section 12.12. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED
Page 31
<PAGE> 32
AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES
GOVERNING CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
Section 12.13. Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14. Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16. Confidentiality, Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules applicable to issuers whose securities are traded
on the National Association of Securities Dealers Automatic Quotation System,
and (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in conducting an examination of the operations and
assets of Target.
Section 12.18. Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing, and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person or
by facsimile transmission. Such notice shall be deemed received on the date on
which it is hand delivered or received by facsimile transmission or on the third
business day following the date on which it is so mailed. For purposes of
notice, the addresses of the parties shall be:
If to Parent or Sub:
Morrilton Acquisition, Inc.
3015 SSE Loop 323
Tyler, Texas 75701
Attn.: Fred R. Nichols, President
Ph.: (903) 595-3701
Fax: (903) 596-9008
Page 32
<PAGE> 33
with a copy to:
Jeffrey W. Brown, General Counsel
3015 SSE Loop 323
Tyler, Texas 75701
Ph.: (903) 595-3701
Fax: (903) 596-10008
If to the Shareholder:
WEHCO Video, Inc.
115 East Capitol Avenue
Little Rock, Arkansas 72201
Attention: Walter E. Hussman, Jr.
Ph.: (501)378-3402
Fax:(501)376-8594
with a copy to:
Philip S. Anderson
Williams & Anderson, LLP
111 Center Street
Little Rock, Arkansas 72201
Ph.: (501)372-0800
Fax: (501)372-6453
Any party may change its address for notice by written notice given to
the other parties in accordance with this Section.
Section 12.19. Service of Process. Service of any and all process that
may be served on any party hereto in any suit, action or proceeding, arising out
of this Agreement may be made in the manner and to the address set forth in
Section 12.18 and service thus made shall be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
Section 12.20. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Page 33
<PAGE> 34
EXECUTED as of the dates set forth below to be effective as of the date
first above written.
TCA CABLE TV, INC.
a Texas corporation
Date: 2/2/99 By: /s/ Robert A. Roseman
--------------------- --------------------------------
Name: Robert A. Roseman
----------------------
Title: Vice President
---------------------
MORRILTON ACQUISITION, INC.
a Texas corporation
Date: 2/2/99 By: /s/ Robert A. Roseman
--------------------- --------------------------------
Robert A. Roseman
Its Vice President
MORRILTON VIDEO, INC.
Date: 1/28/99 By: /s/ Walter Hussman, Jr.
--------------------- --------------------------------
Name: Walter Hussman, Jr.
----------------------
Title: President
---------------------
WEHCO VIDEO, INC.
Date: 1/28/99 By: /s/ Walter Hussman, Jr.
--------------------- --------------------------------
Name: Walter Hussman, Jr.
----------------------
Title: President
---------------------
Page 34
<PAGE> 1
EXHIBIT 99(b)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of June 25, 1999, is entered into by and among Cablevision of
Pflugerville, Inc., a Texas corporation ("Target"), John Muraglia, Dale Hoffman,
Conover Hartin III, Lola H. McDaniel and the Estate of Moran K. McDaniel,
Deceased, by and through its Co-Executors, Melissa Lyons Gardner and Mark A.
Lyons (the "Shareholders"), TCA Cable TV of Central Texas, Inc., a Texas
corporation ("Sub"), and TCA Cable TV, Inc., a Texas corporation ("Parent").
WITNESSETH:
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Target (the "Stock"), and desire to cause the merger of Target into Sub
(the "Merger") in exchange for shares of Parent's common stock, $.10 par value
("TCA Stock");
WHEREAS, Parent desires that Sub acquire the assets and business of
Target pursuant to the Merger, and has established Sub to facilitate the Merger;
WHEREAS, the Shareholders and the respective Boards of Directors of
Parent, Sub, and Target have approved the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") pursuant to the
provisions governing forward triangular mergers.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
Section 1.01. Effect of the Merger.
(a) Subject to the terms and conditions of this Agreement and the
Agreement of Merger executed by Parent, Sub, Target and the Shareholders on the
same date herewith (the "Agreement of Merger"), Target shall be merged into Sub
and the separate existence of Target shall thereupon cease, in accordance with
the applicable provisions of the laws of the State of Texas.
Sub will be the surviving corporation in the Merger (sometimes referred
to herein as the "Surviving Corporation") and will continue to be governed by
the laws of the State of Texas, and
1
<PAGE> 2
the separate existence of Sub and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the laws of the State of Texas and other applicable
laws, will continue unaffected by the Merger.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any member of Sub,
and without any action on the part of any holder of any capital stock of Target,
all outstanding capital stock of Target of any kind or nature shall be canceled
and shall cease to exist.
For the purposes of this Agreement, (i) the term "Closing" shall mean
the closing of the Merger and the other transactions contemplated by this
Agreement at such time and place as shall be mutually agreed upon in writing by
all of the parties hereto, and (ii) the term "Closing Date" shall mean such date
as may be decided solely by the Shareholders of Target by written notice to
Parent and Sub, provided that approvals required by Sections 8.06 and 8.07 have
been obtained.
Section 1.02. Conversion of Target Stock into TCA Stock.
(a) Preliminary Merger Consideration. The value of the consideration
to be paid by Parent to the Shareholders (the "Preliminary Merger
Consideration") shall be $29,673,000, which shall be paid by delivery of 593,460
shares of TCA Stock of Parent, valued for such purposes at $50.00 per share (the
"Closing Shares"). A reasonable amount of the Preliminary Merger Consideration
is allocated by the parties to the Noncompetition Agreement referred to in
Section 2.01 (a) hereof. Following the Effective Time, no Shares of Target shall
be deemed to be outstanding or to have any rights other than those rights set
forth in this Section 1.02 and in Section 1.03 hereof The Preliminary Merger
Consideration set forth in this Section 1.02(a) shall be subject to adjustment
as described in Section 1.02(b).
(b) Adjusted Merger Consideration. It is recognized that the
Preliminary Merger Consideration set forth above was calculated based upon the
Target's best estimate of the number of Equivalent Basic Subscribers receiving
Target's basic tier of cable television service as of the Closing Date. The
Preliminary Merger Consideration shall be adjusted to the extent required under
the provisions of Section 1.02(b)(i), (ii), and (iii) set forth below, and as
adjusted shall be referred to as the "Adjusted Merger Consideration."
(i) Subscriber Adjustment. If the actual number of Target's
Equivalent Basic Subscribers on the Closing Date exceeds or is less than 9,420
by more than three percent (3%), the Preliminary Merger Consideration shall be
increased by the excess or decreased by the deficiency, as the case may be, by
multiplying the excess or deficiency in the number of such customers by
$3,150.00.
"Equivalent Basic Subscribers" shall mean the number of active
customers for Basic Services (as hereinafter defined) either in a single
household, a commercial establishment or a
2
<PAGE> 3
multi-unit dwelling (including a hotel unit); provided, however, that the number
of subscribers in a commercial establishment or multi-unit dwelling, that obtain
service on a "bulk-rate" basis shall be determined for each franchise area by
dividing the gross bulk-rate billings for Basic Services and expanded basic
services (but excluding billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling 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 Basic Rate. For purposes
of this definition (i) an "active subscriber" shall mean, as of any date, any
person, commercial establishment or multi-unit dwelling that is paying for and
receiving Basic Services from the System who has an account that is not more
than sixty (60) days past due (except for past due amounts of $5.00 or less,
provided such account is otherwise current) who is not pending disconnection for
any reason; and (ii) the number of days a subscriber account is past due shall
be calculated from the first day of the period for which the applicable billing
relates.
"Basic Rate" shall mean the rate charged at the date of determination
to individual households for Basic Services, excluding charges from a la carte
tiers, premium services, pay- per-view television, installation or other
non-recurring charges, converter rental, pass-through charges for sales taxes,
line-itemized franchise fees, fees charged by the FCC and similar fees. "Basic
Services" shall mean the lowest tier of cable television programming sold to
subscribers of the System for which subscribers served by the System pay a fixed
monthly fee to the cable operator, excluding expanded basic services, a la carte
tiers, premium services, pay-per-view television and any charges for additional
outlets and installation fees, any revenues derived from the rental of
converters, remote control devices and other like charges for equipment.
(ii) Guaranteed Merger Consideration Adjustment. Parent
guarantees that the Shareholders will, at Closing, receive shares of Common
Stock of TCA Cable TV, Inc. ("Parent Common Stock") with a total market value at
Closing equal to or greater than the Preliminary Merger Consideration,
regardless of whether the Ten Day Average Price of Parent's Common Stock is
below $50.00 per share (the "Guaranteed Merger Consideration"). Additionally,
Parent guarantees that after Closing, in the event the merger agreement between
Parent and Cox Communications, Inc., dated May 11, 1999 (the "Cox-TCA Merger
Agreement") is terminated, and that following the announcement of such
termination the price of Parent's Common Stock drops, Parent will deliver
additional Parent Common Stock to the Shareholders such that the Shareholders
will have the Guaranteed Merger Consideration.
1) Ten Day Average Price. For purposes of determining
whether and to what extent any adjustment should be made under this Section
1.02(b)(ii), the ten trading day average closing price for the Parent Common
Stock for the period up to and including the second day before the Event Date
shall control (the "Ten Day Average Price"). The Event Date in the case of a
Guaranteed Merger Consideration Adjustment at Closing shall be the Closing Date.
The Event Date in the case of a Guaranteed Merger Consideration Adjustment after
Closing shall be
3
<PAGE> 4
the twelfth day after the date of public announcement of termination of the
Cox-TCA Merger Agreement.
2) Method of Adjustment. If the Ten Day Average Price is
less than $50.00 per share, the Preliminary Merger Consideration shall be
increased by an amount equal to the difference between $50.00 and the Ten Day
Average Price, multiplied by the number of Closing Shares. In order to determine
the additional Closing Shares to be delivered to the Shareholders, the resulting
figure shall then be divided by the Ten Day Average Price.
(iii) Accounting Adjustment. The Preliminary Merger Consideration
shall also be adjusted in the following manner to reflect the amount by which
Target's current assets exceed or are less than its current liabilities, each
determined in accordance with past accounting practices of Target: The total
purchase price shall be increased by $1.00 for each $1.00 that current assets
exceed, or decreased by $1.00 for each $1..00 that current assets are less than,
current liabilities as of the close of business on the day preceding the Closing
Date.
(c) Delivery of the Closing Shares. The Closing Shares shall be
delivered by Parent to the Shareholders pursuant to the provisions of this
Agreement.
Section 1.03. Determination and Delivery of Adjustments. The Adjusted
Merger Consideration pursuant to Section 1.02(b) shall be determined and
delivered in accordance with the following procedures:
(a) Subscriber Adjustment. Target shall prepare and deliver to Parent
and Sub not later than ten days before the Closing Date a preliminary settlement
statement (the "Preliminary Settlement Statement") which shall set forth
Target's good faith estimate of Equivalent Basic Subscribers as of Closing and
any adjustments to the Preliminary Merger Consideration under Section
1.02(b)(i). The Preliminary Settlement Statement shall contain all information
reasonably necessary to determine the adjustments to the Preliminary Merger
Consideration under Section 1.02(b)(i), to the extent such adjustments can be
determined or estimated as of the date of the Preliminary Settlement Statement,
and such other information as may be reasonably requested by Parent and Sub.
(b) Guaranteed Merger Consideration Adjustment. With respect to
adjustment to the Preliminary Merger Consideration under Section 1.02(b)(ii),
the Adjusted Merger Consideration shall be delivered to the Shareholder
Representative not later than the tenth business day after the Event Date.
(c) Accounting Adjustment. With respect to adjustment to the
Preliminary Merger Consideration under Section 1.02(b)(iii), the Adjusted Merger
Consideration shall be delivered to the Shareholder Representative or to the
Parent, as the case may be, not later than the 30th business day after the
Closing Date. No later than 15 days after the Closing Date, Chris Cahill, Mills,
Shirley, Eckel & Bassett, 2228 Mechanic Street, Suite 400, Galveston, Texas
77550 (the
4
<PAGE> 5
"Shareholder Representative"), will deliver to Parent and Sub a statement (the
"Accounting Adjustment") setting forth the Shareholders' determination of the
Adjusted Merger Consideration as adjusted pursuant to Section 1.02(b)(iii) and
the calculation thereof, certified by the Shareholders to be accurate as of the
date delivered.
(d) Form of Consideration. All Subscriber Adjustments, Guaranteed
Merger Consideration Adjustments, and Accounting Adjustment payable to the
Shareholders shall be paid in additional Closing Shares, to the extent possible,
or in cash otherwise. All Accounting Adjustments payable to Parent shall be paid
in cash.
Section 1.04. Tax Status of Merger. The Merger and the transfer of the
Closing Shares to the Shareholders contemplated by this Agreement are intended
by the parties to qualify as a forward triangular tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(P) of the Code, and each of the parties
hereto agrees to act with respect to the Stock and the Closing Shares, as
applicable, and take such other steps, including the proper filing of plans of
reorganization and articles of merger, as shall be necessary to insure the
tax-free status of the transaction under such Code sections and the underlying
regulations.
Section 1.05. Status of TCA Stock. Each Shareholder acknowledges that
his or its Closing Shares are being acquired without any view to a transfer,
sale, assignment or other distribution thereof other than a transfer, sale,
assignment or other distribution not in violation of the Securities Act of 1933,
as amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit 1.05, and agree to remain subject to the
representations, warranties and covenants made therein after the Closing Date.
As a condition to Target's obligation to close, Parent agrees that it
shall, at the sole expense of Parent, register all of the Closing Shares in the
manner described in Section 4.05 hereof.
ARTICLE II
Closing Deliveries
Section 2.01. Deliveries of Target and the Shareholders. At the
Closing, Target and the Shareholders shall deliver to Parent the following, all
of which shall be in form and content satisfactory to Parent and its counsel:
(a) executed Noncompetition Agreement (the "Noncompetition Agreement")
among Target, Parent and the Shareholders, in the form of the agreement attached
as Exhibit 2.01(b);
(b) a separate Letter of Investment Intent, in the form attached hereto
as Exhibit 1.05, executed by the Shareholders;
5
<PAGE> 6
(c) a copy of resolutions of the Board of Directors of Target
authorizing the execution, delivery and performance of this Agreement, the
Agreement of Merger and all related documents and agreements, each certified by
the Secretary of that corporation as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(d) a separate certificate of the President of Target, dated the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Target contained herein on and as of the Closing Date, (ii) as to
the performance of and compliance by Target and the Shareholders with all
covenants contained herein on and as of the Closing Dat e, and (iii) certifying
that all conditions precedent of Target to the Closing have been satisfied;
(e) a certificate of the Secretary of Target certifying as to the
incumbency of the directors and officers of Target and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Target;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas establishing that Target is in
existence, has paid all franchise taxes and otherwise is in good standing to
transact business in that state;
(g) certificates, dated within thirty (30) days of the Closing Date, of
the Secretaries of State of the states in which it is necessary for Target to be
qualified to do business, to the effect that Target is qualified to do business
and is in good standing as a foreign corporation in each of such states, if
applicable;
(h) an opinion of legal counsel to Target and the Shareholders, dated
as of the Closing Date, in the form attached hereto as Exhibit 2.01(h), and an
opinion of FCC counsel to Target and the Shareholders, dated as of the Closing
Date, in the form attached hereto as Exhibit 2.01(h- a);
(i) all necessary authorizations, consents, approvals, permits and
licenses referenced in Schedule 3.08;
(j) releases from the Shareholders to Cablevision of Pflugerville, Inc.
for any security interests or liens held by the Shareholders in the form
attached hereto as Exhibit 2.01(j), if applicable; and
(k) such other instrument or instruments as shall be necessary or
appropriate, as Parent or its counsel shall reasonably request, to vest in
Parent good and marketable title to the Stock.
Section 2.02. Deliveries of Parent. At the Closing, Parent shall
deliver the following to Target or the Shareholders, as applicable:
6
<PAGE> 7
(a) the Closing Shares and the Cash Portion to the Shareholder
Representative for the benefit of the Shareholders;
(b) the Noncompetition Agreement;
(c) a separate certificate of each of the President or any Vice
President of Parent and Sub, dated the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Parent and Sub contained
herein on and as of the Closing Date, (ii) as to the performance of and
compliance by Parent and Sub with all covenants contained herein on and as of
the Closing Date, and (iii) certifying that all conditions precedent of Parent
and Sub to the Closing have been satisfied;
(d) a certificate of the Secretary of Parent certifying as to the
incumbency of such officers of Parent, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Parent;
(e) a certificate of the Secretary of Sub certifying as to the
incumbency of such officers of Sub, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Sub;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Parent is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(g) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Sub is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(h) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, in form attached hereto as Exhibit 2.02(h);
(i) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, confirming the matters set forth in Section 4.05 hereof (to
include the specific language contained in such Section); and
(j) entity resolutions for Parent and Sub approving the transactions.
ARTICLE III
Representations and Warranties of Target and the Shareholders
Section 3.01. Ownership of the Stock. The Shareholders severally
represent and warrant that they own, beneficially and of record, good and
marketable title to the Stock, which
7
<PAGE> 8
constitutes all of the issued and outstanding capital stock of Target free and
clear of all security interests, liens, adverse claims, encumbrances, equities,
proxies, options or shareholder agreements.
Target represents and warrants that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date as
if made on that date:
Section 3.02. Organization and Good Standing: Qualification. Target is
a corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Target is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Schedule 3.02, except where the failure to be qualified or licensed would not
have a material adverse effect on the business of Target. Target does not have
any assets, employees or offices located in any state other than the states
listed in Schedule 3.02.
Section 3.03. Capitalization of Target. The authorized capital stock of
Target consists of 20,000 shares of common stock, $10.00 par value per share, of
which 10,000 shares are issued and outstanding. No shares of such capital stock
are held in the treasury of Target. All of issued and outstanding shares of
capital stock of Target are duly authorized, validly issued, fully paid and
nonassessable. There exist no options, warrants, subscriptions or other rights
to purchase, or securities convertible into or exchangeable for, the capital
stock of Target for which a release has not been obtained prior to Closing.
Neither the Shareholders nor Target are parties to or bound by, nor do they have
any knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of Target. No shares of capital stock of Target
have been issued or disposed of in violation of the preemptive rights of any of
Target's Shareholders. All accrued dividends on the capital stock of Target,
whether or not declared, have been paid in full.
Section 3.04. Corporate Records. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Target which have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. To Target's knowledge, the minute book of Target, a
copy of which has been delivered to Parent, contains accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by, the
Board of Directors (and any committees thereof) and the Shareholders of Target
since its formation.
Section 3.05. Authorization and Validity. The execution, delivery and
performance by Target of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Target and the Shareholders. This
Agreement and each other agreement contemplated hereby have been or
8
<PAGE> 9
will be as of the Closing Date duly executed and delivered by Target and the
Shareholders, as applicable, and constitute or will constitute legal, valid and
binding obligations of Target and the Shareholders, as applicable, enforceable
against Target and the Shareholders in accordance with their respective terms.
To Target's knowledge, and, if applicable, subject to the receipt of the various
third-party consents and approvals described in the Schedules hereto, the Merger
will not impair the ability or authority of Sub to carry on the business now
conducted by Target in any material respect.
Section 3.06. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will
materially (i) conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, the Articles of
Incorporation or Bylaws of Target or any agreement, indenture or other
instrument under which Target is bound or to which the appropriate portion of
the Stock or any of the assets of Target are subject, or result in the creation
or imposition of any security interest, lien, charge or encumbrance upon the
Stock or any of the assets of Target, or (ii) violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Target, the
Stock or the assets of Target.
Section 3.07. Financial Statements. Target has furnished to Parent the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 1996 through December 31, 1998,
including the notes thereto, and will, prior to the Closing Date, furnish the
audited statements for the one year period ending December 31, 1998
(collectively, the "Financial Statements"). The Financial Statements are true,
correct and complete, are in accordance with the books and records of Target
fairly present the financial condition and results of operations of Target as of
the dates and for the periods indicated and have been prepared on a cash basis
of accounting and on a proper and consistent basis.
Section 3.08. Target Required Consents. A list and brief description of
all required consents, authorizations and approvals required under the Target
system franchise, Target system licenses, Target system contracts, Target
governmental or public body or authority filing or permit, any Target lender or
bank loan or agreement, and the leases and other documents evidencing Target
leased property and Target other real property interests are set forth in
Schedule 3.08. If for any reason Target fails to make a filing or to obtain a
consent, the failure of Target to do so shall not, individually or in the
aggregate, have an adverse effect on the Target system, on the Shareholders'
ability to perform their obligations under this Agreement, on Target's cable
business, or on Target's ability to conduct such business after the Merger in
substantially the same manner as it is currently being, conducted.
Section 3.09. Target System Contracts. A list and brief description of
all pole line agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements (other than Target
9
<PAGE> 10
system franchise and Target system licenses) to which Target is a party are set
forth in Schedule 3.09. Such documents constitute the entire agreement with the
other party. Each of the Target system contracts is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of Target and
to Target's knowledge, each other party thereto is not in breach or default of
any material terms or conditions thereunder.
Section 3.10. Target System Franchise. A list and brief description of
the franchises to which Target is party are set forth on Schedule 3.10. The
Target system franchise contains all of the commitments and obligations of
Target to the applicable governmental authority granting such franchise with
respect to the construction, ownership and operation of the Target system. The
Target system franchise is currently in full force and effect, is not in default
and is valid under all applicable legal requirements according to their terms.
There is no legal action, governmental proceeding or investigation, pending or
to Target's knowledge threatened, to terminate, suspend or modify the Target
system franchise and Target is, or will be as of the Closing Date, in material
compliance with the terms and conditions of all the Target system franchise and
other applicable requirements of all governmental authorities (including the FCC
and the U.S. Copyright Office) relating to the Target system franchise,
including all requirements for notification, filing, reporting, posting and
maintenance of logs and records.
Section 3.11. Target System Licenses. A list and brief description of
the intangible cable television channel distribution rights, cable television
relay service (CARS), business radio and other licenses, and copyright notices
issued by the FCC and used or held for use in Target's cable business are set
forth on Schedule 3.11. The Target system licenses are currently in full force
and effect, are not in default and are valid under all applicable legal
requirements according to their terms. There is no legal action, governmental
proceeding or investigation, pending or to Target's knowledge threatened, to
terminate, suspend or modify the Target system licenses and Target is, or will
be as of the Closing Date, and the Target system licenses and other applicable
requirements of all governmental authorities (including the FCC and the U.S.
Copyright Office) relating to the Target system licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
Section 3.12. Target Tangible Personal Property. A list and brief
description of all tangible personal property, including towers (other than
towers on Target 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
Target's cable business are set forth on Schedule 3.12. Target has exclusive,
good and marketable title to (or, in the case of assets that are leased, valid
leasehold interests in) the Target assets. Target's assets are free and clear of
all liens, except (a) permitted liens, and (b) liens which will be terminated,
released or, in the case of the rights of first refusal, waived, as appropriate,
at or prior to the Closing. Target's tangible personal property is in good
operating condition and repair (ordinary wear and tear excepted).
10
<PAGE> 11
Section 3.13. Liabilities and Obligations. Except as set forth in
Schedule 3.13, the Financial Statements provided reflect all liabilities of
Target, including all reserves, if applicable, and any liabilities not required
to be reflected or reserved are not material to. the financial condition or
prospects of Target's business. Except as set forth in the Financial Statements,
Target is not liable upon or with respect to, or obligated in any other way to
provide funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity, and Target knows of no basis for the
assertion of any other claims or liabilities of any nature or in any amount.
Section 3.14. Absence of Certain Changes. Any other provisions of this
Agreement to the contrary notwithstanding, it is understood and agreed that
cash, cash equivalents, and any Shareholder capital contributions or loans
available to Target may be expended by Target in order to enable Target to pay
the costs and expenses associated with the consummation of this transaction and
the simultaneous transactions involving Target's affiliated companies (including
but not limited to: substantial employee bonuses outside the ordinary course of
business, sales commissions; attorneys, accountant and other professional fees;
telephone, delivery and copying charges; travel expenses; other closing
expenses; wind-up costs; final taxes and other similar or dissimilar costs)
and/or paid out as dividends or distributions to the Shareholders, provided that
such expenditures do not limit or impair Target's ability to carry on its
business in the ordinary course between the date hereof and the Closing Date,
and do not reduce the amount by which current assets exceed current liabilities
to less than zero (0). Except as set forth above and in Schedule 3.14, since
March 31, 1999, Target has not, except in the ordinary course of business:
(a) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Target, in its condition (financial or otherwise),
operations, assets, liabilities, business or prospects;
(b) contracted for the purchase of any capital assets not to exceed
$10,000, without Parent's prior approval, other than those identified in
Target's financial statements dated December 31, 1998, previously provided to
Parent or other than those used or to be used in Target's routine and regular
ongoing plant expansion program;
(c) incurred any indebtedness for borrowed money or issued or sold any
debt securities;
(d) incurred or discharged any liabilities or obligations;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or canceled any debts or claims or released or waived any rights or claims
except write-offs of accounts receivable in accordance with Target's regular
subscriber disconnect and account write-off,
11
<PAGE> 12
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(g) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could reasonably be expected to materially and adversely affect,
its business;
(h) acquired or disposed of any assets;
(i) written up or written down the carrying value of any of its assets;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) waived any material rights or forgiven any material claims;
(l) lost or terminated any employee, customer or supplier, the loss or
termination of which has materially and adversely affected, or could reasonably
be expected to materially and adversely affect, its business or assets;
(m) increased the compensation of or paid any bonus to any director or
officer;
(n) increased the compensation of or paid any bonus to any employee;
(o) made any payments to or loaned any money to any person or entity
referred to in Section 3.33;
(p) formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to such capital stock or securities, or agreed to
change the terms and conditions of any such rights;
(r) entered into any agreement with any person or group, or modified or
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
(s) entered into, adopted or amended any Employee Benefit Plan (as
hereinafter defined); or
(t) entered into any other commitment or transaction or experienced any
other event that is material to this Agreement or to any of the other agreements
and documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or
12
<PAGE> 13
that has materially and adversely affected, or could materially and adversely
affect, the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target taken as a whole.
Section 3.15. Title, Leased Assets.
(a) Real Property. A description of all interests in real property
owned by Target (collectively, the "Real Property") is set forth in Schedule
3.15(a). Except as set forth in Schedule 3.15(a), Target has good, valid and
marketable title to all the Real Property. The Real Property and the leased real
property referred to in Section 3.15(c) constitute the only real property used
in the conduct of the business of Target.
(b) Personal Property. Except as set forth in Schedule 3.15(b), Target
has good, valid and marketable title to all tangible and intangible personal
property owned by them (collectively, the "Personal Property"). The Personal
Property and the leased personal property referred to in Section 3.15(c)
constitute the only personal property used in the conduct of the business of
Target.
(c) Leases. A list and brief description of all leases of real and
personal property to which Target is a party, either as lessor or lessee, are
set forth in Schedule 3.15(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
(d) Right to Use Assets. Except for those assets acquired since
December 31, 1998, which are listed in Schedule 3.15(d), all tangible and
intangible assets used in the conduct of the business of Target are reflected in
the Financial Statements in a manner that is in conformity with past accounting
practices of Target, consistently applied. Target owns, leases or otherwise
possesses a right to use all assets used in the conduct of the business of
Target, which will not be impaired by the consummation of the transactions
contemplated hereby.
Section 3.16. Commitments.
(a) Commitments; Defaults. Except as set forth in Schedules attached
hereto, Target has not entered into, and the Stock, the assets, and the business
of Target are not bound by, whether or not in writing,
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
13
<PAGE> 14
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation relating
to indebtedness for borrowed money or money lent or to be lent to
another;
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or
attorneys;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
(x) agreement between Target and any affiliate of Target;
(xi) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an
affiliate of Target;
(xii) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving, more than
$10,000 in the aggregate;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or agreement that involves either an
unperformed commitment in excess of $5,000 or that terminates
more than 30 days after the date hereof,
(xvi) agreement relating to any material matter or transaction in
which an interest is held by any person or entity referred to in
Section 3.33;
(xvii) agreement providing for the purchase from a supplier of
all or substantially all of the requirements of Target of a
particular product or service; or
(xviii) any other agreement or commitment not made in the
ordinary course of business or that is material to the business
or financial condition of Target.
14
<PAGE> 15
All of the foregoing items which are listed on the attached Schedules
are hereinafter collectively referred to as the "Commitments." True, correct and
complete copies of the written Commitments, and true, correct and complete
written descriptions of any oral Commitments, have heretofore been delivered or
made available to Parent. There are no material existing defaults, events of
default or events, occurrences, acts or omissions which, with the giving of
notice or lapse of time or both, would constitute material defaults by Target
and no penalties have been incurred nor are amendments pending, with respect to
the Commitments. The Commitments are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their
respective terms, and no defenses, offsets or counterclaims have been asserted,
or to the knowledge of Target may be made by any party thereto, nor has Target
waived any rights thereunder. Target has not received notice of any default with
respect to any Commitment.
(b) No Cancellation or Termination of Commitment. Except as
contemplated hereby, Target has not received notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment or agreement, and Target knows of no fact that would justify the
exercise of such a right. Target does not currently contemplate, or have reason
to believe any other person or entity currently contemplates, any amendment or
change to any Commitment. Except as listed in Schedule 3.16(b), to the knowledge
of Target, none of the customers or suppliers of Target have refused, or
communicated that they will or may refuse, to purchase or supply goods or
services, as the case may be, or have communicated that they will or may
substantially reduce the amounts of goods or services that they are willing to
purchase from, or sell to, Target.
Section 3.17. Adverse Agreements. Target is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation not
generally applicable to other cable television system operators that materially
and adversely affects, or so far as Target can now reasonably foresee, may in
the future materially and adversely affect, the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Target.
Section 3.18. Insurance. A list and brief description of all insurance
policies of Target are set forth in Schedule 3.18. All of such policies are
valid and enforceable policies, issued by insurers of recognized responsibility
and in amounts and against such risks and losses as are customary in its
industry. Such insurance shall be outstanding and duly in force without
interruption up to and including the Closing Date. True, complete and correct
copies of all such policies have been provided to Parent on or prior to the date
hereof.
Section 3.19. Subscribers. Target represents that the cable system
shall have at least 8,949 Equivalent Basic Subscribers as of the Closing Date.
Section 3.20. [Reserved]
15
<PAGE> 16
Section 3.21. Trade Secrets and Customer Lists. Target has the right to
use, free and clear of any claims or rights of others, except claims or rights
specifically set forth in Schedule 3.21, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Target. Target is not using
or in any way making use of any confidential information or trade secrets of any
third party.
Section 3.22. Taxes.
(a) Filing of Tax Returns. Target has duly and timely filed with the
appropriate governmental agencies all tax returns (including information
returns) and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such tax
returns or reports are complete and accurate and properly reflect the taxes of
Target for the periods covered thereby.
(b) Payment of Taxes. Target has paid or accrued, if applicable, all
taxes, penalties and interest which have become due with respect to any returns
that it has filed and any assessments of which it is aware. Target is not
delinquent in the payment of any tax, assessment or governmental charge.
(c) No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as listed in Schedule 3.22(c), no tax deficiency or delinquency has been
asserted against Target. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of Target
that could be asserted by any taxing authority. There is no taxing authority
audit of Target pending, or threatened, and the results of any completed audits
are properly reflected in the Financial Statements of Target. Target has not
violated any federal state, local or foreign tax law.
(d) No Extension of Limitation Period. Target has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
(e) All Withholding Requirements Satisfied. All monies required to be
withheld by Target and paid to Governmental agencies for all taxes have been (i)
collected or withheld and either paid to the respective Governmental agencies or
set aside in accounts for such purpose, or (ii) properly reflected in the
Financial Statements of Target.
(f) State Unemployment Taxes. In respect of its most recently completed
reporting period and all previous reporting periods, Target has paid state
unemployment taxes to all applicable states at the appropriate rates for the
wages paid by Target during such period which were subject to such tax.
(g) Reasonable Expenditures. All amounts paid by Target (i) to
officers, employees,
16
<PAGE> 17
consultants and agents as salaries, compensation, and expenses reimbursed by
Target, or (ii) as rental payments, have been in amounts which are ordinary and
necessary for income tax purposes pursuant to Section 162 of the Internal
Revenue Code.
(h) Tax Liability in Financial Statements. The liabilities (including
deferred taxes) shown in Target's December 31, 1998 Financial Statements and to
be accrued on the books and records of Target through the Closing Date for
taxes, interest and penalties are and will be adequate accruals and have been
and will be accrued in a manner consistent with the practices utilized for
accruing, tax liabilities in the tax year ended December 31, 1998 and take into
account net operating losses, investment credits and other carryovers for
periods ended prior to the Closing Date. This subsection shall not apply to the
extent that Target is a sub-chapter S corporation under the Code.
(i) Foreign Investment in U.S. Real Property. The Shareholders are not
foreign persons, as such term is used in Section 1445(b)(2) of the Code.
(j) Tax Exempt Entity. None of the assets of Target are or will be
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Code.
(k) Collapsible Corporation. Target has not at any time consented, and
the Shareholders will not permit Target to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(l) Change in Accounting Method. Target has not voluntarily or
involuntarily changed a method of accounting resulting in Target's inclusion of
amounts in income pursuant to the adjustment provisions of Section 481 of the
Code.
(m) C corporation. Target is not currently a C corporation as such term
is defined in the Internal Revenue Code.
Section 3.23. Compliance with Laws. Target has complied in all material
respects with all laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports. There are no
existing violations by Target of any federal, state or local law or regulation
that could materially and adversely affect the property or business of Target.
Target possesses all necessary licenses, franchises, permits and governmental
authorizations material to the conduct of its business as now conducted, all of
which are listed in Schedule 3.23.
Section 3.24. Finder's Fee. Neither Target nor the Shareholders have
incurred any obligation for any Finder's or broker's fee in connection with the
transactions contemplated hereby, except for those identified on Schedule 3.24.
17
<PAGE> 18
Section 3.25. Litigation. Except as described in Schedule 3.25, there
are no legal actions or administrative proceedings or investigations instituted,
or to the knowledge of Target threatened, against or affecting, or that could
materially affect, Target, the Stock, or the business of Target. Target is not
(i) subject to any continuing court or administrative order, writ, injunction or
decree applicable specifically to Target or its businesses, assets, operations
or employees, or (ii) in default with respect to any such order, writ,
injunction or decree. Target knows of no basis for any such action, proceeding
or investigation.
Section 3.26. Condition of Fixed Assets. All of the plants, structures
and equipment (the "Fixed Assets") owned by Target are in good condition and
repair, ordinary wear and tear excepted, for their intended use in the ordinary
course of business, (provided, however, that such representations and warranties
are intended to describe the condition of such property in general, and not to
warrant the condition of each and every item of such property) and conform in
all material respects with all applicable ordinances, regulations and other laws
and there are no known latent defects therein.
Section 3.27. Inventory. All of the tangible inventory owned by Target
is in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Target has, and at the Closing Date will have, the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
Section 3.28. Books of Account. The books of account of Target have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Target have been properly recorded in such books. All
such accounts receivable have arisen from bona fide transactions in the ordinary
course of business and are valid and enforceable claims subject to the usual and
typical delinquencies and non-payments, and to Target's standard disconnect and
write-off policies which are described in Schedule 3.30.
Section 3.29. Corporate Name. There are no actions, suits or
proceedings pending, or to the knowledge of Target threatened, against or
affecting Target that could result in any impairment of the right of Target to
use the name "Cablevision of Pflugerville, Inc." The use of the name
"Cablevision of Pflugerville, Inc." does not infringe the rights of any third
party nor is it confusingly similar with the corporate name of any third party.
After the Closing Date, no person or business entity other than Target will be
authorized, directly or indirectly, to use the name "Cablevision of
Pflugerville, Inc." or any name confusingly similar thereto.
Section 3.30. Accounts Receivable. Schedule 3.30 sets forth the
accounts receivable of Target from sales made as of April 30, 1999 and the
payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the
18
<PAGE> 19
ordinary course of business and are valid and enforceable claims subject to no
right of set-off or counterclaim.
Section 3.31. Product Warranties. There is no claim against or
liability of Target on account of product warranties or with respect to the
manufacture, sale or rental of defective products or services and there is no
basis for any such claim on account of defective products or services heretofore
manufactured, sold or rented that is not fully covered by insurance.
Section 3.32. Banking Relations. Set forth in Schedule 3.32 is a
complete and accurate list of all arrangements that Target has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
Section 3.33. Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.33, no officer, supervisory employee, director or
shareholder of Target, or their respective spouses or children, owns directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer or director of, any customer or supplier of Target, or any
organization that has a material contract or arrangement with Target except for
ownership of one percent (1 %) or less of the outstanding stock of any publicly
traded corporation.
Section 3.34. Investments in Competitors. Shareholders do not own,
directly or indirectly, any material interests or has any material investment in
any corporation, business or other person that is a competitor of Target within
the service area of Target.
Section 3.35. Employee Matters.
(a) Cash Compensation. Schedule 3.35(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Target who are
currently compensated at a rate in excess of $12,000 per year and who earned in
excess of such amount during the preceding fiscal year. In addition, Schedule
3.35(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of Target during the current and immediately
preceding fiscal year of Target, and (ii) any promised increases in Cash
Compensation of employees of Target that have not yet been effected.
(b) Compensation Plans. Schedule 3.35(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Target or to which Target contributes on
behalf of its employees, other than Employee Benefit Plans listed in Schedule
3.36(a). The Compensation Plans include without limitation plans, arrangements
or practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options. Target has
provided Parent
19
<PAGE> 20
a copy of each written Compensation Plan and a written description of each
unwritten Compensation Plan. Each of the Compensation Plans can be terminated or
amended at will by Target.
(c) Employees.
1) TCA Management Company, a wholly owned subsidiary of Parent,
may, but shall have no obligation to employ or offer employment to any employee
of Target. Within ten (10) days of closing of this Agreement, TCA Management
Company will provide to Target, in writing, a list of employees which TCA
Management Company desires to employ following the Closing. Prior to Closing,
Target shall terminate the employment of all its employees who are not
designated for employment by TCA Management Company.
2) Nothing in this Section 3.35(c)(l)-(2) or elsewhere in this
Agreement shall be deemed to make any employee of Target a third party
beneficiary of this Agreement.
(d) Employment Agreements. All written or oral employment agreements
(the "Employment Agreements") which exist between Target and its employees,
including, agreements containing covenants not to compete, are listed on
Schedule 3.35(d). Target has provided Parent a copy of each written Employment
Agreement and a written description of each unwritten Employment Agreement, if
any. Except as described on Schedule 3.35(d) Target has no employment
agreements, either written or oral, with any employees of Target and none of the
employment agreements listed on Schedule 3.35(d) requires TCA Management Company
or Parent to employ any person after the Closing.
(e) Employee Policies and Procedures. Schedule 3.35(e) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Target. Target has provided Parent a copy of all written Employee
Policies and Procedures. Each of the Employee Policies and Procedures can be
amended or terminated at will by Target, except as prohibited by law.
(f) Unwritten Amendments. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(g) Labor Compliance. Except as set forth in Schedule 3.35(g), Target:
(i) has been and is in compliance in all material respects with
all laws, rules, regulations and ordinances respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and
(ii) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing in excess of $5,000.
20
<PAGE> 21
Target has not engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices.
There are no:
(i) unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, age or handicap
discrimination charges or complaints, pending or to the
knowledge of Target threatened, against Target before any
federal, state or local court, board, department, commission
or agency nor does any basis therefor exist, or
(ii) existing, or to the knowledge of Target threatened, labor
strikes, disputes, grievances, controversies or other labor
troubles affecting Target and no basis therefor exists.
(h) Unions. Target has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of Target
are represented by any union, labor organization or collective bargaining unit.
To the knowledge of Target, the employees of Target have no intention to and
have not threatened to organize or join a union, labor organization or
collective bargaining unit.
(i) Aliens. All employees of Target are citizens of, or are authorized
to be employed in, the United States.
Section 3.36. Employee Benefit Plans.
(a) Identification. Schedule 3.36(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Target or to which Target contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Target has provided Parent with copies of all plan documents,
determination letters, pending, determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. After
the Closing, Parent shall not be required, under ERISA, the Code or any
collective bargaining agreement, to establish, maintain or continue any Target
Employee Benefit Plans currently maintained by Target or any of its ERISA
Affiliates, except as required by applicable state or federal law.
(b) Administration. Each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations.
21
<PAGE> 22
(c) Examinations. No Employee Benefit Plan is currently the subject of
an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
(d) Prohibited Transactions. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) Claims and Litigation. No claims, suits or other proceeding are
pending, or to the knowledge of Target are threatened, with respect to any
Employee Benefit Plan other than normal benefit claims filed by participants or
beneficiaries.
(f) Qualification. Target has received a favorable determination letter
or ruling from. the Internal Revenue Service for each Employee Benefit Plan
intended to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. No proceedings are
pending, or to the knowledge of Target are threatened, that could result in the
revocation of any such favorable determination letter or ruling.
(g) Funding Status. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning, of Section 412(n)(6)(B) of the Code) in
which Target is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing, basis as of the date hereof. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such plan are at
least equal in value to the present value of accrued benefits as of the date
hereof. Schedule 3.36(g) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued benefits
under all Employee Benefit Plans subject to actuarial assumptions.
(h) Excise Taxes. Neither Target nor any member of a Controlled Group
has any liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
(i) Multiemployer Plans. Neither Target nor any member of a Controlled
Group is or ever has been obligated to contribute to a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Target or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
22
<PAGE> 23
(k) Medical and Dental Care Claims. Target shall use reasonable efforts
to provide a complete and accurate list of all claims made (without identifying
specific individuals) under any medical or dental care plan or commitment
offered by Target to its employees involving hospitalization, medical or dental
care claims that have exceeded $500 per year for an individual during the period
January 1, 1998 to December 31, 1998.
(l) Retirees. Target does not have any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with Target except as required under applicable law, rule or
regulation.
Section 3.37. Investment Intent. Each Shareholder acknowledges that his
or its Closing Shares are being acquired without any view to a transfer, sale,
assignment or other distribution thereof other than a transfer, sale, assignment
or other distribution not in violation of the Securities Act of 1933, as
amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit 1.05, and agree to remain subject to the
representations, warranties and covenants made therein after the Closing Date.
Section 3.38. Environmental Matters.
(a) Environmental Laws. Neither Target nor any of its assets, are
currently in violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
including without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq. as
amended from time to time ("CERCLA")) (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time ("RCRA"), and regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, relating to asbestos or
polychlorinated biphenyls, and (iv) the provisions contained in any applicable
state statutes, rules or orders pertaining to environmental matters, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the assets and operations of
Target.
(b) Use of Assets. To the knowledge of Target, the assets of Target
have never been used in a manner that would be in violation of any of the
Environmental Laws, including without limitation, CERCLA or RCRA.
(c) Permits. Target has not obtained, and is not required to obtain,
and Target has no knowledge of any reason Parent will be required to obtain, any
permits, licenses or similar
23
<PAGE> 24
authorizations to construct, occupy, operate or use any buildings, improvements,
fixtures and equipment owned or leased by Target or by reason of any
Environmental Laws.
(d) Superfund List. To the knowledge of Target, none of the assets
owned or leased by Target are on any federal or state "Superfund" list or
subject to any environmentally related liens.
Section 3.39. Certain Payments. To the knowledge of Target, neither
Target nor any director officer or employee of Target has paid or caused to be
paid, directly or indirectly, in connection with the business of Target:
(a) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by Target
or as otherwise permitted by applicable law).
Section 3.40. Accuracy of Information Furnished. All information
furnished to Parent by Target hereby or in connection with the transactions
contemplated hereby is true, correct and complete in all material respects. Such
information states all facts required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub each represent and warrant that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
Section 4.01. Organization and Good Standing. Parent and Sub are Texas
corporations, both of which are duly organized, validly existing and in good
standing under the laws of the State of Texas, with all requisite power and
authority to carry on the businesses in which they are engaged, to own the
properties they own, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
Section 4.02. Authorization and Validity. The execution, delivery and
performance by Parent and Sub of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Parent and Sub. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Parent and Sub and constitute or
will constitute legal, valid and binding obligations of Parent and Sub,
enforceable against Parent
24
<PAGE> 25
and Sub in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The Closing Shares, when
issued in compliance with the provisions o f the Agreement, will be validly
issued, fully paid, non-assessable, not issued in violation of any preemptive
rights, and will be free from all taxes, liens, charges and other encumbrances,
subject to the terms and provisions of the Letter of Investment Intent.
Section 4.03. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the representative organizational
documents of Parent and Sub or any agreement, indenture or other instrument
under which Parent or Sub is bound, (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Parent or Sub
or the properties or assets of Parent or Sub, or (iii) violate or conflict with
any laws, rules or regulations, including but not limited antitrust laws, or
that of any applicable jurisdiction or any applicable public, governmental or
regulatory agency or body.
Section 4.04. Finder's Fee. Neither Parent nor Sub has incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
Section 4.05. Closing Shares. Upon consummation of the merger and
delivery of the Closing Shares (including additional shares delivered as a
result of adjustments called for in this Agreement), each of the Closing Shares
will be (a) duly authorized, validly issued, fully paid, and non-assessable,
with no personal liability attached thereto, and free and clear of any liens or
preemptive rights (unless imposed at the direction of a Shareholder); (b) issued
pursuant to a valid exemption from registration under the Securities Act of 1933
and the Texas Securities Act; (c) covered by a valid resale statement filed with
the Securities and Exchange Commission; and (d) freely tradable in resale
transactions by the Shareholders as of the Closing Date.
ARTICLE V
The Covenants of Target
Target makes the following covenants relating to the period between the
date hereof and the Closing.
Section 5.01. Consummation of Agreement. Target shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions.
Section 5.02. Business Operations. Except as authorized by this
Agreement and its other terms and conditions, Target shall operate its business
in the ordinary course and will not
25
<PAGE> 26
introduce any new method of management or operation. Target shall use its best
efforts to preserve the business of Target intact, to retain the present
customers and suppliers so that they will be available to Parent after the
Closing. Target shall not take any action that could adversely affect the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Target without the prior written consent of Parent or take or fail
to take any action that would cause or permit the representations made in
Article III to be inaccurate at the time of Closing or preclude Target from
making such representations and warranties at the Closing.
Section 5.03. Access. Target shall permit Parent and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Target, including its employees, customers and suppliers,
and permit Parent and its authorized representatives to inspect and make copies
of all documents, records and information with respect to the affairs of Target
as Parent and its representatives may request, all for the sole purpose of
permitting Parent to become familiar with the business and assets and
liabilities of Target.
Section 5.04. Material Change. Target shall promptly inform Parent in
writing, of any material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Target.
Notwithstanding the disclosure to Parent of any such material adverse change,
Target shall not be relieved of any liability for, nor shall the providing of
such information by Target to Parent be deemed a waiver by Parent of the breach
of any representation or warranty of Target contained in this Agreement.
Section 5.05. Approvals of Third Parties. Target, with the cooperation
and assistance of Parent and Sub, shall use its best efforts to secure, as soon
as practicable after the date hereof, all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
Section 5.06. Employee Matters. Target shall not, without the prior
written approval of Parent, except as required by law:
(a) increase the Cash Compensation of any employee of Target;
(b) adopt, amend or terminate any Compensation Plan, Employment
Agreement, Employee Policies and Procedures or Employee Benefit Plan;
(c) institute, settle or dismiss any employment litigation;
(d) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit;
(e) take or fail to take any action with respect to any past or present
employee of Target that could adversely affect the business of Target;
26
<PAGE> 27
(f) take any action that would deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(g) fail to pay any premium or contribution due with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee
Benefit Plan; or
(i) take or fail to take any action that could adversely affect any
Employee Benefit Plan.
Section 5.07. Contracts. Except with Parent's prior written consent,
Target shall not waive any right or cancel any contract, debt or claim or assume
or enter into any contract, lease, license, obligation, indebtedness,
commitment, or purchase or sale, except in the ordinary course of business.
Section 5.08. Changes in Inventory. Target shall not alter the physical
contents or character of its raw materials, work-in-process or finished goods
inventory or the mixture of products in its finished goods inventory so as to
affect the nature of its business or result in a change in the total dollar
valuation thereof.
Section 5.09. Capital Assets; Payments of Liabilities. Target shall
not, without the prior written approval of Parent, (i) acquire or dispose of any
capital asset, or (ii) discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (a) liabilities and obligations
reflected in the Financial Statements, or (b) current liabilities and
obligations incurred in the ordinary course of business and, in the case of
either (a) or (b) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
Section 5.10. Mortgages, Liens and Guaranties. Target shall not,
without the prior written approval of Parent, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets,
whether now owned or hereafter acquired, or guarantee or otherwise become
contingently liable for any obligation of another, except obligations arising by
reason of endorsement for collection and other similar transactions in the
ordinary course of business, or make any capital contribution or investment in
any corporation, business or other person.
Section 5.11. No Negotiation with Others. Target shall not solicit or
participate in negotiations with (and Target shall use its best efforts to
prevent any affiliate, shareholder, director, officer, employee or other
representative or agent of Target from negotiating with, soliciting or
participating in negotiations with) any third party with respect to the sale of
the business of Target or any transaction inconsistent with those contemplated
hereby.
27
<PAGE> 28
Section 5.12.
(a) Income Tax Refunds. The Shareholders have no claim to or interest
in any income tax refunds which Target may receive after the Closing Date
relating to tax periods prior to the Closing Date.
(b) Cooperation. The Target, on the one hand, and Parent and Sub, on
the other hand, shall each provide such assistance to the other as may be
reasonably requested in connection with the preparation of any tax return
required to be filed in respect of Target or any of the Shareholders, any audit
or other examination by any taxing authority, any judicial or administrative
proceeding relating to liability for taxes, or any claim for refund in respect
of such taxes, and the Shareholders, Parent and Sub will retain, and upon
request provide, any records or information which may be relevant to such
return, audit, examination, proceeding or claim. Such assistance shall include
(i) making employees or counsel available at and for reasonable times to provide
additional information and explanation of any material to be provided hereunder,
and (ii) furnishing access to, and permitting the copying of any records,
returns, schedules, documents, work papers or other relevant materials which
might reasonably be expected to be of use in connection with such return, audit,
examination, proceeding or claim.
Section 5.13. Registration Statement. Target and Shareholders shall
provide to Parent such information and assistance as Parent may request in
connection with Parent's efforts to prepare, file and maintain the effectiveness
of the Registration Statement.
Section 5.14. Section 626 of the Cable Act. Target represents that it
has duly and timely filed a valid notice of renewal under Section 626 of the
Cable Act with the appropriate governmental authority with respect to any
Systems Franchises that will expire within 36 months of the Closing Date.
Section 5.15. Required Consents; Franchise Renewal.
(a) Target 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
Target in connection with the transactions contemplated by this Agreement,
substantially in the form attached hereto as Exhibit 5.15 and deliver to Parent
copies of such Required Consents and such other consents, authorizations or
approvals promptly after they are obtained by Target; provided, however, that
Target will afford Parent the opportunity to review, approve and revise the form
of Required Consent prior to delivery to the third party whose consent is
sought. Parent will cooperate with Target 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 Systems
Franchises, Systems Licenses, Systems Contracts or leases or documents
evidencing Leased Property or Other Real Property Interests of its Cable
Business that are not acceptable to the other.
28
<PAGE> 29
Section 5.16. Hart-Scott-Rodino Filing. Target agrees to cooperate with
Parent to file, or caused to be filed, at the expense of Parent, on such date as
Parent, Sub and Target shall mutually agree, with the U.S. Department of Justice
("DOJ") and Federal Trade Commission ("FTC") all filings, if any, that are
required in connection with the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), as amended,
within ten (10) business days after the date of this Agreement and to request
early termination of the waiting period following the filing thereof; (b)
cooperate with each other in connection with such HSR Act filings, which
cooperation shall include furnishing the other with any information or documents
that may be reasonably required in connection with such filings; (c) promptly
file, after any request by the FTC or DOJ and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (e) furnish each other with any correspondence
from or to, and notify each other of any other communications (and the substance
thereof) with, the FTC or DOJ that relates to the transaction contemplated
hereunder, and to the extent practicable, to permit each other to participate in
any conferences with the FTC or DOJ.
ARTICLE VI
Covenants of Parent and Sub
Section 6.01. Consummation of Agreement. Parent and Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions.
Section 6.02. Registration of Resale of Closing Shares. Parent and Sub
shall as a condition to closing (i) on or prior to May 1, 1999, or as soon as
possible thereafter, file with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") registering under the Securities Act the sale by Shareholders of the
Closing Shares, (ii) cause the Registration Statement to be declared effective
by the Commission and pursuant to Sections 1.04 and 3.38 herein, and (iii)
maintain the effectiveness of the Registration Statement for a period of two (2)
years from the Closing Date. Parent and Sub shall at the expiration of two (2)
years from the Closing Date also cause the deletion of any registration-related
legends on the Closing Shares.
Section 6.03. Hart-Scott-Rodino Filing. Parent and Sub agree to (a)
file, or caused to be filed, at the expense of Parent, on such date as Parent,
Sub and Target shall mutually agree, with the U.S. Department of Justice ("DOJ")
and Federal Trade Commission ("FTC") all filings, if any, that are required in
connection with the transactions contemplated hereby under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), as amended, within
ten (10) business days after the date of this Agreement and to request early
termination of the waiting period following the filing thereof, (b) cooperate
with each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents that may be
reasonably required in connection with such filings; (c) promptly file,
29
<PAGE> 30
after any request by the FTC or DOJ and after appropriate negotiation with the
FTC or DOJ of the scope of such request, any information or documents requested
by the FTC or DOJ; and (e) furnish each other with any correspondence from or
to, and notify each other of any other communications (and the substance
thereof) with, the FTC or DOJ that relates to the transaction contemplated
hereunder, and to the extent practicable, to permit each other to participate in
any conferences with the FTC or DOJ.
Section 6.04. Continuity of Business Enterprise. Parent and Sub agree
that Sub will continue to operate the historic business of Target or use a
significant portion of Target's historic business assets in a business, as
required by the continuity of business enterprise doctrine as set forth in
Treas. Reg. Section 368-1(d).
ARTICLE VII
Parent's Conditions Precedent
Except as may be waived in writing by Parent and Sub, the obligations
of Parent and Sub hereunder are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
Section 7.01. Representations and Warranties. The representations and
warranties of Target and the Shareholders contained herein shall have been true
and correct in all material respects when initially made and shall be true and
correct in all material respects as of the Closing Date; and Parent and Sub
shall have received a certificate from each of Target's President, dated as of
the Closing Date, to the foregoing., effect.
Section 7.02. Covenants and Conditions. Target shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by Target prior to the Closing
Date; and Parent and Sub shall have received a certificate from each of Target's
President, dated as of the Closing, Date, to the foregoing effect.
Section 7.03. Proceedings. No action, precaution or order by any court
or governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 7.04. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target shall have occurred since the date of the most
recent balance sheet of each included in the Financial Statements, whether or
not such change shall have been caused by the deliberate act or omission of
Target.
30
<PAGE> 31
Section 7.05. Resignations of Directors and Officers. Parent and Sub
shall have received the resignations of the directors and officers of Target to
the extent requested.
Section 7.06. Closing Deliveries. Parent shall have received all
documents referred to in Section 2.01 hereof, duly executed in form satisfactory
to Parent and its counsel.
Section 7.07. Tax Affidavit. Parent shall have received a nonforeign
affidavit, as such affidavit is referred to in Section 1445(b)(2) of the Code,
of Target, signed under penalties of perjury and dated as of the date of the
Closing Date, to the effect that Target is not a foreign person (as such term is
defined in Section 1445(f)(3) of the Code) and providing Target's United States
taxpayer identification number.
Section 7.08. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Williamson County
Cablevision Company and Cablevision of Leander, Inc. to be final and effective.
Section 7.09. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
ARTICLE VIII
The Conditions Precedent of Target and the Shareholders
Except as may be waived in writing by Target and the Shareholders, the
obligations of Target and the Shareholders hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and
warranties of Parent and Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date; and Parent and Sub shall have
delivered to the Shareholders certificates of Parent's and Sub's respective
President or Vice President, dated as of the Closing Date, to the foregoing
effect.
Section 8.02. Covenants and Conditions. Parent and Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date; and Parent shall have delivered to the Shareholders
certificates of Parent's and Sub's President or Vice President, dated as of the
Closing Date, to the foregoing effect.
31
<PAGE> 32
Section 8.03. Proceedings. No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 8.04. Closing Deliveries. Target or the Shareholders, as the
case may be, shall have received all documents referred to in Section 2.02.
Section 8.05. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Williamson County
Cablevision Company and Cablevision of Leander, Inc. to be final and effective.
Section 8.06. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
Section 8.07. Registration Statement Effective. The registration
statement filed by Parent pursuant to Section 1.05 shall have been declared
effective and sales of securities may be made thereunder.
ARTICLE IX
Post Closing Matters
Section 9.01. Further Instruments of Transfer. Following the Closing,
at the request of Parent, the Shareholders shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
carry out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
ARTICLE X
Remedies
Section 10.01. Indemnification by the Shareholders. Subject to the
terms and conditions of this Article, the Shareholders agree to indemnify,
defend and hold Parent and Sub and their respective directors, officers, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
attorneys' fees and expenses (collectively "Damages"), asserted against or
incurred by any of such indemnitees by reason of or resulting from:
32
<PAGE> 33
(a) a breach of any representation, warranty or covenant of Target or
the Shareholders contained herein, in any exhibit, schedule, certificate or
financial statement delivered hereunder, or in any agreement executed in
connection with the transactions contemplated hereby; or
(b) the violation or alleged violation, on or before the Closing Date,
of any Environmental Law, and any and all matters arising out of any act,
omission, event or circumstance existing or occurring on or prior to the Closing
Date (including without limitation the presence on the Real Property or release
from the Real Property, or the generation by Target or any Shareholder of
hazardous substances or solid waste disposed or otherwise released prior to the
Closing Date), regardless of whether the act, omission, event or circumstance
constituted a violation of any Environmental Law at the time of its existence or
occurrence. The terms "hazardous substance" and "release" shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposed" shall
have the meanings specified in RCRA; provided that to the extent that any
applicable statute of any state, any subdivision thereof or any other
governmental body or agency of competent jurisdiction over the matter, establish
a meaning for "hazardous substance," "release," "solid waste" or "disposed" that
is broader than that specified in either CERCLA or RCRA, such broader meaning,
shall apply.
(c) The provisions of this Section 10.0 1 shall survive the Closing two
(2) years after the Closing Date, and after such date the Shareholders shall
have no liability whatsoever to Parent, Sub or their directors, officers,
agents, attorneys or affiliates for any of the matters made the subject of this
Section 10.01.
Notwithstanding anything to contrary above:
(d) (i) Target and Shareholders shall not be required to indemnify or
otherwise be liable to Parent and Sub for any breach of a representation or
warranty, or for the breach of any covenant to be performed prior to the
Closing, except to the extent the losses suffered or incurred by Parent or Sub
arising from all such breaches by Target and Shareholders exceed in the
aggregate $50,000.
(ii) Target and Shareholders shall not be required to
indemnify or otherwise be liable to Parent and Sub for any breach of a
representation or warranty, or for the breach of any covenant to be performed
prior to the Closing, to the extent the losses suffered or incurred by Parent
and Sub exceed in the aggregate $2,000,000.
Section 10.02. Indemnification by Parent.
(a) Subject to the terms and conditions of this Article, Parent hereby
agrees to indemnify, defend and hold Target and the Shareholders and their
respective directors, officers, agents, attorneys and affiliates harmless from:
33
<PAGE> 34
(b) all Damages asserted against or incurred by any of such indemnitees
by reason of or resulting, from a breach of any representation, warranty or
covenant of Parent or Sub contained herein or in any exhibit, schedule or
certificate delivered hereunder, or in any agreement executed in connection with
the transactions contemplated hereby; or
(c) The violation or alleged violation, after the Closing Date, of any
Environmental Law, and any and all matters arising out of any act, omission,
event or circumstance existing or occurring after the Closing Date (including
without limitation the presence on the Real Property or release from the Real
Property, or the generation by Parent or Sub of hazardous substances or solid
waste disposed or otherwise released after the Closing Date), regardless of
whether the act, omission, event or circumstance constituted a violation of any
Environmental Law at the time of its existence or occurrence. The terms
"hazardous substance" and "release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposed" shall have the meanings specified in
RCRA; provided that to the extent that any applicable statute of any state, any
subdivision thereof or any other environmental body or agency of competent
jurisdiction over the matter, establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposed" that is broader than that specified in
either CERCLA or RCRA, such broader meaning, shall apply.
(d) The provisions of this Section 10.02 shall survive the Closing two
(2) years after the Closing Date, and after such date Parent and Sub shall have
no liability whatsoever to the Shareholders for any of the matters made the
subject of this Section 10.02.
Section 10.03. Conditions of Indemnification. The respective
obligations and liabilities of the Shareholders and Parent (the "indemnitor") to
the other parties (the "indemnitees") under Sections 10.01 and 10.02 with
respect to claims resulting from the assertion of liability by third parties,
shall be subject to the following terms and conditions:
(a) In the event that a legal proceeding or action is commenced against
the indemnitees with respect to any indemnified matter, that indemnitees
promptly will provide written notice thereof to the indemnitor (but in no event
later than ten (10) days after receipt of notice), together with a copy of any
claim, process or other legal pleading. The indemnitor will undertake the
defense thereof, as its expense, by counsel of its own choosing and reasonably
acceptable to the indemnitees provided that the indemnitees may participate in
all aspects of the defense with, or without, counsel of its own choice. In the
event that the indemnitees elect to retain additional counsel of their own
choice, the fees and expenses of said counsel shall be the exclusive
responsibility of the indemnitees unless (i) the indemnitor has agreed to pay
such fees and expenses, (ii) the indemnitor has failed to undertake the defense
of such action, or (iii) if the nature of any action presents a conflict between
the interests of the indemnitor and the indemnitees, or the indemnitees have
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the indemnitor
(in which case, if the indemnitees inform the indemnitor in writing that it
elects to employ separate counsel at the expense of the indemnitor, the
indemnitor shall have no further
34
<PAGE> 35
right to participate in or undertake the defense of such action on behalf of the
indemnitees except with respect to payment of full indemnification for any
Damages).
(b) Except for failure by the indemnitees to provide notice as provided
for above in subsection (a), in the event that the indemnitor, on or before the
thirtieth day after receipt of notice of any such action, or, if applicable and
earlier, on or before the tenth day preceding the day on which an answer,
appearance or other pleading must be served in order to prevent judgment by
default in favor of the person asserting such claim or other prejudice to the
indemnitees, fails to undertake the defense of such action, the indemnitees will
have the right to retain counsel of their own choosing and undertake the
defense, compromise or settlement of such claim for the account and risk of the
indemnitor without waiving the indemnitee's right to full indemnification from
the indemnitor and at the indemnitor's expense, subject to the right of the
indemnitor to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof with counsel reasonably acceptable to
the indemnitees.
(c) Notwithstanding the foregoing, the indemnitor shall not settle any
claim asserted against the indemnitees without the prior consent of the
indemnitees unless such settlement involves only the payment of money and the
claimant provides the indemnitees with a release from all liability in respect
of such claim. If the settlement of any claims involves more than the payment of
money, the indemnitor shall not settle the claim without the prior written
consent of the indemnitees, which consent shall not be unreasonably withheld. In
the event the indemnitor has not undertaken the defense, as described above,
with respect to any claim resulting from the assertion of liability by third
parties, the indemnitor may settle any claim without prior notice to and consent
of the indemnifying party, and indemnitor agrees to promptly, and in any event
within thirty days after receipt of written demand, reimburse indemnitees for
all Damages, including without limitation all amounts paid or incurred in
connection with such settlement, together with attorneys' fees, costs and
expenses and other costs incurred in connection with defense of the claim.
(d) The indemnitees and indemnitor will each cooperate with all
reasonable requests of the other.
Section 10.04. Remedies Not Exclusive. Except as otherwise specifically
provided herein, the remedies provided in this Agreement shall not be exclusive
of any other rights or remedies available to one party against the other, either
at law or in equity.
ARTICLE XI
Termination
Section 11.01. Termination. This Agreement may be terminated:
35
<PAGE> 36
(a) At any time prior to the Closing Date by mutual agreement of all
parties.
(b) At any time prior to the Closing Date by Parent if any
representation or warranty of Target or the Shareholders contained in this
Agreement or in any certificate or other document executed and delivered by
Target or the Shareholders pursuant to this Agreement is or becomes untrue or
breached in any material respect, or if Target or the Shareholders fail to
comply in any material respect with any covenant contained herein.
(c) At any time prior to the Closing Date by the Shareholders if any
representation or warranty of Parent or Sub contained in this Agreement or in
any certificate or other document executed and delivered by Parent or Sub
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Parent or Sub fails to comply in any material respect with any
covenant contained herein.
(d) After the Closing Date by Parent if the conditions stated in
Article VII have not been satisfied by the Closing Date.
(e) After the Closing Date by the Shareholders if the conditions stated
in Article VIII and have not been satisfied by the Closing Date.
(f) At any time prior to the Closing Date by the Shareholders if the
Agreement and Plan of Merger by and among Cox Communications, Inc., Cox Classic
Cable, Inc. and TCA Cable TV, Inc., dated May 11, 1999, is terminated by any
party to that Agreement and Plan of Merger.
(g) Prior to the Closing Date by the Shareholders if the Cox
Communications, Inc., Ten Day Cox Weighted Average Stock Price is below $34.50.
"Ten Day Cox Weighted Average Stock Price" means the quotient of (a)
the sum of ten products determined by multiplying (i) the Daily Closing Stock
Price for a share of Cox Communications, Inc.'s Class A Common Stock for each of
the ten consecutive NYSE trading days ending on the second trading day prior to
the Closing Date by (ii) the number of shares of Cox Communications, Inc.'s
Class A Common Stock traded on the NYSE on the day on which each such Daily
Closing Stock Price occurred divided by (b) the aggregate number of shares of
Cox Communications, Inc.'s Class A Common Stock traded on the NYSE during such
ten trading day period.
"Daily Closing Stock Price" means, with respect to any NYSE trading
day, the amount obtained by multiplying the trading volume of the Cox
Communications, Inc.'s Class A Common Stock on the NYSE for such day by the
closing sales price, regular way (or, if there is no such closing sales price of
the Cox Communications, Inc.'s Class A Common Stock on such day, the last bid
price of the Cox Communications, Inc.'s Class A Common Stock.
36
<PAGE> 37
"Cox Communications, Inc. Class A Common Stock" means the Class A
Common Stock, par value $1.00 per share, of Cox Communications, Inc.
In the event this Agreement is terminated pursuant to subparagraph (b),
(c), (d), (e), (f) or (g) above, Parent, Sub, Target and the Shareholders shall
each be entitled to pursue, exercise and enforce any and all remedies, rights,
powers and privileges available at law or in equity. In the event of a
termination of this Agreement under the provisions of this Article, a party not
then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
ARTICLE XII
Miscellaneous
Section 12.01. Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party, or (ii) proving that another party breached any of the terms of
this Agreement.
Section 12.02. Waiver. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, or any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
Section 12.03. Offset. Any and all amounts owing, or to be paid by
Parent to the Shareholders hereunder or otherwise, shall be subject to offset
and reduction pro tanto by any amounts that may be owing at any time by the
Shareholders to Parent in respect of any failure or breach of any
representation, warranty or covenant of Target or the Shareholders under or in
connection with this Agreement, the Agreement Not to Compete or any other
agreement with Parent or any transaction contemplated hereby or thereby, as
reasonably determined by Parent. If Parent determines that such offset is
appropriate, thirty (30) days' written notice shall be given to Shareholders of
such determination on or prior to the due date of the payment to be reduced.
Section 12.04. Knowledge. "Knowledge," "have no knowledge of," or "do
not know of" and similar phrases shall mean (i) in the case of a natural person,
the particular fact was known,
37
<PAGE> 38
or not known, as the context requires, to such person after reasonable
investigation and inquiry by such person, and (ii) in the case of an entity, the
particular fact was known, or not known, as the context requires, to any
employee of such entity after reasonable investigation and inquiry by the
principal executive officer of such entity.
Section 12.05. Specific Performance. Each of the parties hereto
acknowledges that a refusal by any other party to consummate the transactions
contemplated hereby will cause irreparable harm to each other party for which
there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, each of the parties hereto shall be
entitled, in addition to, and without having to prove the inadequacy of, other
remedies at law, to specific performance of this Agreement, as well as
injunctive relief.
Section 12.06. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
Section 12.07. Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Parent to
an affiliate of Parent.
Section 12.08. Parties In Interest: No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.09. Entire Agreement. This Agreement, the Agreement of
Merger and the agreements contemplated hereby and thereby constitute the entire
agreement of the parties regarding the subject matter hereof, and supersede all
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.
Section 12.10. Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.11. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive the
Closing and all
38
<PAGE> 39
statements contained in any certificate, exhibit or other instrument delivered
by or on behalf of Target, the Shareholders, Sub or Parent pursuant to this
Agreement shall be deemed to have been representations and warranties by Target
or Parent and Sub, as the case may be, and, notwithstanding any provision in
this Agreement to the contrary, shall, survive the Closing for two (2) years
from the date of Closing.
Section 12.12. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
Section 12.13. Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14. Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16. Confidentiality Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules applicable to issuers whose securities are traded
on the National Association of Securities Dealers Automatic Quotation System,
and (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in conducting an examination of the operations and
assets of Target.
Section 12.17. Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing, and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person or
by facsimile transmission. Such notice shall be deemed received on the date on
which it is hand delivered or received by facsimile transmission or on the third
business day following the date on which it is so mailed. For purposes of
notice, the addresses of the parties shall be:
39
<PAGE> 40
If to Parent or Sub:
3015 SSE Loop 323
Tyler, Texas 75701
Attn.: Fred R. Nichols, President
Ph.: (903) 595-3701
Fax: (903) 596-9008
with a copy to:
Jeffrey W. Brown, General Counsel
3015 SSE Loop 323
Tyler, Texas 75701
Ph.: (903) 595-3701
Fax: (903) 596-9008
If to the Shareholders:
Mr. John Muraglia
Meridian Communications, Inc.
670 Marian Street
Denver, Colorado 80202
Mr. Dale Hoffman
111 North College Street
Georgetown, Texas 78626
Mr. Conover Hartin III
111 North College Street
Georgetown, Texas 78626
Mrs. Lola H. McDaniel
Ms. Melissa Lyons Gardner
Mr. Mark A. Lyons
c/o Mr. John W. Lyons, Jr.
2831 Palmer Hwy.
Texas City, Texas 77592
with a copy to:
Mr. Chris Cahill
Mills, Shirley, Eckel & Bassett
P.O. Box 1943
Galveston, Texas 77553-1943
Any party may change its address for notice by written notice given to
the other parties in accordance with this Section.
40
<PAGE> 41
Section 12.18. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE> 42
EXECUTED as of the dates set forth below to be effective as of the date
first above written.
Date: 6/25/99 By: /s/ Robert A. Roseman
-------------------------- --------------------------------------------
Name: Robert A. Roseman
------------------------------------------
Title: Vice President Business Development
-----------------------------------------
TCA CABLE TV OF CENTRAL TEXAS, INC.,
a Texas corporation
Date: 6/25/99 By: /s/ Jeffrey W. Brown
-------------------------- --------------------------------------------
Name: Jeffrey W. Brown
------------------------------------------
Title: Secretary and General Counsel
-----------------------------------------
42
<PAGE> 43
CABLEVISION OF PFLUGERVILLE,
a Texas corporation
Date: 6/25/99 By: /s/ Dale Hoffman
----------------------- --------------------------------------------
Name: Dale Hoffman
------------------------------------------
Title: President
-----------------------------------------
SHAREHOLDERS
Date: By:
----------------------- --------------------------------------------
Name: John Muraglia
Date: 6/25/99 By: /s/ Dale Hoffman
----------------------- --------------------------------------------
Name: Dale Hoffman
Date: 6/25/99 By: /s/ Conover Hartin III
----------------------- --------------------------------------------
Name: Conover Hartin, III
Date: 6/25/99 By: /s/ Lola H. McDaniel
----------------------- --------------------------------------------
Name: Lola H. McDaniel
The Estate of Moran K. McDaniel
Date: 6/25/99 By: /s/ Melissa Lyons Gardner
----------------------- --------------------------------------------
Name: Melissa Lyons Gardner
Title: Co-Executor
Date: 6/25/99 By: /s/ Mark A. Lyons
----------------------- --------------------------------------------
Name: Mark A. Lyons
Title: Co-Executor
43
<PAGE> 1
EXHIBIT 99(c)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of June 25, 1999, is entered into by and among Williamson County
Cablevision Company, a Texas corporation ("Target"), John Muraglia, Dale
Hoffman, Lola H. McDaniel and the Estate of Moran K. McDaniel, Deceased, by and
through its Co-Executors, Melissa Lyons Gardner and Mark A. Lyons (the
"Shareholders"), TCA Cable TV of Central Texas, Inc., a Texas corporation
("Sub"), and TCA Cable TV, Inc., a Texas corporation ("Parent").
WITNESSETH:
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Target (the "Stock"), and desire to cause the merger of Target into Sub
(the "Merger") in exchange for shares of Parent's common stock, $.10 par value.
("TCA Stock");
WHEREAS, Parent desires that Sub acquire the assets and business of
Target pursuant to the Merger, and has established Sub to facilitate the Merger;
WHEREAS, the Shareholders and the respective Boards of Directors of
Parent, Sub, and Target have approved the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") pursuant to the
provisions governing forward triangular mergers.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
Section 1.01. Effect of the Merger.
(a) Subject to the terms and conditions of this Agreement and the
Agreement of Merger executed by Parent, Sub, Target and the Shareholders on the
same date herewith (the "Agreement of Merger"), Target shall be merged into Sub
and the separate existence of Target shall thereupon cease, in accordance with
the applicable provisions of the laws of the State of Texas.
Sub will be the surviving corporation in the Merger (sometimes referred
to herein as the ("Surviving Corporation") and will continue to be governed by
the laws of the State of Texas, and the separate existence of Sub and all of its
rights, privileges, immunities and franchises,
AGREEMENT AND PLAN OF REORGANIZATION - Page 1
<PAGE> 2
public or private, and all its duties and liabilities as a corporation organized
under the laws of the State of Texas and other applicable laws, will continue
unaffected by the Merger.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any member of Sub,
and without any action on the part of any holder of any capital stock of Target,
all outstanding capital stock of Target of any kind or nature shall be canceled
and shall cease to exist.
For the purposes of this Agreement, (i) the term "Closing" shall mean
the closing of the Merger and the other transactions contemplated by this
Agreement at such time and place as shall be mutually agreed upon in writing by
all of the parties hereto, and (ii) the term "Closing Date" shall mean such date
as may be decided solely by the Shareholders of Target by written notice to
Parent and Sub, provided that approvals required by Sections 8.06 and 8.07 have
been obtained.
Section 1.02. Conversion of Target Stock into TCA Stock.
(a) Preliminary Merger Consideration. The value of the
consideration to be paid by Parent to the Shareholders (the "Preliminary Merger
Consideration") shall be $33,988,500, which shall be paid by delivery of 679,770
shares of TCA Stock of Parent, valued for such purposes at $50.00 per share (the
"Closing Shares"). A reasonable amount of the Preliminary Merger Consideration
is allocated by the parties to the Noncompetition Agreement referred to in
Section 2.01 (a) hereof. Following the Effective Time, no Shares of Target shall
be deemed to be outstanding, or to have any rights other than those rights set
forth in this Section 1.02 and in Section 1.3 hereof. The Preliminary Merger
Consideration set forth in this Section 1.02(a) shall be subject to adjustment
as described in Section 1.02(b).
(b) Adjusted Merger Consideration. It is recognized that the
Preliminary Merger Consideration set forth above was calculated based upon the
Target's best estimate of the number of Equivalent Basic Subscribers receiving
Target's basic tier of cable television service as of the Closing Date. The
Preliminary Merger Consideration shall be adjusted to the extent required under
the provisions of Section 1.02(b)(i), (ii), and (iii) set forth below, and as
adjusted shall be referred to as the "Adjusted Merger Consideration."
(i) Subscriber Adjustment. If the actual number of
Target's Equivalent Basic Subscribers on the Closing Date exceeds or is less
than 10,790 by more than three percent (3%), the Preliminary Merger
Consideration shall be increased by the excess or decreased by the deficiency,
as the case may be, by multiplying the excess or deficiency in the number of
such customers by $3,150.00.
"Equivalent Basic Subscribers" shall mean the number of active
customers for Basic Services (as hereinafter defined) either in a single
household, a commercial establishment or a multi-unit dwelling (including a
hotel unit); provided, however, that the number of subscribers in a commercial
AGREEMENT AND PLAN OF REORGANIZATION - Page 2
<PAGE> 3
establishment or multi-unit dwelling that obtain service on a "bulk-rate" basis
shall be determined for each franchise area by dividing the gross bulk-rate
billings for Basic Services and expanded basic services (but excluding billings
from a la carte tiers or premium services, installation or other non recurring
charges, converter rental or any outlet or connection other than the first
outlet or connection, pass-through charges for sales taxes, line-itemized
franchise fees, fees charged by the FCC and the like) attributable to such
commercial establishment or multi-unit dwelling 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 Basic Rate. For purposes of this definition
(i) an "active subscriber" shall mean, as of any date, any person, commercial
establishment or multi-unit dwelling that is paying for and receiving Basic
Services from the System who has an account that is not more than sixty (60)
days past due (except for past due amounts of $5.00 or less, provided such
account is otherwise current) who is not pending disconnection for any reason;
and (ii) the number of days a subscriber account is past due shall be calculated
from the first day of the period for which the applicable billing relates.
"Basic Rate" shall mean the rate charged at the date of determination
to individual households for Basic Services, excluding charges from a la carte
tiers, premium services, pay-per- view television, installation or other
non-recurring charges, converter rental, pass-through charges for sales taxes,
line-itemized franchise fees, fees charged by the FCC and similar frees. "Basic
Services" shall mean the lowest tier of cable television programming sold to
subscribers of the System for which subscribers served by the System pay a fixed
monthly fee to the cable operator, excluding expanded basic services, a la carte
tiers, premium services, pay-per-view television and any charges for additional
outlets and installation fees, any revenues derived from the rental of
converters, remote control devices and other like charges for equipment.
(ii) Guaranteed Merger Consideration Adjustment. Parent guarantees
that the Shareholders will, at Closing, receive shares of Common Stock of TCA
Cable TV, Inc. ("Parent Common Stock") with a total market value at Closing,
equal to or greater than the Preliminary Merger Consideration, regardless of
whether the Ten Day Average Price of Parent's Common Stock is below $50.00 per
share (the "Guaranteed Merger Consideration"). Additionally, Parent guarantees
that after Closing, in the event the merger agreement between Parent and Cox
Communications, Inc., dated May 11, 1999 (the "Cox-TCA Merger Agreement") is
terminated, and that following the announcement of such termination the price of
Parent's Common Stock drops, Parent will deliver additional Parent Common Stock
to the Shareholders such that the Shareholders will have the Guaranteed Merger
Consideration.
1) Ten Day Average Price. For purposes of determining whether
and to what extent any adjustment should be made under this Section
1.02(b)(ii), the ten trading day average closing price for the
Parent Common Stock for the period up to and including the second
day before the Event Date shall control (the "Ten Day Average
Price"). The Event Date in the case of a Guaranteed Merger
Consideration Adjustment at Closing shall be the Closing Date. The
Event Date in the case of a Guaranteed Merger Consideration
Adjustment after Closing shall be the twelfth day
AGREEMENT AND PLAN OF REORGANIZATION - Page 3
<PAGE> 4
after the date of public announcement of termination of the Cox-TCA
Merger Agreement.
2) Method of Adjustment. If the Ten Day Average Price is less
than $50.00 per share, the Preliminary Merger Consideration shall be increased
by an amount equal to the difference between $50.00 and the Ten Day Average
Price, multiplied by the number of Closing Shares. In order to determine the
additional Closing Shares to be delivered to the Shareholders, the resulting
figure shall then be divided by the Ten Day Average Price.
(c) Accounting Adjustment. The Preliminary Merger Consideration shall
also be adjusted in the following, manner to reflect the amount by which
Target's current assets exceed or are less than its current liabilities, each
determined in accordance with past accounting practices of Target: The total
purchase price shall be increased by $1.00 for each $1.00 that current assets
exceed, or decreased by $1.00 for each $1.00 that current assets are less than,
current liabilities as of the close of business on the day preceding the Closing
Date.
(d) Delivery of the Closing Shares. The Closing Shares shall be
delivered by Parent to the Shareholders pursuant to the provisions of this
Agreement.
Section 1.03. Determination and Delivery of Adjustments. The Adjusted
Merger Consideration pursuant to Section 1.02(b) shall be determined and
delivered in accordance with the following procedures:
(a) Subscriber Adjustment. Target shall prepare and deliver to Parent
and Sub not later than ten days before the Closing Date a preliminary settlement
statement (the "Preliminary Settlement Statement") which shall set forth
Target's good faith estimate of Equivalent Basic Subscribers as of Closing and
any adjustments to the Preliminary Merger Consideration under Section
1.02(b)(i). The Preliminary Settlement Statement shall contain all information
reasonably necessary to determine the adjustments to the Preliminary Merger
Consideration under Section 1.02(b)(i), to the extent such adjustments can be
determined or estimated as of the date of the Preliminary Settlement Statement,
and such other information as may be reasonably requested by Parent and Sub.
(b) Guaranteed Merger Consideration Adjustment. With respect to
adjustment to the Preliminary Merger Consideration under Section 1.02(b)(ii),
the Adjusted Merger Consideration shall be delivered to the Shareholder
Representative not later than the tenth business day after the
Event Date.
(c) Accounting Adjustment. With respect to adjustment to the
Preliminary Merger Consideration under Section 1.02(b)(iii), the Adjusted Merger
Consideration shall be delivered to the Shareholder Representative or to the
Parent, as the case may be, not later than the 30th business day after the
Closing Date. No later than 15 days after the Closing Date, Chris Cahill, Mills,
Shirley, Eckel & Bassett, 2228 Mechanic Street, Suite 400, Galveston, Texas
77550 (the "Shareholder
AGREEMENT AND PLAN OF REORGANIZATION - Page 4
<PAGE> 5
Representative"), will deliver to Parent and Sub a statement (the "Accounting
Adjustment") setting forth the Shareholders' determination of the Adjusted
Merger Consideration as adjusted pursuant to Section 1.02(b)(iii) and the
calculation thereof, certified by the Shareholders to be accurate as of the date
delivered.
(d) Form of Consideration. All Subscriber Adjustments, Guaranteed
Merger Consideration Adjustments, and Accounting Adjustment payable to the
Shareholders shall be paid in additional Closing Shares, to the extent possible,
or in cash otherwise. All Accounting Adjustments payable to Parent shall be paid
in cash.
Section 1.04. Tax Status of Merger. The Merger and the transfer of the
Closing Shares to the Shareholders contemplated by this Agreement are intended
by the parties to qualify as a forward triangular tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(P) of the Code, and each of the parties
hereto agrees to act with respect to the Stock and the Closing Shares, as
applicable, and take such other steps, including the proper filing of plans of
reorganization and articles of merger, as shall be necessary to insure the
tax-free status of the transaction under such Code sections and the underlying
regulations.
Section 1.05. Status of TCA Stock. Each Shareholder acknowledges that
his or its Closing Shares are being acquired without any view to a transfer,
sale, assignment or other distribution thereof other than a transfer, sale,
assignment or other distribution not in violation of the Securities Act of 1933,
as amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit 1.05, and agree to remain subject to the
representations, warranties and covenants made therein after the Closing Date.
As a condition to Target's obligation to close, Parent agrees that it shall, at
the sole expense of Parent, register all of the Closing Shares in the manner
described in Section 4.05 hereof.
ARTICLE II
Closing Deliveries
Section 2.01. Deliveries of Target and the Shareholders. At the
Closing, Target and the Shareholders shall deliver to Parent the following, all
of which shall be in form and content satisfactory to Parent and its counsel:
(a) executed Noncompetition Agreement (the "Noncompetition Agreement")
among Target, Parent and the Shareholders, in the form of the agreement attached
as Exhibit 2.01(b);
(b) a separate Letter of Investment Intent, in the form attached hereto
as Exhibit 1.05, executed by the Shareholders;
AGREEMENT AND PLAN OF REORGANIZATION - Page 5
<PAGE> 6
(c) a copy of resolutions of the Board of Directors of Target
authorizing the execution, delivery and performance of this Agreement, the
Agreement of Merger and all related documents and agreements, each certified by
the Secretary of that corporation as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(d) a separate certificate of the President of Target, dated the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Target contained herein on and as of the Closing Date, (ii) as to
the performance of and compliance by Target and the Shareholders with all
covenants contained herein on and as of the Closing Date, and (iii) certifying
that all conditions precedent of Target to the Closing have been satisfied;
(e) a certificate of the Secretary of Target certifying as to the
incumbency of the directors and officers of Target and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Target;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas establishing that Target is in
existence, has paid all franchise taxes and otherwise is in good standing to
transact business in that state;
(g) certificates, dated within thirty (30) days of the Closing Date, of
the Secretaries of State of the states in which it is necessary for Target to be
qualified to do business, to the effect that Target is qualified to do business
and is in good standing as a foreign corporation in each of such states, if
applicable;
(h) an opinion of legal counsel to Target and the Shareholders, dated
as of the Closing Date, in the form attached hereto as Exhibit 2.01(h), and an
opinion of FCC counsel to Target and the Shareholders, dated as of the Closing
Date, in the form attached hereto as Exhibit 2.01 (h-a);
(i) all necessary authorizations, consents, approvals, permits and
licenses referenced in Schedule 3.08;
(j) releases from the Shareholders to Williamson County Cablevision
Company for any security interests or liens held by the Shareholders in the form
attached hereto as Exhibit 2.01(j), if applicable; and
(k) such other instrument or instruments as shall be necessary or
appropriate, as Parent or its counsel shall reasonably request, to vest in
Parent good and marketable title to the Stock.
Section 2.02. Deliveries of Parent. At the Closing, Parent shall
deliver the following to Target or the Shareholders, as applicable:
(a) the Closing Shares and the Cash Portion to the Shareholder
Representative for the benefit of the Shareholders;
AGREEMENT AND PLAN OF REORGANIZATION - Page 6
<PAGE> 7
(b) the Noncompetition Agreement;
(c) a separate certificate of each of the President or any Vice
President of Parent and Sub, dated the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Parent and Sub contained
herein on and as of the Closing Date, (ii) as to the performance of and
compliance by Parent and Sub with all covenants contained herein on and as of
the Closing Date, and (iii) certifying that all conditions precedent of Parent
and Sub to the Closing have been satisfied;
(d) a certificate of the Secretary of Parent certifying as to the
incumbency of such officers of Parent, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Parent;
(e) a certificate of the Secretary of Sub certifying as to the
incumbency of such officers of Sub, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Sub;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Parent is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(g) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Sub is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(h) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, in form attached hereto as Exhibit 2.02(h);
(i) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, confirming the matters set forth in Section 4.05 hereof (to
include the specific language contained in such Section); and
(j) entity resolutions for Parent and Sub approving the transactions.
ARTICLE III
Representations and Warranties of Target and the Shareholders
Section 3.01. Ownership of the Stock. The Shareholders severally
represent and warrant that they own, beneficially and of record, good and
marketable title to the Stock, which constitutes all of the issued and
outstanding capital stock of Target free and clear of all security interests,
liens, adverse claims, encumbrances, equities, proxies, options or shareholder
agreements.
AGREEMENT AND PLAN OF REORGANIZATION - Page 7
<PAGE> 8
Target represents and warrants that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date as
if made on that date:
Section 3.02. Organization and Good Standing: Qualification. Target is
a corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Target is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Schedule 3.02, except where the failure to be qualified or licensed would not
have a material adverse effect on the business of Target. Target does not have
any assets, employees or offices located in any state other than the states
listed in Schedule 3.02.
Section 3.03. Capitalization of Target. The authorized capital stock of
Target consists of 20,000 shares of common stock, $10.00 par value per share, of
which 10,000 shares are issued and outstanding. No shares of such capital stock
are held in the treasury of Target. All of issued and outstanding shares of
capital stock of Target are duly authorized, validly issued, fully paid and
nonassessable. There exist no options, warrants, subscriptions or other rights
to purchase, or securities convertible into or exchangeable for, the capital
stock of Target for which a release has not been obtained prior to Closing.
Neither the Shareholders nor Target are parties to or bound by, nor do they have
any knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of Target. No shares of capital stock of Target
have been issued or disposed of in violation of the preemptive rights of any of
Target's Shareholders. All accrued dividends on the capital stock of Target,
whether or not declared, have been paid in full.
Section 3.04. Corporate Records. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Target which have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. To Target's knowledge, the minute book of Target, a
copy of which has been delivered to Parent, contains accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by, the
Board of Directors (and any committees thereof) and the Shareholders of Target
since its formation.
Section 3.05. Authorization and Validity. The execution, delivery and
performance by Target of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Target and the Shareholders. This
Agreement and each other agreement contemplated hereby have been or will be as
of the Closing Date duly executed and delivered by Target and the Shareholders,
as applicable, and constitute or will constitute legal, valid and binding
obligations of Target and the Shareholders, as applicable, enforceable against
Target and the Shareholders in accordance with their respective terms. To
Target's knowledge, and, if applicable, subject to the receipt of the various
third-party
AGREEMENT AND PLAN OF REORGANIZATION - Page 8
<PAGE> 9
consents and approvals described in the Schedules hereto, the Merger will not
impair the ability or authority of Sub to carry on the business now conducted by
Target in any material respect.
Section 3.06. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will
materially (i) conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, the Articles of
Incorporation or Bylaws of Target or any agreement, indenture or other
instrument under which Target is bound or to which the appropriate portion of
the Stock or any of the assets of Target are subject, or result in the creation
or imposition of any security interest, lien, charge or encumbrance upon the
Stock or any of the assets of Target, or (ii) violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Target, the
Stock or the assets of Target.
Section 3.07. Financial Statements. Target has furnished to Parent the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 1996 through December 31, 1998,
including the notes thereto, and will, prior to the Closing Date, furnish the
audited statements for the one year period ending December 31, 1998
(collectively, the "Financial Statements"). The Financial Statements are true,
correct and complete, are in accordance with the books and records of Target
fairly present the financial condition and results of operations of Target as of
the dates and for the periods indicated and have been prepared on a cash basis
of accounting and on a proper and consistent basis.
Section 3.08. Target Required Consents. A list and brief description of
all required consents, authorizations and approvals required under the Target
system franchise, Target system licenses, Target system contracts, Target
governmental or public body or authority filing or permit, any Target lender or
bank loan or agreement, and the leases and other documents evidencing Target
leased property and Target other real property interests are set forth in
Schedule 3.08. If for any reason Target fails to make a filing, or to obtain a
consent, the failure of Target to do so shall not, individually or in the
aggregate, have an adverse effect on the Target system, on the Shareholders'
ability to perform their obligations under this Agreement, on Target's cable
business, or on Target's ability to conduct such business after the Merger in
substantially the same manner as it is currently being conducted.
Section 3.09. Target System Contracts. A list and brief description of
all pole line agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements (other than Target system franchise and Target system
licenses) to which Target is a party are set forth in Schedule 3.09. Such
documents constitute the entire agreement with the other party. Each of the
Target system contracts is in full force and effect and constitutes the valid,
legal, binding and enforceable obligation of Target and to Target's knowledge,
each other party thereto is not in breach or default of any material terms or
conditions thereunder.
AGREEMENT AND PLAN OF REORGANIZATION - Page 9
<PAGE> 10
Section 3.10. Target System Franchise. A list and brief description of
the franchises to which Target is party are set forth on Schedule 3.10. The
Target system franchise contains all of the commitments and obligations of
Target to the applicable governmental authority granting such franchise with
respect to the construction, ownership and operation of the Target system. The
Target system franchise is currently in full force and effect, is not in default
and is valid under all applicable legal requirements according to their terms.
There is no legal action, governmental proceeding or investigation, pending or
to Target's knowledge threatened, to terminate, suspend or modify the Target
system franchise and Target is, or will be as of the Closing Date, in material
compliance with the terms and conditions of all the Target system franchise and
other applicable requirements of all governmental authorities (including the FCC
and the U.S. Copyright Office) relating to the Target system franchise,
including all requirements for notification, filing, reporting, posting and
maintenance of logs and records.
Section 3.11. Target System Licenses. A list and brief description of
the intangible cable television channel distribution rights, cable television
relay service (CARS), business radio and other licenses, and copyright notices
issued by the FCC and used or held for use in Target's cable business are set
forth on Schedule 3.11. The Target system licenses are currently in full force
and effect, are not in default and are valid under all applicable legal
requirements according to their terms. There is no legal action, governmental
proceeding or investigation, pending or to Target's knowledge threatened, to
terminate, suspend or modify the Target system licenses and Target is, or will
be as of the Closing Date, and the Target system licenses and other applicable
requirements of all governmental authorities (including the FCC and the U.S.
Copyright Office) relating to the Target system licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
Section 3.12. Target Tangible Personal Property. A list and brief
description of all tangible personal property, including towers (other than
towers on Target 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
Target's cable business are set forth on Schedule 3.12. Target has exclusive,
good and marketable title to (or, in the case of assets that are leased, valid
leasehold interests in) the Target assets. Target's assets are free and clear of
all liens, except (a) permitted liens, and (b) liens which will be terminated,
released or, in the case of the rights of first refusal, waived, as appropriate,
at or prior to the Closing. Target's tangible personal property is in good
operating condition and repair (ordinary wear and tear excepted).
Section 3.13. Liabilities and Obligations. Except as set forth in
Schedule 3.13, the Financial Statements provided reflect all liabilities of
Target, including all reserves, if applicable, and any liabilities not required
to be reflected or reserved are not material to the financial condition or
prospects of Target's business. Except as set forth in the Financial Statements,
Target is not liable upon or with respect to, or obligated in any other way to
provide funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association,
AGREEMENT AND PLAN OF REORGANIZATION - Page 10
<PAGE> 11
partnership, joint venture, trust or other entity, and Target knows of no basis
for the assertion of any other claims or liabilities of any nature or in any
amount.
Section 3.14. Absence of Certain Changes. Any other provisions of this
Agreement to the contrary notwithstanding, it is understood and agreed that
cash, cash equivalents, and any Shareholder capital contributions or loans
available to Target may be expended by Target in order to enable Target to pay
the costs and expenses associated with the consummation of this transaction and
the simultaneous transactions involving Target's affiliated companies (including
but not limited to: substantial employee bonuses outside the ordinary course of
business, sales commissions, attorneys, accountant and other professional fees;
telephone, delivery and copying charges; travel expenses; other closing
expenses; wind-up costs; final taxes and other similar or dissimilar costs)
and/or paid out as dividends or distributions to the Shareholders, provided that
such expenditures do not limit or impair Target's ability to carry on its
business in the ordinary course between the date hereof and the Closing Date,
and do not reduce the amount by which current assets exceed current liabilities
to less than zero (0). Except as set forth above and in Schedule 3.14, since
March 31, 1999, Target has not, except in the ordinary course of business:
(a) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Target, in its condition (financial or otherwise),
operations, assets, liabilities, business or prospects;
(b) contracted for the purchase of any capital assets not to exceed
$10,000, without Parent's prior approval, other than those identified in
Target's financial statements dated December 31, 1998, previously provided to
Parent or other than those used or to be used in Target's routine and regular
ongoing plant expansion program;
(c) incurred any indebtedness for borrowed money or issued or sold any
debt securities;
(d) incurred or discharged any liabilities or obligations;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or canceled any debts or claims or released or waived any rights or claims
except write-offs of accounts receivable in accordance with Target's regular
subscriber disconnect and account write-off;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(g) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could reasonably be expected to materially and adversely affect,
its business;
(h) acquired or disposed of any assets;
AGREEMENT AND PLAN OF REORGANIZATION - Page 11
<PAGE> 12
(i) written up or written down the carrying value of any of its assets;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) waived any material rights or forgiven any material claims;
(l) lost or terminated any employee, customer or supplier, the loss or
termination of which has materially and adversely affected, or could reasonably
be expected to materially and adversely affect, its business or assets;
(m) increased the compensation of or paid any bonus to any director or
officer;
(n) increased the compensation of or paid any bonus to any employee;
(o) made any payments to or loaned any money to any person or entity
referred to in Section 3.33;
(p) formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to such capital stock or securities, or agreed to
change the terms and conditions of any such rights;
(r) entered into any agreement with any person or group, or modified or
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
(s) entered into, adopted or amended any Employee Benefit Plan (as
hereinafter defined); or
(t) entered into any other commitment or transaction or experienced any
other event that is material to this Agreement or to any of the other agreements
and documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or that has materially and
adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Target taken as a whole.
Section 3.15. Title; Leased Assets.
(a) Real Property. A description of all interests in real property
owned by Target (collectively, the "Real Property") is set forth in Schedule
3.15(a). Except as set forth in Schedule 3.15(a), Target has good, valid and
marketable title to all the Real Property. The Real Property and
AGREEMENT AND PLAN OF REORGANIZATION - Page 12
<PAGE> 13
the leased real property referred to in Section 3.15(c) constitute the only real
property used in the conduct of the business of Target.
(b) Personal Property. Except as set forth in Schedule 3.15(b), Target
has good, valid and marketable title to all tangible and intangible personal
property owned by them (collectively, the "Personal Property"). The Personal
Property and the leased personal property referred to in Section 3.15(c)
constitute the only personal property used in the conduct of the business of
Target.
(c) Leases. A list and brief description of all leases of real and
personal property to which Target is a party, either as lessor or lessee, are
set forth in Schedule 3.15(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
(d) Right to Use Assets. Except for those assets acquired since
December 31, 1998, which are listed in Schedule 3.15(d), all tangible and
intangible assets used in the conduct of the business of Target are reflected in
the Financial Statements in a manner that is in conformity with past accounting
practices of Target, consistently applied. Target owns, leases or otherwise
possesses a right to use all assets used in the conduct of the business of
Target, which will not be impaired by the consummation of the transactions
contemplated hereby.
Section 3.16. Commitments.
(a) Commitments; Defaults. Except as set forth in Schedules attached
hereto, Target has not entered into, and the Stock, the assets, and the business
of Target are not bound by, whether or not in writing,
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any director or
officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another;
AGREEMENT AND PLAN OF REORGANIZATION - Page 13
<PAGE> 14
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
(x) agreement between Target and any affiliate of Target;
(xi) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an affiliate of Target;
(xii) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving, more than $10,000 in the
aggregate;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or agreement that involves either an
unperformed commitment in excess of $5,000 or that terminates more than 30 days
after the date hereof,
(xvi) agreement relating to any material matter or transaction
in which an interest is held by any person or entity referred to in Section
3.33;
(xvii) agreement providing for the purchase from a supplier of
all or substantially all of the requirements of Target of a particular product
or service; or
(xviii) any other agreement or commitment not made in the
ordinary course of business or that is material to the business or financial
condition of Target.
All of the foregoing items which are listed on the attached Schedules
are hereinafter collectively referred to as the "Commitments." True, correct and
complete copies of the written Commitments, and true, correct and complete
written descriptions of any oral Commitments, have heretofore been delivered or
made available to Parent. There are no material existing defaults, events of
default or events, occurrences, acts or omissions which, with the giving of
notice or lapse of time or both, would constitute material defaults by Target
and no penalties have been incurred nor are amendments pending, with respect to
the Commitments. The Commitments are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their
respective terms, and no defenses, offsets or counterclaims have been asserted,
or to the knowledge
AGREEMENT AND PLAN OF REORGANIZATION - Page 14
<PAGE> 15
of Target may be made by any party thereto, nor has Target waived any rights
thereunder. Target has not received notice of any default with respect to any
Commitment.
(b) No Cancellation or Termination of Commitment. Except as
contemplated hereby, Target has not received notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment or agreement, and Target knows of no fact that would justify the
exercise of such a right. Target does not currently contemplate, or have reason
to believe any other person or entity currently contemplates, any amendment or
change to any Commitment. Except as listed in Schedule 3.16(b), to the knowledge
of Target, none of the customers or suppliers of Target have refused, or
communicated that they will or may refuse, to purchase or supply goods or
services, as the case may be, or have communicated that they will or may
substantially reduce the amounts of goods or services that they are willing to
purchase from, or sell to, Target.
Section 3.17. Adverse Agreements. Target is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation not
generally applicable to other cable television system operators that materially
and adversely affects, or so far as Target can now reasonably foresee, may in
the future materially and adversely affect, the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Target.
Section 3.18. Insurance. A list and brief description of all insurance
policies of Target are set forth in Schedule 3.18. All of such policies are
valid and enforceable policies, issued by insurers of recognized responsibility
and in amounts and against such risks and losses as are customary in its
industry. Such insurance shall be outstanding and duly in force without
interruption up to and including the Closing Date. True, complete and correct
copies of all such policies have been provided to Parent on or prior to the date
hereof.
Section 3.19. Subscribers. Target represents that the cable system
shall have at least 10,250 Equivalent Basic Subscribers as of the Closing Date.
Section 3.20. [Reserved]
Section 3.21. Trade Secrets and Customer Lists. Target has the right to
use, free and clear of any claims or rights of others, except claims or rights
specifically set forth in Schedule 3.21, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Target. Target is not using
or in any way making use of any confidential information or trade secrets of any
third party.
Section 3.22. Taxes.
(a) Filing of Tax Returns, Target has duly and timely filed with the
appropriate governmental agencies all tax returns (including information
returns) and reports required to be filed
AGREEMENT AND PLAN OF REORGANIZATION - Page 15
<PAGE> 16
by the United States or any state or any political subdivision thereof or any
foreign jurisdiction. All such tax returns or reports are complete and accurate
and properly reflect the taxes of Target for the periods covered thereby.
(b) Payment of Taxes. Target has paid or accrued, if applicable, all
taxes, penalties and interest which have become due with respect to any returns
that it has filed and any assessments of which it is aware. Target is not
delinquent in the payment of any tax, assessment or governmental charge.
(c) No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as listed in Schedule 3.22(c), no tax deficiency or delinquency has been
asserted against Target. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of Target
that could be asserted by any taxing authority. There is no taxing authority
audit of Target pending, or threatened, and the results of any completed audits
are properly reflected in the Financial Statements of Target. Target has not
violated any federal, state, local or foreign tax law.
(d) No Extension of Limitation Period. Target has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
(e) All Withholding Requirements Satisfied. All monies required to be
withheld by Target and paid to Governmental agencies for all taxes have been (i)
collected or withheld and either paid to the respective Governmental agencies or
set aside in accounts for such purpose, or (ii) properly reflected in the
Financial Statements of Target.
(f) State Unemployment Taxes. In respect of its most recently completed
reporting period and all previous reporting periods, Target has paid state
unemployment taxes to all applicable states at the appropriate rates for the
wages paid by Target during such period which were subject to such tax.
(g) Reasonable Expenditures. All amounts paid by Target (i) to
officers, employees, consultants and agents as salaries, compensation, and
expenses reimbursed by Target, or (ii) as rental payments, have been in amounts
which are ordinary and necessary for income tax purposes pursuant to Section 162
of the Internal Revenue Code.
(h) Tax Liability in Financial Statements. The liabilities (including
deferred taxes) shown in Target's December 31, 1998 Financial Statements and to
be accrued on the books and records of Target through the Closing Date for
taxes, interest and penalties are and will be adequate accruals and have been
and will be accrued in a manner consistent with the practices utilized for
accruing tax liabilities in the tax year ended December 31, 1998 and take into
account net operating losses, investment credits and other carry-overs for
periods ended prior to the Closing Date. This subsection shall not apply to the
extent that Target is a sub-chapter S corporation under the Code.
AGREEMENT AND PLAN OF REORGANIZATION - Page 16
<PAGE> 17
(i) Foreign Investment in U.S. Real Property. The Shareholders are not
foreign persons, as such term is used in Section 1445(b)(2) of the Code.
(j) Tax Exempt Entity. None of the assets of Target are or will be
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Code.
(k) Collapsible Corporation. Target has not at any time consented, and
the Shareholders will not permit Target to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(l) Change in Accounting Method. Target has not voluntarily or
involuntarily changed a method of accounting resulting in Target's inclusion of
amounts in income pursuant to the adjustment provisions of Section 481 of the
Code.
(m) C corporation. Target is not currently a C corporation as such term
is defined in the Internal Revenue Code.
Section 3.23. Compliance with Laws. Target has complied in all material
respects with all laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports. There are no
existing violations by Target of any federal, state or local law or regulation
that could materially and adversely affect the property or business of Target.
Target possesses all necessary licenses, franchises, permits and governmental
authorizations material to the conduct of its business as now conducted, all of
which are listed in Schedule 3.23.
Section 3.24. Finder's Fee. Neither Target nor the Shareholders have
incurred any obligation for any finder's or broker's fee in connection with the
transactions contemplated hereby, except for those identified on Schedule 3.24.
Section 3.25. Litigation. Except as described in Schedule 3.25, there
are no legal actions or administrative proceedings or investigations instituted,
or to the knowledge of Target threatened, against or affecting, or that could
materially affect, Target, the Stock, or the business of Target. Target is not
(i) subject to any continuing court or administrative order, writ, injunction or
decree applicable specifically to Target or its businesses, assets, operations
or employees, or (ii) in default with respect to any such order, writ,
injunction or decree. Target knows of no basis for any such action, proceeding
or investigation.
Section 3.26. Condition of Fixed Assets. All of the plants, structures
and equipment (the "Fixed Assets") owned by Target are in good condition and
repair, ordinary wear and tear excepted, for their intended use in the ordinary
course of business, (provided, however, that such representations and warranties
are intended to describe the condition of such property in general, and not to
warrant the condition of each and every item of such property) and conform in
all material respects with all applicable ordinances, regulations and other laws
and there are no known latent defects therein.
AGREEMENT AND PLAN OF REORGANIZATION - Page 17
<PAGE> 18
Section 3.27. Inventory. All of the tangible inventory owned by Target
is in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Target has, and at the Closing Date will have, the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
Section 3.28. Books of Account. The books of account of Target have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Target have been properly recorded in such books. All
such accounts receivable have arisen from bona fide transactions in the ordinary
course of business and are valid and enforceable claims subject to the usual and
typical delinquencies and non-payments, and to Target's standard disconnect and
write-off policies which are described in Schedule 3.30.
Section 3.29. Corporate Name. There are no actions, suits or
proceedings pending, or to the knowledge of Target threatened, against or
affecting Target that could result in any impairment of the right of Target to
use the name "Williamson County Cablevision Company". The use of the name
"Williamson County Cablevision Company" does not infringe the rights of any
third party nor is it confusingly similar with the corporate name of any third
party. After the Closing Date, no person or business entity other than Target
will be authorized, directly or indirectly, to use the name "Williamson County
Cablevision Company" or any name confusingly similar thereto.
Section 3.30. Accounts Receivable. Schedule 3.30 sets forth the
accounts receivable of Target from sales made as of April 30, 1999 and the
payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the ordinary course of
business and are valid and enforceable claims subject to no right of set-off or
counterclaim.
Section 3.31. Product Warranties. There is no claim against or
liability of Target on account of product warranties or with respect to the
manufacture, sale or rental of defective products or services and there is no
basis for any such claim on account of defective products or services heretofore
manufactured, sold or rented that is not fully covered by insurance.
Section 3.32. Banking Relations. Set forth in Schedule 3.32 is a
complete and accurate list of all arrangements that Target has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
Section 3.33. Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.33, no officer, supervisor employee, director or shareholder
of Target, or their respective spouses or children, owns directly or indirectly,
on an individual or joint basis, any material interest in, or serves as an
officer or director of, any customer or supplier of Target, or any organization
that has a
AGREEMENT AND PLAN OF REORGANIZATION - Page 18
<PAGE> 19
material contract or arrangement with Target except for ownership of one percent
(1%) or less of the outstanding stock of any publicly traded corporation.
Section 3.34. Investments in Competitors. Shareholders do not own,
directly or indirectly, any material interests or has any material investment in
any corporation, business or other person that is a competitor of Target within
the service area of Target.
Section 3.35. Employee Matters.
(a) Cash Compensation. Schedule 3.35(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Target who are
currently compensated at a rate in excess of $12,000 per year and who earned in
excess of such amount during the preceding fiscal year. In addition, Schedule
3.35(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of Target during the current and immediately
preceding fiscal year of Target, and (ii) any promised increases in Cash
Compensation of employees of Target that have not yet been effected.
(b) Compensation Plans. Schedule 3.35(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Target or to which Target contributes on
behalf of its employees, other than Employee Benefit Plans listed in Schedule
3.36(a). The Compensation Plans include without limitation plans, arrangements
or practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options. Target has
provided Parent a copy of each written Compensation Plan and a written
description of each unwritten Compensation Plan. Each of the Compensation Plans
can be terminated or amended at will by Target.
(c) Employees.
1) TCA Management Company, a wholly owned subsidiary of
Parent, may, but shall have no obligation to employ or offer
employment to any employee of Target. Within ten (10) days of
closing of this Agreement, TCA Management Company will provide to
Target, in writing, a list of employees which TCA Management
Company desires to employ following the Closing. Prior to Closing,
Target shall terminate the employment of all its employees who are
not designated for employment by TCA Management Company.
2) Nothing in this Section 3.35(c)(l)-(2) or elsewhere in
this Agreement shall be deemed to make any employee of Target a
third party beneficiary of this Agreement.
(d) Employment Agreements. All written or oral employment agreements
(the "Employment Agreements") which exist between Target and its employees,
including agreements
AGREEMENT AND PLAN OF REORGANIZATION - Page 19
<PAGE> 20
containing covenants not to compete, are listed on Schedule 3.35(d). Target has
provided Parent a copy of each written Employment Agreement and a written
description of each unwritten Employment Agreement, if any. Except as described
on Schedule 3.35(d) Target has no employment agreements, either written or oral,
with any employees of Target and none of the employment agreements listed on
Schedule 3.35(d) requires TCA Management Company or Parent to employ any person
after the Closing.
(e) Employee Policies and Procedures. Schedule 3.35(e) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Target. Target has provided Parent a copy of all written Employee
Policies and Procedures. Each of the Employee Policies and Procedures can be
amended or terminated at will by Target, except as prohibited by law.
(f) Unwritten Amendments. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(g) Labor Compliance. Except as set forth in Schedule 3.35(g), Target:
(i) has been and is in compliance in all material respects with
all laws, rules, regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and hours, and
(ii) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing in excess of $5,000.
Target has not engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices.
There are no:
(i) unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age or handicap
discrimination charges or complaints, pending or to the
knowledge of Target threatened, against Target before any
federal, state or local court, board, department, commission
or agency nor does any basis therefor exist, or
(ii) existing, or to the knowledge of Target threatened, labor
strikes, disputes, grievances, controversies or other labor
troubles affecting Target and no basis therefor exists.
(h) Unions. Target has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of Target
are represented by any union,
AGREEMENT AND PLAN OF REORGANIZATION - Page 20
<PAGE> 21
labor organization or collective bargaining unit. To the knowledge of Target,
the employees of Target have no intention to and have not threatened to organize
or join a union, labor organization or collective bargaining unit.
(i) Aliens. All employees of Target are citizens of, or are authorized
to be employed in, the United States.
Section 3.36. Employee Benefit Plans.
(a) Identification. Schedule 3.36(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Target or to which Target contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Target has provided Parent with copies of all plan documents,
determination letters, pending, determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. After
the Closing, Parent shall not be required, under ERISA, the Code or any
collective bargaining agreement, to establish, maintain or continue any Target
Employee Benefit Plans currently maintained by Target or any of its ERISA
Affiliates, except as required by applicable state or federal law.
(b) Administration. Each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations.
(c) Examinations. No Employee Benefit Plan is currently the subject of
an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
(d) Prohibited Transactions. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) Claims and Litigation. No claims, suits or other proceeding, are
pending, or to the knowledge of Target are threatened, with respect to any
Employee Benefit Plan other than normal benefit claims filed by participants or
beneficiaries.
(f) Qualification. Target has received a favorable determination letter
or ruling from the Internal Revenue Service for each Employee Benefit Plan
intended to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. No proceedings are
pending, or to the knowledge of Target are threatened, that could result in the
revocation of any such favorable determination letter or ruling.
AGREEMENT AND PLAN OF REORGANIZATION - Page 21
<PAGE> 22
(g) Funding Status. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning, of Section 412(n)(6)(B) of the Code) in
which Target is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing, basis as of the date hereof. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such plan are at
least equal in value to the present value of accrued benefits as of the date
hereof. Schedule 3.36(g) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued benefits
under all Employee Benefit Plans subject to actuarial assumptions.
(h) Excise Taxes. Neither Target nor any member of a Controlled Group
has any liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
(i) MultiEmployer Plans. Neither Target nor any member of a Controlled
Group is or ever has been obligated to contribute to a multi employer plan
within the meaning of Section 3(37) of ERISA.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Target or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(k) Medical and Dental Care Claims. Target shall use reasonable efforts
to provide a complete and accurate list of all claims made (without identifying
specific individuals) under any medical or dental care plan or commitment
offered by Target to its employees involving hospitalization, medical or dental
care claims that have exceeded $500 per year for an individual during the period
January 1, 1998 to December 31, 1998.
(l) Retirees. Target does not have any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with Target except as required under applicable law, rule or
regulation.
Section 3.37. Investment Intent. Each Shareholder acknowledges that his
or its Closing Shares are being acquired without any view to a transfer, sale,
assignment or other distribution thereof other than a transfer, sale, assignment
or other distribution not in violation of the Securities Act of 1933, as
amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit
AGREEMENT AND PLAN OF REORGANIZATION - Page 22
<PAGE> 23
1.05, and agree to remain subject to the representations, warranties and
covenants made therein after the Closing Date.
Section 3.38. Environmental Matters.
(a) Environmental Laws. Neither Target nor any of its assets, are
currently in violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
including without limitation (i) the Comprehensive, Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq. as
amended from time to time ("CERCLA")) (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time ("RCRA"), and regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, relating to asbestos or
polychlorinated biphenyls, and (iv) the provisions contained in any applicable
state statutes, rules or orders pertaining to environmental matters, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the assets and operations of
Target.
(b) Use of Assets. To the knowledge of Target, the assets of Target
have never been used in a manner that would be in violation of any of the
Environmental Laws, including without limitation, CERCLA or RCRA.
(c) Permits. Target has not obtained, and is not required to obtain,
and Target has no knowledge of any reason Parent will be required to obtain, any
permits, licenses or similar authorizations to construct, occupy, operate or use
any buildings, improvements, fixtures and equipment owned or leased by Target or
by reason of any Environmental Laws.
(d) Superfund List. To the knowledge of Target, none of the assets
owned or leased by Target are on any federal or state "Superfund" list or
subject to any environmentally related liens.
Section 3.39. Certain Payments. To the knowledge of Target, neither
Target nor any director, officer or employee of Target has paid or caused to be
paid, directly or indirectly, in connection with the business of Target:
(a) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by Target
or as otherwise permitted by applicable law).
AGREEMENT AND PLAN OF REORGANIZATION - Page 23
<PAGE> 24
Section 3.40. Accuracy of Information Furnished. All information
furnished to Parent by Target hereby or in connection with the transactions
contemplated hereby is true, correct and complete in all material respects. Such
information states all facts required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub each represent and warrant that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
Section 4.01. Organization and Good Standing. Parent and Sub are Texas
corporations, both of which are duly organized, validly existing and in good
standing under the laws of the State of Texas, with all requisite power and
authority to carry on the businesses in which they are engaged, to own the
properties they own, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
Section 4.02. Authorization and Validity. The execution, delivery and
performance by Parent and Sub of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Parent and Sub. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Parent and Sub and constitute or
will constitute legal, valid and binding obligations of Parent and Sub,
enforceable against Parent and Sub in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Closing Shares, when issued in compliance with the provisions of the
Agreement, will be validly issued, fully paid, non-assessable, not issued in
violation of any preemptive rights, and will be free from all taxes, liens,
charges and other encumbrances, subject to the terms and provisions of the
Letter of Investment Intent.
Section 4.03. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the representative organizational
documents of Parent and Sub or any agreement, indenture or other instrument
under which Parent or Sub is bound, (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Parent or Sub
or the properties or assets of Parent or Sub, or (iii) violate or conflict with
any laws, rules or regulations, including but not limited to antitrust laws, or
that of any applicable jurisdiction or any applicable public, governmental or
regulatory agency or body.
AGREEMENT AND PLAN OF REORGANIZATION - Page 24
<PAGE> 25
Section 4.04. Finder's Fee. Neither Parent nor Sub has incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
Section 4.05. Closing Shares. Upon consummation of the merger and
delivery of the Closing Shares (including additional shares delivered as a
result of adjustments called for in this Agreement), each of the Closing Shares
will be (a) duly authorized, validly issued, fully paid, and non-assessable,
with no personal liability attached thereto, and free and clear of any liens or
preemptive rights (unless imposed at the direction of a Shareholder); (b) issued
pursuant to a valid exemption from registration under the Securities Act of 1933
and the Texas Securities Act; (c) covered by a valid resale statement filed with
the Securities and Exchange Commission; and (d) freely tradable in resale
transactions by the Shareholders as of the Closing Date.
ARTICLE V
The Covenants of Target
Target makes the following covenants relating to the period between the
date hereof and the Closing.
Section 5.01. Consummation of Agreement. Target shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions.
Section 5.02. Business Operations. Except as authorized by this
Agreement and its other terms and conditions, Target shall operate its business
in the ordinary course and will not introduce any new method of management or
operation. Target shall use its best efforts to preserve the business of Target
intact, to retain the present customers and suppliers so that they will be
available to Parent after the Closing. Target shall not take any action that
could adversely affect the condition (financial or otherwise), operations,
assets, liabilities, business or prospects of Target without the prior written
consent of Parent or take or fail to take any action that would cause or permit
the representations made in Article III to be inaccurate at the time of Closing
or preclude Target from making such representations and warranties at the
Closing.
Section 5.03. Access. Target shall permit Parent and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Target, including its employees, customers and suppliers,
and permit Parent and its authorized representatives to inspect and make copies
of all documents, records and information with respect to the affairs of Target
as Parent and its representatives may request, all for the sole purpose of
permitting Parent to become familiar with the business and assets and
liabilities of Target.
Section 5.04. Material Change. Target shall promptly inform Parent in
writing, of any material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Target.
Notwithstanding the disclosure to Parent of any such material adverse change,
Target shall not be relieved of any liability for, nor shall the providing of
such
AGREEMENT AND PLAN OF REORGANIZATION - Page 25
<PAGE> 26
information by Target to Parent be deemed a waiver by Parent of the breach of
any representation or warranty of Target contained in this Agreement.
Section 5.05. Approvals of Third Parties. Target, with the cooperation
and assistance of Parent and Sub, shall use its best efforts to secure, as soon
as practicable after the date hereof, all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
Section 5.06. Employee Matters. Target shall not, without the prior
written approval of Parent, except as required by law:
(a) increase the Cash Compensation of any employee of Target;
(b) adopt, amend or terminate any Compensation Plan, Employment
Agreement, Employee Policies and Procedures or Employee Benefit Plan;
(c) institute, settle or dismiss any employment litigation;
(d) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit;
(e) take or fail to take any action with respect to any past or present
employee of Target that could adversely affect the business of Target;
(f) take any action that would deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(g) fail to pay any premium or contribution due with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee
Benefit Plan; or
(i) take or fail to take any action that could adversely affect any
Employee Benefit Plan.
Section 5.07. Contracts. Except with Parent's prior written consent,
Target shall not waive any right or cancel any contract, debt or claim or assume
or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale, except in the ordinary course of business.
Section 5.08. Changes in Inventory. Target shall not alter the physical
contents or character of its raw materials, work-in-process or finished goods
inventory or the mixture of products in its finished goods inventory so as to
affect the nature of its business or result in a change in the total dollar
valuation thereof.
AGREEMENT AND PLAN OF REORGANIZATION - Page 26
<PAGE> 27
Section 5.09. Capital Assets; Payments of Liabilities. Target shall
not, without the prior written approval of Parent, (i) acquire or dispose of any
capital asset, or (ii) discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (a) liabilities and obligations
reflected in the Financial Statements, or (b) current liabilities and
obligations incurred in the ordinary course of business and, in the case of
either (a) or (b) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
Section 5.10. Mortgages, Liens and Guaranties. Target shall not,
without the prior written approval of Parent, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets,
whether now owned or hereafter acquired, or guarantee or otherwise become
contingently liable for any obligation of another, except obligations arising by
reason of endorsement for collection and other similar transactions in the
ordinary course of business, or make any capital contribution or investment in
any corporation, business or other person.
Section 5.11. No Negotiation with Others. Target shall not solicit or
participate in negotiations with (and Target shall use its best efforts to
prevent any affiliate, shareholder, director, officer, employee or other
representative or agent of Target from negotiating with, soliciting or
participating, in negotiations with) any third party with respect to the sale of
the business of Target or any transaction inconsistent with those contemplated
hereby.
Section 5.12.
(a) Income Tax Refunds. The Shareholders have no claim to or interest
in any income tax refunds which Target may receive after the Closing Date
relating to tax periods prior to the Closing Date.
(b) Cooperation. The Target, on the one hand, and Parent and Sub, on
the other hand, shall each provide such assistance to the other as may be
reasonably requested in connection with the preparation of any tax return
required to be filed in respect of Target or any of the Shareholders, any audit
or other examination by any taxing authority, any judicial or administrative
proceeding relating to liability for taxes, or any claim for refund in respect
of such taxes, and the Shareholders, Parent and Sub will retain, and upon
request provide, any records or information which may be relevant to such
return, audit, examination, proceeding or claim. Such assistance shall include
(i) making employees or counsel available at and for reasonable times to provide
additional information and explanation of any material to be provided hereunder,
and (ii) furnishing access to, and permitting the copying of any records,
returns, schedules, documents, work papers or other relevant materials which
might reasonably be expected to be of use in connection with such return, audit,
examination, proceeding or claim.
AGREEMENT AND PLAN OF REORGANIZATION - Page 27
<PAGE> 28
Section 5.13. Registration Statement. Target and Shareholders shall
provide to Parent such information and assistance as Parent may request in
connection with Parent's efforts to prepare, file and maintain the effectiveness
of the Registration Statement.
Section 5.14. Section 626 of the Cable Act. Target represents that it
has duly and timely filed a valid notice of renewal under Section 626 of the
Cable Act with the appropriate governmental authority with respect to any
Systems Franchises that will expire within 36 months of the Closing Date.
Section 5.15. Required Consents; Franchise Renewal.
(a) Target 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
Target in connection with the transactions contemplated by this Agreement,
substantially in the form attached hereto as Exhibit 5.15 and deliver to Parent
copies of such Required Consents and such other consents, authorizations or
approvals promptly after they are obtained by Target; provided, however, that
Target will afford Parent the opportunity to review, approve and revise the form
of Required Consent prior to delivery to the third party whose consent is
sought. Parent will cooperate with Target 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 Systems
Franchises, Systems Licenses, Systems Contracts or leases or documents
evidencing Leased Property or Other Real Property Interests of its Cable
Business that are not acceptable to the other.
Section 5.16. Hart-Scott-Rodino Filing. Target agrees to cooperate with
Parent to file, or caused to be filed, at the expense of Parent, on such date as
Parent, Sub and Target shall mutually agree, with the U.S. Department of Justice
("DOJ") and Federal Trade Commission ("FTC") all filings, if any, that are
required in connection with the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), as amended,
within ten (10) business days after the date of this Agreement and to request
early termination of the waiting period following the filing thereof, (b)
cooperate with each other in connection with such HSR Act filings, which
cooperation shall include furnishing the other with any information or documents
that may be reasonably required in connection with such filings; (c) promptly
file, after any request by the FTC or DOJ and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (e) furnish each other with any correspondence
from or to, and notify each other of any other communications (and the substance
thereof) with, the FTC or DOJ that relates to the transaction contemplated
hereunder, and to the extent practicable, to permit each other to participate in
any conferences with the FTC or DOJ.
AGREEMENT AND PLAN OF REORGANIZATION - Page 28
<PAGE> 29
ARTICLE VI
Covenants of Parent and Sub
Section 6.01. Consummation of Agreement. Parent and Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions.
Section 6.02. Registration of Resale of Closing Shares. Parent and Sub
shall as a condition to closing (i) on or prior to May 1, 1999, or as soon as
possible thereafter, file with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") registering, under the Securities Act the sale by Shareholders of
the Closing Shares, (ii) cause the Registration Statement to be declared
effective by the Commission and pursuant to Sections 1.04 and 3.38 herein, and
(iii) maintain the effectiveness of the Registration Statement for a period of
two (2) years from the Closing Date. Parent and Sub shall at the expiration of
two (2) years from the Closing Date also cause the deletion of any
registration-related legends on the Closing Shares.
Section 6.03. Hart-Scott-Rodino Filing. Parent and Sub agree to (a)
file, or caused to be filed, at the expense of Parent, on such date as Parent,
Sub and Target shall mutually agree, with the U.S. Department of Justice (DOJ)
and Federal Trade Commission ("FTC") all filings, if any, that are required in
connection with the transactions contemplated hereby under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"), as amended, within ten (10)
business days after the date of this Agreement and to request early termination
of the waiting period following the filing thereof, (b) cooperate with each
other in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents that may be reasonably
required in connection with such filings; (c) promptly file, after any request
by the FTC or DOJ and after appropriate negotiation with the FTC or DOJ of the
scope of such request, any information or documents requested by the FTC or DOJ;
and (e) furnish each other with any correspondence from or to, and notify each
other of any other communications (and the substance thereof) with, the FTC or
DOJ that relates to the transaction contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
Section 6.04. Continuity of Business Enterprise. Parent and Sub agree
that Sub will continue to operate the historic business of Target or use a
significant portion of Target's historic business assets in a business, as
required by the continuity of business enterprise doctrine as set forth in
Treas. Reg. Section 1.368-1(d).
ARTICLE VII
Parent's Conditions Precedent
Except as may be waived in writing by Parent and Sub, the obligations
of Parent and Sub hereunder are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
AGREEMENT AND PLAN OF REORGANIZATION - Page 29
<PAGE> 30
Section 7.01. Representations and Warranties. The representations and
warranties of Target and the Shareholders contained herein shall have been true
and correct in all material respects when initially made and shall be true and
correct in all material respects as of the Closing Date; and Parent and Sub
shall have received a certificate from each of Target's President, dated as of
the Closing Date, to the foregoing effect.
Section 7.02. Covenants and Conditions. Target shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by Target prior to the Closing
Date; and Parent and Sub shall have received a certificate from each of Target's
President, dated as of the Closing, Date, to the foregoing effect.
Section 7.03. Proceedings. No action, precaution or order by any court
or governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 7.04. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target shall have occurred since the date of the most
recent balance sheet of each included in the Financial Statements, whether or
not such change shall have been caused by the deliberate act or omission of
Target.
Section 7.05. Resignations of Directors and Officers. Parent and Sub
shall have received the resignations of the directors and officers of Target to
the extent requested.
Section 7.06. Closing Deliveries. Parent shall have received all
documents referred to in Section 2.01 hereof, duly executed in form satisfactory
to Parent and its counsel.
Section 7.07. Tax Affidavit. Parent shall have received a nonforeign
affidavit, as such affidavit is referred to in Section 1445(b)(2) of the Code,
of Target, signed under penalties of perjury and dated as of the date of the
Closing Date, to the effect that Target is not a foreign person (as such term is
defined in Section 1445(f)(3) of the Code) and providing Target's United States
taxpayer identification number.
Section 7.08. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Cablevision of
Pflugerville, Inc. and Cablevision of Leander, Inc. to be final and effective.
Section 7.09. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
AGREEMENT AND PLAN OF REORGANIZATION - Page 30
<PAGE> 31
ARTICLE VIII
The Conditions Precedent of Target and the Shareholders
Except as may be waived in writing by Target and the Shareholders, the
obligations of Target and the Shareholders hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and
warranties of Parent and Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date; and Parent and Sub shall have
delivered to the Shareholders certificates of Parent's and Sub's respective
President or Vice President, dated as of the Closing Date, to the foregoing
effect.
Section 8.02. Covenants and Conditions. Parent and Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date; and Parent shall have delivered to the Shareholders
certificates of Parent's and Sub's President or Vice President, dated as of the
Closing Date, to the foregoing effect.
Section 8.03. Proceedings. No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 8.04. Closing Deliveries. Target or the Shareholders, as the
case may be, shall have received all documents referred to in Section 2.02.
Section 8.05. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Cablevision of
Pflugerville, Inc. and Cablevision of Leander, Inc. to be final and effective.
Section 8.06. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
Section 8.07. Registration Statement Effective. The registration
statement filed by Parent pursuant to Section 1.05 shall have been declared
effective and sales of securities may be made thereunder.
AGREEMENT AND PLAN OF REORGANIZATION - Page 31
<PAGE> 32
ARTICLE IX
Post Closing Matters
Section 9.01. Further Instruments of Transfer. Following the Closing,
at the request of Parent, the Shareholders shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
carry out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
ARTICLE X
Remedies
Section 10.01. Indemnification by the Shareholders. Subject to the
terms and conditions of this Article, the Shareholders agree to indemnify,
defend and hold Parent and Sub and their respective directors, officers, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
attorneys' fees and expenses (collectively "Damages"), asserted against or
incurred by any of such indemnitees by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of Target or
the Shareholders contained herein, in any exhibit, schedule, certificate or
financial statement delivered hereunder, or in any agreement executed in
connection with the transactions contemplated hereby; or
(b) the violation or alleged violation, on or before the Closing Date,
of any Environmental Law, and any and all matters arising out of any act,
omission, event or circumstance existing, or occurring on or prior to the
Closing Date (including without limitation the presence on the Real Property or
release from the Real Property, or the generation by Target or any Shareholder
of hazardous substances or solid waste disposed or otherwise released prior to
the Closing Date), regardless of whether the act, omission, event or
circumstance constituted a violation of any Environmental Law at the time of its
existence or occurrence. The terms "hazardous substance" and "release" shall
have the meanings specified in CERCLA, and the terms "solid waste" and
"disposed" shall have the meanings specified in RCRA; provided that to the
extent that any applicable statute of any state, any subdivision thereof or any
other governmental body or agency of competent jurisdiction over the matter,
establish a meaning for "hazardous substance," "release," "solid waste" or
"disposed" that is broader than that specified in either CERCLA or RCRA, such
broader meaning, shall apply.
(c) The provisions of this Section 10.01 shall survive the Closing two
(2) years after the Closing Date, and after such date the Shareholders shall
have no liability whatsoever to Parent, Sub or their directors, officers,
agents, attorneys or affiliates for any of the matters made the subject of this
Section 10.01.
Notwithstanding anything to contrary above:
(d) (i) Target and Shareholders shall not be required to indemnify or
otherwise be liable to Parent and Sub for any breach of a representation or
warranty, or for the breach of any
AGREEMENT AND PLAN OF REORGANIZATION - Page 32
<PAGE> 33
covenant to be performed prior to the Closing, except to the extent the losses
suffered or incurred by Parent or Sub arising from all such breaches by Target
and Shareholders exceed in the aggregate $50,000.
(ii) Target and Shareholders shall not be required to indemnify or
otherwise be liable to Parent and Sub for any breach of a representation or
warranty, or for the breach of any covenant to be performed prior to the
Closing, to the extent the losses suffered or incurred by Parent and Sub exceed
in the aggregate $2,000,000.
Section 10.02. Indemnification by Parent.
(a) Subject to the terms and conditions of this Article, Parent hereby
agrees to indemnify, defend and hold Target and the Shareholders and their
respective directors, officers, agents, attorneys and affiliates harmless from:
(b) All damages asserted against or incurred by any of such indemnitees
by reason of or resulting, from a breach of any representation, warranty or
covenant of Parent or Sub contained herein or in any exhibit, schedule or
certificate delivered hereunder, or in any agreement executed in connection with
the transactions contemplated hereby; or
(c) The violation or alleged violation, after the Closing Date, of any
Environmental Law, and any and all matters arising out of any act, omission,
event or circumstance existing or occurring after the Closing Date (including
without limitation the presence on the Real Property or release from the Real
Property, or the generation by Parent or Sub of hazardous substances or solid
waste disposed or otherwise released after the Closing Date), regardless of
whether the act, omission, event or circumstance constituted a violation of any
Environmental Law at the time of its existence or occurrence. The terms
"hazardous substance" and "release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposed" shall have the meanings specified in
RCRA; provided that to the extent that any applicable statute of any state, any
subdivision thereof or any other governmental body or agency of competent
jurisdiction over the matter, establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposed" that is broader than that specified in
either CERCLA or RCRA, such broader meaning, shall apply.
(d) The provisions of this Section 10.02 shall survive the Closing two
(2) years after the Closing Date, and after such date Parent and Sub shall have
no liability whatsoever to the Shareholders for any of the matters made the
subject of this Section 10.02.
Section 10.03. Conditions of Indemnification. The respective
obligations and liabilities of the Shareholders and Parent (the "indemnitor") to
the other parties (the "indemnitees") under Sections 10.01 and 10.02 with
respect to claims resulting from the assertion of liability by third parties,
shall be subject to the following terms and conditions:
AGREEMENT AND PLAN OF REORGANIZATION - Page 33
<PAGE> 34
(a) In the event that a legal proceeding or action is commenced against
the indemnitees with respect to any indemnified matter, that indemnitees
promptly will provide written notice thereof to the indemnitor (but in no event
later than ten (10) days after receipt of notice), together with a copy of any
claim, process or other legal pleading. The indemnitor will undertake the
defense thereof, as its expense, by counsel of its own choosing and reasonably
acceptable to the indemnitees; provided that the indemnitees may participate in
all aspects of the defense with, or without, counsel of its own choice. In the
event that the indemnitees elect to retain additional counsel of their own
choice, the fees and expenses of said counsel shall be the exclusive
responsibility of the indemnitees unless (i) the indemnitor has agreed to pay
such fees and expenses, (ii) the indemnitor has failed to undertake the defense
of such action, or (iii) if the nature of any action presents a conflict between
the interests of the indemnitor and the indemnitees, or the indemnitees have
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the indemnitor
(in which case, if the indemnitees inform the indemnitor in writing that it
elects to employ separate counsel at the expense of the indemnitor, the
indemnitor shall have no further right to participate in or undertake the
defense of such action on behalf of the indemnitees except with respect to
payment of full indemnification for any Damages).
(b) Except for failure by the indemnitees to provide notice as provided
for above in subsection (a) in the event that the indemnitor, on or before the
thirtieth day after receipt of notice of any such action, or, if applicable and
earlier, on or before the tenth day preceding the day on which an answer,
appearance or other pleading must be served in order to prevent judgment by
default in favor of the person asserting such claim or other prejudice to the
indemnitees, fails to undertake the defense of such action, the indemnitees will
have the right to retain counsel of their own choosing and undertake the
defense, compromise or settlement of such claim for the account and risk of the
indemnitor without waiving the indemnitees's right to full indemnification from
the indemnitor and at the indemnitor's expense, subject to the right of the
indemnitor to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof with counsel reasonably acceptable to
the indemnitees.
(c) Notwithstanding the foregoing, the indemnitor shall not settle any
claim asserted against the indemnitees without the prior consent of the
indemnitees unless such settlement involves only the payment of money and the
claimant provides the indemnitees with a release from all liability in respect
of such claim. If the settlement of any claims involves more than the payment of
money, the indemnitor shall not settle the claim without the prior written
consent of the indemnitees, which consent shall not be unreasonably withheld. In
the event the indemnitor has not undertaken the defense, as described above,
with respect to any claim resulting from the assertion of liability by third
parties, the indemnitor may settle any claim without prior notice to and consent
of the indemnifying party, and indemnitor agrees to promptly, and in any event
within thirty days after receipt of written demand, reimburse indemnitees for
all Damages, including without limitation all amounts paid or incurred in
connection with such settlement, together with attorneys' fees, costs and
expenses and other costs incurred in connection with defense of the claim.
AGREEMENT AND PLAN OF REORGANIZATION - Page 34
<PAGE> 35
(d) The indemnitees and indemnitor will each cooperate with all
reasonable requests of the other.
Section 10.04. Remedies Not Exclusive. Except as otherwise specifically
provided herein, the remedies provided in this Agreement shall not be exclusive
of any other rights or remedies available to one party against the other, either
at law or in equity.
ARTICLE XI
Termination
Section 11.01. Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date by mutual agreement of all
parties.
(b) At any time prior to the Closing Date by Parent if any
representation or warranty of Target or the Shareholders contained in this
Agreement or in any certificate or other document executed and delivered by
Target or the Shareholders pursuant to this Agreement is or becomes untrue or
breached in any material respect, or if Target or the Shareholders fail to
comply in any material respect with any covenant contained herein.
(c) At any time prior to the Closing Date by the Shareholders if any
representation or warranty of Parent or Sub contained in this Agreement or in
any certificate or other document executed and delivered by Parent or Sub
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Parent or Sub fails to comply in any material respect with any
covenant contained herein.
(d) After the Closing Date by Parent if the conditions stated in
Article VII have not been satisfied by the Closing Date.
(e) After the Closing Date by the Shareholders if the conditions stated
in Article VIII have not been satisfied by the Closing Date.
(f) At any time prior to the Closing Date by the Shareholders if the
Agreement and Plan of Merger by and among Cox Communications, Inc., Cox Classic
Cable, Inc. and TCA Cable TV, Inc., dated May 11, 1999, is terminated by any
party to that Agreement and Plan of Merger.
(g) Prior to the Closing Date by the Shareholders if the Cox
Communications, Inc., Ten Day Cox Weighted Average Stock Price is below $34.50.
"Ten Day Cox Weighted Average Stock Price" means the quotient of (a)
the sum of ten products determined by multiplying (i) the Daily Closing Stock
Price for a share of Cox Communications, Inc.'s Class A Common Stock for each of
the ten consecutive NYSE trading days
AGREEMENT AND PLAN OF REORGANIZATION - Page 35
<PAGE> 36
ending on the second trading day prior to the Closing Date by (ii) the number of
shares of Cox Communications, Inc.'s Class A Common Stock traded on the NYSE on
the day on which each such Daily Closing Stock Price occurred divided by (b) the
aggregate number of shares of Cox Communications, Inc.'s Class A Common Stock
traded on the NYSE during such ten trading day period.
"Daily Closing Stock Price" means, with respect to any NYSE trading
day, the amount obtained by multiplying the trading volume of the Cox
Communications, Inc.'s Class A Common Stock on the NYSE for such day by the
closing sales price, regular way (or, if there is no such closing sales price of
the Cox Communications, Inc.'s Class A Common Stock on such day, the last bid
price of the Cox Communications, Inc.'s Class A Common Stock.
"Cox Communications, Inc. Class A Common Stock" means the Class A
Common Stock, par value $1.00 per share, of Cox Communications, Inc.
In the event this Agreement is terminated pursuant to subparagraph (b),
(c), (d), (e), (f) or (g) above, Parent, Sub, Target and the Shareholders shall
each be entitled to pursue, exercise and enforce any and all remedies, rights,
powers and privileges available at law or in equity. In the event of a
termination of this Agreement under the provisions of this Article, a party not
then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
ARTICLE XII
Miscellaneous
Section 12.01. Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party, or (ii) proving that another party breached any of the terms of
this Agreement.
Section 12.02. Waiver. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, or any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
AGREEMENT AND PLAN OF REORGANIZATION - Page 36
<PAGE> 37
Section 12.03. Offset. Any and all amounts owing, or to be paid by
Parent to the Shareholders hereunder or otherwise, shall be subject to offset
and reduction pro tanto by any amounts that may be owing at any time by the
Shareholders to Parent in respect of any failure or breach of any
representation, warranty or covenant of Target or the Shareholders under or in
connection with this Agreement, the Agreement Not to Compete or any other
agreement with Parent or any transaction contemplated hereby or thereby, as
reasonably determined by Parent. If Parent determines that such offset is
appropriate, thirty (30) days' written notice shall be given to Shareholders of
such determination on or prior to the due date of the payment to be reduced.
Section 12.04. Knowledge. "Knowledge," "have no knowledge of," or "do
not know of"and similar phrases shall mean (i) in the case of a natural person,
the particular fact was known, or not known, as the context requires, to such
person after reasonable investigation and inquiry by such person, and (ii) in
the case of an entity, the particular fact was known, or not known, as the
context requires, to any employee of such entity after reasonable investigation
and inquiry by the principal executive officer of such entity.
Section 12.05. Specific Performance. Each of the parties hereto
acknowledges that a refusal by any other party to consummate the transactions
contemplated hereby will cause irreparable harm to each other party for which
there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, each of the parties hereto shall be
entitled in addition to, and without having to prove the inadequacy of, other
remedies at law, to specific performance of this Agreement, as well as
injunctive relief.
Section 12.06. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
Section 12.07. Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Parent to
an affiliate of Parent.
Section 12.08. Parties In Interest: No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.09. Entire Agreement. This Agreement, the Agreement of
Merger and the agreements contemplated hereby and thereby constitute the entire
agreement of the parties regarding the subject matter hereof, and supersede all
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.
Section 12.10. Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall
AGREEMENT AND PLAN OF REORGANIZATION - Page 37
<PAGE> 38
be fully severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
Section 12.11. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Target, the Shareholders, Sub or Parent
pursuant to this Agreement shall be deemed to have been representations and
warranties by Target or Parent and Sub, as the case may be, and, notwithstanding
any provision in this Agreement to the contrary, shall survive the Closing for
two (2) years from the date of Closing.
Section 12.12. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
Section 12.13. Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14. Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16. Confidentiality, Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules applicable to issuers whose securities are traded
on the National Association of Securities Dealers Automatic Quotation System,
and (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in conducting an examination of the operations and
assets of Target.
Section 12.17. Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing, and given by
AGREEMENT AND PLAN OF REORGANIZATION - Page 38
<PAGE> 39
depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested, or by delivering the same in person or by facsimile transmission.
Such notice shall be deemed received on the date on which it is hand delivered
or received by facsimile transmission or on the third business day following the
date on which it is so mailed. For purposes of notice, the addresses of the
parties shall be:
If to Parent or Sub:
3015 SSE Loop 323
Tyler, Texas 75701
Attn: Fred R. Nichols, President
Ph.: (903) 595-3701
Fax: (903) 596-9008
with a copy to:
Jeffrey W. Brown, General Counsel
3015 SSE Loop 323
Tyler, Texas 75701
Ph.: (903) 595-3701
Fax: (903) 596-9008
If to the Shareholders:
Mr. John Muraglia
Meridian Communications, Inc.
670 Marian Street
Denver, Colorado 80202
Mr. Dale Hoffman
111 North College Street
Georgetown, Texas 78626
Mrs. Lola H. McDaniel
Ms. Melissa Lyons Gardner
Mr. Mark A. Lyons
c/o Mr. John W. Lyons, Jr.
2831 Palmer Hwy.
Texas City, Texas 77592
with a copy to:
Mr. Chris Cahill
Mills, Shirley, Eckel & Bassett
P.0. Box 1943
Galveston, Texas 77553-1943
AGREEMENT AND PLAN OF REORGANIZATION - Page 39
<PAGE> 40
Any party may change its address for notice by written notice given to
the other parties in accordance with this Section.
Section 12.18. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
EXECUTED as of the dates set forth below to be effective as of the date
first above written.
TCA CABLE TV, INC., a Texas corporation
Date: 6/25/99 By: /s/ Robert A. Roseman
---------------- ------------------------------------------
Name: Robert A. Roseman
----------------------------------------
Title: Vice President - Business Development
---------------------------------------
TCA CABLE TV OF CENTRAL TEXAS, INC.,
a Texas corporation
Date: 6/25/99 By: /s/ Jeffrey W. Brown
---------------- ------------------------------------------
Name: Jeffrey W. Brown
----------------------------------------
Title: Secretary and General Counsel
---------------------------------------
WILLIAMSON COUNTY CABLEVISION
COMPANY, INC., a Texas corporation
Date: 6/25/99 By: /s/ Dale Hoffman
---------------- ------------------------------------------
Name: Dale Hoffman
----------------------------------------
Title: President
---------------------------------------
SHAREHOLDERS
Date: By:
---------------- ------------------------------------------
Name: John Muraglia
Date: 6/25/99 By: /s/ Dale Hoffman
---------------- ------------------------------------------
Name: Dale Hoffman
Date: 6/25/99 By: /s/ Lola H. McDaniel
---------------- ------------------------------------------
Name: Lola H. McDaniel
The Estate of Moran K. McDaniel
AGREEMENT AND PLAN OF REORGANIZATION - Page 40
<PAGE> 41
Date: 6/25/99 By: /s/ Melissa Lyons Gardner
---------------- ------------------------------------------
Name: Melissa Lyons Gardner
Title: Co-Executor
Date: 6/25/99 By: /s/ Mark A. Lyons
---------------- ------------------------------------------
Name: Mark A. Lyons
Title: Co-Executor
AGREEMENT AND PLAN OF REORGANIZATION - Page 41
<PAGE> 1
EXHIBIT 99(d)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of June 25, 1999, is entered into by and among Cablevision of
Leander, Inc., a Texas corporation ("Target"), John Muraglia, Dale Hoffman, Lola
H. McDaniel and the Estate of Moran K. McDaniel, Deceased, by and through its
Co-Executors, Melissa Lyons Gardner and Mark A. Lyons (the "Shareholders"), TCA
Cable TV of Central Texas, Inc., a Texas corporation ("Sub"), and TCA Cable TV,
Inc., a Texas corporation ("Parent").
WITNESSETH:
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Target (the "Stock"), and desire to cause the merger of Target into Sub
(the "Merger") in exchange for shares of Parent's common stock, $.10 par value
("TCA Stock");
WHEREAS, Parent desires that Sub acquire the assets and business of
Target pursuant to the Merger, and has established Sub to facilitate the Merger;
WHEREAS, the Shareholders and the respective Boards of Directors of
Parent, Sub, and Target have approved the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") pursuant to the
provisions governing forward triangular mergers.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
Section 1.01. Effect of the Merger.
(a) Subject to the terms and conditions of this Agreement and the
Agreement of Merger executed by Parent, Sub, Target and the Shareholders on the
same date herewith (the "Agreement of Merger"), Target shall be merged into Sub
and the separate existence of Target shall thereupon cease, in accordance with
the applicable provisions of the laws of the State of Texas.
Sub will be the surviving corporation in the Merger (sometimes referred
to herein as the "Surviving Corporation") and will continue to be governed by
the laws of the State of Texas, and the separate existence of Sub and all of its
rights, privileges, immunities and franchises, public or
AGREEMENT AND PLAN OF REORGANIZATION - Page 1
<PAGE> 2
private, and all its duties and liabilities as a corporation organized under the
laws of the State of Texas and other applicable laws, will continue unaffected
by the Merger.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any member of Sub,
and without any action on the part of any holder of any capital stock of Target,
all outstanding capital stock of Target of any kind or nature shall be canceled
and shall cease to exist.
For the purposes of this Agreement, (i) the term "Closing" shall mean
the closing of the Merger and the other transactions contemplated by this
Agreement at such time and place as shall be mutually agreed upon in writing, by
all of the parties hereto, and (ii) the term "Closing Date" shall mean such date
as may be decided solely by the Shareholders of Target by written notice to
Parent and Sub, provided that approvals required by Sections 8.06 and 8.07 have
been obtained.
Section 1.02. Conversion of Target Stock into TCA Stock.
(a) Preliminary Merger Consideration. The value of the consideration to
be paid by Parent to the Shareholders (the "Preliminary Merger Consideration")
shall be $9,355,500, which shall be paid by delivery of 187,110 shares of TCA
Stock of Parent, valued for such purposes at $50.00 per share (the "Closing
Shares"). A reasonable amount of the Preliminary Merger Consideration is
allocated by the parties to the Noncompetition Agreement referred to in Section
2.01 (a) hereof. Following the Effective Time, no Shares of Target shall be
deemed to be outstanding or to have any rights other than those rights set forth
in this Section 1.02 and in Section 1.03 hereof. The Preliminary Merger
Consideration set forth in this Section 1.02(a) shall be subject to adjustment
as described in Section 1.02(b).
(b) Adjusted Merger Consideration. It is recognized that the
Preliminary Merger Consideration set forth above was calculated based upon the
Target's best estimate of the number of Equivalent Basic Subscribers receiving
Target's basic tier of cable television service as of the Closing Date. The
Preliminary Merger Consideration shall be adjusted to the extent required under
the provisions of Section 1.02(b)(i), (ii), and (iii) set forth below, and as
adjusted shall be referred to as the "Adjusted Merger Consideration."
(i) Subscriber Adjustment. If the actual number of Target's
Equivalent Basic Subscribers on the Closing Date exceeds or is less than 2,970
by more than three percent (3%), the Preliminary Merger Consideration shall be
increased by the excess or decreased by the deficiency, as the case may be, by
multiplying the excess or deficiency in the number of such customers by
$3,150.00.
"Equivalent Basic Subscribers" shall mean the number of active
customers for Basic Services (as hereinafter defined) either in a single
household, a commercial establishment or a multi-unit dwelling (including a
hotel unit); provided, however, that the number of subscribers in a commercial
establishment or multi-unit dwelling that obtain service on a "bulk-rate" basis
shall be determined for each franchise area by dividing the gross bulk-rate
billings for Basic Services and expanded basic
AGREEMENT AND PLAN OF REORGANIZATION - Page 2
<PAGE> 3
services (but excluding billings from a la carte tiers or premium services,
installation or other nonrecurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling 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 Basic Rate. For purposes
of this definition (i) an "active subscriber" shall mean, as of any date, any
person, commercial establishment or multi-unit dwelling that is paying for and
receiving Basic Services from the System who has an account that is not more
than sixty (60) days past due (except for past due amounts of $5.00 or less,
provided such account is otherwise current) who is not pending disconnection for
any reason; and (ii) the number of days a subscriber account is past due shall
be calculated from the first day of the period for which the applicable billing
relates.
"Basic Rate" shall mean the rate charged at the date of determination
to individual households for Basic Services, excluding charges from a la carte
tiers, premium services, pay-per-view television, installation or other
non-recurring charges, converter rental, pass-through charges for sales taxes,
line-itemized franchise fees, fees charged by the FCC and similar fees. "Basic
Services" shall mean the lowest tier of cable television programming sold to
subscribers of the System for which subscribers served by the System pay a fixed
monthly fee to the cable operator, excluding expanded basic services, a la carte
tiers, premium services, pay-per-view television and any charges for additional
outlets and installation fees, any revenues derived from the rental of
converters, remote control devices and other like charges for equipment.
(ii) Guaranteed Merger Consideration Adjustment. Parent
guarantees that the Shareholders will, at Closing, receive shares of Common
Stock of TCA Cable TV, Inc. ("Parent Common Stock") with a total market value at
Closing equal to or greater than the Preliminary Merger Consideration,
regardless of whether the Ten Day Average Price of Parent's Common Stock is
below $50.00 per share (the "Guaranteed Merger Consideration"). Additionally,
Parent guarantees that after Closing, in the event the merger agreement between
Parent and Cox Communications, Inc., dated May 11, 1999 (the "Cox-TCA Merger
Agreement") is terminated, and that following the announcement of such
termination the price of Parent's Common Stock drops, Parent will deliver
additional Parent Common Stock to the Shareholders such that the Shareholders
will have the Guaranteed Merger Consideration.
1) Ten Day Average Price. For purposes of determining
whether and to what extent any adjustment should be made under this Section
1.02(b)(ii), the ten trading day average closing price for the Parent Common
Stock for the period up to and including the second day before the Event Date
shall control (the "Ten Day Average Price"). The Event Date in the case of a
Guaranteed Merger Consideration Adjustment at Closing shall be the Closing Date.
The Event Date in the case of a Guaranteed Merger Consideration Adjustment after
Closing shall be the twelfth day after the date of public announcement of
termination of the Cox-TCA Merger Agreement.
2) Method of Adjustment. If the Ten Day Average
Price is less than $50.00 per share, the Preliminary Merger Consideration shall
be increased by an amount equal to
AGREEMENT AND PLAN OF REORGANIZATION - Page 3
<PAGE> 4
the difference between $50.00 and the Ten Day Average Price, multiplied by the
number of Closing Shares. In order to determine the additional Closing Shares to
be delivered to the Shareholders, the resulting figure shall then be divided by
the Ten Day Average Price.
(iii) Accounting Adjustment. The Preliminary Merger
Consideration shall also be adjusted in the following manner to reflect the
amount by which Target's current assets exceed or are less than its current
liabilities, each determined in accordance with past accounting practices of
Target: The total purchase price shall be increased by $1.00 for each $1.00 that
current assets exceed, or decreased by $1.00 for each $1.00 that current assets
are less than, current liabilities as of the close of business on the day
preceding the Closing Date.
(c) Delivery of the Closing Shares. The Closing Shares shall be
delivered by Parent to the Shareholders pursuant to the provisions of this
Agreement.
Section 1.03. Determination and Delivery of Adjustments. The Adjusted
Merger Consideration pursuant to Section 1.02(b) shall be determined and
delivered in accordance with the following procedures:
(a) Subscriber Adjustment. Target shall prepare and deliver to Parent
and Sub not later than ten days before the Closing Date a preliminary settlement
statement (the "Preliminary Settlement Statement") which shall set forth
Target's good faith estimate of Equivalent Basic Subscribers as of Closing and
any adjustments to the Preliminary Merger Consideration under Section
1.02(b)(i). The Preliminary Settlement Statement shall contain all information
reasonably necessary to determine the adjustments to the Preliminary Merger
Consideration under Section 1.02(b)(i), to the extent such adjustments can be
determined or estimated as of the date of the Preliminary Settlement Statement,
and such other information as may be reasonably requested by Parent and Sub.
(b) Guaranteed Merger Consideration Adjustment. With respect to
adjustment to the Preliminary Merger Consideration under Section 1.02(b)(ii),
the Adjusted Merger Consideration shall be delivered to the Shareholder
Representative not later than the tenth business day after the
Event Date.
(c) Accounting Adjustment. With respect to adjustment to the
Preliminary Merger Consideration under Section 1.02(b)(iii), the Adjusted Merger
Consideration shall be delivered to the Shareholder Representative or to the
Parent, as the case may be, not later than the 30th business day after the
Closing Date. No later than 15 days after the Closing Date, Chris Cahill, Mills,
Shirley, Eckel & Bassett, 2228 Mechanic Street, Suite 400, Galveston, Texas
77550 (the "Shareholder Representative"), will deliver to Parent and Sub a
statement (the "Accounting Adjustment") setting forth the Shareholders'
determination of the Adjusted Merger Consideration as adjusted pursuant to
Section 1.02(b)(iii) and the calculation thereof, certified by the Shareholders
to be accurate as of the date delivered.
AGREEMENT AND PLAN OF REORGANIZATION - Page 4
<PAGE> 5
(d) Form of Consideration. All Subscriber Adjustments, Guaranteed
Merger Consideration Adjustments, and Accounting Adjustment payable to the
Shareholders shall be paid in additional Closing Shares, to the extent possible,
or in cash otherwise. All Accounting Adjustments payable to Parent shall be paid
in cash.
Section 1.04. Tax Status of Merger. The Merger and the transfer of the
Closing Shares to the Shareholders contemplated by this Agreement are intended
by the parties to qualify as a forward triangular tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(P) of the Code, and each of the parties
hereto agrees to act with respect to the Stock and the Closing Shares, as
applicable, and take such other steps, including the proper filing of plans of
reorganization and articles of merger, as shall be necessary to insure the
tax-free status of the transaction under such Code sections and the underlying
regulations.
Section 1.05. Status of TCA Stock. Each Shareholder acknowledges that
his or its Closing Shares are being acquired without any view to a transfer,
sale, assignment or other distribution thereof other than a transfer, sale,
assignment or other distribution not in violation of the Securities Act of 1933,
as amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit 1.05, and agree to remain subject to the
representations, warranties and covenants made therein after the Closing Date.
As a condition to Target's obligation to close, Parent agrees that it
shall, at the sole expense of Parent, register all of the Closing Shares in the
manner described in Section 4.05 hereof.
ARTICLE II
Closing Deliveries
Section 2.01. Deliveries of Target and the Shareholders. At the
Closing, Target and the Shareholders shall deliver to Parent the following, all
of which shall be in form and content satisfactory to Parent and its counsel:
(a) executed Noncompetition Agreement (the "Noncompetition Agreement")
among Target, Parent and the Shareholders, in the form of the agreement attached
as Exhibit 2.01(b);
(b) a separate Letter of Investment Intent, in the form attached hereto
as Exhibit 1.05, executed by the Shareholders;
(c) a copy of resolutions of the Board of Directors of Target
authorizing the execution, delivery and performance of this Agreement, the
Agreement of Merger and all related documents and agreements, each certified by
the Secretary of that corporation as being true and correct copies of the
originals thereof subject to no modifications or amendments;
AGREEMENT AND PLAN OF REORGANIZATION - Page 5
<PAGE> 6
(d) a separate certificate of the President of Target, dated the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Target contained herein on and as of the Closing Date, (ii) as to
the performance of and compliance by Target and the Shareholders with all
covenants contained herein on and as of the Closing Date, and (iii) certifying
that all conditions precedent of Target to the Closing have been satisfied;
(e) a certificate of the Secretary of Target certifying as to the
incumbency of the directors and officers of Target and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Target;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas establishing that Target is in
existence, has paid all franchise taxes and otherwise is in good standing to
transact business in that state;
(g) certificates, dated within thirty (30) days of the Closing Date, of
the Secretaries of State of the states in which it is necessary for Target to be
qualified to do business, to the effect that Target is qualified to do business
and is in good standing as a foreign corporation in each of such states, if
applicable;
(h) an opinion of legal counsel to Target and the Shareholders, dated
as of the Closing Date, in the form attached hereto as Exhibit 2.01(h), and an
opinion of FCC counsel to Target and the Shareholders, dated as of the Closing
Date, in the form attached hereto as Exhibit 2.01(h-a);
(i) all necessary authorizations, consents, approvals, permits and
licenses referenced in Schedule 3.08;
(j) releases from the Shareholders to Cablevision of Leander, Inc. for
any security interests or liens held by the Shareholders in the form attached
hereto as Exhibit 2.01(j), if applicable; and
(k) such other instrument or instruments as shall be necessary or
appropriate, as Parent or its counsel shall reasonably request, to vest in
Parent good and marketable title to the Stock.
Section 2.02. Deliveries of Parent. At the Closing, Parent shall
deliver the following to Target or the Shareholders, as applicable:
(a) the Closing Shares and the Cash Portion to the Shareholder
Representative for the benefit of the Shareholders;
(b) the Noncompetition Agreement;
(c) a separate certificate of each of the President or any Vice
President of Parent and Sub, dated the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Parent and Sub contained
herein on and as of the Closing Date, (ii) as to the performance of and
AGREEMENT AND PLAN OF REORGANIZATION - Page 6
<PAGE> 7
compliance by Parent and Sub with all covenants contained herein on and as of
the Closing Date, and (iii) certifying that all conditions precedent of Parent
and Sub to the Closing have been satisfied;
(d) a certificate of the Secretary of Parent certifying as to the
incumbency of such officers of Parent, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Parent;
(e) a certificate of the Secretary of Sub certifying as to the
incumbency of such officers of Sub, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Sub;
(f) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Parent is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(g) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Texas, establishing, that Sub is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
(h) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, in form attached hereto as Exhibit 2.02(h);
(i) an opinion of legal counsel to Parent and Sub, dated as of the
Closing Date, confirming the matters set forth in Section 4.05 hereof (to
include the specific language contained in such Section); and
(j) entity resolutions for Parent and Sub approving the transactions.
ARTICLE III
Representations and Warranties of Target and the Shareholders
Section 3.01. Ownership of the Stock. The Shareholders severally
represent and warrant that they own, beneficially and of record, good and
marketable title to the Stock, which constitutes all of the issued and
outstanding capital stock of Target free and clear of all security interests,
liens, adverse claims, encumbrances, equities, proxies, options or shareholder
agreements.
Target represents and warrants that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date as
if made on that date:
Section 3.02. Organization and Good Standing: Qualification. Target is
a corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions
AGREEMENT AND PLAN OF REORGANIZATION - Page 7
<PAGE> 8
contemplated hereby. Target is duly qualified and licensed to do business and is
in good standing in all jurisdictions where the nature of its business makes
such qualification necessary, which jurisdictions are listed in Schedule 3.02,
except where the failure to be qualified or licensed would not have a material
adverse effect on the business of Target. Target does not have any assets,
employees or offices located in any state other than the states listed in
Schedule 3.02.
Section 3.03. Capitalization of Target. The authorized capital stock of
Target consists of 20,000 shares of common stock, $10.00 par value per share, of
which 10,000 shares are issued and outstanding. No shares of such capital stock
are held in the treasury of Target. All of issued and outstanding shares of
capital stock of Target are duly authorized, validly issued, fully paid and
nonassessable. There exist no options, warrants, subscriptions or other rights
to purchase, or securities convertible into or exchangeable for, the capital
stock of Target for which a release has not been obtained prior to Closing.
Neither the Shareholders nor Target are parties to or bound by, nor do they have
any knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of Target. No shares of capital stock of Target
have been issued or disposed of in violation of the preemptive rights of any of
Target's Shareholders. All accrued dividends on the capital stock of Target,
whether or not declared, have been paid in full.
Section 3.04. Corporate Records. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Target which have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. To Target's knowledge, the minute book of Target, a
copy of which has been delivered to Parent, contains accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by, the
Board of Directors (and any committees thereof) and the Shareholders of Target
since its formation.
Section 3.05. Authorization and Validity. The execution, delivery and
performance by Target of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Target and the Shareholders. This
Agreement and each other agreement contemplated hereby have been or will be as
of the Closing Date duly executed and delivered by Target and the Shareholders,
as applicable, and constitute or will constitute legal, valid and binding
obligations of Target and the Shareholders, as applicable, enforceable against
Target and the Shareholders in accordance with their respective terms. To
Target's knowledge, and, if applicable, subject to the receipt of the various
third-party consents and approvals described in the Schedules hereto, the Merger
will not impair the ability or authority of Sub to carry on the business now
conducted by Target in any material respect.
Section 3.06. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will
materially (i) conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, the Articles of
Incorporation or Bylaws of Target or any agreement, indenture or other
instrument under which Target is bound or to which the appropriate portion of
the Stock or any of the assets of Target are subject, or result in
AGREEMENT AND PLAN OF REORGANIZATION - Page 8
<PAGE> 9
the creation or imposition of any security interest, lien, charge or encumbrance
upon the Stock or any of the assets of Target, or (ii) violate or conflict with
any judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over
Target, the Stock or the assets of Target.
Section 3.07. Financial Statements. Target has furnished to Parent the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 1996 through December 31, 1998,
including the notes thereto, and will, prior to the Closing Date, furnish the
audited statements for the one year period ending December 31, 1998
(collectively, the "Financial Statements"). The Financial Statements are true,
correct and complete, are in accordance with the books and records of Target
fairly present the financial condition and results of operations of Target as of
the dates and for the periods indicated and have been prepared on a cash basis
of accounting and on a proper and consistent basis.
Section 3.08. Target Required Consents. A list and brief description of
all required consents, authorizations and approvals required under the Target
system franchise, Target system licenses, Target system contracts, Target
governmental or public body or authority filing or permit, any Target lender or
bank loan or agreement, and the leases and other documents evidencing Target
leased property and Target other real property interests are set forth in
Schedule 3.08. If for any reason Target fails to make a filing or to obtain a
consent, the failure of Target to do so shall not, individually or in the
aggregate, have an adverse effect on the Target system, on the Shareholders'
ability to perform their obligations under this Agreement, on Target's cable
business, or on Target's ability to conduct such business after the Merger in
substantially the same manner as it is currently being conducted.
Section 3.09. Target System Contracts. A list and brief description of
all pole line agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements (other than Target system franchise and Target system
licenses) to which Target is a party are set forth in Schedule 3.09. Such
documents constitute the entire agreement with the other party. Each of the
Target system contracts is in full force and effect and constitutes the valid,
legal, binding and enforceable obligation of Target and to Target's knowledge,
each other party thereto is not in breach or default of any material terms or
conditions thereunder.
Section 3.10. Target System Franchise. A list and brief description of
the franchises to which Target is party are set forth on Schedule 3.10. The
Target system franchise contains all of the commitments and obligations of
Target to the applicable governmental authority granting such franchise with
respect to the construction, ownership and operation of the Target system. The
Target system franchise is currently in full force and effect, is not in default
and is valid under all applicable legal requirements according to their terms.
There is no legal action, governmental proceeding or investigation, pending or
to Target's knowledge threatened, to terminate, suspend or modify the Target
system franchise and Target is, or will be as of the Closing Date, in material
compliance with the terms and conditions of all the Target system franchise and
other applicable requirements of all governmental authorities (including the FCC
and the U.S. Copyright Office) relating to the Target
AGREEMENT AND PLAN OF REORGANIZATION - Page 9
<PAGE> 10
system franchise, including all requirements for notification, filing,
reporting, posting and maintenance of logs and records.
Section 3.11. Target System Licenses. A list and brief description of
the intangible cable television channel distribution rights, cable television
relay service (CARS), business radio and other licenses, and copyright notices
issued by the FCC and used or held for use in Target's cable business are set
forth on Schedule 3.11. The Target system licenses are currently in full force
and effect, are not in default and are valid under all applicable legal
requirements according to their terms. There is no legal action, governmental
proceeding or investigation, pending or to Target's knowledge threatened, to
terminate, suspend or modify the Target system licenses and Target is, or will
be as of the Closing Date, and the Target system licenses and other applicable
requirements of all governmental authorities (including the FCC and the U.S.
Copyright Office) relating to the Target system licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
Section 3.12. Target Tangible Personal Property. A list and brief
description of all tangible personal property, including towers (other than
towers on Target 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
Target's cable business are set forth on Schedule 3.12. Target has exclusive,
good and marketable title to (or, in the case of assets that are leased, valid
leasehold interests in) the Target assets. Target's assets are free and clear of
all liens, except (a) permitted liens, and (b) liens which will be terminated,
released or, in the case of the rights of first refusal, waived, as appropriate,
at or prior to the Closing. Target's tangible personal property is in good
operating condition and repair (ordinary wear and tear excepted).
Section 3.13. Liabilities and Obligations. Except as set forth in
Schedule 3.13, the Financial Statements provided reflect all liabilities of
Target, including all reserves, if applicable, and any liabilities not required
to be reflected or reserved are not material to the financial condition or
prospects of Target's business. Except as set forth in the Financial Statements,
Target is not liable upon or with respect to, or obligated in any other way to
provide funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity, and Target knows of no basis for the
assertion of any other claims or liabilities of any nature or in any amount.
Section 3.14. Absence of Certain Changes. Any other provisions of this
Agreement to the contrary notwithstanding, it is understood and agreed that
cash, cash equivalents, and any Shareholder capital contributions or loans
available to Target may be expended by Target in order to enable Target to pay
the costs and expenses associated with the consummation of this transaction and
the simultaneous transactions involving Target's affiliated companies (including
but not limited to: substantial employee bonuses outside the ordinary course of
business, sales commissions; attorneys, accountant and other professional fees;
telephone, delivery and copying charges; travel expenses; other closing
expenses; wind-up costs; final taxes and other similar or dissimilar costs)
AGREEMENT AND PLAN OF REORGANIZATION - Page 10
<PAGE> 11
and/or paid out as dividends or distributions to the Shareholders, provided that
such expenditures do not limit or impair Target's ability to carry on its
business in the ordinary course between the date hereof and the Closing Date,
and do not reduce the amount by which current assets exceed current liabilities
to less than zero (0). Except as set forth above and in Schedule 3.14, since
March 31, 1999, Target has not, except in the ordinary course of business:
(a) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Target, in its condition (financial or otherwise),
operations, assets, liabilities, business or prospects;
(b) contracted for the purchase of any capital assets not to exceed
$10,000, without Parent's prior approval, other than those identified in
Target's financial statements dated December 31, 1998, previously provided to
Parent or other than those used or to be used in Target's routine and regular
ongoing plant expansion program;
(c) incurred any indebtedness for borrowed money or issued or sold any
debt securities;
(d) incurred or discharged any liabilities or obligations;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or canceled any debts or claims or released or waived any rights or claims
except write-offs of accounts receivable in accordance with Target's regular
subscriber disconnect and account write-off;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(g) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could reasonably be expected to materially and adversely affect,
its business;
(h) acquired or disposed of any assets;
(i) written up or written down the carrying value of any of its assets;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) waived any material rights or forgiven any material claims;
(l) lost or terminated any employee, customer or supplier, the loss or
termination of which has materially and adversely affected, or could reasonably
be expected to materially and adversely affect, its business or assets;
(m) increased the compensation of or paid any bonus to any director or
officer;
AGREEMENT AND PLAN OF REORGANIZATION - Page 11
<PAGE> 12
(n) increased the compensation of or paid any bonus to any employee;
(o) made any payments to or loaned any money to any person or entity
referred to in Section 3.33;
(p) formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to such capital stock or securities, or agreed to
change the terms and conditions of any such rights;
(r) entered into any agreement with any person or group, or modified or
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
(s) entered into, adopted or amended any Employee Benefit Plan (as
hereinafter defined); or
(t) entered into any other commitment or transaction or experienced any
other event that is material to this Agreement or to any of the other agreements
and documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or that has materially and
adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Target taken as a whole.
Section 3.15. Title; Leased Assets.
(a) Real Property. A description of all interests in real property
owned by Target (collectively, the "Real Property") is set forth in Schedule
3.15(a). Except as set forth in Schedule 3.15(a), Target has good, valid and
marketable title to all the Real Property. The Real Property and the leased real
property referred to in Section 3.15(c) constitute the only real property used
in the conduct of the business of Target.
(b) Personal Property. Except as set forth in Schedule 3.15(b), Target
has good, valid and marketable title to all tangible and intangible personal
property owned by them (collectively, the "Personal Property"). The Personal
Property and the leased personal property referred to in Section 3.15(c)
constitute the only personal property used in the conduct of the business of
Target.
(c) Leases. A list and brief description of all leases of real and
personal property to which Target is a party, either as lessor or lessee, are
set forth in Schedule 3.15(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
AGREEMENT AND PLAN OF REORGANIZATION - Page 12
<PAGE> 13
(d) Right to Use Assets. Except for those assets acquired since
December 31, 1998, which are listed in Schedule 3.15(d), all tangible and
intangible assets used in the conduct of the business of Target are reflected in
the Financial Statements in a manner that is in conformity with past accounting
practices of Target, consistently applied. Target owns, leases or otherwise
possesses a right to use all assets used in the conduct of the business of
Target, which will not be impaired by the consummation of the transactions
contemplated hereby.
Section 3.16. Commitments.
(a) Commitments; Defaults. Except as set forth in Schedules attached
hereto, Target has not entered into, and the Stock, the assets, and the business
of Target are not bound by, whether or not in writing,
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent
to another;
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
(x) agreement between Target and any affiliate of Target;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is
an affiliate of Target;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving, more than
$10,000 in the aggregate;
AGREEMENT AND PLAN OF REORGANIZATION - Page 13
<PAGE> 14
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or agreement that involves either an
unperformed commitment in excess of $5,000 or that terminates more than
30 days after the date hereof,
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity
referred to in Section 3.33;
(xvii) agreement providing for the purchase from a supplier of
all or substantially all of the requirements of Target of a particular
product or service; or
(xviii) any other agreement or commitment not made in the
ordinary course of business or that is material to the business or
financial condition of Target.
All of the foregoing items which are listed on the attached Schedules
are hereinafter collectively referred to as the "Commitments." True, correct and
complete copies of the written Commitments, and true, correct and complete
written descriptions of any oral Commitments, have heretofore been delivered or
made available to Parent. There are no material existing defaults, events of
default or events, occurrences, acts or omissions which, with the giving of
notice or lapse of time or both, would constitute material defaults by Target
and no penalties have been incurred nor are amendments pending, with respect to
the Commitments. The Commitments are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their
respective terms, and no defenses, offsets or counterclaims have been asserted,
or to the knowledge of Target may be made by any party thereto, nor has Target
waived any rights thereunder. Target has not received notice of any default with
respect to any Commitment.
(b) No Cancellation or Termination of Commitment. Except as
contemplated hereby, Target has not received notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment or agreement, and Target knows of no fact that would justify the
exercise of such a right. Target does not currently contemplate, or have reason
to believe any other person or entity currently contemplates, any amendment or
change to any Commitment. Except as listed in Schedule 3.16(b), to the knowledge
of Target, none of the customers or suppliers of Target have refused, or
communicated that they will or may refuse, to purchase or supply goods or
services, as the case may be, or have communicated that they will or may
substantially reduce the amounts of goods or services that they are willing to
purchase from, or sell to, Target.
Section 3.17. Adverse Agreements. Target is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation not
generally applicable to other cable television system operators that materially
and adversely affects, or so far as Target can now reasonably foresee, may in
the future
AGREEMENT AND PLAN OF REORGANIZATION - Page 14
<PAGE> 15
materially and adversely affect, the condition (financial or otherwise),
operations, assets, liabilities, business or prospects of Target.
Section 3.18. Insurance. A list and brief description of all insurance
policies of Target are set forth in Schedule 3.18. All of such policies are
valid and enforceable policies, issued by insurers of recognized responsibility
and in amounts and against such risks and losses as are customary in its
industry. Such insurance shall be outstanding and duly in force without
interruption up to and including the Closing Date. True, complete and correct
copies of all such policies have been provided to Parent on or prior to the date
hereof.
Section 3.19. Subscribers. Target represents that the cable system
shall have at least 2,821 Equivalent Basic Subscribers as of the Closing Date.
Section 3.20. [Reserved]
Section 3.21. Trade Secrets and Customer Lists. Target has the right to
use, free and clear of any claims or rights of others, except claims or rights
specifically set forth in Schedule 3.21, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Target. Target is not using
or in any way making use of any confidential information or trade secrets of any
third party.
Section 3.22. Taxes.
(a) Filing of Tax Returns. Target has duly and timely filed with the
appropriate governmental agencies all tax returns (including information
returns) and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such tax
returns or reports are complete and accurate and properly reflect the taxes of
Target for the periods covered thereby.
(b) Payment of Taxes. Target has paid or accrued, if applicable, all
taxes, penalties and interest which have become due with respect to any returns
that it has filed and any assessments of which it is aware. Target is not
delinquent in the payment of any tax, assessment or governmental charge.
(c) No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as listed in Schedule 3.22(c), no tax deficiency or delinquency has been
asserted against Target. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of Target
that could be asserted by any taxing authority. There is no taxing authority
audit of Target pending, or threatened, and the results of any completed audits
are properly reflected in the Financial Statements of Target. Target has not
violated any federal, state, local or foreign tax law.
(d) No Extension of Limitation Period. Target has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
AGREEMENT AND PLAN OF REORGANIZATION - Page 15
<PAGE> 16
(e) All Withholding Requirements Satisfied. All monies required to be
withheld by Target and paid to Governmental agencies for all taxes have been (i)
collected or withheld and either paid to the respective Governmental agencies or
set aside in accounts for such purpose, or (ii) properly reflected in the
Financial Statements of Target.
(f) State Unemployment Taxes. In respect of its most recently completed
reporting period and all previous reporting periods, Target has paid state
unemployment taxes to all applicable states at the appropriate rates for the
wages paid by Target during such period which were subject to such tax.
(g) Reasonable Expenditures. All amounts paid by Target (i) to
officers, employees, consultants and agents as salaries, compensation, and
expenses reimbursed by Target, or (ii) as rental payments, have been in amounts
which are ordinary and necessary for income tax purposes pursuant to Section 162
of the Internal Revenue Code.
(h) Tax Liability in Financial Statements. The liabilities (including
deferred taxes) shown in Target's December 31, 1998 Financial Statements and to
be accrued on the books and records of Target through the Closing Date for
taxes, interest and penalties are and will be adequate accruals and have been
and will be accrued in a manner consistent with the practices utilized for
accruing tax liabilities in the tax year ended December 31, 1998 and take into
account net operating losses, investment credits and other carryovers for
periods ended prior to the Closing Date. This subsection shall not apply to the
extent that Target is a sub-chapter S corporation under the Code.
(i) Foreign Investment in U. S. Real Property. The Shareholders are not
foreign persons, as such term is used in Section 1445(b)(2) of the Code.
(j) Tax Exempt Entity. None of the assets of Target are or will be
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Code.
(k) Collapsible Corporation. Target has not at any time consented, and
the Shareholders will not permit Target to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(l) Change in Accounting Method. Target has not voluntarily or
involuntarily changed a method of accounting resulting in Target's inclusion of
amounts in income pursuant to the adjustment provisions of Section 481 of the
Code.
(m) C corporation. Target is not currently a C corporation as such term
is defined in the Internal Revenue Code.
Section 3.23. Compliance with Laws. Target has complied in all material
respects with all laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports. There are no
existing violations by Target of any federal, state or local law or regulation
that could materially and adversely affect the property or business of Target.
Target
AGREEMENT AND PLAN OF REORGANIZATION - Page 16
<PAGE> 17
possesses all necessary licenses, franchises, permits and governmental
authorizations material to the conduct of its business as now conducted, all of
which are listed in Schedule 3.23.
Section 3.24. Finder's Fee. Neither Target nor the Shareholders have
incurred any obligation for any finder's or broker's fee in connection with the
transactions contemplated hereby, except for those identified on Schedule 3.24.
Section 3.25. Litigation. Except as described in Schedule 3.25, there
are no legal actions or administrative proceedings or investigations instituted,
or to the knowledge of Target threatened, against or affecting, or that could
materially affect, Target, the Stock, or the business of Target. Target is not
(i) subject to any continuing court or administrative order, writ, injunction or
decree applicable specifically to Target or its businesses, assets, operations
or employees, or default with respect to any such order, writ, injunction or
decree. Target knows of no basis for any such action, proceeding or
investigation.
Section 3.26. Condition of Fixed Assets. All of the plants, structures
and equipment (the "Fixed Assets") owned by Target are in good condition and
repair, ordinary wear and tear excepted, for their intended use in the ordinary
course of business, (provided, however, that such representations and warranties
are intended to describe the condition of such property in general, and not to
warrant the condition of each and every item of such property) and conform in
all material respects with all applicable ordinances, regulations and other laws
and there are no known latent defects therein.
Section 3.27. Inventory. All of the tangible inventory owned by Target
is in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Target has, and at the Closing Date will have, the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
Section 3.28. Books of Account. The books of account of Target have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Target have been properly recorded in such books. All
such accounts receivable have arisen from bona fide transactions in the ordinary
course of business and are valid and enforceable claims subject to the usual and
typical delinquencies and non-payments, and to Target's standard disconnect and
write-off policies which are described in Schedule 3.30.
Section 3.29. Corporate Name. There are no actions, suits or
proceedings pending, or to the knowledge of Target threatened, against or
affecting Target that could result in any impairment of the right of Target to
use the name "Cablevision of Leander, Inc." The use of the name "Cablevision of
Leander, Inc." does not infringe the rights of any third party nor is it
confusingly similar with the corporate name of any third party. After the
Closing Date, no person or business entity other than Target will be authorized,
directly or indirectly, to use the name "Cablevision of Leander, Inc." or any
name confusingly similar thereto.
AGREEMENT AND PLAN OF REORGANIZATION - Page 17
<PAGE> 18
Section 3.30. Accounts Receivable. Schedule 3.30 sets forth the
accounts receivable of Target from sales made as of April 30, 1999 and the
payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the ordinary course of
business and are valid and enforceable claims subject to no right of set-off or
counterclaim.
Section 3.31. Product Warranties. There is no claim against or
liability of Target on account of product warranties or with respect to the
manufacture, sale or rental of defective products or services and there is no
basis for any such claim on account of defective products or services heretofore
manufactured, sold or rented that is not fully covered by insurance.
Section 3.32. Banking Relations. Set forth in Schedule 3.32 is a
complete and accurate list of all arrangements that Target has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
Section 3.33. Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.33, no officer, supervisory employee, director or
shareholder of Target, or their respective spouses or children, owns directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer or director of, any customer or supplier of Target, or any
organization that has a material contract or arrangement with Target except for
ownership of one percent (1%) or less of the outstanding stock of any publicly
traded corporation.
Section 3.34. Investments in Competitors. Shareholders do not own,
directly or indirectly, any material interests or has any material investment in
any corporation, business or other person that is a competitor of Target within
the service area of Target.
Section 3.35. Employee Matters.
(a) Cash Compensation. Schedule 3.35(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Target who are
currently compensated at a rate in excess of $12,000 per year and who earned in
excess of such amount during the preceding fiscal year. In addition, Schedule
3.35(a) contains a complete and accurate description of (i) all increases-in
Cash Compensation of employees of Target during the current and immediately
preceding fiscal year of Target, and (ii) any promised increases in Cash
Compensation of employees of Target that have not yet been effected.
(b) Compensation Plans. Schedule 3.35(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Target or to which Target contributes on
behalf of its employees, other than Employee Benefit Plans listed in Schedule
3.36(a). The Compensation Plans include without limitation plans, arrangements
or practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options. Target has
provided Parent a copy of each written
AGREEMENT AND PLAN OF REORGANIZATION - Page 18
<PAGE> 19
Compensation Plan and a written description of each unwritten Compensation Plan.
Each of the Compensation Plans can be terminated or amended at will by Target.
(c) Employees.
(1) TCA Management Company, a wholly owned subsidiary of
Parent, may, but shall have no obligation to employ or offer employment to any
employee of Target. Within ten (10) days of closing of this Agreement, TCA
Management Company will provide to Target, in writing, a list of employees which
TCA Management Company desires to employ following the Closing. Prior to
Closing, Target shall terminate the employment of all its employees who are not
designated for employment by TCA Management Company.
(2) Nothing in this Section 3.35(c)(l)-(2) or elsewhere in
this Agreement shall be deemed to make any employee of Target a third party
beneficiary of this Agreement.
(d) Employment Agreements. All written or oral employment agreements
(the "Employment Agreements") which exist between Target and its employees,
including agreements containing covenants not to compete, are listed on Schedule
3.35(d). Target has provided Parent a copy of each written Employment Agreement
and a written description of each unwritten Employment Agreement, if any. Except
as described on Schedule 3.35(d) Target has no employment agreements, either
written or oral, with any employees of Target and none of the employment
agreements listed on Schedule 3.35(d) requires TCA Management Company or Parent
to employ any person after the Closing.
(e) Employee Policies and Procedures. Schedule 3.35(e) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Target. Target has provided Parent a copy of all written Employee
Policies and Procedures. Each of the Employee Policies and Procedures can be
amended or terminated at will by Target, except as prohibited by law.
(f) Unwritten Amendments. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(g) Labor Compliance. Except as set forth in Schedule 3.35(g), Target:
(i) has been and is in compliance in all material respects
with all laws, rules, regulations and ordinances respecting employment
and employment practices, terms and conditions of employment and wages
and hours, and
(ii) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing in excess of $5,000.
AGREEMENT AND PLAN OF REORGANIZATION - Page 19
<PAGE> 20
Target has not engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices.
There are no:
(i) unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, age or handicap discrimination
charges or complaints, pending, or to the knowledge of Target
threatened, against Target before any federal, state or local court,
board, department, commission or agency nor does any basis therefor
exist, or
(ii) existing, or to the knowledge of Target threatened, labor
strikes, disputes, grievances, controversies or other labor troubles
affecting Target and no basis therefor exists.
(h) Unions. Target has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of Target
are represented by any union, labor organization or collective bargaining unit.
To the knowledge of Target, the employees of Target have no intention to and
have not threatened to organize or join a union, labor organization or
collective bargaining unit.
(i) Aliens. All employees of Target are citizens of, or are authorized
to be employed in, the United States.
Section 3.36. Employee Benefit Plans.
(a) Identification. Schedule 3.36(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Target or to which Target contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Target has provided Parent with copies of all plan documents,
determination letters, pending, determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. After
the Closing, Parent shall not be required, under ERISA, the Code or any
collective bargaining agreement, to establish, maintain or continue any Target
Employee Benefit Plans currently maintained by Target or any of its ERISA
Affiliates, except as required by applicable state or federal law.
(b) Administration. Each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations.
(c) Examinations. No Employee Benefit Plan is currently the subject of
an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
AGREEMENT AND PLAN OF REORGANIZATION - Page 20
<PAGE> 21
(d) Prohibited Transactions. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) Claims and Litigation. No claims, suits or other proceeding are
pending, or to the knowledge of Target are threatened, with respect to any
Employee Benefit Plan other than normal benefit claims filed by participants or
beneficiaries.
(f) Qualification. Target has received a favorable determination letter
or ruling from the Internal Revenue Service for each Employee Benefit Plan
intended to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. No proceedings are
pending, or to the knowledge of Target are threatened, that could result in the
revocation of any such favorable determination letter or ruling.
(g) Funding Status. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning, of Section 412(n)(6)(B) of the Code) in
which Target is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing, basis as of the date hereof. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such plan are at
least equal in value to the present value of accrued benefits as of the date
hereof. Schedule 3.36(g) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued benefits
under all Employee Benefit Plans subject to actuarial assumptions.
(h) Excise Taxes. Neither Target nor any member of a Controlled Group
has any liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
(i) Multiemployer Plans. Neither Target nor any member of a Controlled
Group is or ever has been obligated to contribute to a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Target or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(k) Medical and Dental Care Claims. Target shall use reasonable efforts
to provide a complete and accurate list of all claims made (without identifying
specific individuals) under any medical or dental care plan or commitment
offered by Target to its employees involving hospitalization, medical or dental
care claims that have exceeded $500 per year for an individual during the period
January 1, 1998 to December 31, 1998.
AGREEMENT AND PLAN OF REORGANIZATION - Page 21
<PAGE> 22
(l) Retirees. Target does not have any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with Target except as required under applicable law, rule or
regulation.
Section 3.37. Investment Intent. Each Shareholder acknowledges that his
or its Closing Shares are being acquired without any view to a transfer, sale,
assignment or other distribution thereof other than a transfer, sale, assignment
or other distribution not in violation of the Securities Act of 1933, as
amended. The Shareholders agree to and shall execute a Letter of Investment
Intent relating to their ownership of the Closing Shares in the form of the
letter attached hereto as Exhibit 1.05, and agree to remain subject to the
representations, warranties and covenants made therein after the Closing Date.
Section 3.38. Environmental Matters.
(a) Environmental Laws. Neither Target nor any of its assets, are
currently in violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
including without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq. as
amended from time to time ("CERCLA")) (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time ("RCRA"), and regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, relating to asbestos or
polychlorinated biphenyls, and (iv) the provisions contained in any applicable
state statutes, rules or orders pertaining to environmental matters, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the assets and operations of
Target.
(b) Use of Assets. To the knowledge of Target, the assets of Target
have never been used in a manner that would be in violation of any of the
Environmental Laws, including without limitation, CERCLA or RCRA.
(c) Permits. Target has not obtained, and is not required to obtain,
and Target has no knowledge of any reason Parent will be required to obtain, any
permits, licenses or similar authorizations to construct, occupy, operate or use
any buildings, improvements, fixtures and equipment owned or leased by Target or
by reason of any Environmental Laws.
(d) Superfund List. To the knowledge of Target, none of the assets
owned or leased by Target are on any federal or state "Superfund" list or
subject to any environmentally related liens.
AGREEMENT AND PLAN OF REORGANIZATION - Page 22
<PAGE> 23
Section 3.39. Certain Payments. To the knowledge of Target, neither
Target nor any director, officer or employee of Target has paid or caused to be
paid, directly or indirectly, in connection with the business of Target:
(a) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by Target
or as otherwise permitted by applicable law).
Section 3.40. Accuracy of Information Furnished. All information
furnished to Parent by Target hereby or in connection with the transactions
contemplated hereby is true, correct and complete in all material respects. Such
information states all facts required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub each represent and warrant that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
Section 4.01. Organization and Good Standing. Parent and Sub are Texas
corporations, both of which are duly organized, validly existing and in good
standing under the laws of the State of Texas, with all requisite power and
authority to carry on the businesses in which they are engaged, to own the
properties they own, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
Section 4.02. Authorization and Validity. The execution, delivery and
performance by Parent and Sub of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Parent and Sub. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Parent and Sub and constitute or
will constitute legal, valid and binding obligations of Parent and Sub,
enforceable against Parent and Sub in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability, of equitable
remedies. The Closing Shares, when issued in compliance with the provisions of
the Agreement, will be validly issued, fully paid, non-assessable, not issued in
violation of any preemptive rights, and will be free from all taxes, liens
charges and other encumbrances, subject to the terms and provisions of the
Letter of Investment Intent.
AGREEMENT AND PLAN OF REORGANIZATION - Page 23
<PAGE> 24
Section 4.03. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the representative organizational
documents of Parent and Sub or any agreement, indenture or other instrument
under which Parent or Sub is bound, (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Parent or Sub
or the properties or assets of Parent or Sub, or (iii) violate or conflict with
any laws, rules or regulations, including but not limited to antitrust laws, or
that of any applicable jurisdiction or any applicable public, governmental or
regulatory agency or body.
Section 4.04. Finder's Fee. Neither Parent nor Sub has incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
Section 4.05. Closing Shares. Upon consummation of the merger and
delivery of the Closing Shares (including additional shares delivered as a
result of adjustments called for in this Agreement), each of the Closing Shares
will be (a) duly authorized, validly issued, fully paid, and non-assessable,
with no personal liability attached thereto, and free and clear of any liens or
preemptive rights (unless imposed at the direction of a Shareholder); (b) issued
pursuant to a valid exemption from registration under the Securities Act of 1933
and the Texas Securities Act; (c) covered by a valid resale statement filed with
the Securities and Exchange Commission; and (d) freely tradable in resale
transactions by the Shareholders as of the Closing Date.
ARTICLE V
The Covenants of Target
Target makes the following covenants relating to the period between the
date hereof and the Closing.
Section 5.01. Consummation of Agreement. Target shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions.
Section 5.02. Business Operations. Except as authorized by this
Agreement and its other terms and conditions, Target shall operate its business
in the ordinary course and will not introduce any new method of management or
operation. Target shall use its best efforts to preserve the business of Target
intact, to retain the present customers and suppliers so that they will be
available to Parent after the Closing. Target shall not take any action that
could adversely affect the condition (financial or otherwise), operations,
assets, liabilities, business or prospects of Target without the prior written
consent of Parent or take or fail to take any action that would cause or permit
the representations made in Article III to be inaccurate at the time of Closing
or preclude Target from making such representations and warranties at the
Closing.
AGREEMENT AND PLAN OF REORGANIZATION - Page 24
<PAGE> 25
Section 5.03. Access. Target shall permit Parent and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Target, including its employees, customers and suppliers,
and permit Parent and its authorized representatives to inspect and make copies
of all documents, records and information with respect to the affairs of Target
as Parent and its representatives may request, all for the sole purpose of
permitting Parent to become familiar with the business and assets and
liabilities of Target.
Section 5.04. Material Change. Target shall promptly inform Parent in
writing, of any material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Target.
Notwithstanding the disclosure to Parent of any such material adverse change,
Target shall not be relieved of any liability for, nor shall the providing of
such information by Target to Parent be deemed a waiver by Parent of the breach
of any representation or warranty of Target contained in this Agreement.
Section 5.05. Approvals of Third Parties. Target, with the cooperation
and assistance of Parent and Sub, shall use its best efforts to secure, as soon
as practicable after the date hereof, all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
Section 5.06. Employee Matters. Target shall not, without the prior
written approval of Parent, except as required by law:
(a) increase the Cash Compensation of any employee of Target;
(b) adopt, amend or terminate any Compensation Plan, Employment
Agreement, Employee Policies and Procedures or Employee Benefit Plan;
(c) institute, settle or dismiss any employment litigation;
(d) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit;
(e) take or fail to take any action with respect to any past or present
employee of Target that could adversely affect the business of Target;
(f) take any action that would deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(g) fail to pay any premium or contribution due with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee
Benefit Plan; or
AGREEMENT AND PLAN OF REORGANIZATION - Page 25
<PAGE> 26
(i) take or fail to take any action that could adversely affect any
Employee Benefit Plan.
Section 5.07. Contracts. Except with Parent's prior written consent,
Target shall not waive any right or cancel any contract, debt or claim or assume
or enter into any contract, lease, license, obligation, indebtedness,
commitment, or purchase or sale, except in the ordinary course of business.
Section 5.08. Changes in Inventory. Target shall not alter the physical
contents or character of its raw materials, work-in-process or finished goods
inventory or the mixture of products in its finished goods inventory so as to
affect the nature of its business or result in a change in the total dollar
valuation thereof.
Section 5.09. Capital Assets, Payments of Liabilities. Target shall
not, without the prior written approval of Parent, (i) acquire or dispose of any
capital asset, or (ii) discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (a) liabilities and obligations
reflected in the Financial Statements, or (b) current liabilities and
obligations incurred in the ordinary course of business and, in the case of
either (a) or (b) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
Section 5.10. Mortgages, Liens and Guaranties. Target shall not,
without the prior written approval of Parent, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets,
whether now owned or hereafter acquired, or guarantee or otherwise become
contingently liable for any obligation of another, except obligations arising by
reason of endorsement for collection and other similar transactions in the
ordinary course of business, or make any capital contribution or investment in
any corporation, business or other person.
Section 5.11. No Negotiation with Others. Target shall not solicit or
participate in negotiations with (and Target shall use its best efforts to
prevent any affiliate, shareholder, director, officer, employee or other
representative or agent of Target from negotiating with, soliciting or
participating in negotiations with) any third party with respect to the sale of
the business of Target or any transaction inconsistent with those contemplated
hereby.
Section 5.12.
(a) Income Tax Refunds. The Shareholders have no claim to or interest
in any income tax refunds which Target may receive after the Closing Date
relating to tax periods prior to the Closing Date.
(b) Cooperation. The Target, on the one hand, and Parent and Sub, on
the other hand, shall each provide such assistance to the other as may be
reasonably requested in connection with the preparation of any tax return
required to be filed in respect of Target or any of the Shareholders, any audit
or other examination by any taxing authority, any judicial or administrative
proceeding relating to liability for taxes, or any claim for refund in respect
of such taxes, and the Shareholders,
AGREEMENT AND PLAN OF REORGANIZATION - Page 26
<PAGE> 27
Parent and Sub will retain, and upon request provide, any records or information
which may be relevant to such return, audit, examination, proceeding or claim.
Such assistance shall include (i) making employees or counsel available at and
for reasonable times to provide additional information and explanation of any
material to be provided hereunder, and (ii) furnishing access to, and permitting
the copying of any records, returns, schedules, documents, work papers or other
relevant materials which might reasonably be expected to be of use in connection
with such return, audit, examination, proceeding or claim.
Section 5.13. Registration Statement. Target and Shareholders shall
provide to Parent such information and assistance as Parent may request in
connection with Parent's efforts to prepare, file and maintain the effectiveness
of the Registration Statement.
Section 5.14. Section 626 of the Cable Act. Target represents that it
has duly and timely filed a valid notice of renewal under Section 626 of the
Cable Act with the appropriate governmental authority with respect to any
Systems Franchises that will expire within 36 months of the Closing Date.
Section 5.15. Required Consents, Franchise Renewal.
(a) Target 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
Target in connection with the transactions contemplated by this Agreement,
substantially in the form attached hereto as Exhibit 5.15 and deliver to Parent
copies of such Required Consents and such other consents, authorizations or
approvals promptly after they are obtained by Target; provided, however, that
Target will afford Parent the opportunity to review, approve and revise the form
of Required Consent prior to delivery to the third party whose consent is
sought. Parent will cooperate with Target 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 Systems
Franchises, Systems Licenses, Systems Contracts or leases or documents
evidencing Leased Property or Other Real Property Interests of its Cable
Business that are not acceptable to the other.
Section 5.16. Hart-Scott-Rodino Filing. Target agrees to cooperate with
Parent to file, or caused to be filed, at the expense of Parent, on such date as
Parent, Sub and Target shall mutually agree, with the U.S. Department of Justice
("DOJ") and Federal Trade Commission ("FTC") all filings, if any that are
required in connection with the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), as amended,
within ten (10) business days after the date of this Agreement and to request
early termination of the waiting period following the filing thereof, (b)
cooperate with each other in connection with such HSR Act filings, which
cooperation shall include furnishing the other with any information or documents
that may be reasonably required in connection with such filings; (c) promptly
file, after any request by the FTC or DOJ and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (e) furnish each other with any correspondence
from or to, and notify each other of any other communications (and the substance
AGREEMENT AND PLAN OF REORGANIZATION - Page 27
<PAGE> 28
thereof) with, the FTC or DOJ that relates to the transaction contemplated
hereunder, and to the extent practicable, to permit each other to participate in
any conferences with the FTC or DOJ.
ARTICLE VI
Covenants of Parent and Sub
Section 6.01. Consummation of Agreement. Parent and Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions.
Section 6.02. Registration of Resale of Closing Shares. Parent and Sub
shall as a condition to closing (i) on or prior to May 1, 1999, or as soon as
possible thereafter, file with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") registering under the Securities Act the sale by Shareholders of the
Closing Shares, (ii) cause the Registration Statement to be declared effective
by the Commission and pursuant to Sections 1.04 and 3.38 herein, and (iii)
maintain the effectiveness of the Registration Statement for a period of two (2)
years from the Closing Date. Parent and Sub shall at the expiration of two (2)
years from the Closing Date also cause the deletion of any registration-related
legends on the Closing Shares.
Section 6.03. Hart-Scott-Rodino Filing. Parent and Sub agree to (a)
file, or caused to be filed, at the expense of Parent, on such date as Parent,
Sub and Target shall mutually agree, with the U.S. Department of Justice ("DOJ)
and Federal Trade Commission ("FTC") all filings, if any, that are required in
connection with the transactions contemplated hereby under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"), as amended, within ten (10)
business days after the date of this Agreement and to request early termination
of the waiting period following the filing thereof; (b) cooperate with each
other in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents that may be reasonably
required in connection with such filings; (c) promptly file, after any request
by the FTC or DOJ and after appropriate negotiation with the FTC or DOJ of the
scope of such request, any information or documents requested by the FTC or DOJ;
and (e) furnish each other with any correspondence from or to, and notify each
other of any other communications (and the substance thereof) with, the FTC or
DOJ that relates to the transaction contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
Section 6.04. Continuity of Business Enterprise. Parent and Sub agree
that Sub will continue to operate the historic business of Target or use a
significant portion of Target's historic business assets in a business, as
required by the continuity of business enterprise doctrine as set forth in
Treas. Reg. Section 1.368-1(d).
AGREEMENT AND PLAN OF REORGANIZATION - Page 28
<PAGE> 29
ARTICLE VII
Parent's Conditions Precedent
Except as may be waived in writing by Parent and Sub, the obligations
of Parent and Sub hereunder are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
Section 7.01. Representations and Warranties. The representations and
warranties of Target and the Shareholders contained herein shall have been true
and correct in all material respects when initially made and shall be true and
correct in all material respects as of the Closing Date; and Parent and Sub
shall have received a certificate from each of Target's President, dated as of
the Closing, Date, to the foregoing effect.
Section 7.02. Covenants and Conditions. Target shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by Target prior to the Closing
Date; and Parent and Sub shall have received a certificate from each of Target's
President, dated as of the Closing, Date, to the foregoing effect.
Section 7.03. Proceedings. No action, precaution or order by any court
or governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 7.04. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target shall have occurred since the date of the most
recent balance sheet of each included in the Financial Statements, whether or
not such change shall have been caused by the deliberate act or omission of
Target.
Section 7.05. Resignations of Directors and Officers. Parent and Sub
shall have received the resignations of the directors and officers of Target to
the extent requested.
Section 7.06. Closing Deliveries. Parent shall have received all
documents referred to in Section 2.01 hereof, duly executed in form satisfactory
to Parent and its counsel.
Section 7.07. Tax Affidavit. Parent shall have received a nonforeign
affidavit, as such affidavit is referred to in Section 1445(b)(2) of the Code,
of Target, signed under penalties of perjury and dated as of the date of the
Closing Date, to the effect that Target is not a foreign person (as such term is
defined in Section 1445(f)(3) of the Code) and providing Target's United States
taxpayer identification number.
Section 7.08. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Cablevision of
Pflugerville, Inc. and Williamson County Cablevision Company to be final and
effective.
AGREEMENT AND PLAN OF REORGANIZATION - Page 29
<PAGE> 30
Section 7.09. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
ARTICLE VIII
The Conditions Precedent of Target and the Shareholders
Except as may be waived in writing by Target and the Shareholders, the
obligations of Target and the Shareholders hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and
warranties of Parent and Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date; and Parent and Sub shall have
delivered to the Shareholders certificates of Parent's and Sub's respective
President or Vice President, dated as of the Closing Date, to the foregoing
effect.
Section 8.02. Covenants and Conditions. Parent and Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date; and Parent shall have delivered to the Shareholders
certificates of Parent's and Sub's President or Vice President, dated as of the
Closing Date, to the foregoing effect.
Section 8.03. Proceedings. No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 8.04. Closing Deliveries. Target or the Shareholders, as the
case may be, shall have received all documents referred to in Section 2.02.
Section 8.05. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Agreement and Plan of Reorganizations between Parent, Sub and Cablevision of
Pflugerville, Inc. and Williamson County Cablevision Company to be final and
effective.
Section 8.06. HSR Act. All waiting periods of the HSR Act applicable to
this Agreement or the transactions contemplated by this Agreement to be
consummated at the Closing shall have expired or been terminated.
Section 8.07. Registration Statement Effective. The registration
statement filed by Parent pursuant to Section 1.05 shall have been declared
effective and sales of securities may be made thereunder.
AGREEMENT AND PLAN OF REORGANIZATION - Page 30
<PAGE> 31
ARTICLE IX
Post Closing Matters
Section 9.01. Further Instruments of Transfer. Following the Closing,
at the request of Parent, the Shareholders shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
carry out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
ARTICLE X
Remedies
Section 10.01. Indemnification by the Shareholders. Subject to the
terms and conditions of this Article, the Shareholders agree to indemnify,
defend and hold Parent and Sub and their respective directors, officers, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
attorneys' fees and expenses (collectively "Damages"), asserted against or
incurred by any of such indemnitees by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of Target or
the Shareholders contained herein, in any exhibit, schedule, certificate or
financial statement delivered hereunder, or in any agreement executed in
connection with the transactions contemplated hereby; or
(b) the violation or alleged violation, on or before the Closing Date,
of any Environmental Law, and any and all matters arising out of any act,
omission, event or circumstance existing or occurring on or prior to the Closing
Date (including without limitation the presence on the Real Property or release
from the Real Property, or the generation by Target or any Shareholder of
hazardous substances or solid waste disposed or otherwise released prior to the
Closing Date), regardless of whether the act, omission, event or circumstance
constituted a violation of any Environmental Law at the time of its existence or
occurrence. The terms "hazardous substance" and "release" shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposed" shall
have the meanings specified in RCRA; provided that to the extent that any
applicable statute of any state, any subdivision thereof or any other
governmental body or agency of competent jurisdiction over the matter, establish
a meaning for "hazardous substance," "release," "solid waste" or "disposed" that
is broader than that specified in either CERCLA or RCRA, such broader meaning,
shall apply.
(c) The provisions of this Section 10.01 shall survive the Closing two
(2) years after the Closing Date, and after such date the Shareholders shall
have no liability whatsoever to Parent, Sub or their directors, officers,
agents, attorneys or affiliates for any of the matters made the subject of this
Section 10.01.
AGREEMENT AND PLAN OF REORGANIZATION - Page 31
<PAGE> 32
Notwithstanding anything to contrary above:
(d) (i) Target and Shareholders shall not be required to indemnify or
otherwise be liable to Parent and Sub for any breach of a representation or
warranty, or for the breach of any covenant to be performed prior to the
Closing, except to the extent the losses suffered or incurred by Parent or Sub
arising from all such breaches by Target and Shareholders exceed in the
aggregate $20,000.
(ii) Target and Shareholders shall not be required to
indemnify or otherwise be liable to Parent and Sub for any breach of a
representation or warranty, or for the breach of any covenant to be performed
prior to the Closing, to the extent the losses suffered or incurred by Parent
and Sub exceed in the aggregate $1,000,000.
Section 10.02. Indemnification by Parent.
(a) Subject to the terms and conditions of this Article, Parent hereby
agrees to indemnify, defend and hold Target and the Shareholders and their
respective directors, officers, agents, attorneys and affiliates harmless from:
(b) all Damages asserted against or incurred by any of such indemnitees
by reason of or resulting, from a breach of any representation, warranty or
covenant of Parent or Sub contained herein or in any exhibit, schedule or
certificate delivered hereunder, or in any agreement executed in connection with
the transactions contemplated hereby; or
(c) The violation or alleged violation, after the Closing Date, of any
Environmental Law, and any and all matters arising out of any act, omission,
event or circumstance existing or occurring after the Closing Date (including
without limitation the presence on the Real Property or release from the Real
Property, or the generation by Parent or Sub of hazardous substances or solid
waste disposed or otherwise released after the Closing Date), regardless of
whether the act, omission, event or circumstance constituted a violation of any
Environmental Law at the time of its existence or occurrence. The terms
"hazardous substance" and "release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposed" shall have the meanings specified in
RCRA; provided that to the extent that any applicable statute of any state, any
subdivision thereof or any, other governmental body or agency of competent
jurisdiction over the matter, establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposed" that is broader than that specified in
either CERCLA or RCRA, such broader meaning, shall apply.
(d) The provisions of this Section 10.02 shall survive the Closing two
(2) years after the Closing Date, and after such date Parent and Sub shall have
no liability whatsoever to the Shareholders for any of the matters made the
subject of this Section 10.02.
Section 10.03. Conditions of Indemnification. The respective
obligations and liabilities of the Shareholders and Parent (the "indemnitor") to
the other parties (the "indemnitees") under
AGREEMENT AND PLAN OF REORGANIZATION - Page 32
<PAGE> 33
Sections 10.01 and 10.02 with respect to claims resulting from the assertion of
liability by third parties, shall be subject to the following terms and
conditions:
(a) In the event that a legal proceeding, or action is commenced
against the indemnitees with respect to any indemnified matter, that indemnitees
promptly will provide written notice thereof to the indemnitor (but in no event
later than ten (10) days after receipt of notice), together with a copy of any
claim, process or other legal pleading. The indemnitor will undertake the
defense thereof, as its expense, by counsel of its own choosing, and reasonably
acceptable to the indemnitees; provided that the indemnitees may participate in
all aspects of the defense with, or without, counsel of its own choice. In the
event that the indemnitees elect to retain additional counsel of their own
choice, the fees and expenses of said counsel shall be the exclusive
responsibility of the indemnitees unless (i) the indemnitor has agreed to pay
such fees and expenses, (ii) the indemnitor has failed to undertake the defense
of such action, or (iii) if the nature of any action presents a conflict between
the interests of the indemnitor and the indemnitees, or the indemnitees have
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the indemnitor
(in which case, if the indemnitees inform the indemnitor in writing, that it
elects to employ separate counsel at the expense of the indemnitor, the
indemnitor shall have no further right to participate in or undertake the
defense of such action on behalf of the indemnitees except with respect to
payment of full indemnification for any Damages).
(b) Except for failure by the indemnitees to provide notice as provided
for above in subsection (a), in the event that the indemnitor, on or before the
thirtieth day after receipt of notice of any such action, or, if applicable and
earlier, on or before the tenth day preceding the day on which an answer,
appearance or other pleading must be served in order to prevent judgment by
default in favor of the person asserting such claim or other prejudice to the
indemnitees, fails to undertake the defense of such action, the indemnitees will
have the right to retain counsel of their own choosing and undertake the
defense, compromise or settlement of such claim for the account and risk of the
indemnitor without waiving the indemnitee's right to full indemnification from
the indemnitor and at the indemnitor's expense, subject to the right of the
indemnitor to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof with counsel reasonably acceptable to
the indemnitees.
(c) Notwithstanding the foregoing, the indemnitor shall not settle any
claim asserted against the indemnitees without the prior consent of the
indemnitees unless such settlement involves only the payment of money and the
claimant provides the indemnitees with a release from all liability in respect
of such claim. If the settlement of any claims involves more than the payment of
money, the indemnitor shall not settle the claim without the prior written
consent of the indemnitees, which consent shall not be unreasonably withheld. In
the event the indemnitor has not undertaken the defense, as described above,
with respect to any claim resulting from the assertion of liability by third
parties, the indemnitor may settle any claim without prior notice to and consent
of the indemnifying party, and indemnitor agrees to promptly, and in any event
within thirty days after receipt of written demand, reimburse indemnitees for
all Damages, including without limitation all
AGREEMENT AND PLAN OF REORGANIZATION - Page 33
<PAGE> 34
amounts paid or incurred in connection with such settlement, together with
attorneys' fees, costs and expenses and other costs incurred in connection with
defense of the claim.
(d) The indemnitees and indemnitor will each cooperate with all
reasonable requests of the other.
Section 10.04. Remedies Not Exclusive. Except as otherwise specifically
provided herein, the remedies provided in this Agreement shall not be exclusive
of any other rights or remedies available to one party against the other, either
at law or in equity.
[PAGE 32 IS MISSING]
"Cox Communications, Inc. Class A Common Stock" means the Class A
Common Stock, par value $1.00 per share, of Cox Communications, Inc.
In the event this Agreement is terminated pursuant to subparagraph (b),
(c), (d), (e), (f) or (g) above, Parent, Sub, Target and the Shareholders shall
each be entitled to pursue, exercise and enforce any and all remedies, rights,
powers and privileges available at law or in equity. In the event of a
termination of this Agreement under the provisions of this Article, a party not
then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
ARTICLE XII
Miscellaneous
Section 12.01. Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party, or (ii) proving that another party breached any of the terms of
this Agreement.
Section 12.02. Waiver. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, or any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
AGREEMENT AND PLAN OF REORGANIZATION - Page 34
<PAGE> 35
Section 12.03. Offset. Any and all amounts owing, or to be paid by
Parent to the Shareholders hereunder or otherwise, shall be subject to offset
and reduction pro tanto by any amounts that may be owing at any time by the
Shareholders to Parent in respect of any failure or breach of any
representation, warranty or covenant of Target or the Shareholders under or in
connection with this Agreement, the Agreement Not to Compete or any other
agreement with Parent or any transaction contemplated hereby or thereby, as
reasonably determined by Parent. If Parent determines that such offset is
appropriate, thirty (30) days' written notice shall be given to Shareholders of
such determination on or prior to the due date of the payment to be reduced.
Section 12.04. Knowledge. "Knowledge," "have no knowledge of," or "do
not know of" and similar phrases shall mean (i) in the case of a natural person,
the particular fact was known, or not known, as the context requires, to such
person after reasonable investigation and inquiry by such person, and (ii) in
the case of an entity, the particular fact was known, or not known, as the
context requires, to any employee of such entity after reasonable investigation
and inquiry by the principal executive officer of such entity.
[PAGE 34 IS MISSING]
Section 12.13. Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14. Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16. Confidentiality, Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules applicable to issuers whose securities are traded
on the National Association of Securities Dealers Automatic Quotation System,
and (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in conducting an examination of the operations and
assets of Target.
Section 12.17. Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing, and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person or
by facsimile transmission. Such notice shall be deemed received on the date on
which it is hand
AGREEMENT AND PLAN OF REORGANIZATION - Page 35
<PAGE> 36
delivered or received by facsimile transmission or on the third business day
following the date on which it is so mailed. For purposes of notice, the
addresses of the parties shall be:
If to Parent or Sub:
3015 SSE Loop 323
Tyler, Texas 75701
Attn.: Fred R. Nichols, President
Ph.: (903) 595-3701
Fax: (903) 596-9008
with a copy to:
Jeffrey W. Brown, General Counsel
3015 SSE Loop 323
Tyler, Texas 75701
Ph.: (903) 595-3701
Fax: (903) 596-9008
If to the Shareholders:
Mr. John Muraglia
Meridian Communications, Inc.
670 Marian Street
Denver, Colorado 80202
Mr. Dale Hoffman
111 North College Street
Georgetown, Texas 78626
Mrs. Lola H. McDaniel
Ms. Melissa Lyons Gardner
Mr. Mark A. Lyons
c/o Mr. John W. Lyons, Jr.
2831 Palmer Hwy.
Texas City, Texas 77592
with a copy to:
Mr. Chris Cahill
Mills, Shirley, Eckel & Bassett
P. O. Box 1943
Galveston, Texas 77553-1943
Any party may change its address for notice by written notice given to
the other parties in accordance with this Section.
AGREEMENT AND PLAN OF REORGANIZATION - Page 36
<PAGE> 37
Section 12.20. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
AGREEMENT AND PLAN OF REORGANIZATION - Page 37
<PAGE> 38
EXECUTED as of the dates set forth below to be effective as of the date
first above written.
TCA CABLE TV, INC., a Texas corporation
Date: 6/25/99 By: /s/ Robert A. Roseman
----------------------- ------------------------------------------
Name: Robert A. Roseman
----------------------------------------
Title: Vice President Business Development
---------------------------------------
TCA CABLE TV OF CENTRAL TEXAS, INC.,
a Texas corporation
Date: 6/25/99 By: /s/ Jeffrey W. Brown
----------------------- ------------------------------------------
Name: Jeffrey W. Brown
----------------------------------------
Title: Secretary and General Counsel
---------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION - Page 38
<PAGE> 39
CABLEVISION OF LEANDER, INC.,
a Texas corporation
Date: 6/25/99 By: /s/ Dale Hoffman
----------------------- ------------------------------------------
Name: Dale Hoffman
----------------------------------------
Title: President
---------------------------------------
SHAREHOLDERS
Date: By:
----------------------- ------------------------------------------
Name: John Muraglia
----------------------------------------
Date: 6/25/99 By: /s/ Dale Hoffman
----------------------- ------------------------------------------
Name: Dale Hoffman
----------------------------------------
Date: 6/25/99 By: /s/ Lola H. McDaniel
----------------------- ------------------------------------------
Name: Lola H. McDaniel
----------------------------------------
The Estate of Moran K. McDaniel
Date: 6/25/99 By: /s/ Melissa Lyons Gardner
----------------------- ------------------------------------------
Name: Melissa Lyons Gardner
----------------------------------------
Title: Co-Executor
---------------------------------------
Date: 6/25/99 By: /s/ Mark A. Lyons
----------------------- ------------------------------------------
Name: Mark A. Lyons
----------------------------------------
Title: Co-Executor
---------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION - Page 39
